There's Something in the Trade Wind

By Silber, Kenneth | Insight on the News, April 5, 1993 | Go to article overview
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There's Something in the Trade Wind

Silber, Kenneth, Insight on the News

Summary: It's getting to be crunch time for the North American Free Trade Agreement, which was reached in August but faces many obstacles before it can take affect. The crucial factor may be how strongly the Clinton administration pushes for the pact, which has special interests lined up against it.

When Bill Clinton moved into the White House in January, he inherited from George Bush a 2,000-page, half-foot-thick document called the North American Free Trade Agreement. NAFTA, as it's commonly known, is a deal to knit the United States and Canada (which already have a free trade agreement) together with Mexico into the world's largest trading bloc.

Economists overwhelmingly agree that the deal, which would eliminate trade barriers within North America over a period of 15 years, will stimulate growth, benefiting consumers and producers in all three countries. But special interests have been baring their fangs over it, and the Clinton administration is walking a tricky line between supporting free trade and placating the various labor unions, environmental groups and companies that are hostile to the agreement.

Hoping to defuse the opposition, the administration is entering negotiations with the governments of Mexico and Canada on additional agreements concerning workers' rights, environmental standards and other issues. Some proponents of free trade, however, fear that the supplemental talks will create new trade barriers between the three countries, defeating the purpose of the original agreement.

The trade agreement, reached in August, is to take effect on Jan. 1, but must first be ratified by Congress -- and many observers note that congressional animosity toward free trade has strengthened in the past year. House Majority Leader Richard Gephardt, for example, is a leading -- and vocal -- opponent of the deal. While U.S. Trade Representative Mickey Kantor told the Senate Finance Committee in mid-March that he was optimistic that the pact would be ratified this year, it's still not clear how high NAFTA ranks on the administration's list of legislative priorities, or how willing Clinton is to go to the mat over it. And with organized opposition to the deal becoming more strident, there's growing sense of doubt that NAFTA will ever be signed into law.

That's due in part to Clinton's wobbly support. In October, candidate Clinton gave NAFTA only a qualified endorsement, saying that as president he would negotiate stronger protections for workers and the environment. This statement came after several weeks in which Clinton, refusing to take a stand on the pact, was accused by the Bush campaign of "waffling."

Since the election, there have been repeated reminders that NAFTA is a highly charged political issued for the president. Just prior to the inauguration, Clinton met with Mexican President Carlos Salinas de Gortari in the mansion of Texas Gov. Ann Richards. While Clinton reassured Salinas that he would move to put NAFTA into effect once the supplemental accords had been negotiated, demonstrators outside chanted "No free trade!" and held up signs with messages such as "Free Trade = Slave Trade."

In February, a controversy arose over an investment fund set up to purchase small U.S. manufacturing companies and move them to Mexico. AmeriMex Maquiladora Fund L.P., a private partnership partly financed by a Mexican government development bank, was denounced by Gephardt for "stealing American jobs." Under pressure from Kantor, Mexican officials hastily announced that the development bank would withdraw from participation in the fund.

The issue of jobs has been central to the debate over NAFTA. Opponents of the pact argue that dismantling trade barriers would encourage U.S. companies to relocate to Mexico to take advantage of lower wages. Supporters assert that the agreement, by raising exports and spurring economic growth, would create more jobs that it would eliminate.

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There's Something in the Trade Wind


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