Bush Urges Passage Of North American Free-Trade Pact
Congress must ratify, and opponents say it will hurt US workers; experts' studies on effects differ dramatically
AGAINST the backdrop of the White House Rose Garden, President Bush unveiled a North American free-trade agreement yesterday that he hopes will put the bloom back on his reelection campaign.
The trade pact, which Mr. Bush called "historic," would lower trade barriers between the United States, Mexico, and Canada, and create the largest trading block in the world.
Congress still must ratify the deal, however, and opponents were quick to question whether it will protect US workers and consumers. They also raised warning flags about possible damage to the environment if companies move thousands of factories to Mexico, where regulation of air and water pollution is comparatively lax.
The deal was inked after months of negotiations, including a final day-and-night effort that began July 29 at the Watergate Hotel in Washington.
Bush clearly wanted an agreement as quickly as possible, and it was reached at a propitious moment on the eve of the Republican National Convention in Houston.
Under fire because of a stagnant economy and high unemployment, Bush emphasized in his Rose Garden remarks that the trade agreement should create jobs for Americans.
"This historic trade agreement will further open markets in Mexico, Canada, and the United States," he told reporters. "It will create jobs and generate economic growth in all three countries."
Like other members of his administration, Bush hopes that exports will raise corporate profits and put new zip into the business community, which lost momentum in the late 1980s. He explained:
"Open markets in Mexico and Canada mean more American jobs. Our nation is the world's leading exporter - well ahead of Japan and Germany. Today over 7 million Americans are hard at work making products that will be sold around the world."
While critics complain that world trade seems to be lowering the wages of Americans, Bush says that export-related jobs pay 17 percent more than the average US wage. "These jobs are the kind that our nation needs to grow and prosper - the kind that showcase American talent and technology," he says.
Nationwide, 2.1 million US jobs rely on exports to Canada and Mexico. Exports are one of the few parts of the economy to experience growth recently.
The North American Free Trade Agreement (NAFTA) will eliminate all tariffs over a transition period, including barriers to agricultural products, manufactured goods, and services. A White House fact sheet says it will also provide effective protection for intellectual property rights, such as patents, and remove restrictions on investments.
One of the sticking points in the deal was the treatment of exports of autos. Under NAFTA, only vehicles that contain 62.5 percent North American content will be eligible for free trade. There will be requirements to trace the origin of parts so they can be identified by country of manufacture.
Mexico already imports $3 billion a year in US agricultural products. The agreement will immediately eliminate Mexican import licenses and will phase out all remaining Mexican tariffs over a 10-to-15-year period.
While negotiators completed NAFTA, scholars were busily debating its potential impact on the wobbling American economy.
Agreement is difficult to find. Some economists, such as Gary Hufbauer and Jeffrey Schott of the Institute for International Economics, conclude in a lengthy study that it will boost jobs on both sides of the border.
On the other hand, Jeff Faux and Thea Lee of the Economic Policy Institute argue that the danger of losing jobs, particularly among unskilled American workers, is great. Their report says:
"One can literally choose a study by a technically competent economist to support any of the positions in the NAFTA debate - that the agreement will destroy jobs, create jobs, or have no appreciable impact on jobs. And indeed, the estimates range from net job losses in the United States of 900,000 to net job gains of 130,000."
Organized labor in the US is frightened that low-wage Mexican workers, who often make just $1 an hour, will depress American wages. Already some large manufacturers, such as Ford Motor Company, have moved factories to Mexico, where they are producing products like Mercury Tracer and Ford Escort automobiles.
A key figure in the coming debate on NAFTA will be House majority leader Richard Gephardt (D) of Missouri. Mr. Gephardt is close to organized labor and an intractable political foe of Bush. And he has made defeating NAFTA a top priority.
Echoing labor's concerns after Zenith moved its TV plant to Mexico, Gephardt observed: "Each time this occurs, families lose wages, health benefits, and the means to meet their mortgages.... That's why real people have real concerns about ... NAFTA...."