NAFTA Benefits for U.S. Only ‘Modest,’ Report Says

The Clinton administration conceded Friday that the controversial North American Free Trade Agreement has produced only “modest” benefits for the United States so far, but rejected claims by critics that the pact is hurting U.S. wages and jobs.

In a 140-page report to Congress, the White House argues that NAFTA has caused increases in U.S. exports to Mexico, along with higher income, investment and jobs on both sides of the border as Mexico carries out its promises to reduce barriers to investment and trade.

“This report provides solid evidence that NAFTA has already proved its worth to the United States during the three years it has been in effect,” President Clinton said in a letter to lawmakers. “We can look forward to realizing NAFTA’s full benefits in the years ahead.”

At the same time, the document forgoes much of the high-flown rhetoric that senior administration officials used in 1993 as they were persuading Congress to approve the sweeping accord, which affects trade and investment between the U.S. and Canada and Mexico.

The report estimates that increased trade with Mexico under the pact has created a relatively scant 90,000 to 160,000 new U.S. jobs--far fewer than the hundreds of thousands Clinton had promised --and says there is no way to calculate accurately how many jobs may have been lost.

Despite its low-key tone, the review is likely to provide ammunition for both sides in the NAFTA debate, which has become more and more strident in recent months. Opponents contend the accord has hurt U.S. workers and resulted in continued damage to the environment.

The administration is expected to ask Congress in September for new “fast track” authority to negotiate similar trade pacts with Chile and other Latin American countries, and to hammer out broader trade accords under the auspices of the Geneva-based World Trade Organization.

NAFTA was a bipartisan venture. Negotiations were conducted by the Republican Bush administration. Democrat Clinton embraced the pact when he took office, but ignored it for several months while he concentrated on domestic issues. The agreement became effective in January 1994.

The initial strategy behind the accord was to keep Mexico heading toward a free-market economy, reducing its trade and investment barriers and dismantling its huge, inefficient state-run enterprises, as U.S. officials had been urging for years.

During the last several years, however, the accord has become embroiled in a battle over job creation, with labor groups saying it has caused an exodus of U.S. firms that want to take advantage of cheaper labor costs in Mexico. Friday’s report rejects such contentions.

Critics of NAFTA lambasted the report. “Instead of a candid evaluation of NAFTA’s costs and benefits, it’s a sales job again,” Jeff Faux, president of the labor-backed Economic Policy Institute, said in an interview. He called the review “disappointing.”

Last month, Faux’s EPI and a coalition of five other groups opposed to NAFTA issued their own study, concluding the accord has reduced wages and living standards in all three countries, and weakened workers’ bargaining power.

The administration’s report says little about labor rights and environmental protection--issues addressed in side agreements that were part of the NAFTA accord. In both cases, all three governments are still setting up the machinery to carry them out.

The White House report makes these points:

* The volume of trade between the U.S. and its major trading partners, Canada and Mexico, has surged 44% since NAFTA was signed, compared to a 33% gain in trade between the United States and the rest of the world.

* U.S. exports to Mexico grew at a “modest” pace, rising $12 billion in 1996, after factoring out the impact of Mexico’s 1995 financial crisis, with imports growing by $5 billion.