After All the Talk, NAFTA Will Be About Vision

Even in this hot, muggy capital, the North American Free Trade Agreement with Mexico is raising the temperature.

Frequent demonstrations on Capitol Hill put Congress on notice that NAFTA has considerable opposition among U.S. voters. And Congress doesn’t need reminding; the latest political judgments here, notably by Budget Director and former Congressional power Leon Panetta, say NAFTA would fail if put to a vote today.

The new Mexican ambassador, Jorge Montano, agrees that it would fail, and so does Rep. Robert Matsui (D-Sacramento), who will guide the NAFTA legislation on the House floor later this year.

Nonetheless, NAFTA will probably pass. Its salvation is that there won’t be a vote in Congress until fall. And by that time, labor and environmental side agreements will be concluded with Mexico and Canada and President Clinton will be leading the drive for passage--”I strongly support it,” Clinton said of NAFTA to an Iowa radio audience last week.

But if it’s all so predictable, why so much heat now? Because NAFTA and other issues, such as economic aid for Russia and the trade status of China, mark the start of a new era for the United States.

After World War II, the United States used economic policy to support other countries, move their systems toward democracy and fulfill its own vision of a better world.

But with the Cold War over, there’s a debate on about the proper focus of the American vision: Should it continue to help others or look to concerns closer to home and tell other countries to shape up on their own? As America is still the moral and political leader of the world, the NAFTA debate is about more than economics.

Smart people in Washington and Mexico City are worried. S. Linn Williams, a Washington lawyer who was a U.S. trade representative in the Bush Administration, sees a historic parallel. “I see a turning inward as after World War I,” he says. “It’s a tense time, with Russia looking like Germany in 1922, China emerging, and nations looking for guidance. It would be a tragedy if the U.S. turned inward.”

From Mexico City, economist Rogelio Ramirez de la O sees a parallel with England, where he studied at Cambridge. “The U.S. reaction to NAFTA shows it is in decline, as England was early in this century when it began to look inward,” Ramirez says. His opinion is colored by his knowledge that NAFTA is critical if Mexico is to consolidate the economic reforms of President Carlos Salinas de Gortari and move toward multiparty democracy from the one-party rule that has governed the country for 60 years.

Big issues, heavy talk. But ironically the issues were best defined by Rep. Richard Gephardt (D.-Mo.), a supposed foe of NAFTA, in a speech here last week. Of course the United States must be involved in the world, must help Russia, he said. And NAFTA will be in “our deep best interest,” if it is concluded with a clear understanding of what’s in store for the American people.

On trade that’s no problem. A U.S. trade surplus with Mexico has grown since 1988 when the promise of NAFTA began lifting Mexico out of its 1980s depression. U.S. exports to Mexico have doubled to more than $40 billion, while imports have risen to about $36 billion. Prospects are powerful as a new growth market develops in Mexico.

On jobs, though, let’s be clear that free trade with a growing Mexico will create some and displace some. This is already explained in detail in a study the U.S. International Trade Commission handed to Congress in January. In industrial machinery, for example, where big investments are needed to produce farm tractors and food refrigeration equipment, U.S. exports will continue to grow rapidly, creating jobs in many Midwestern communities. The same goes for electronics and computers and telecommunications equipment, which are produced all over the United States.

But in home appliances, it will make sense to produce close to the market as Mexicans spend their higher wages on new washers and refrigerators. “A 5% to 10% decline in U.S. production and employment is likely,” says the Trade Commission, “especially in the Midwest.” Yet that very increase in Mexican sales and production will enhance the global competitiveness of Whirlpool, Maytag, General Electric and other producers.

Fine, says Gephardt, let’s see what we can do to offset production declines at Maytag in Newton, Iowa, Whirlpool in Benton Harbor, Mich., and GE in Louisville, Ky. And also ask how the increased global competitiveness that Mexican business will bring these companies can translate into new jobs for displaced U.S. workers.

With NAFTA, as Gephardt knows, the United States begins to do in the Western Hemisphere what it did in Europe and parts of Asia after World War II--help others to reach for the American dream so that dream can keep flourishing here at home.

The prospect offers tremendous opportunity--and if the American people understand that, they will support NAFTA. But if they remain suspicious, NAFTA won’t get the votes now, or in the fall. And that would be a historic tragedy.