NAFTA Is Not Afterthought to U.S. Policy : Trade: Growth depends on finding new markets; delay on the pact would be death blow.

In the single-minded rush to pass its domestic economic program, the Clinton Administration may deliver a fatal blow to the most important hemispheric agreement of the past 30 years: the North American Free Trade Agreement.

Killing NAFTA through delay is a major mistake: The pact would produce a bigger and more sustainable boost to the U.S. economy than the stimulus program on which the Administration unsuccessfully spent so much capital; failure to ratify it will squander a historic opportunity to improve cooperation on a broad range of economic and political issues.

Treasury Secretary Lloyd Bentsen has said that congressional consideration of NAFTA should be delayed until passage of the President’s economic program was assured, which is unlikely before fall.

Unfortunately, time is the enemy of NAFTA. Canadian populists have been fanning the flames against the Canadian-U.S. Free Trade Agreement for years, despite substantial empirical evidence that it has provided a significant boost to the Canadian economy. The upcoming Canadian elections provide an opportunity to foster this sentiment.

Mexico’s President Carlos Salinas de Gortari is in a politically sensitive period at the end of his presidency. It is unclear whether a resurgent populist, anti-business element in the ruling party will have any effect on broad Mexican support for NAFTA, but Salinas, at a minimum, will be required to work much harder to maintain a consensus in favor of the agreement. Coupled with the request to negotiate additional side agreements to NAFTA, these internal political concerns will seriously complicate the ratification process in both Canada and Mexico.

Further delay will also aid opponents of NAFTA in Congress. A variety of single-interest opponents would be accorded additional time to work on members of Congress who, at the end of 1993, will already be preparing for reelection campaigns. Additionally, if the Administration follows the Bentsen proposal, there will have already been a series of difficult votes to raise taxes and cut spending that will sap Congress’ strength to oppose constituent interests on a free trade agreement.

Reducing NAFTA to an afterthought to the President’s economic program misses the message of the agreement--that our economic future depends increasingly on finding new markets for competitive U.S. suppliers. Since 1986, U.S. exports to Mexico have more than tripled. Mexicans spend more per capita on U.S. goods than Europeans. Eighty-five percent of all U.S. exports to Mexico are manufactured goods such as computers, auto parts and telecommunications equipment. Fifteen cents of every dollar earned in Mexico is spent on U.S.-produced goods. Mexico is the premier growth market for U.S. suppliers and is the most obvious candidate for trade liberalization as part of a larger growth strategy based on expansion of trade.

Consensus projections of the macroeconomic impact of NAFTA show positive results for both countries. Since the United States will face the dampening of domestic demand as a result of tax increases and spending cuts in the years ahead, we need to create new opportunities for exporters in dynamic economies like Mexico. The Pacific Economic Cooperation Council’s 1992 economic projection for the Pacific region concluded that the biggest danger to a robust growth scenario for the Pacific Basin was failure to complete NAFTA.

In Latin America, NAFTA and the related Enterprise for the Americas initiative gave hope to the reformers of Mexico, Argentina, Chile, Colombia, Central America and elsewhere that their difficult recovery programs would lead not only to domestic gains but also to a sustainable economic and political relationship with the world’s largest consumer market, the United States. If NAFTA founders, a solid pillar of support for economic reform in Latin America will quickly erode.

The Administration needs to embrace NAFTA fully as part of its economic recovery program rather than running from the short-term political pain resulting from the ratification vote.

To endanger this opportunity for political and economic achievement would be a tragedy for North America and would also reinforce the drift toward worldwide protectionism that could result in a recession reminiscent of the 1930s. For the Uruguay Round is clearly in trouble after the French elections, the economic slowdowns in Japan and Germany, and the needlessly provocative criticism of Japan by the Administration. Without some forceful leadership from the United States, the trade liberalization agenda that has served the world well since 1948 will risk collapse.