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Not This Treaty, and Not Now : NAFTA: Follow Europe's example; require that conditions be met before, not after, signing a trade pact with Mexico.

August 02, 1993|JANE HARMAN | Rep. Jane Harman (D-Marina del Rey) is co - chair of the California delegation task force on defense reinvestment and economic development in the House. and

The North American Free Trade Agreement is a good idea whose time has not come.

In principle, it may be appealing to unify Canada, Mexico and the United States into a single economic market. In the long run, free trade among countries is no doubt superior to any other arrangement. Unfortunately, as economist John Maynard Keynes pointed out, "In the long run, we'll all be dead." In other words, the short term matters, and in the short term, NAFTA could be a disaster for American workers.

Just look at what the American work force has endured over the past few years--a recession whose recovery is almost indistinguishable from the recession itself. It has been two full years since the recession's trough, yet the national unemployment rate is still 7%; the unemployment rate in California has hovered around 9% for the past year and a half. In addition, we are undergoing a huge restructuring of our economy as a result of the end of the Cold War. But the human cost of the defense drawdown has been devastating to communities like those I represent in the South Bay area. Thousands upon thousands of high-skill, high-wage jobs have simply vanished. Then there is the evolution of a world economy that is breaking down national barriers worldwide and putting workers at greater risk than ever before. The days when a worker had the confidence that a job with General Motors or IBM meant lifetime security for his or her family are gone.

In this environment, we cannot, we must not, take a chance on NAFTA. The risk is too great and the payoff far, far too small.

First, let's just look at the risk. Consider the difference between the average hourly wages for production workers in the United States and Mexico: $14.83 versus $1.85. Add to this the almost total lack of enforcement of environmental and worker protection standards in Mexico, and the result should be obvious. Reduced labor costs (and the reduced costs from the availability of parts made with low-cost labor) are making Mexico a magnet for U.S. jobs and investment. Companies are already exploiting the cost advantages of manufacturing in Mexico. With NAFTA, more companies will move--to sell products in Mexico's small consumer market, but also, more dangerously, to re-import products into the U.S. market. Few expect the side agreements being negotiated on worker and environmental protections to be adequate or adequately enforced.

Where are the new high-skill, high-wage jobs for Americans? In a report that is meant to be favorable to NAFTA, the Congressional Budget Office asserts, "NAFTA's expected contribution to total (U.S.) employment is negligible." Real high-skill, high-wage job growth will be in Mexico, where the Economic Policy Institute says that productivity will be virtually as high as U.S. productivity.

Some claim that NAFTA represents a good-faith effort to establish a trading bloc for the Americas to compete with Asia and Europe. However, simply opening the borders is the wrong approach. There is a better way. We might look to Europe and the procedures by which countries are brought into the European Community.

The more developed countries in Europe faced the same challenges that we are facing when the less developed countries, like Spain and Portugal, sought membership. Rather than simply incorporating Spain and Portugal into the EC, however, the community required a range of pre-conditions--including a free press, trade unions free of government domination and an independent judiciary--before these new members were admitted. Moreover, the EC set up the European Social Fund and the European Investment Bank to provide assistance to less developed countries to reduce economic disparities between existing member nations and those seeking admission. The key is that conformance to standards was required before admission.

In contrast, NAFTA proponents argue that the agreement itself will be the engine to bring about the desired equalization of standards. Why? A more plausible outcome could be the loss of leverage, the loss of the opportunity to create major environmental, labor and democratic reform in Mexico and the significant loss of U.S. jobs.

I commend the President for taking on the tough issues. But I encourage the President to put NAFTA on the shelf and give full attention to the more pressing and urgent problems of reducing the deficit and reforming our health-care system. With respect to NAFTA, my advice is: not this treaty, and not now.

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