Mexico Is Viewed
As Clear Winner
In Nafta Report
By Asra Q. Nomani
02/03/1993
The Wall Street Journal
PAGE A2
(Copyright (c) 1993, Dow Jones & Co., Inc.)
WASHINGTON -- While seeing the potential for a surge in U.S. exports to Mexico because of the North American Free Trade Agreement, the International Trade Commission found one clear winner from the treaty: Mexico.
In a congressionally requested report just completed, the ITC indicated that any gains the U.S. and Canada get from the pact will very likely be dwarfed by improvements for Mexico. Mexico, the report said, would benefit "substantially more" than either the U.S. or Canada from the trade accord, which was reached last year by the three countries. Congress hasn't released the voluminous report yet, but a summary was obtained by The Wall Street Journal.
The ITC, a quasi-judicial government body that also produces trade-related reports for Congress, generally blessed the pact as an "important step toward free trade in the hemisphere," but acknowledged that certain major U.S. industries -- such as autos and apparel -- will "experience losses" because of the agreement. It said the Midwest, South and the West would be most affected by the agreement.
Other industries, the report said, that would be hurt include: flat glass, peanuts, shrimp, major household appliances, certain household glassware, certain fresh and frozen vegetables, citrus juice and fresh-cut roses. Many of those industries have been pressing Congress to oppose the agreement or change its provisions so they can win trade protection or reductions in Mexican trade barriers.
The ITC said U.S. winners from the accord would be machine tools, textiles, bearings, industrial machinery, steel mill products, pharmaceuticals, grains and oil seeds, lumber and wood products, cotton and automotive parts. The summary didn't address the effects on consumers.
The report clearly indicated that Mexican industries would benefit the most from the treaty. It concluded that the pact would boost Mexico's gross domestic product -- the market value of all the goods and services produced in the country -- by anywhere from 0.1% to 11.4% after adjusting for inflation. U.S. and Canadian GDPs would be boosted 0.5% or less, it said.
The summary didn't explain the wide variations in its conclusions. It said, however, that Mexico would gain the most from the agreement partly because its economy is much smaller than either the U.S. or Canadian economies, and any extra boost would have a relatively wider effect in Mexico.
In a benefit to U.S. trade, the report says, U.S. exports to Mexico would increase by 5.2% to 27.1%, while Mexican imports to the U.S. would increase by 3.4% to 15.4%. For the first three quarters of 1992, Mexico exported $26.5 billion to the U.S., according to the U.S. Commerce Department, while the U.S. exported $30.5 billion to Mexico.
The report concluded that U.S. workers would be helped much less -- if at all -- by the agreement. The effect on U.S. workers has been a particularly thorny issue, especially among labor unions concerned that workers will be displaced by unfair competition from Mexican workers, including children. The ITC projected long-term gains in aggregate employment of less than 1% for the U.S. and Canada because of the pact. It predicted a gain of as much as 7% in employment in Mexico.
The study also projected that the agreement would lift wages in Mexico by 0.7% to 16.2%, adjusting for inflation, while wages would be increased 0.3% or less in the U.S. and 0.5% or less in Canada. The report concludes there will be an "indiscernible" effect on U.S. wages for low-skilled and high-skilled workers. Some other studies of the agreement have predicted U.S. wages will decrease as a result of the pact.
Critics and proponents, alike, could use results from the ITC study as weapons in the congressional battle that's expected to erupt in the coming months over passage of the North American Free Trade Agreement.