FEDERAL District Judge Charles Richey's ruling last week requiring an environmental impact statement on the North American Free Trade Agreement (NAFTA) could be a blessing in disguise for the Clinton administration. If the ruling forces tougher environmental protections on NAFTA, the deal will be easier to defend. And if Judge Richey's ruling kills NAFTA, it will spare the administration political responsibility for a dubious trade agreement.
Even before the ruling, NAFTA-watchers in Congress and the administration put the odds of the agreement's passage at less than 50-50, particularly in the House. Congressional Democrats have scant political reason to support NAFTA and strong reason to fear that it will cost their constituents jobs.
Ross Perot's attack on NAFTA strongly resonates with precisely the working-class Democrats whom Bill Clinton needs to hold in 1996 and whom congressional Democrats must retain in 1994. If NAFTA does squeak through, it will depend on an odd coalition of Republicans and conservative Democrats, with most Democratic legislators in opposition.
NAFTA was the brainchild of the Bush administration. It was intended to extend the 1988 free-trade deal with Canada to include Mexico; this would shore up pro-American Mexican leaders such as current president Carlos Salinas, as well as the ++ broader free-trade ideology.
By eliminating most trade barriers, NAFTA would undoubtedly increase U.S. investment in Mexico. But it is far from clear that it would produce net economic gain for the United States. The basic problem is low Mexican wages combined with rising Mexican productivity.
The U.S. sponsors of NAFTA imagined low-wage jobs migrating to Mexico and higher-wage jobs expanding here. But Mexico produces numerous products requiring advanced technology and skilled workers. It is already the world's leading exporter of auto engines.
Unfortunately, Mexican factory workers, using the same production technology as their American counterparts, are paid between one-seventh and one-tenth of U.S. wages. As a result of Mexico's high unemployment rate and high birthrate, workers are so plentiful that wages remain depressed even as productivity rises.
Therefore, the shift of jobs and capital to Mexico will not be offset by increased Mexican purchases of American products -- which few Mexicans can afford to buy. The more likely result is a net job drain and continued pressure on Americans to lower their own wages lest more jobs move south.
