PERSPECTIVE ON NAFTA : Coming to Terms With a Neighbor : This isn’t about jobs; it’s about whether the U.S. will be a smart player in trade relationships or retreat to protectionism.

The only good thing about the public debate over the North American Free Trade Agreement is that it will soon end. The debate on both sides has been characterized by demagogic posturing, exaggeration, misleading arguments and outright lies. The key question--whether NAFTA is in the national interest of the United States--has been lost in the shuffle.

Contrary to the claims of both proponents and opponents, NAFTA is not mostly about jobs. Jobs gained and jobs lost, according to practically every authoritative study, are likely to be in rough balance. Even the most pessimistic analysts foresee gross job losses over five years of no more than 500,000; by comparison, almost 9 million jobs were lost in the United States between 1985 and 1990.

This is not to minimize the very real human costs of those jobs that will disappear. But job loss and job creation are natural occurrences in a healthy economy adjusting to changing technological, cultural and competitive circumstances. Jobs lost because of NAFTA are no different from jobs lost because of lower military spending, robotization or any of dozens of pressures shaping the economy at any moment. The challenge to policy-makers is to design strategies that make American workers and capital competitive enough to prosper in an increasingly globalized world economy. Arguably, that is an essential part of the rationale for NAFTA.

In some ways, the most dangerous aspect of the NAFTA debate as it has unfolded is the assertion that Mexico’s low wages constitute an unfair trade advantage. Acceptance of that notion would turn post-war U.S. trade policy on its head. It implies that the United States should seek to trade only with countries whose wages are more or less the same as ours, thereby forgoing the manufacturing output of all of the developing world and much of the developed.

The absurdity of this new protectionism does not seem to undercut its appeal. It has surfaced in Europe, where French Prime Minister Edouard Balladur recently argued, “The question now is how to organize to protect ourselves from countries whose different values enable them to undercut us.” Unfortunately, this proposition would probably find considerable support in parliaments and factories (and even some boardrooms) across the industrial world. Balladur’s rhetoric points toward the never-stated conclusion of NAFTA’s opponents: Its mere defeat would not be enough to achieve their goals. If low-wage producers are a threat to American jobs and living standards, then, they will eventually argue, the United States should shut itself off from their products.

This is bad economics and would be worse public policy. Forty-five years of gradually freer trade and the steady internationalization of its economy has served the United States well, producing wealth, jobs and one of the highest living standards in the world.

But to define NAFTA entirely in the context of jobs and wages is to miss the basic point. NAFTA needs to be understood--and accepted or rejected--in a broader political context.

Fundamentally, the North American Free Trade Agreement is about how the United States will learn to live with a large and serious neighbor on its southern border, a challenge that it has never before had to face. In the past, the United States largely dictated the terms of the bilateral relationship, seldom taking Mexico’s concerns seriously, and Mexico could express its objections only through ineffective posturing and anti-Yankee rhetoric.

Under its current leadership, Mexico has emerged from decades of state socialism and self-absorption and is firmly on a path of modernization. Within a few years, its population will top 100 million. As a result, the United States will have to accept a qualitatively different and considerably more equal relationship. This will require a careful balancing of overlapping--and sometimes conflicting--interests and priorities. NAFTA is, in effect, a first attempt to establish the rules of that new relationship.

What if NAFTA is rejected by Congress? Conventional wisdom holds that Mexico has more at stake than the United States; that Mexican politics and Mexican markets would be unpredictably roiled by NAFTA’s defeat. As usual, conventional wisdom is probably wrong--in this case rooted in a perception of fragility that undervalues the permanence of the dramatic changes of the past years. Indeed, Mexico could emerge from NAFTA’s defeat in better condition than the United States.

For Mexico, NAFTA is one element of a broad, dynamic and well-articulated strategy of modernization; without NAFTA, that strategy would remain largely intact. Mexican leaders may choose to move ahead even more aggressively, implementing elements of the agreement unilaterally and demonstrating to their own people and international markets the basic soundness of their policies.

For the United States, however, NAFTA’s defeat would signal the rejection of its postwar strategy of increasingly open markets and progressively freer trade. It would signal that GATT reform is dead and that the forces of protectionism are on the rise.

Even more important, NAFTA’s defeat would raise doubts in Asia and Europe about America’s ability to define and to act on its own national interest. The Japanese and the Europeans have long since embraced regionalism as one of the essential building blocks of the post-Cold War world. For them, NAFTA is an obvious step for the United States, especially at a moment when Latin America is beginning to grow and when market-oriented democratic reforms are spreading throughout the region.

If the United States rejects this opportunity to engage its newly interesting neighbors, the country’s wisdom, reliability and predictability will be questioned, even by its friends. The already complicated task of forging new international rules and relationships to replace those designed during the Cold War will be further complicated.

Ultimately, this is what is wrong about the way the NAFTA debate in the United States has been conducted over the past months. NAFTA is not primarily about jobs; rather, it is about beginning to define how this country will relate to the rest of the world in the years ahead.

If the United States cannot construct a mutually beneficial, forward-looking relationship with its most interesting neighbor, what kind of partner will it be for anyone else?