Small IMpact on State from Trade Agreement Foreseen

Article excerpt

By Bill May

Journal Record Staff Reporter

A North American Free Trade Agreement, creating a free market among Canada, the United States and Mexico, would have little impact on Oklahoma's economy, a pair of economists said Monday.

In some areas, such an agreement would have a positive impact while in other areas the impact would be negative, resulting in an economic situation about the same as the one which exists today.

Those are the conclusions of Gerald M. Lage and Andreas Savvides, economics professors at Oklahoma State University. Their conclusions are contained in a report "The Economic Impact of the North American Free Trade Agreement on the Oklahoma Economy" released Monday.

It was prepared at the behest of Larry Bowles of the Halliburton Inc. office in Washington, D.C., Lage said Monday during a telephone interview from his Stillwater office.

"This is not something you can look at and come up with a simple answer," he said. "It was prepared for people who are willing to think in terms of a major impact on the Mexican market which will grow over a period of time, and Oklahoma will share in that.

"Of course, since Oklahoma now exports about one-half the national average to Mexico, our conclusions are that Oklahoma's share would still be about one-half the national average."

This estimate is based upon exports to Mexico, because there are no figures with which to track imports from Mexico, he said.

Biggest impact on Oklahoma's economy, Lage said, is that as Mexico's economy begins to grow and residents there begin to import more products from the United States, Oklahoma will prosper and create jobs along with the rest of the nation. But no longer will illegal aliens flock to the United States from Mexico in search of job opportunities.

Other than this, Oklahoma's biggest opportunities lie in exporting manufactured goods, wheat and cattle to Mexico.

"Mexican imports of wheat are expected to rise considerably by the time of full implementation of the agreement in 15 years," the report read. "Also, U.S. exports of wheat are expected to rise further and faster immediately following implementation because of rising demands to feed expanding Mexican livestock herds, as corn imports remain tightly constrained by high transitional, above-quota tariffs."

Oklahoma's share of this increased trade is expected to total about $4.1 million annually, with 38 percent of that going to the farmer.

Mexico should prove to be a valuable market for United States beef with implementation of this agreement, the professors reported.

"No estimates are available to attribute cattle and beef sales to individual states, but the Oklahoma share of all livestock and meat products was 0.6 percent of U.S. exports," the report read. "The value attributed to Oklahoma has ranged from $12 million to $18 million over the last three years."

One area in which Oklahoma's expertise would be expected to show up is in the oil and gas industry, but under the proposed agreement, this won't happen.

Exploration, production, refining and distribution all are expected to remain under Pemex, a government-owned monopoly, even under the new trade agreement. But there will be a huge equipment investment which will be open to United States and Canadian companies. Analysts predict that the Mexican company will spend $4 billion per year for the next five years to meet production targets. The proposed agreement provides that 50 percent of these expenditures be open to foreign companies. …