PERSPECTIVE ON FREE TRADE : Who’s Afraid of Mexican Trade? : Bush can have the job-creating pact quickly if he’ll take a more vigorous approach to environmental protections.

The outline of a North American free-trade agreement that could be consummated this year is at hand. Negotiators from the United States, Mexico and Canada are about to exchange their first drafts. But growing support for protectionism may spook the President from pushing the agreement in an election year.

It need not be such a gamble. It’s still possible to write an agreement that would promote job growth and improve the environment more satisfactorily than the quick fixes proposed so far in Washington.

Exports have driven our economic growth in recent years, and without stronger links to the global economy, we will find it difficult to compete with regional trading blocs in Asia and Europe--regardless of tax cuts or Japanese trade concessions.

A successful North American free-trade agreement would immediately expand U.S. access to Mexico, a rapidly growing market. The unilateral reforms that Mexico has undertaken since joining the General Agreement on Tariffs and Trade in 1986 have triggered an investment boom and energized Mexican entrepreneurs. They now have the money to buy American heavy equipment, such as trucks, tractors and earth movers, high-technology products, environmental cleanup services and products, finished paper products and agricultural products, including wheat, fruit, nuts and potatoes.

In addition, a free-trade agreement would enable all North American companies to develop the kind of regional links that help make German and Japanese competitors so formidable. The old model of huge, integrated, monolithic companies launching exports from a single national base no longer reflects reality. Most production now comes from what Harvard Prof. Robert Reich calls a “web” of trade and investment flows, in which products and services are created out of flexible, ever-shifting combinations of joint ventures, target-specific alliances and specialized service providers.

European and Asian companies have already spun such webs in their regions. North American companies should have similar opportunities.

But to be successful, a North American free-trade “web” must include explicit provisions to protect the environment and public health. Without such rules, free-trade pressures would induce companies to cut short-term costs by skirting laws intended to protect health and the environment. And without such protections, long-term economic growth could not be sustained, because business can’t operate with a work force suffering the effects of air and water pollution.

This question of negotiating environmental protections has polarized political debate on the free-trade agreement. From the outset, the Bush Administration has seemed to favor an approach that pushes Mexico hard for concessions on intellectual property and investment rules, but backs off when it comes to clean water, clean air and safe food.

There has been serious opposition in some quarters to almost any treaty that would expose the U.S. economy to additional competition, even though refusing free trade with Mexico would sacrifice economic growth and leave major existing environmental problems to fester untreated.

The key votes in Congress, however, seem to be held by a group that falls in neither camp. These pro-trade Democrats and pro-environment Republicans suggest another path: Negotiate a job-creating trade agreement but include the cleanup of pollution along the U.S.-Mexico border and require that new investment in Mexico pay up front for basic environmental protection infrastructure.

This swing group of policy-makers wants an environmental protection program built around strong rules, adequate resources and tough enforcement.

Serious environmental protection would require rules to ensure high standards on both sides of the border, with the costs based on the “polluter pays” principle.

Serious environmental protection would provide for a binational bond program to raise the $5 billion to $9 billion needed to clean up existing pollution along the border and a small levy on new investment to be set aside for future environmental protection.

Serious environmental protection would include a mandatory enforcement program, based on a binational enforcement agency that would be supported by a provision to allow citizens of either country access to the other’s legal systems.

The current thinking of the Administration, unfortunately, is that free trade and environmental protection are not related and should not be linked. It has asked for less money to protect the border environment than Mexico plans to spend, even though the U.S. economy is 25 times larger than Mexico’s. It maintains that free trade will provide resources for environmental protection, but will not say when such resources might be available nor commit to actually spending them on the environment.

In fact, the Administration’s central position is that it will be enough to rely on voluntary agreements with Mexico and voluntary compliance by the very businesses that created the environmental problems in the first place. It has said only that it will conduct additional regulatory enforcement “as appropriate”--whatever that means.

A North American free-trade agreement built around the principles we advocate would bring this country more jobs and a cleaner environment. Unlike the short-term tax breaks and subsidy programs being bandied about Washington, it would help generate prosperity--even after the election.