Nafta Isn't Out, But It Sure Is DownDouglas Harbrecht
Somebody had better check the North American Free Trade Agreement's pulse.
When George Bush left office, the pact looked healthy. It was expected to glide through Congress, adorned with a few side accords to meet critics' concerns. Supporters hoped the agreement would trigger a trade boom and spawn similar market-opening pacts throughout the hemisphere.
But as U.S., Mexican, and Canadian negotiators plan for a Mar. 17 meeting in Washington to hash out the final details, the agreement is on life support. Some of the Clinton Administration's core constituencies want to kill it. Conflicts within the Administration may hamper a unified strategy for curing some of the agreement's ills. What's more, investor jitters about Mexico's prospects without the deal and upcoming elections in Canada pose further threats to the Yukon-to-Yucatan accord. "NAFTA is in trouble," says Robert L. McNeill, executive vice-chairman of the Emergency Committee for American Trade, a supporter of the agreement.
One reason is a shift in American public sentiment. Last year, polls showed approval of the pact running more than 2 to 1 among the small number of people who knew about it. But as familiarity has grown, so has opposition. With slightly more than half of American voters now saying they are aware of NAFTA, opponents outnumber supporters, according to recent polls. That reflects fears that American jobs will be lost to low-cost labor in Mexican plants.
Rising opposition is galvanizing a lobbying effort on Capitol Hill. Key Clinton supporters such as unions, environmentalists, and minorities are griping. And lawmakers are listening. "What our big businesses want to do is make products down there with cheap labor and sell them on the open market," complains House Small Business Committee Chairman John J. LaFalce (D-N.Y.). "Who benefits from that?"
STRAY PACT. To win passage, the Administration will have to become far more aggressive than it has been up to now. Although Clinton has endorsed NAFTA, there are lingering doubts about how committed he is to George Bush's deal. "This Administration didn't negotiate NAFTA," says U.S. Trade Representative Mickey Kantor. "Our challenge is to strengthen this agreement and make it acceptable to the public."
To assuage opponents, the Administration plans to negotiate a series of supplemental treaties governing worker rights, environmental safeguards, and protection against import surges. But internal splits could hurt these efforts. The Commerce, State, and Treasury Departments want a toothless trinational panel to monitor abuses and publicize them. But more hawkish Labor, Interior, and the Environmental Protection Agency want arbitration panels in each area that could impose stiff penalties and even confiscate goods if companies fail to adhere to standards.
The Administration faces a delicate task. If the supplemental accords are too strict, they could embarrass the ruling Mexican Institutional Revolutionary Party (PRI), which is counting on NAFTA to give the Mexican economy a boost. "We've got a big problem here," says one senior U.S. official. "It's hard to follow through without being horribly intrusive or allowing countries to harrass each other."
The uncertainty over NAFTA, which is supposed to take effect Jan. 1, 1994, already is making investors nervous. Outsiders are waiting for ratification before making the additional investments in Mexico desperately needed by the government of President Carlos Salinas de Gortari. "We need a bit of good news to cure these jitters," worries Mexican economist Luis Pazos. "People in Washington appear to be listening mainly to lobbies and ignoring the medium- and long-term benefits for the American consumer."
LONG ROAD. Even if NAFTA is approved on Capitol Hill by the end of the year, its ultimate prospects are murky. While Canadian Prime Minister Brian Mulroney's Conservative government has reaffirmed its intent to push NAFTA through Parliament by June, it must call national elections this fall. And the Conservatives are currently running 28 points behind the opposition Liberals, who vow to push for reopening the highly unpopular agreement if they win. Their beef: They want a precise definition of subsidies in the agreement to stop the endless U.S.-Canadian skirmishes over Canadian exports. "The longer-term success of free trade depends on the ability to define what a subsidy is," says Liberal Member of Parliament Roy MacLaren, the party's chief trade critic.
Despite the dangers of the Clinton Administration's high-wire act, few experts believe NAFTA will collapse. "That would seriously disrupt the whole Mexican economic game plan," says Bernard W. Aronson, outgoing Assistant Secretary of State for Inter-American Affairs. He notes that in anticipation of NAFTA, much of the rest of Latin America has been moving toward free-trade pacts that could eventually link the entire Western hemisphere.
That has always been the dream. But achieving a North American free-trade pact still will require delicate surgery in the side deals. And even then, Canada's allergic reaction makes it far from certain that NAFTA will survive for long. Somebody get a respirator--quick.