Marathon negotiations to transform the North American continent into the world's largest free-trade zone are nearly complete. Next up: a signing ceremony. But even then, the battle will be just half over. The U.S. Congress must still vote on the pact, and the lobbying for and against is intensifying.
Although final details are still being worked out, this much is clear: The agreement will bring Mexico into the current free-trade agreement between the U.S. and Canada and will benefit the overall U.S. economy by creating jobs in the export sector. Right now, Mexico's tariffs on U.S. goods are 10% on average, while nearly half of all goods currently entering the U.S. from Mexico are duty free. The remaining half is taxed at an average of only 4%. Some Mexican industries, such as financial services, are highly protected. So U.S. exporters and investors actually have the most to gain from lifting trade barriers.
Certainly, the loss of some relatively low-wage, low-skill American jobs to Mexico will accelerate. But over the long run, these jobs would be lost anywayprobably to Southeast Asia's developing nations. Because the Mexicans spend 60% of their export earnings buying goods from the U.S., a figure far higher than in other nations, the U.S. clearly stands to benefit. Still, some provision must be made for displaced U.S. workers, and Mexican regulations on worker health and safety and child labor will have to be strengthened. Similarly, both nations will have to commit to a massive environmental cleanup of the border area. The current effort is the world's first attempt to wed the economies of two industrialized nationsthe U.S. and Canadato that of a developing country. If successful, the North American Free Trade Agreement will boost the economies of all three countries and certainly be worth the pain.