Class warfare is raging on Capitol Hill-but not under that name. It’s called the debate over free trade with Mexico. President Bush is negotiating an agreement with Mexico that would remove existing trade barriers. The pact he is angling for would eliminate the few tariffs left on American imports, allow U.S. corporations full ownership of companies in Mexico and grant U.S. financial services greater access to Mexican markets. Lifting restrictions on foreign business ownership will open the floodgates for U.S. manufacturers who want to locate plants in Mexico.
Bush has been bargaining with Mexico under “fast track” authority, a power Congress delegates to the President to ease trade deliberations. It enables the President to negotiate a treaty that cannot be amended by the Senate. In 1988 Congress permitted Bush to ride the fast track for three years, but that was not enough time, so Bush has requested a two-year extension, which he will automatically receive unless either house of Congress denies it by June 1. Fast track has become the most contentious issue before Congress; no other legislative matter has generated as many hearings. Although some on Capitol Hill are alarmed by the prospect of Bush single-handedly shaping an accord that would affect so many industries and individuals, it appears that lawmakers will yield the fast lane to the President.
Outside Congress, fast-track negotiations with Mexico have spawned pockets of opposition rather than a broad coalition. Labor unions, including the electricians, the garment workers, the autoworkers and the A.F.L.-C.I.O. itself, rightly worry about the loss of jobs through increased factory flight to the land of cheap labor. They also warn of increased exploitation of Mexican workers, particularly children. Labor is joined by some lawmakers from manufacturing states-including Jesse Helms, no friend of unions-who fear the loss of textile jobs.
Environmental groups such as Friends of the Earth, the Sierra Club and the National Toxics Campaign fret that an expansion of factories in Mexico will create more pollution there, some of which will travel across the border. Environmentalists and consumer advocates-Ralph Nader’s Public Citizen among them-point out that free trade is sometimes used as a cover for deregulation. For example, Canada employed its free-trade agreement with the United States to challenge the U.S. asbestos control program. Tainted Canadian meat, including pork with pus-filled abscesses and potentially deadly bacteria, now enters the United States because Canadian exporters successfully claimed that U.S. meat inspection is a trade barrier. The United States, for its part, criticized Canadian acid rain pollution laws as an unfair trading practice. In the context of free-trade negotiations, Mexico has asked the Bush Administration to lift the embargo that limits the importation of tuna caught with methods that kill dolphins.
The vociferous objections of the unions, environmentalists and consumer groups have won much media attention. Less sensational but just as significant is the overall impact on the U.S. economy that will likely come from a Bush-negotiated trade pact.
Carla Hills, the U.S. Trade Representative, has been scurrying from one hearing to the next extolling the wonders of an agreement. Eliminating the remaining tariffs and restrictions, she says, will create a wealth of new business opportunities for U.S. exporters, service industries and investors. It will allow U.S. firms to sink their teeth into Mexican markets. No doubt this will be a good deal for the upper echelons of the manufacturing and financial services sectors. But the question remains, How good is the pact for the rest of the United States? A report by the U.S. International Trade Commission (I.T.C.) notes that the general benefits for the U.S. economy of a free-trade pact with Mexico would be small in the “near to medium term.” No problem, says Hills, the check’s in the mail. That is, the gains will come further down the road-after each American industry affected by the pact goes through its own transition period.
Hills has good reason to be so vague. The free-trade issue is really about winners and losers. And it’s not in the Administration’s interest to let everyone know the score. Under questioning from skeptical members of Congress, Hills has admitted that some jobs would be lost when corporations moved U.S.-based plants to Mexico, where the average wage is, according to conservative estimates, one-seventh the U.S. level. But this competition with Mexico, she contends, would “push our work force up the skill ladder.” How would that happen? She doesn’t say. Would workers who once welded automobile frames become car designers? Even if that is what she has in mind, such a transition would require extensive worker retraining. And the record of the Reagan and Bush administrations does not offer much hope that such programs will materialize. American workers who lost their jobs to foreign competition in the early 1980s typically remained unemployed or were shunted into lower-skilled jobs at lower pay. In this year’s budget the Bush Administration has slashed funds for dislocated workers.
Jeff Faux, president of the progressive Economic Policy Institute, who has been dogging Hills at Congressional hearings, presents a bleaker picture. The losers would not be limited to those employed by companies that shift assembly jobs to Mexico. According to the I.T.C’s own data, Faux discovered, the net effect of free trade would be a shift of income from the bottom three-fourths of the American work force to the wealthiest one-fourth.
The institute predicts that a treaty would mean fewer new plants built in the United States. Fewer jobs would be created, and increased competition for jobs would mean lower wages. Those hit hardest by this trend, Faux estimates, would be the roughly 75 percent of the U.S. work force who do not hold college degrees. White-collar Americans, however, would likely benefit from the lower prices resulting from the free-trade agreement. Major corporations would make higher profits from increased access to Mexico. New cars should cost less.
Such voices of corporate America as the Chamber of Commerce, the Business Roundtable and the National Association of Manufacturers contend that in order for U.S. industry to be globally competitive, it must cut production costs, which means it needs to secure greater access to low-paid campesinos. Business groups argue that an agreement with Mexico will at least keep production jobs in this hemisphere-instead of moving them to Asia-and will preserve a market for American products, even if the new buyers are poorly paid Mexicans.
This is a poor route to competitiveness. Rather than taking the low road of cutting labor costs, which would erode the wages of American workers and do nothing to improve the quality of goods, American industry could try a high-road strategy of improving U.S. competitiveness through more efficient production of high-quality products. Such an approach, which stresses innovation and technology, would maintain decent standards of living for workers. A free-trade pact that encourages U.S. companies to take the easy path of exploiting Mexican wages (and the lax enforcement of environmental and labor regulations there) would drive U.S. living standards in the direction of Mexico’s. United States industrial policy should not depend on desperate foreign workers who accept 60 cents an hour but on home-grown innovation and a highly skilled and motivated work force-from the corporate suites to the shop floor.
With the emergence of a global economy, trade barriers have indeed become harder to maintain and justify. But the response should not be a policy of anything goes. A socially conscientious pact would include measures to protect the environment, wage levels and working conditions. It would also include worker retraining provisions, enhance consumer safety and take on the knotty issue of Mexico’s $95 billion debt, the real obstacle to that nation’s development. The problem is, such an accord could be negotiated only by an administration that has as much empathy for American workers as it does for corporate managers, and that has some notion of how to make the U.S. and global economies work effectively and fairly. And that is not a track Bush is on.