Consumers participate in international trade decisions every day. Each time you enjoy exotic fruits, drive a foreign car or watch movies on a foreign TV, you are having some impact on world trade.
In fact, consumers actually have the most to gain or lose in international trade debates. Decisions that affect the flow of goods and services across national borders can also affect the choices consumers have and the prices they pay in the marketplace.This is one reason a new set of initials - NAFTA - is worth paying attention to.
The debate over the North American Free Trade Agreement, which would tie the United States, Mexico and Canada together in the world's biggest free trade zone, has been heating up of late.
Lead by Ross Perot, critics of the treaty claim that it will prompt thousands of U.S. manufacturers to move south of the border in search of low-wage, non-union workers, thus costing American jobs.
On the other side, supporters say trade with Mexico has already created hundreds of thousands of high-wage jobs in the United States that will be lost if the deal is defeated. The International Trade Commission estimates a net gain of anywhere from 35,000 to 94,000 jobs.
Some consumer groups, such as the National Consumers League, have expressed concern about a couple of provisions of the treaty. Limits on pesticide residues and other consumer health and safety measures are subject to challenge by Mexico and Canada, says the NCL, and could be substantially weakened. In the case of food safety standards, NAFTA names the Codex Alimentarius as its source of international standards, and the Codex permits higher pesticide levels than are now permissible under U.S. law.
A second concern, says NCL, is the failure to restrict child labor in Mexico, where children as young as 6 years of age are hired out to work in harvesting fruits and vegetables. Although the treaty was negotiated under the George Bush administration, the Clinton administration has said it will back ratification of NAFTA if agreements can be reached that will protect the environment and workers' rights.
While these debates go on, it is interesting to take a look at NAFTA from a different perspective, that of demographics.
"Free trade agreements are an essential component of future economic growth for our country," says Peter Francese, publisher of American Demographics magazine. Speaking at the editors' briefing at the Food Marketing Institute convention in Chicago this spring, Francese noted that "our country is aging, population growth is slowing, and the retail landscape is virtually saturated with every conceivable kind of food store and restaurant."
With U.S. markets saturated, companies are finding that if they want to grow, they have to export. Large corporations like McDonald's, Pepsico and Colgate saw this phenomenon years ago, he says, and that's the reason why you see a large presence from these companies in other nations.
Currently our largest trading partner is Canada, a country we share virtually identical demographic profiles with.
But our fastest-growing trading partner, and second largest for manufactured goods, is Mexico. With a population of 81 million, Mexico has three times the population of Canada, and says Francese, it has two demographic characteristics that we used to have: youth and growth. These are critical to future economic development.
Mexico is growing at about 2 percent per year - roughly twice the rate of growth of the U.S. and Canada.
What's more, nearly half of Mexico's population (44 percent) lives in places with populations of 100,000 or more.
"The concentration of people in metropolitan areas is very important for the development of consumer markets because urban areas create wealth and make distribution of food and other goods more efficient," said Francese.
Another reason the Mexican market looks so promising is its age structure. The median age in Mexico is 21 vs. 33-plus in the United States and Canada. The biggest difference between the three countries is in the age 25-34 population group. In the United States and Canada, this group (a primary consumer market) has not been growing in recent years and will actually decrease between now and 2000. In Mexico, it is projected that this group will grow by 37 percent.
A third consideration is the fact that Mexican households spend money quite differently from U.S. or Canadian households. In the United States, we spend about equal amounts (about 15 percent) on food, housing and health care. Canadian consumers spend nearly 20 percent of their income on housing but only 4.4 percent on health care. And they spend more than U.S. consumers on food but less on clothing or household goods. Mexican consumers, by contrast, spend one-third of their money on food. But they spend the same proportion as Canada on health care, about twice as much on clothing and far less on housing.
One reason Mexicans spend so much on food is their large household size, says Francese. "But another reason is that their distribution and storage systems are not as efficient as in the U.S. and Canada. Supermarkets are not very plentiful, and refrigerated trucks are relatively scarce."
And that can be a plus for U.S. companies looking to do business south of the border, he says. "I believe there is enormous opportunity in Mexico for food manufac- turers, food distributors and food retailers. The North American Free Trade Agreement can only increase that opportunity."
The U.S. Department of Agriculture estimates that four consumer products will do especially well in the Mexican market: dairy, frozen and processed foods, candy and meat.
Utah agriculture interests are looking at the export potentials the new treaty will bring. Randy Parker, marketing director for the Utah Department of Agriculture, has already made one trip to Mexico to look at possibilities of shipping Utah apples to that country. And the department is sponsoring an export seminar Wednesday that will focus on trade with Mexico and Canada. (For more information, contact Parker at 538-7100.)
Deputy Secretary of Agriculture Ann M. Veneman has called NAFTA "a tremendous victory for American agriculture and one of the most significant economic achievements in the postwar period."
But one important thing to remember, says Francese, is that this is a long-term enterprise. There is much about Mexican culture and customs that we need to learn, and companies who want to make inroads there need to expect a long-term commitment. But, he says, Mexico is also the gateway to the rest of Latin America and even more opportunity.
Consumers who wish to comment on pros, cons or portions of NAFTA can reach their representatives through the Capitol switchboard at 202-224-3121 (Senate) or 202-225-3121 (House).
Listed below are percentages of income spend on each categroy by a typical consumer in each country. Figures reflect 1990 data.
Food Clothing Household Housing Healthcare
U.S.A. 15.9% 5.4% 7.6% 14.8% 14.8%
Canada 17.6% 5.0% 6.7% 19.9% 4.4%
Mexico 33.7% 10.0% 11.6% 8.4% 4.9%