Treaty or No, U.S., Mexico Grow Together

MIAMI — Miami. -- Though the proposed North American Free Trade Agreement could have a dramatic impact on the U.S. and Mexico, public debate here -- only just stirring -- is likely to be stillborn. If Congress extends President Bush's fast-track negotiating authority by June 1, as anticipated, the treaty could be hammered out behind closed doors and approved by the spring of 1992.

The White House and Mexican President Salinas are strongly lobbying for it, but the tide isn't just coming from the top. The North American Free Trade Agreement simply formalizes an ongoing process of North America-wide business-driven integration marked by much freer cross-border trade. And if the pact were expanded to address opponents' concerns about labor rights and environmental safeguards, it would likely get strong public support in both the U.S. and Mexico.


Though Mexican business is swimming with the tide, the strongest push is coming from big U.S. business. Leading U.S.-based multinationals in the short term see Mexico as a low-cost production center, but also envisage the long-term development of the Mexican consumer market. Some corporate spokesmen also echo Bush administration arguments that Mexican prosperity and political stability will be enhanced by the free-trade agreement.

Leading the business push are corporate CEO's like Kodak's Kay Whitmore and American Express' James Robinson, who are driven as much by their philosophical conviction that North American free trade will strengthen all three economies as by the immediate self-interest of their firms.


Far less active publicly are the Detroit Big Three, which don't want to unduly antagonize the United Auto Workers. But Ford and Chrysler are among the strongest corporate advocates of the pact -- not surprisingly, since their south-of-the-border subsidiaries are already the two leading private-sector exporters from Mexico to the United States. Computer giants like IBM and Texas Instruments are also staunch supporters, both for production and market reasons. The slimmed-down U.S. steel industry, long resistant to the free-trade agreement, now sees it as a major sales opportunity.

"The U.S. private sector views the [pact] as a tool for the long-term development of export markets in Mexico," says Laura B. Rawlings, who tracks U.S.-Mexico affairs for the Overseas Development Council. "Mexico's purchasing power is barely one-twentieth that of the U.S. market. But export-hungry U.S. businesses underscore that Mexico, with a population of 88 million, 47 percent of whom are under the age of 15, presents long-term opportunities."

No industry will be more directly affected than the car business, analysts say. A North American free-trade pact "will very likely clear the path for a dramatic reorganization of the regional production system," says James P. Womack, an MIT researcher. "By the end of the century, the entry-level products for the entire North American region will be manufactured in northern Mexico in top-to-bottom production complexes built by multinational assemblers -- American, European and Japanese -- and their first-tier suppliers."

He and other specialists say that market liberalization under the free-trade agreement will lead Mexican plants increasingly to specialize in smaller economy cars and light trucks, while car factories in the U.S. will accelerate their concentration on higher-profit vans, heavy trucks and luxury passenger vehicles. At the same time, Mexico is expected to continue to grow in importance as a world supplier of engines and other parts. Even without cross-border free trade, it has been by far the fastest-growing supplier of autos and auto parts to the U.S. market for the past five years.

The new Mexican assembly operations are already among the most automated and efficient anywhere; in an MIT world industry survey, the Ford Mercury Tracer operation in Hermosillo tallied a lower incidence of defects than any major factory studied except a Mercedes-Benz plant in Germany.

In labor and energy supply, in manufacturing and marketing, in cross-border media penetration, and in trading relations with the rest of the world, the economic integration of North America is fast becoming an accomplished fact. Even if the current agreement should be blocked, the longer-term issue is not whether Mexico, the U.S. and Canada will implement a freer trade regime, but when and on what basis.

Over the last two centuries, North American history has been driven by periodic redefinitions of the relationship between Mexico and the U.S., usually to Mexico's detriment. Critics worry that the proposed agreement represents little more than an annexation of an underpaid Mexican work force by U.S. manufacturers. But even a flawed trade pact sets in motion economic and political forces that could set the stage for a fairer continental partnership.

*William A. Orme Jr. is a veteran reporter on U.S.-Latin American financial affairs. He wrote this commentary for Pacific News Service.