MEXICO CITY -- President Bush notified Congress yesterday that he wants to include Canada in the trade talks with Mexico. If approved by all three governments, a trilateral pact would create the world's largest free-trade zone, with more than 360 million people and an annual production of $6 trillion.
The move came as no surprise, since Canada's inclusion became a near-certainty last summer. Canada already has a free-trade agreement with the United States.
Trade among the three countries currently totals more than $200 billion. Latest figures show $150 billion in annual trade between the United States and Canada, $52 billion between the United States and Mexico and $2 billion between Canada and Mexico.
"A successful conclusion of the free-trade agreement will expand market opportunities, increase prosperity and help our three countries meet the economic challenges of the future," President Bush said after telephoning Mexican President Carlos Salinas de Gortari and Canadian Prime Minister Brian Mulroney.
Hearings begin today before the Senate Finance Committee. The aim is to begin negotiations by early June with a pact ready for congressional approval sometime next year. Non-trade items, such as immigration, human rights, the environment and political concerns, are not on the table.
But the proposed pact is beginning to rouse protectionist sentiment in Canada and the United States, where many fear Mexico's dramatically lower wage rates will create further job losses in industries already hit by the recession.
U.S. industries that could be hurt the most are textiles, steel, citrus and other agricultural products, the auto industry and electronics.
Mexican opponents say the pact will mean the loss of sovereignty to huge multinational companies and that its rich northern partners will demand access to Mexican oil and other resources barred to foreigners by its constitution.
The Persian Gulf war has heightened U.S. interest in developing some formula to permit U.S. investment in Mexico's severely undercapitalized state oil monopoly. But Mexico has resisted for historical and legal reasons.
A U.S. advisory group has already indicated it will oppose a free trade pact if Mexico continues to bar foreign investment in 20 primary petrochemicals now reserved to the state.
President Bush's notification to Congress fulfills a legal obligation to use the "fast track" method of negotiation. Under this system, Congress votes on the the final negotiated pact and has no direct role in the negotiations, thus making the process less cumbersome or likely to fail.
But either the House Ways and Means Committee or the Senate Finance Committee can veto the "fast track" method within 60 legislative days of the president's notification. The 60-day requirement is about to expire in the case of the president's September notification of his intention to negotiate with Mexico. The 60 days in Canada's case will probably expire in late May.
However, the proposed pact's U.S. opponents, notably the AFL-CIO, concede that neither committee is likely to veto the "fast track" method. They are concentrating their attack on a second legislative hurdle -- the extension of the president's "fast track" negotiating authority, which expires June 1 and is subject to a veto by either house.
The opponents believe that the worsening recession in the United States will create a protectionist backlash in Congress.
The AFL-CIO contends that thousands of jobs will be lost to Mexico, whose average manufacturing wage is 60 to 80 cents an hour (as opposed to $12 to $13 in the United States) and where environmental and other employer costs are similarly lower.
As a measure of the protectionist sentiment, foes point to the vote in December by 37 senators who co-sponsored a resolution attacking the "fast track" method. The move stemmed from the European Common Market's refusal to lower farm price supports, but it could be a harbinger of a negative reaction if Mexico refuses to budge on some key issues, such as petrochemicals.
For their part, the Mexicans might find such pressures difficult to endure. The Mexican House of Deputies is up for re-election in August, along with half the of Senate. Extreme U.S. demands, along with the strong anti-gulf war sentiment here, could place President Salinas and his ruling party in a difficult position.