Free Trade Talks Focus on U.S.-Mexico Differences

MEXICO CITY — Mexico City.--It was a most un-Japanese thing to do.

The Japanese legislator was a guest of the Mexican Senate last summer. His hosts were asking him the usual softball questions about Mexico as a good place to invest.


Surely, he would respond with praise.

But, alas, Kei Inoue would not be restrained.


Mexico, he said, was corrupt and anti-democratic. No sensible Japanese businessman would invest a single yen unless Mexico cleaned up its act.

Today the United States and Canada are poised to begin negotiations with Mexico on a historic trade agreement, as President Bush meets in Houston with Mexico's President Carlos Salinas de Gortari.

If all goes as planned, Mexico will join the U.S. and Canada in creating the world's largest trading bloc, with a population in excess of 360 million people.

Yet, as the Japanese legislator observed, Mexico is still scarred by its protectionist past, its corruption, its poverty and one-party rule.

In seeking international support, it has also opened itself to outside opinions shaped by the new world agenda of human rights, respect for the environment and democratic principles.

The U.S. Congress is now showing mounting unease that a commercial pact with Third-World Mexico can be treated in the same way as the two-year-old free trade agreement with Canada, whose economy and culture is analogous to its neighbor's.

Within the past year, Mexico has received painful criticisms from Americas Watch (for police torture, rapes and killings), from the Organization of American States (for its undemocratic elections) and from the American Medical Association (for border pollution).

To be sure, Mexico has its own list of complaints against its big northern brother. These range from the dumping of hazardous waste, including radiocative materials, to the murder of illegal migrants.


Yet the issue is not so much who did what to whom, but whether the disparities between Mexico and the two developed countries can be dealt with in a narrow trade agreement.

Above all else, Mexico is a country of poor people whose minimum daily wage is barely $3.70 and whose protectionist policies have left the economy undercapitalized and technologically backward.

It is a nation where the cops rent their bullets and where government fixers need to be bribed to get things done.

It is also a nation where per capita income is about $2,000 (versus more than $16,000 in the U.S.), where the work week is still 48 hours and where some Mexican economists estimate that 40 percent of the population is living in poverty.

At the same time, it is a country of a powerful, fabulously wealthy elite, the very people are who are the prime movers and potential beneficiaries of a free trade agreement.

Thirty-seven Mexican industrialists are the principals in 70 companies that accounted for an estimated 22 percent of the gross national product in 1989, according to a recent study by La Jornada, the Mexico City daily.


Between 1983 and 1990, during a period when Mexican workers lost more than 50 percent of their buying power, many of those companies had yields in excess of 9,000 percent after discounting inflation, the Jornada study showed.

The Bush administrations believes a free trade agreement will address Washington's fundamental strategic interest: The continuance of a politically stable southern neighbor of 81 million people, whose economy is already inextricably bound to the U.S.

By improving Mexico's economy, both nations hope to stanch the flow of illegal immigrants seeking jobs in the U.S. (More than a million are stopped at the border each year, but many thousands more get through.)

Also, supporters say, a trade agreement would provide Mexico with the money to curb its disastrous environmental problems, improve its infrastructure and eventually provide wage equalizaton, possibly within 15 years.

At the same time, critics wonder whether the U.S. can ignore the undemocratic nature of the Mexican political system and whether it has chosen stability at any price, as it has so many times in the past -- leading to bloody setbacks in Nicaragua, Panama, Cuba, Chile, Guatemala, El Salvador, Iran and Vietnam.

There is scant evidence that the "democratic reforms" adopted by the Mexican Congress last year will lead to a truly pluralistic system and end what Peruvian novelist Mario Vargas Llosa calls its "camouflaged dictatorship."


* This spring, the U.S. Congress is expected to decide whether to grant President Bush the "fast track" authority he needs to negotiate the tripartite agreement.

The "fast track" method limits Congress to a final vote on a trade package negotiated by the administration.

Without the authority, an agreement is unlikely, administration officials concede, since it would be subject to congressional amendments and bring painful focus to issues that have long divided the two countries.

Powerful Democratic lawmakers have raised important questions about Mexico. Together with the AFL-CIO, the textile and steel industries, and some farm sectors, they fear thousands of American jobs will be lost as U.S. companies move south of the border to take advantage of Mexico's lax environmental and labor laws. Mexican manufacturing wages are 8 to 24 percent of those in the U.S.

Already resolutions to disapprove the "fast track" method for Mexico have been introduced in the House.

A simple majority in either house could kill the measure, presenting the Bush administration with a major foreign policy setback and constituting a powerful slap in the face to President Salinas.


(The U.S. is already Mexico's No. 1 trading partner, accounting for nearly 70 percent of its foreign trade, while Mexico is the third biggest American trading partner after Japan and Canada.)

Should the "fast track" method be rejected, the ruling Institutional Revolutionary Party (PRI, from its Spanish initials), led by Mr. Salinas, will enter the August congressional elections as the party that extended its hand to the U.S., only to be told by Congress that impoverished Mexico didn't meet the civilized standards of the gringos.

* Since June, the Mexican government and companies have showered millions of dollars on Washington public relations firms and lawyers, according to El Universal, a respected Mexico City daily.

Yet by ignoring the wider issues, from drugs to human rights, the Bush administration and the Mexican government may have seriously misjudged the congressional debate. Mr. Bush has been forced to retreat to the point that his trade officials are now talking about negotiating simultaneous agreements on the environment and other issues.

Where once the administration was talking of a negotiated agreement by the end of the year, the timeline has now been stretched into 1992. If the recession continues, charges that an agreement would mean job losses in the U.S. could become an election issue.

"Those who believe this is just another commercial agreement are not really conversant with the issues," says Adolfo Aguilar Zinser, a Mexican political scientist teaching at American University in Washington. "What is needed is a greater exploration of the issues, resulting in a comprehensive agreement that addresses the whole range of differences. Otherwise, I feel the U.S. will simply swallow Mexico, worsening -- not bettering -- our relations."


For many critics, it is difficult to separate trade from the wider issues.

If a free trade agreement will permit Mexican companies open access to American markets, will Washington be able to maintain its restrictive policies on Mexican migrants?

If U.S. firms are free to invest in Mexico, what can be expected if current investments along the border have helped turn the region's environment into what the American Medical Association called a "virtual cesspool" of "major magnitude?"

* As Mr. Salinas pointed out in a speech to the Business Roundtable last year: "Consideration must be given to the different levels of development of both countries."

How that is translated in the final agreement is unclear, though U.S. and Mexican officials talk of at least a 10-year period for full implementation, with some kind of safeguard against Mexican sweatshops and sudden U.S. and Canadian plant closings.

Cuauhtemoc Cardenas, head of the leftist Party of the Democratic Revolution, a major opposition party, has suggested that the agreement must level the playing field by getting Mexico to adopt the health-safety standards, collective bargaining rights and legal framework of its prospective partners.


What he did not say was that this would require major changes in the Mexican legal system, labor legislation and enforcement of environmental laws, all of which is either politically risky or presently unaffordable.

With a justice system based on presidential patronage, a legislature dominated by the ruling party, a labor movement co-opted by the government and a disillusioned electorate whose absenteeism sometimes exceeds 80 percent, it is doubtful that Mexico is likely to adopt those measures.

While Mr. Salinas has won much praise for his forceful actions on the economy, human rights, the environment and drugs, the political system still remains essentially unchanged, with the president at the pinnacle of power.

Indeed, a troubling aspect of the Mexican system is that investors have no guarantee of continuity once Mr. Salinas leaves office in 1994. His successor will be free to reverse all of his policies.

"The fundmental problem here is that we don't have a true system of checks and balances," said Mariclaire Acosta, head of an independent human rights group here. "We don't have an independent judiciary, nor a true opposition or labor movement. We have the word of one man. And while I praise many of the things he's done, they do not have the effect of law, nor a judicial system to uphold the law."

John McClintock is The Sun's Mexico City correspondent.