PACT INFLAMES JOBS DEBATE Trade accord seen as helping, hurting U.S. employment

THE BALTIMORE SUN

WASHINGTON -- President Bush's announcement yesterday that the United States, Canada and Mexico had reached an agreement to create the world's largest free-trade area opens the prospect of economic growth but intensifies an election-year political feud over American jobs.

Mr. Bush hailed the tariff-reducing North American Free Trade Agreement as heralding "a new era" that would boost U.S. exports and increase jobs.

But critics said it would accelerate the exodus of U.S. corporations to Mexico, cost 500,000 U.S. jobs by the end of the decade and worsen environmental conditions along the southern border as more companies take advantage of Mexico's low standards for pollution, health and safety.

Democratic presidential candidate Bill Clinton said yesterday that he would support a free trade agreement with Mexico "as long as it provides adequate protection for workers, farmers and the environment on both sides of the border." He withheld direct comment on the North American Free Trade Agreement but faced immediate pressure from at least one of the most powerful lobbies in his constituency, the AFL-CIO, to seek its revision.

The agreement was packaged by the White House -- on the eve of next week's Republican convention -- as Mr. Bush's latest foreign policy achievement. It will clearly be presented during the presidential campaign as evidence of Mr. Bush's commitment to economic expansion and job creation.

"This agreement will level the North American playing field, allowing American companies to increase sales from Alaska to the Yucatan," Mr. Bush said during a Rose Garden ceremony yesterday.

Gov. William Donald Schaefer, who has supported the NAFTA effort, also welcomed the agreement yesterday and urged Congress to act promptly on it.

"By extending to Mexico the same open-trade policies that we have with Canada, the United States can create all types of new business opportunities for American companies, including those in Maryland," he said. Maryland exported $775 million in goods to Canada in 1990, nearly one-fourth of the state's exports, according to the U.S. Department of Commerce. Exports to Mexico totaled $53 million in 1990.

But after 14 months of painstaking negotiations to create a North American market of 360 million consumers with a total annual output of more than $6 trillion, the administration's toughest challenge might be ahead: getting the agreement ratified by Congress.

Rep. Richard A. Gephardt of Missouri, the House Democratic leader, said that based on his understanding of the pact the "essential goals" of a "good free-trade agreement . . . remain unfulfilled."

He called for the text of the pact to be declassified, reflecting fears inside and outside Congress that there might be controversial details or oral agreements the administration has withheld.

The Sierra Club, Ralph Nader's Public Citizen group, and the National Farmers Union also demanded disclosure of the text. "Is the administration so scared about public reaction to the contents of the agreement?" asked Lori Wallach, staff attorney for Public Citizen.

Administration officials said the text was being given "a legal scrub" by lawyers before being released and did not say when that would be.

Mr. Gephardt said U.S. Trade Representative Carla A. Hills should be ready to return to the negotiating table to "improve this incomplete document." He cited the environment, worker training, labor and human rights as "deficient" areas of the agreement.

Senate Banking Committee Chairman Donald W. Riegle Jr., from the auto-producing state Michigan, said, "This is a jobs program for Mexico, and that means taking jobs from the United States."

Another key legislator, Sen. Patrick J. Leahy, a Vermont Democrat who is chairman of the Senate Agriculture, Nutrition and Forestry Committee, echoed that concern, saying, "A recession is not the time to be thinking about signing a free-trade agreement that could export jobs south of the border. . . . I will judge the final agreement by the impact it has on jobs, the environment and agriculture."

Congress will not vote on the agreement until early next year, and the outcome is likely to be affected dramatically by who is elected president in November.

In recession-plagued Canada, where the unemployment rate is 11.6 percent, there is also concern over the threat to jobs from cheap Mexican labor. Two of Canada's biggest provinces, Ontario and British Columbia, called on the government to abandon the negotiations before they were completed. A recent opinion poll found that nearly two out of three Canadians opposed free trade with the United States and Mexico, assuring the agreement will have a rough ride in Parliament.

Such issues have less impact in Mexico, where the economy is 5 percent as big as its U.S. counterpart and where there is much to gain from close partnership with two of the richest nations in the industrial world.

The Mexican legislature is expected to rubber stamp the agreement, which covers things from computers to crops, from auto parts to bus services and from copyright standards to sanitation measures.

The United States and Canada have had a bilateral trade agreement since January 1989. The new pact effectively adds Mexico.

Mrs. Hills, the administration's chief negotiator on the new agreement, said the United States will benefit disproportionately from removal of barriers to trade with Mexico. Mexican barriers to U.S. exports are much higher than U.S. barriers to Mexican goods, giving the United States more to gain from the removal of tariffs over 15 years, she said.

The administration also argues that as direct U.S. investment in Mexico has increased over recent years, so have U.S. exports to Mexico, which are projected to reach $44 billion this year, up from $33 billion last year. This trend likely will accelerate as Mexico's economy strengthens, say the agreement's backers.

U.S. exports to Mexico support 600,000 U.S. jobs, and that number will exceed 1 million by 1995, according to a study by the independent Institute for International Economics. Mrs. Hills said the administration would work with Congress on a retraining or compensation program for workers displaced by the agreement.

The U.S. Chamber of Commerce endorsed the agreement, saying it would increase high-paying, highly skilled jobs in U.S. manufacturing, which already accounts for 85 percent of total U.S. exports to Mexico, and would broaden U.S. access to the $430 billion Mexican and Canadian services markets.

However, according to a study by the liberal Economic Policy Institute, quoted by the AFL-CIO yesterday, the pact could cost the United States $36 billion in gross domestic product and 550,000 jobs after 10 years.

"This agreement is not about free trade, nor is it about development in Mexico," said the AFL-CIO's Thomas R. Donahue. "It is about guaranteeing the ability of U.S. investors to move plants to Mexico to take advantage of cheap wages and poor working conditions and to produce goods for export to the U.S. market."

Another area of acute concern is the environment. The worry is that the influx of U.S. companies into Mexico will add to already unacceptable levels of border pollution. The administration notes that the agreement dictates "sustainable development," or development that is environmentally acceptable, commits the partners to "work jointly to enhance the protection of human, animal and plant life, and health and the environment," and outlaws any lowering of environmental standards to attract investment.

Mrs. Hills noted Mexico has committed $460 million over three years and the administration has asked Congress for $240 million for border clean-up.

But critics, like Sierra Club trade analyst John Audley, estimated it would take $6 billion to clean up the area. They questioned a lack of public redress in the pact to any pollution incidents and said an increase in U.S. factories along the border will make "a bad situation worse."

Highlights of free-trade pact

The following provisions are contained in the North American Free Trade Agreement, which still must be ratified by legislatures in Canada, Mexico and the United States.

* Tariffs will be cut on cars and light trucks with 62.5 percent North American parts and labor content.

* U.S. and Canadian manufacturers will get greater access to the Mexican market. The Mexican auto parts industry will be opened to U.S. and Canadian investment, and tariffs on vehicles and parts traded among the three countries are to be phased out.

* U.S. and Canadian financial services, insurance and telecommunications trade with Mexico will expand.

* U.S. and Canadian firms operating in Mexico will receive the same treatment as Mexican companies.

* Textile and apparel trade barriers will be eliminated over 10 years.

* Restrictions on cross-border truck and bus operations will be removed. Barriers to investment in the Mexican trucking industry will be phased out over 10 years.

* Copyrights, patents and trademarks will be protected.

* All three countries will be allowed to follow their own environmental, health and safety protections. No country can lower standards to attract investors. The pact also provides for plans to deal with environmental problems on the U.S.-Mexican border.

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