Herald a Glorious Market--From Yukon to Yucatan : Reforming a trade relationship ‘driven more by accident than design’

International trade agreements can be fiendishly complex under the best of circumstances. And the intense political spotlight on the historic North American Free Trade Agreement certainly did not make for an ideal setting for negotiations. Despite these circumstances, good work was done in drawing up parallel agreements to deal with labor and environmental concerns arising from the pact. NAFTA should now be approved by Congress.

The parallel agreements, announced last week by U.S. Trade Representative Mickey Kantor, were negotiated because President Clinton insisted on them as a condition for moving forward with the trade initiative, begun under George Bush. NAFTA would, over the next 15 years, phase out tariffs and other trade barriers among the United States, Mexico and Canada, creating the world’s largest free market--sprawling from the Yukon to the Yucatan, with a population of 360 million and production worth $6.4 trillion or more per year. A good deal by any standards. But many Clinton supporters in organized labor and environmental groups were dubious about a free trade agreement worked out by a Republican administration.

Among those NAFTA critics were sincere doubters looking for guarantees that economic growth stimulated by NAFTA would not create environmental problems, especially along the U.S.-Mexico border. Others sought to mitigate any economic dislocations, such as factory closings and other sources of job loss, that might be caused by U.S. companies relocating all or part of their operations to Mexico. They should be assuaged by the structures created under the parallel agreements. These establish trilateral trade and environment commissions, with full-time staffs, to monitor environmental and workplace standards and to handle complaints from any parties, whether governmental or non-governmental. The commissions will have the power to resolve disputes, through trade sanctions if necessary.

Unfortunately, among NAFTA’s critics there are also groups not really interested in solving potential problems with the pact; instead, their interest lies in sabotaging it. They include knee-jerk protectionists determined to insulate U.S. industries and trade unions from international competition and a few extreme environmentalists who would halt economic development in regions like the borderlands, as if keeping Mexico poor were somehow conducive to cleaning it up.

One outspoken NAFTA critic worth special note is Ross Perot, the former presidential candidate and perpetual gadfly. Perot’s opposition is strictly political. He sees NAFTA as a handy issue if he runs against Clinton in 1996. Perot is trying to recast the complexities of foreign trade in simplistic, pseudo-patriotic terms, claiming NAFTA will create a “giant sucking sound” as U.S. jobs flow south of the border. In fact, U.S. jobs are already leaving the country--and going much further away than Mexico--because of major economic readjustments taking place all over the world. If anything, NAFTA will better equip all three countries to compete in that new world economy by making it easier to combine their strengths and work together.

The best rejoinder to Perot comes from a fellow Texan, Treasury Secretary Lloyd Bentsen, who argues that if NAFTA creates any sucking sounds they will be caused by the rush of more U.S. goods en route to be sold in Mexico.

In the last five years alone U.S. trade with Mexico has tripled to $70 billion. Kantor made note of that when he announced the parallel agreements, and he pointed out that rather than create a new trading system NAFTA would “reform a trade relationship that has been driven more by accident than design.”

In the end, that is the strongest argument for NAFTA--one that Clinton must use to sell the pact not just to Congress but to the American people, counteracting Perot’s folksy sophistry. The claimed negative effects of freer trade, like job losses and ecological problems, are more likely to occur when trade evolves haphazardly and without any effort at fairness or openness. By making the system fairer and more open, NAFTA will help regulate a process already well under way, and impossible to stop.

Growing Nicely

U.S. balance of trade with Mexico since 1986 ‘92: $5.4 billion Source: U.S. Dept. of Commerce