NAFTA Seen as Key To Regional Growth, Democratic Gains

THE White House-congressional battle over the North American Free Trade Agreement (NAFTA) is yet another struggle over jobs. The score will be settled by both ends of Pennsylvania Avenue, but its implications will reach far beyond domestic affairs.

Pushing the three-nation pact, the Clinton administration says it will create the largest free-trade zone in the world with the greatest opportunities for robust economic growth.

"Its benefits notwithstanding, NAFTA is turning out to be a hard sell here in the US," says Labor Secretary Robert Reich.

Ernest Hollings (D) of South Carolina, chairman of the Senate Committee on Commerce, Science, and Transportation, echoes the concerns of some Capitol Hill Democrats. "NAFTA is the wrong idea, at the wrong time, for all the wrong reasons. Instead of securing a bright future, the agreement will lead to lower US wages, lost jobs and opportunities, and the exodus of important sectors of American industry [in search of cheaper ways to produce goods across the southern US border]."

While Mr. Reich and others concede short-term job losses, they predict long-term gains for US productivity. Open borders and the free flow of goods and services will help develop economies in Latin America and create demand for US products, NAFTA supporters say. And, they add, a sounder Mexican economy will provide a basis for more ecological responsibility in Mexico.

Max Baucus (D) of Montana, chairman of the Senate Finance Subcommittee on International Trade, says the message President Clinton and the Congress must deliver is simple: Mexico has much higher trade barriers than the US; if Washington fails to enact NAFTA, those barriers will remain.

By eliminating Mexican barriers, Mr. Reich says, the US will boost its burgeoning exports there, which accounted for a $5.5 billion US trade surplus in 1992.

NAFTA is essential to democratic and economic gains south of the border, Mr. Baucus says. "[Mexican] President [Carlos] Salinas [de Gortari] is banking his party's future - and his country's future - on the successful passage of the agreement."

US prospects are also closely linked, he adds: "A strong, vibrant Mexican economy means a better opportunity to sell American products."

Enrique Iglesias, president of the Inter-American Development Bank, says US producers should use NAFTA to tap other regional markets. "Forty percent of Japanese exports are are not produced in Japan," Mr. Iglesias says, referring to one of America's toughest competitors. "Why don't we see this [the availability of cheap Mexican labor through NAFTA] as increased capacity for US exports?"

Iglesias calls for an agreement that transcends the borders of the US, Mexico, and Canada. The more market-driven the region, he says, the better US prospects for trade and investments. To keep developing countries out of the pact would work against the important goal of "establishing common ground in economic principles:" liberalized trade, open investments, and free labor transfers.

"The North American option is very important to Caribbean, Central and South American countries," he says. "The critical mass of NAFTA will help move these other economies along."

Quebec's Minister of International Relations John Ciaccia, whose province accounts for one quarter of Canada's economy, agrees that NAFTA can do a lot to develop the regional economy.

He is bullish on the pact, despite the massive trade deficit Quebec racked up with Mexico last year, when it imported four and a half times more that it exported.

"We have to talk about the importance of free trade," says Mr. Ciaccia. "Mexico is a growing economy. We had 25 Quebec companies in Mexico five years ago. We now have 150 - and three quarters of them went since the negotiations for NAFTA began."

Clinton's "White House has to take [such arguments] to the American people," says Ciaccia. Canada's own parliament is scheduled to reach a decision on NAFTA before countrywide elections for the new prime minister are held in the fall.