NAFTA effects will be felt first south of the border

January 01, 1994|By New York Times News Service

MEXICO CITY -- Trade barriers on thousands of products shipped among Mexico, the United States and Canada drop or disappear with the arrival of the New Year, as the North American Free Trade Agreement takes effect.

In the first hours of 1994, the Mexican beer that Canadians drink, the Mexican garlic that Americans eat, the American computers on which Mexicans type and the Canadian Christmas trees that strike Mexicans as remarkably sturdy and green could all become slightly cheaper as tariffs on most goods come down by at least half.

Under the terms of the accord, nearly all tariffs on goods produced and sold in North America will be eliminated over 15 years. U.S. and Canadian banks will be allowed to establish subsidiaries in Mexico, Mexico will open more of its government purchases to foreign bidders, and sales of imported cars in Mexico should shoot up quickly from their level of only 5,000 a year.

New Mexican rules will encourage foreign investment, and new arbitration panels will be set up to resolve trade disputes among the three countries.

Prodded by the threat of international sanctions, Mexico will take a series of new steps to insure that it does not become a haven for polluting industries because of lax enforcement of its environmental standards.

But for all of the apocalyptic visions offered by both opponents and supporters of the agreement in the United States, economists say its most important benefits -- more jobs and higher wages for Mexican workers, hungry new markets for U.S. goods, and a waning of illegal Mexican immigration -- will probably not be felt for years.

Indeed, in Canada and the United States, the short-term impact on businesses and jobs may well be negligible. Mexico will feel the accord more and more quickly, because its likely effects will range from greater U.S. influence on Mexican politics and culture to billions of dollars in new foreign investment.

Yet along with more Wal-Marts, Pizza Huts and True Value Hardware stores from Tijuana to Cancun, the trade accord will place sharp new competitive pressures on Mexico's sluggish economy just as the country turns toward a presidential election in August that is likely to focus on economic issues.

After a decade's painful adjustment as Mexico suffered through the Latin American debt crisis and then began opening its borders to foreign imports, political and economic analysts believe the trade deal on which President Carlos Salinas de Gortari has staked Mexico's economic future might even disappoint some of his countrymen in the months ahead.

"I think 1994 is going to be a very difficult year," said Dr. Soledad Loaeza, a political scientist at the Colegio de Mexico, a leading research institution here.

"The government won't be able to show people the real benefits of NAFTA next year, and it has raised expectations so high," Dr. Loaeza noted. "Do you ask people to be patient in an election year? People have been patient for 10 years now. They are tired."

Weeks before the accord was approved Nov. 17, Mr. Salinas began a concerted effort to deflate the promises he used to persuade Mexicans to join their more powerful northern neighbors. The trade pact would not be "a panacea," he began telling Mexicans, repeating again and again that only hard work would assure them a more prosperous future.

The government has taken few steps, however, to prepare smaller and medium-sized companies, poor farmers and inefficient industries for the new competition.

Even after a wave of industrial restructuring that cost half a million Mexican jobs, worker re-training programs are almost non-existent.

A new subsidy program has been established to entice peasant farmers away from less competitive crops like corn, but most of them still have little notion of how they might grow and sell grains or vegetables that might find markets across the border.

And manufacturers, who must re-equip their plants to compete with larger, more efficient producers abroad, still have trouble finding commercial bank loans at interest rates below 25 percent.

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