PERSPECTIVE ON FREE TRADE : Mexican Pact Means More Jobs for All : Expanded employment in Mexico means a vast new market for U.S. exports; each $1 billion will add 19,600 U.S. jobs.

The moment that a North American free-trade agreement among the United States, Canada and Mexico is mentioned, Americans immediately think of its effect on U.S. jobs--and rightly so. Interestingly, it is exactly this concern--preserving and increasing the number of U.S. jobs--that is one of the most visible benefits of a free-trade agreement. This is not only the opinion of Mexico’s leaders, but it is also the conclusion reached by top U.S. negotiators for the agreement, whose very charge it is to preserve U.S. jobs.

All independent studies on the effects of the agreement have found that it would result in a net increase in U.S. exports into Mexico, considerably stimulating the U.S. job market.

American workers already make 70% of the goods that Mexico imports, and every increase in access to the Mexican market gives a strong boost both to U.S. exports and to the U.S. jobs supporting those exports. Currently, U.S. exports to Mexico support about 650,000 U.S. jobs. One independent study, conducted by the Washington-based Institute for International Economics, reports that free trade will result in a “net U.S. export expansion (that) should generate about 130,000 net additional U.S. jobs” by 1995.

U.S. Trade Representative Carla Hills says that decreased trade barriers have already benefited the American worker. She has pointed out that since Mexico joined the General Agreement on Trades and Tariffs in 1986, thereby reducing the nation’s tariffs on imports from 100% to 10%, U.S. exports to Mexico have more than doubled to reach $28.4 billion. This increase alone created 264,000 U.S. jobs.

Competitiveness in heavy manufacturing has been identified by U.S. business leaders, politicians and academics as the key to economic health for the long term; this is precisely why the issue of imported Japanese cars is so very sensitive in the United States. In U.S. trade with Mexico, the automobile industry is one of the primary U.S. sectors that has significantly benefited. Since Mexico’s drastic reductions in tariffs in the mid-1980s, the number of U.S. automobile exports to Mexico has quadrupled, while exports in the telecommunications equipment industry--another strategic area for U.S. competitiveness--have doubled. U.S. exports of iron and steel to Mexico, which were running a $12-million deficit four years ago, now register a $300-million surplus. U.S. trade with Mexico in textiles and apparel also has reversed from deficit to surplus.

In short, both American companies and American workers benefit from the Mexican consumer. Mexico already imports $295 per person from the United States--which exceeds the European Community’s imports of U.S. goods by more than 10%--and a free-trade agreement would solidify and further improve this positive trade environment. U.S. firms would enjoy access to 100 million Mexican consumers by the year 2000. And every $1 billion in exports to these consumers means 19,600 new jobs in the United States.

Still, some fear that a free-trade accord would also “export” U.S. jobs to Mexico as U.S. companies establish operations south of the border. This claim misses the central point of transnational operations. As corporations find offshore production necessary for survival, it is no longer a question of whether to manufacture abroad, but rather where to do it. The alternative to cost-reducing foreign operations--one suffered by all too many major U.S. corporations--is going out of business or “downsizing” to a small fraction of the company’s original capacity and employment.

A less obvious benefit from U.S. companies operating abroad is the increased buying power that foreign workers gain. This is where Mexico’s advantages become undeniable. For comparison, consider the effects of an operating strategy in Asia. When American companies opt to build and operate facilities in Asian countries, they employ large numbers of Asian workers, do business with local Asian suppliers and generally stimulate the Asian economy.

How much does this benefit the U.S. worker? Unfortunately, not much. On average, Asian workers spend less than the equivalent of 2 cents of every dollar they earn on American products. So, companies that operate in Asia are generously stimulating demand for Asian products. It’s easy to see where the interests of U.S. workers get lost in the equation.

In Mexico, workers spend six times more on U.S. products than their counterparts in Asia or Eastern Europe. U.S. companies investing in Mexico are fueling demand for American-made products, for both intermediate and finished goods. With operations just across the border in Mexico, American facilities do business with hundreds of local suppliers, either other American companies, or Mexican vendors, whose profits further bolster demand for U.S. products.

In addition to global production strategies, today’s companies are increasingly looking to industry alliances. Thanks to an environment of decreased trade barriers, U.S. and Mexican firms are already turning to these cooperative strategies.

Agribusiness offers a good example. Mexican farmers in Ciudad Obregon, in the state of Sonora, have teamed up with the California-based agricultural firm Tanimura to maintain a constant supply of fresh produce. During the winter, when California vegetable production slows or is dormant, Tanimura now counts on Ciudad Obregon growers to cover shortfalls. The Mexican producers, on the other hand, are benefiting from new technologies for preserving freshness, provided by Tanimura, which enables these growers to serve more distant and sophisticated markets.

These successful endeavors, in addition to the plain, solid fact that increased trade with Mexico has already created thousands of U.S. jobs, offer the best possible argument for free trade.