CAUTION ON CANADA-MEXICO FREE TRADE

Some Canadians are nervous about free-trade talks between Mexico and the United States because it might throw a monkey wrench into the agreement between Canada and the US. And Canadian economic nationalists, who didn't like the Canada-US free trade pact, worry about ``continentalism,'' a free-trade zone across North America that might move jobs out of Canada. ``There hasn't been a single thoughtful piece of research put together by the government to indicate otherwise,'' says David Barrett, the opposition New Democratic Party's trade critic in the House of Commons.

But with so little trade between Canada and Mexico now, there appears to be little to fear. Only about 1 percent of Canada's trade is with Mexico and the balance is in Mexico's favor. Canada exports manufactured goods worth $312.5 million (Canadian: US$266.5 million) to Mexico; it imports goods worth C$1.3 billion (US$1.1 billion) from there.

``It could affect low-wage areas such as textiles where Canada now has an advantage over the United States. Canada wouldn't have that same advantage with Mexico,'' says William Watson, an economist with McGill University in Montreal and a free-trade advocate.

He adds that freer trade with Mexico would have advantages. ``Consumers would see lower prices on imports.''

Prime Minister Brian Mulroney's Progressive Conservative government appears to be ambivalent on the subject. On a trip to Mexico earlier this year Mr. Mulroney said he was not against a free-trade zone involving Canada, the US, and Mexico.

But Minister of Trade John Crosbie said that there would probably be no North American trade pact linking all three. ``My guess is that it's more likely to be two agreements,'' he said this week in the House of Commons.