Newspaper article THE JOURNAL RECORD

Markets Brace for Turbulence Should NAFTA Vote Fail

Newspaper article THE JOURNAL RECORD

Markets Brace for Turbulence Should NAFTA Vote Fail

Article excerpt

Wall Street is bracing for a suspenseful week in the world's financial markets pending action in Congress on the North American Free Trade Agreement.

Most analysts expect the tally to be very close in the U.S. House of Representatives vote Wednesday on a measure to put NAFTA into effect. If the House approves it, it would then go to the Senate.

The most common guess on the Street is that the legislation will pass, in much the same manner that last summer's budget plan squeaked through by the narrowest of margins.

But if those expectations prove wrong, many say the markets will be in for a spell of turbulence.

Beyond the economic pros and cons of the pact, analysts say the situation has taken on great domestic political significance, given the risks President Clinton has taken to try to get it passed and the opposition he has encountered from within his own party.

"The danger lies in its not passing," said Alan Gottlieb, president of the investment management firm of Reynders, Gray Gottlieb in New York. "I think it would have some emotional kick.

"It's largely staking a president's reputation on the outcome.

He's put a lot of chips on the table. The ramifications of that are much more serious than just the treaty itself."

In the view of Thomas Gallagher, political economist at Lehman Brothers, the president "has too much of a stake in NAFTA to let it fail, even if it means making tough deals in Congress.

"It does look increasingly likely that this will be a repeat of the budget vote in the House, with the outcome unknown before the vote actually begins. If NAFTA wins, it will surely be by single digits."

Predicting how the markets will respond on any sensitive issue like this is a dicey proposition. The more obvious and inevitable a given market swing appears ahead of time, the greater the chance that it won't happen the way people think it will.

Still, the NAFTA news promises to ripple through the whole international trading system of stocks, bonds and currencies. …

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