Despite Expressions of Optimism, NAFTA Ratification Is In Trouble

July 18, 1993|By JOHN M. McCLINTOCK

he proposed North American Free Trade Agreement (NAFTA)creating the world's largest trading bloc is in trouble.

While U.S. negotiators bravely predict Congress will enact it by January 1, the best estimate puts passage in the middle of next year -- if ever.

Corporate America's long-cherished dream of establishing a tariff-free zone between the United States, Canada and Mexico is in danger of being eclipsed by President Clinton's domestic agenda.

Free traders are trying to get the president to hire a super salesman to give NAFTA greater visibility. One adviser half-hysterically suggests the movie star Debra Winger.

But NAFTA is, after all, the cranky, complex child of President George Bush, the first chief executive to promise real change in Latin American economic relations since Franklin Roosevelt.

Mr. Bush envisioned the first-world economies of the United States and Canada joining Mexico's struggling 85 million people. Then, with the blessing of every multinational worthy of the name, Mexico would be embraced by the American economy 30 times its size.

To give the relationship some domestic scale, a recent economic report said the deal was equivalent to Los Angeles County having a trade alliance with the United States.

The actual written agreement -- the size of the Manhattan telephone directory -- now faces "a steep uphill climb" in the House, says a key adviser who once predicted easy passage.

The snag, he says, lies with Mexico's refusal to accept sanctions against partners who circumvent labor and environmental laws to gain unfair trade advantages.

"Without adequate sanction mechanisms, I can guarantee to you that NAFTA will be stillborn," said the House adviser.

Senate support for NAFTA, once considered a certainty, is now beginning to waver, especially among senators from border states where laid-off workers perceive -- wrongly -- that the job market is being flooded by illegal Mexican immigrants. (The immigrants generally perform menial tasks the laid-off worker would shun.)

Some say that Congress is beginning to reflect an anti-Mexican backlash from voters who fear NAFTA will put their jobs on the line, especially if the jobs require little skill. Money to retrain workers laid off by the agreement remains an idle promise, they say.

As for what life would be like once the trade pact is passed by Congress, Mexico points to a surge in jobs already caused by foreign investors anticipating NAFTA's enactment.

In fact, Mexico lost 1.5 million jobs between 1991 and 1993, as measured by the number of workers paying into the Mexican Social Security system.

As for Mexico's claim that the foreign investment is trickling down to the masses, a recent article in Financiero, the distinguished Mexico City daily, estimated that 60 per cent of the nation's gross domestic product is in the hands of 27 wealthy individuals or holding companies.

As for the great benefits to the U.S. and Canadian economies, a study by the U.S. International Trade Commission estimates that gains in real gross domestic product will be 0.5 percent or less, while Mexico's gains may be as high as 11.2 percent.

About the only good sign for NAFTA is David R. Gergen's appointment as Mr. Clinton's counselor. A former Reagan spokesman and moderate Republican, Mr. Gergen hopes to convince Mr. Clinton to put NAFTA on the front burner.

The trade pact is a key test of Mr. Clinton's credentials as a "centrist Democrat," he argues, one that will allow the president's statesmanship to upstage the likes of Ross Perot, who believes NAFTA will mean the loss of thousands of jobs to low-wage Mexico.

Two other key players may also be able to reverse NAFTA's gloomy future.

President Clinton is about to appoint James R. Jones as his ambassador to Mexico.

Mr. Jones, an old Clinton ally and ex-Oklahoma congressman, is currently president of the American Stock Exchange.

Another high-powered wheeler dealer, Robert S. Strauss, is being mentioned as NAFTA's super salesman to Congress.

Mr. Strauss, the former chairman of the Democratic National Committee and Mr. Bush's ambassador to Moscow, is said to be wary of accepting a post that could divide the party and end in failure.

Whatever the mix of players, the chance of NAFTA being enacted before next year is "about 20 percent," says John Bailey, a Georgetown University government professor who specializes in Mexico.

"I know the Mexicans and the State Department all say otherwise, but I just don't see it happening so soon," said Dr. Bailey, who supports the trade agreement. Whether it will ultimately fail remains to be seen, he says.

A federal court has also thrown a monkey wrench into the timetable for NAFTA's acceptance.

Earlier this month, the court ruled that the administration must assess NAFTA's impact on the environment, a complicated process that could take months. The administration hopes to have the ruling reversed on appeal in September.

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