NAFTA: A U.S. Perspective

NAFTA: A U.S. PERSPECTIVE Robert C. Fisher O,? June 12, 1991, Ambassador Carla A. Hills, the U.S. Trade Representative , met in Toronto with Dr. Jaime Serra Puche, Mexico's Secretary ofCommerce and Industrial Development, and Michael Wilson, Canada's Minister for International Trade and Industry, Science and Technology, to formally launch negotiations for the North American Free Trade Agreement (NAFTA). Their meeting came almost a year after President George Bush and President Carlos Salinas de Gortari of Mexico first endorsed the goal of a comprehensive free trade agreement between the United States and Mexico, and four months after the two presidents and Prime Minister Brian Mulroney of Canada agreed to expand the U.S.Mexico talks into trilateral negotiations aimed at freeing trade and investment flows within North America. Even before the initial presidential endorsement of a bilateral U.S.Mexico Free Trade Agreement (FTA), the NAFTA was on its way to becoming one ofthe most hotly debated trade policy issues in recent memory. For its proponents, the NAFTA's logic is simple: the agreement will set up a continental market of360 milüon consumers and $6 trillion in total output, create jobs, promote growth, and strengthen the ability of North American producers to compete both within North America and in the world markets. It represents the first major step toward hemispheric free trade, as envisioned in the President's Enterprise for the Americas Initiative. Robert C. Fisher is Director, Mexican Affairs, at the Office of the United States Trade Representative. The views expressed in this article are his own and do not necessarily represent those of USTR or the U.S. government. 43 44 SAISREVIEW The NAFTA's opponents in the United States see it as another threat to U.S. jobs, particularly in manufacturing. They fear both an onslaught of low-price imports from Mexico and the wholesale relocation of U.S. firms to take advantage of low Mexican wages or lax environmental standards. Others, both active opponents and those whose judgment is suspended pendingthe negotiation's final outcome, are concerned that the NAFTA will worsen environmental problems in Mexico and the United States or result in unsafe products threatening the health and safety of U.S. consumers. This article examines some of the factors affecting the U.S. decision to pursue the NAFTA, the benefits the NAFTA should present to the United States, the measures that the Administration is taking to limit the potential adjustment costs, and the relationship ofthe NAFTA to overall U.S. trade policy.1 Mexico's Trade and Economic Reforms In the mid-1980s, most trade policy experts would have predicted that a NAFTA or a bilateral U.S.-Mexico FTA would not occur until the 21st century. The United States and Mexico shared strong trade and economic bonds based on proximity, but they shared little in the way of common policies. The United States was a member of the General Agreement on Tariffs and Trade (GATT), and Mexico was not. In 1979 Mexico had taken preliminary steps to join the GATT, but backed away a year later. U.S. trade and economic policy was based on free market and free trade principles. In Mexico the state intervened in almost every aspect of economic decision making, with highly protectionist trade barriers, state ownership of major sectors of the economy, and an overly regulated business environment. The NAFTA was made possible by an economic revolution that took place in Mexico starting in the mid-1980s, under the leadership of President Miguel de la Madrid. Without it, the United States would not have been willing to pursue the NAFTA negotiations. In the aftermath of the debt crisis of the early 1980s, Mexico undertook a series of macroeconomic reforms, in addition to new trade initiatives . The reforms required substantial austerity, including reductions in government expenditures and the public deficit, privatization of many of 1. While the article discusses the NAFTA, much of the focus is on U.S.-Mexican issues, rather than U.S.-Canadian issues. The United States, Mexico and Canada are equal partners in the negotiation and all three are actively engaged in developing the NAFTA The focus of the article reflects...