Pluses, Minuses of Free Trade With Mexico
But impact on US jobs must be taken into account
AN uneasy confrontation is developing in Washington's international-trade arena as lawmakers begin debating the merits of a Free Trade Agreement (FTA) involving Mexico, Canada, and the United States. Since the US already has an FTA with Canada, the debate really revolves around Mexico. Few question the long-term macroeconomic benefits that will come from a North American FTA. The enthusiasm of those who are free to focus solely on the big picture is understandable.
But in the Congress, where the voice of the people is heard, serious concerns about the regional, sectoral, and individual effects of the proposed agreement are being raised. President Bush and his trade advisers would do well to listen carefully.
Among the important considerations the administration has refused to address so far is the impact an FTA will have on America's working middle class.
For many manufacturing workers, particularly those in the heavy industries of the Northeast and Midwest, an FTA involving Mexico very likely will mean lower wages and fewer benefits. For some, it will mean a loss of jobs altogether.
Bush administration officials aren't going to advertise that fact. But they don't deny it. They just talk around it.
They say they don't believe that jobs will ``tumble South'' right away. They talk about a long phase-in period for any job-threatening provisions of the agreement. They say that in the long run the FTA will be good for the economy overall and will create new jobs.
And somewhere in all the happy talk, the reality of an FTA's impact gets obscured. Congress can't let that happen.
US manufacturing workers have suffered a serious decline in real wages over the last decade. A study by the Economic Policy Institute shows that during the 1980s the average hourly real wages of American workers fell by 9.3 percent. An FTA negotiated under the narrow parameters set by the White House will almost certainly lead to future situations where workers are forced to accept wage and benefit cuts or see their jobs move south.
In our global economy, plant location decisions affecting American workers are frequently made in the faraway board rooms of multinational conglomerates by number-crunching strategic planners looking for the lowest costs - components of which are the lowest wages and the ``friendliest'' regulatory climate. Common sense tells us that US manufacturing workers, whose wages average $10.47 per hour, will lose out to Mexican workers, who average 57 cents an hour. America's more vigorous enforcement of environ mental and health and safety regulations will further reduce US attractiveness to bottom-line-oriented decisionmakers when compared to Mexico's lax enforcement record.
These are simple facts of life. In view of them, the US government owes American workers an honest assessment of the costs as well as the benefits of an FTA. It owes American workers a carefully negotiated agreement which accounts for the disparities in environmental and labor-standard enforcement. And it owes American workers adjustment assistance when the realities of the FTA hit home.
Mexico, Canada, and the US are moving toward this agreement awfully fast. US officials want to start negotiations in June, finish them six months later, and get the agreement passed into law by early next year. By contrast, it took two years for Canada and the US to negotiate an FTA.
President Bush has asked Congress for an extension of his fast-track negotiation authority, which expires June 1. As written, the law authorizing the fast-track process applies to both bilateral negotiations like the FTA and multilateral negotiations like the recently revived GATT talks. Efforts are being made to find a way to delink the two processes.
If Congress can say no to an extension of fast-track authority for the FTA but yes for the GATT, it very well may do so. But, if the two issues cannot be separated, FTA opponents may have no choice but to reject extending the fast track altogether.
Sacrificing the GATT talks would be devastating to our standing in the world trading community. To avoid it, the Bush administration will have to quell congressional fears about the impact of an FTA with Mexico. Like it or not, that means slowing down the process and broadening the agenda.