Look Southward, US the Biggest Trade Opportunities for the United States Aren't with Japan, but with the Newly Opening Economies of Latin America. THE GLOBAL ECONOMY
Richard Feinberg and Peter Hakim. Richard Feinberg is executive vice president of the Overseas Development Council. Peter Hakim is director of the Inter-American Dialogue., The Christian Science Monitor
THE market-opening objectives that were sought in vain by President Bush on his recent foray to Japan should be pursued closer to home - in Mexico and the rest of Latin America - where they are far more easily attainable. Mexico is ready to sign a North American Free Trade Agreement (NAFTA) with the United States and Canada, providing for reciprocal reductions in import and investment barriers, and most Latin American countries are eager to follow suit.
Americans, even those who should know better, tend to spurn Mexico and Latin America as a collection of poor countries without much economic importance for the US. They think Japan is where the commercial action is - where the high-profit markets are to be found.
Americans need to get the facts right. The US actually sells more to Latin America each year than it does to Japan - and more than one-half of those sales are destined for Mexico.
Living on less than one-tenth the income, the average Mexican spends nearly as much per year on US products as the average Japanese (about $300 versus $400). Not only is Mexico already a booming market for US goods and services - prominently including Detroit's automobiles - but the potential for expansion is also enormous, probably greater than that of Japan.
In the first place, Mexico - along with most other Latin American countries - is just beginning to recover its economic dynamism after a prolonged slump that forced imports, wages, and public spending to contract sharply.
Following a painful economic restructuring, Mexico has established a sound strategy for sustained growth that will require stepped-up purchases from abroad - most of which will come from the US. For each dollar that Mexico spends on imports, almost 70 cents goes to the US; the comparable figure for Japan is less than 25 cents. Stimulated by a free-trade agreement, an open and growing market in Mexico would mainly benefit US exporters. Not so in Japan, where European and Asian traders would score the most gains from reduced protection.
Just as US sales to Japan mean more jobs for American workers, so do sales to Mexico. Reciprocal market access with Mexico - precisely what we demanded of Japan - is what NAFTA is all about, and it will create employment at home.
Substantial economic changes inevitably cause disruptions, however, and some American workers will lose their jobs. The US government should stand ready to assist these workers generously through, for example, retraining, resettlement allowances, and the like. Rather than opposing free trade with Mexico, labor unions in the US should fight for these kinds of benefits.
Economic advantage is a powerful reason for Washington to pursue a free-trade pact with Mexico. …