Freer Trade, Fewer US Jobs?

With the US economy struggling, Congress's stance on NAFTA will depend on the perceived costs and benefits. The Monitor looks at how the accord would affect some prominent US industries. NORTH AMERICAN FREE TRADE AGREEMENT

WINDING up some 14 months of talks, Canadian, Mexican, and United States negotiators overcame their differences this week to create the world's largest trading bloc, reaching from the Queen Elizabeth Islands in the north to Mexico's border with Guatemala.

In three-way discussions, trade officials resolved differences on trade in a wide range of industries - from telecommunications and automobiles to banking and processed food.

Strong disagreements remain between North American Free Trade Agreement (NAFTA) advocates and detractors in the US. American trade unions and environmental organizations have been charging that NAFTA will encourage US manufacturers to transfer operations and jobs to Mexico, where cheap labor and lax environmental regulations may offer higher profits.

On Monday, Congress's General Accounting Office reported that American assembly plants in Mexico have managed to duck certain environmental laws with the help of Mexican officials. However, the deal allows the US and Mexico to require the same environmental-impact statements on foreign investment and building that they apply to domestic projects. And it says countries and states may maintain environmental standards that exceed international standards.

US manufacturers are aware of vast new market potential for US exports in Mexico. But some producers fear that low-cost Mexican production will flood into the US market and compete with American-made goods.

The Bush administration promises that the agreement will add 400,000 jobs in the US. Treasury Secretary Nicholas Brady asserts that foreign investors are increasingly attracted to the US, where wages are competitive with other leading industrial countries and worker productivity is high. With NAFTA in place, he says, the lure is even greater.

Congress will consider ratification of the treaty sometime next spring, leaving many months open for opponents to air their views. Senate Finance Committee Chairman Lloyd Bentsen (D) of Texas intends to hold hearings on the agreement this fall.

Sen. Max Baucus (D) of Montana, chairman of the Senate Finance Subcommittee on trade, is prodding the Bush administration to expend as much energy on retraining US workers whose jobs may go south as it has on promoting the merits of the agreement. He proposes a new trade tax to help finance worker retraining and environmental protection. House Majority Leader Richard Gephardt (D) of Missouri proposes a similar tax.

US Trade Representative Carla Hills says it is absurd to create a new trade impediment when NAFTA is designed to break them down. The USTR will work with trade unions across the country on a worker retraining bill to be sent to Congress next year along with the NAFTA.

Environmental Protection Agency Administrator William Reilly foresees long-term environmental benefits from NAFTA. The accord will strengthen Mexico's economy and its ability to redress ecological problems by providing ample access to US markets and capital.

Administration officials also argue that an important by-product of NAFTA will be improved living standards in Mexico and a sharp reduction in the numbers of Mexicans who immigrate illegally to the US in search of work.

Willard Workman, international vice president for the US Chamber of Commerce, insists that future discussions should look at economic benefits, not the liabilities that labor groups, environmentalists, and others associate with the agreement. "Eighty-five percent of our exports to Mexico are in the manufacturing sector, in which workers earn 17 percent more than the average US wage," he says.