Is the congressional debate over President Clinton's trade deal with China heats up, let's look at another free trade pact that has been in existence for seven years.
Our North American Free Trade Agreement with Canada and Mexico, signed in 1993, suffers the same assaults from organized labor, farmers, ranchers, human rights activists, environmentalists and members of Congress as those leveled at the World Trade Organization and the China deal:To wit, it has lowered American farm incomes or lost American jobs to countries that underpay their workers, have lax pollution controls and flood our market with cheap foreign imports that pushed the U.S. trade deficit to a record high of $271 billion last year.
The figures, however, prove how witless those arguments really are.
Canada and Mexico have become our biggest trading partners, consuming 40 percent of American exports that surged to a record high of $958 billion last year. Since exports account for a third of our gross domestic product, they fuel a huge increase in U.S. production that creates American jobs.
Two-way trade with Canada has risen from $159 billion before NAFTA to $270 billion a year, more than our trade with the whole of Europe. Ontario alone is a bigger trading partner than Japan. And since many of the auto, truck and parts manufacturers in that province are subsidiaries of U.S. companies, who do you think benefits from their exports to the United States?
Two-way trade with Mexico has risen from $80 billion at the time NAFTA was signed to $210 billion. Mexico now supplies 60 percent of all winter vegetables sold in the United States. But U.S. agricultural exports to Mexico also have doubled from $3.5 billion a year to more than $7 billion, along with a broad range of other goods.
In terms of purely merchandise trade, we are running annual deficits of $25 billion with Mexico and $30 billion to $40 billion with Canada. But if you include services and tourism, the United States has a surplus with both.
Elsewhere in the world, we're going to have to live with a deficit as long as our economy is booming and a strong dollar makes our exports more expensive than our imports. That is not necessarily a bad thing as long as it does not slow U.S. export growth too much. Do we really want a weak dollar?
Of course, no trade agreement is perfect, and our NAFTA partners have some of the same complaints as we do. Canada complains of a "brain drain" to the United States, with companies like Microsoft stealing the best computer brains from the University of Waterloo. Mexican corn farmers complain of cheap grain imports from the United States while American ranchers complain of cheap beef coming in from Mexico and Canada.
About 2,000 farmers and ranchers recently descended on Washington to push for higher crop subsidies and special labels on imported meat and foods. The "Rally for Rural America" blamed free trade and deregulation of agriculture for lowering U.S. farm incomes by $50 billion last year.
A similar protest occurred south of the border last year when hundreds of Mexican farmers on horseback accompanied by a motorcade of thousands of supporters rode from Ciudad Juarez to Mexico City to demand protection against cheap imports of American grain and fruit. Their 52-day journey retraced Pancho Villa's 1,000 mile ride during the 1914 Mexican Revolution.
Jeffrey Davidow, our ambassador to Mexico, says: "What NAFTA does is give the consumer the best product at the lowest price. This can result in economic dislocation," meaning producers who can't compete are getting hurt.
"But the cost of food in our supermarkets is a fraction of what it would be in Paris or Hamburg. And the Mexican housewife is buying her tortillas at a lower price, too."
Gordon Giffin, our ambassador to Canada, adds that NAFTA not only benefits the American economy but "keeps the neighborhood prosperous and secure. You don't want to have the nicest house on the street."
Both ambassadors point out that most of the Fortune 500 companies are well established in Canada and Mexico and already positioned to take advantage of free trade. They are trying to convince smaller and medium-sized companies to take advantage of NAFTA and "get on the gravy train."
Contact international editor Holger Jensen of the Denver Rocky Mountain News at http://www.denver-rmn.com.