Mexico, US, and Trade

Article excerpt

MEXICO'S president needs to move fast to consolidate his economic reforms. That's why Carlos Salinas de Gortari recently switched his position on a free-trade agreement with the United States and hustled off to Washington to discuss the matter. That's also why Mr. Salinas earlier this week flew to Tokyo, with hopes of attracting further Japanese investment.

As Salinas darts among world capitals, the Mexican economy totters back home - responding, though slowly, to the president's free-market therapy. Its problems include dwindling foreign reserves because of capital flight and a growing trade imbalance; a political culture that makes further privatization of state-run industry extremely difficult; a $95 billion foreign debt that's only being slightly whittled down by debt-reduction schemes; a populace gripped by unemployment and inclined toward leftist political appeals.

It's not surprising that US and Japanese officials and investors remain cautious.

After years of urging Mexico to consider free trade, Washington was taken aback when a Mexican president suddenly took up the offer and suggested that a deal be completed in less than the three years needed to finish the US-Canada trade pact.

The negatives quickly came into focus. US unions, joined by industries wary of "unfair" competition, clamored about the dangers of US jobs flowing toward Mexico's low wages and inexpensively produced goods flowing northward. Such concerns are well founded. …