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Originally Processed With FOIA(s):
FOIA Number:
S; 1999-0062-F
FOIA
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This is not a textual record. This is used as an
administrative marker by the George Bush Presidential
Library Staff.
Record Group/Collection:
George H.W. Bush Presidential Records
Collection/Office of Origin:
Speechwriting, White House Office of
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Snow, Tony, Files
Subseries:
Subject File, 1988-1993
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13896-006
Folder Title:
[NAFTA 12/91]
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18
29
2
4
To: Tony Snow THE WASHINGTON WHITE Ecol HOUSE Tradel NAFTA
Fr: J. Vast
FYI Anecdotes re:
Mexico FTA -
for future speeches -
A good organing
Cheers /
J.
THE NORTH AMERICAN FREE TRADE AGREEMENT
MYTHS AND REALITIES
I. Myth Number One: Mexico is too poor to buy our products.
Between 1986 and 1990, U.S. exports to Mexico rose by $16 billion in
response to the partial liberalization of the Mexican economy and the
economic recovery. As a result, the U.S. trade balance with Mexico
swung from a deficit to a surplus in non-oil trade of over $3 billion, for
a swing in our net export position of nearly $5 billion. With no other
country have we experienced such strong export growth. Somebody in
Mexico was buying our products.
II. Myth Number Two: Exports to Mexico do not create U.S.
jobs.
American workers were employed making those extra exports. Using a
rule of thumb of 30 U.S. jobs created for every one million dollars in
net exports, that means an extra 144,500 jobs were created in the
United States during 1986-90 because of trade with Mexico. Many
more American workers would be unemployed were it not for exports
to Mexico. Even if the relationship between job creation and exports is
less than generally assumed, there is no doubt that there has been a
very positive impact for American workers from developments in
Mexico over the past four years.
III. Myth Number Three: Mexico is already open so there
are no extra barriers for the U.S. to eliminate.
Mexico continues to maintain considerable barriers to U.S. exports.
Autos are a good example.
The U.S. has a two and one half percent tariff. Mexico has a twenty
percent tariff and other barriers to access. Mexico is a market of
500,000 vehicles. If that market were truly open, and if the Mexican
economy continues to grow, it is easy to imagine the U.S. selling
2
100,000 U.S. made vehicles there. That alone would translate into an
extra $1 billion in U.S. exports to Mexico on a sustained basis.
Another example is agriculture. At present, restrictive licensing
inhibits 40 percent of our agricultural exports to Mexico.
IV. Myth Number Four: The benefits for the U.S. will be the
same whether or not we have a Free Trade Agreement.
A major incentive to negotiate a Free Trade Agreement with Mexico is
to achieve additional liberalization of the Mexican economy as well as
lock in what has been done thus far. An agreement with the United
States would go a long way to ensuring that the opening of the Mexican
economy outlives the current Salinas Administration. Certainty and
predictability are essential for business planning.
No doubt, President Salinas also understands the importance of
predictability. Mexicans are finally regaining confidence in their own
economy after the disastrous 1980's. An agreement would provide an
extra boost to confidence inside Mexico, which in turn could lead to a
boom in the Mexican economy.
With a Free Trade Agreement, Mexico could easily experience 5 percent
real growth over the next ten years. Given that 70 cents of every
dollar spent on imports in Mexico is spent on U.S. goods, the potential
benefit for American workers and American jobs is enormous.
If we lock in the opening of the Mexican economy with a Free Trade
Agreement, what will we sell? Everything you can think of and things
we cannot even conceive of now. A few examples:
Caterpillar is the main supplier of heavy equipment to build new
roads in Mexico. The infrastructure of Mexico is terrible and badly
in need of upgrading. President Salinas has an innovative program
funded by the private sector to build major new roads in Mexico.
Already, Caterpillar's sales in Mexico have doubled every year
since 1988.
3
In 1989, General Electric's exports to Mexico totaled over $100
million dollars. These exports included locomotives, power
generation equipment and diagnostic imaging equipment. GE's
exports to Mexico are projected to grow fourfold in 1991, reaching
$430 million. With a Free Trade Agreement, GE expects its exports
to continue to increase at a comparable pace.
Proctor and Gamble's net exports of finished products, raw
materials, equipment and services to Mexico supports roughly
1,500 jobs in the United States. Their best estimate is that a free
trade agreement will increase this figure by about 2,000 jobs for a
total of 3,500. Some of those new jobs will be in Procter and
Gamble, but many will be in their U.S. suppliers' businesses.
Union Pacific Railroad is already adding jobs in Texas to handle the
additional trains moving across the border and is likely to add
more.
These stories can be repeated over and over again by hundreds of
American companies. One final one about my own company, Kodak.
In 1990, Kodak exports to Mexico were $126 million. We expect in
the 1990s, with a free trade agreement, that Kodak's exports will
at least double. As a result, in our sensitized goods operations, we
expect U.S. employment which supports operations in Mexico to
double, as well.
Mexico is our natural market. Let's lock it in.
V. Myth Number Five: A Free Trade Agreement with
Mexico will result in massive job loss in the U.S as we
are flooded with Mexican imports.
The fact is that the U.S. economy is mostly open to Mexican imports
now, and we have hardly experienced a flood. The average U.S. tariff
on Mexican imports is only 3.9 percent.
Nor should further liberalization between our two countries be
disruptive for the U.S. economy overall. This is confirmed by each of
4
the economic studies on the impact of a U.S.-Mexico Free Trade
Agreement done thus far-- from the University of Maryland study for
the Department of Labor, to the ITC study to the one done by Peat
Marwick. In fact, each of these studies indicates that on balance a
comprehensive agreement with Mexico will be beneficial for the United
States and American workers.
VI. Myth Number Six: A Free Trade Agreement will result
in massive U.S. job loss as American manufacturing
moves South of the Border.
On many counts this is wrong. First, an important incentive for U.S.
companies to invest in Mexico will disappear with an Agreement. My
company, as well as many others, invested in Mexico in the 60's and
70's to get inside a closed market. It was the only way we could sell
there. With the barriers down, an important reason for relocating is
gone.
Second, opponents assume that the cost of labor is the key variable in
investment decisions by U.S. manufacturers. Other factors are at least
as important, like transportation, communications infrastructure,
financial and business services, high quality, reliable suppliers,
proximity to market, and above all an educated, skilled, productive
workforce.
With regard to this particular matter, I would like to quote Jacques
Delors, President of the European Communities, since opponents like to
say that there is no analogy between our situation with Mexico and
that of the Community with the accession of Spain and Portugal:
"Of course there will be investment in those countries
where labor costs are lower, where social security is less
and where employees -- and thus also the machines --
work longer hours. But on the other hand, I ask myself if
the European Community did not exist, if Spain and
Portugal were not members of the European Community,
would the problem really be different? We should not
forget that the work factor is not the only criterion
governing the company's choice of location. Financial
5
conditions, training opportunities, availability of
information and speed of access to information also are
crucially important. The risk that a company might
choose to set up elsewhere therefore should be viewed in
perspective."
(1992 - The Social Dimension, Feb. 1990, p. 56)
Mr. Delors made these arguments to counter opponents in the northern
countries, and to urge limited European intervention because "social
dumping" would not be a risk except in isolated cases.
Third, let's not forget that U.S. manufacturing production is at post-war
high (23 percent of GNP). Even with substantial productivity gains,
employment in manufacturing has stayed relatively constant over the
last several years, although certainly the current recession is hurting.
The reason is that manufacturing in this country has developed new
products and new markets and new ways to maintain competitiveness.
Surely, this would not be the case if our major preoccupation was cheap
labor. To the contrary, the favorable trends are due in large measure
to our growing export competitiveness.
Fourth, opponents forget that Mexicans are and will be the primary
source of investment in the Mexican economy. Anywhere from $80
billion to $100 billion in Mexican money sits in American and foreign
banks waiting to see whether there is stability and growth over a
sustained period. Flight capital already is returning to Mexico in
substantial amounts. More will come as confidence returns. So the
biggest source of new investment in Mexico will be the Mexicans,
themselves. Most investment is likely to be for infrastructure, such as
transportation and communications to catch up after the very
depressed levels of investment in the 1980's. We are the logical
suppliers of the capital equipment and services to rebuild Mexico's
infrastructure.
Furthermore, investment in Mexico, whatever the source, directly
benefits the United States. For every extra dollar earned in Mexico, 20
cents is spent on U.S. goods. With no other country does the United
States have such a direct, beneficial economic relationship.
6
Finally, why are we so afraid of investment by U.S. companies in
Mexico? There has always been some and there will no doubt be more.
In many instances, U.S. companies invest in some parts of production in
Mexico to maximize global competitiveness, and as a result, maintain
production and high value added jobs in the United States. Without
some assembly in Mexico, often there would be no production in the
United States at all. Rather, production would move off-shore entirely,
or companies would simply stop making that particular product.
For example:
Dana Corporation, a major auto parts manufacturer currently
exports two dollars of product from the United States to Mexico for
every dollar it imports. With a Free Trade Agreement, Dana, the
second largest auto parts manufacturer in the world, estimates that
its exports will rise even further. This is contrary to the popular
notion that auto parts in the United States will be damaged by free
trade.
General Motors' Packard Electric Division produces powered signal
distribution systems for GM and many non-GM customers.
Components from Packard's U.S. operations are shipped to Mexico
for labor intensive assembly. By placing subassembly in Mexico,
and retaining high technology operations in the United States,
Packard has been able to enhance its competitiveness and secure
significant business with non-GM customers, which in turn has
created new component business in the U.S. The local union
leadership of the International Union of Electrical Works is
supportive of this co-production and recognizes that it is essential
to maintain competitiveness and jobs in the United States.
In a recent petition to the USTR requesting duty free status for
ceramic magnets imported from their Mexican operation, the local
union of the International Union of Electrical Workers joined with
the management of another division of GM, to argue that their
Mexican operation helps them to be more competitive.
7
AT&T has shifted repair of its cordless phones from Singapore to
Mexico. The turnaround time on the repair work is now one
quarter of what it was. This has allowed AT&T to become more
competitive which has led to lower prices and created more sales
jobs in the United States.
Another example from Kodak. In 1986, Kodak moved its harness
assembly for copiers from Rochester to Mexico because the
operation was not cost-competitive. The choice was to move it to
Kodak Mexico or out-source to the most competitive non-US
supplier. By moving it to Mexico, Kodak had the time to develop
new technology which was less labor intensive for Rochester, as
well as value added services such as product design, drafting, and
other activities necessary to stay in the business and enhance
world-wide competitiveness. By moving the assembly operation to
Mexico, we saved 300 jobs in Rochester.
To say that there is no direct benefit to the United States in co-
production is simply not true.
VII. MYTH NUMBER SEVEN: Everyone in Mexico makes 57
cents an hour.
According to the U.S. Dept. of Labor, hourly compensation in Mexico by
major occupation is as follows: $1.89 for unskilled laborers, $2.38 for
semi-skilled workers, $2.97 for clerical workers and $14 per hour for
professional/managerial workers.
According to the Wharton Group, the average compensation of a
maquiladora worker is $1.60 per hour. The Wharton group estimates
that in 1989, technicians and administration personnel in the
maquiladoras made up to $4.50 per hour.
It is- true that the minimum wage in Mexico is very low, but workers in
manufacturing are not receiving that wage, and it is these workers that
opponents say we are competing against. Let's also remember that the
U.S. worker is far more productive than his Mexican counterpart. The
wage gap reflects the huge productivity gap.
8
Opponents assume that Mexico deliberately is pursuing a low wage
strategy for exports. They conveniently forget that Mexico suffered a
major debt crisis in the 1980's which prompted a real decline in wages,
not a deliberate strategy to keep the Mexican worker down. In 1980,
Mexican manufacturing compensation was $3.00 an hour. The Salinas
Administration's ultimate goal is to get back to that level and exceed it,
not keep wages down.
VIII. Myth Number Eight: We have no commitment in this
country to handle economic adjustment.
First, The Business Roundtable strongly endorses the idea that we will
need appropriate transition periods for certain sectors of the U.S.
economy to ensure a smooth transition and adjustment.
Second, The Business Roundtable supports inclusion of an escape clause
in the agreement in the event a surge of imports is the substantial
cause of serious injury.
Third, while I would certainly be the first to say that we need to do a
much better job of educating, training, and retraining our workforce to
ensure rising living standards in this country in the years ahead, to say
that little is being done in this area is false. U.S. companies spend $30-
$50 billion in hard cash and incurred another $150-$170 billion in
expenses for benefits, salaries, and lost time every year training and
retraining American workers.
There are government programs, as well, such as the Job Training and
Partnership Act designed to help dislocated workers. Rather than
saying that we cannot move ahead with negotiations with Mexico, the
public and private sectors should consider creative ways to target
programs more effectively.
Finally, The Business Roundtable has made a major 50 state
commitment to improve levels and standards of education in this
country. In each state, Roundtable companies are working closely with
the governors to achieve important results by the year 2000. We are
doing this because we are concerned that we will not have the
workforce we need to maintain our competitiveness in the years ahead.
9
Roundtable companies would not be putting this much effort into
improving education in this country if we were not committed to
maintaining production in the United States.
IX. Myth Number Nine: Mexico has no environmental laws
and workers rights.
In 1988, Mexico passed a comprehensive environmental law patterned
after ours. New investments must now include a detailed assessment
of their environmental impact, and the impact must meet regional
environmental standards. Investment approval is tied to compliance.
Criminal penalties and administrative sanctions exist for non-
compliance.
Mexican laws on workers rights are codified in their constitution. They
ensure the right of association, the right to organize and bargain
collectively, the prohibition of forced or compulsory labor, a minimum
age for employment of children, as well as set minimum wage levels
and maximum hours of work. The same labor rights and standards
apply throughout Mexico, including the maquiladoras. Mexican laws
are at least as comprehensive and stringent as ours, and in some cases
more so.
So, lack of laws providing adequate protection in the areas of the
environment and workers rights is not the problem. The major
problem is enforcement.
Opponents assume that companies will rush to Mexico to take
advantage of lower environmental enforcement and standards. As
with wage rates, they make the mistake of assuming that diverging
environmental standards drive investment. Many factors are far more
important. Besides, most major companies today have global
environmental standards which means investments any where in the
world will be made to the same high standards.
Furthermore, no intelligent businessman today would flee to Mexico for
environmental reasons when investment is a ten year project. It would
be very foolish to assume that Mexican enforcement will not be
10
substantially improved in that time period. In fact, Mexico is already
showing a strong commitment to the environment. The Salinas
government has promised that all new investment in Mexico must
conform to its new environmental laws. With respect to existing
investment, new efforts are underway. For example, they shut down a
major oil refinery outside Mexico City, and altogether have closed 900
operations for non-compliance with the law.
Nevertheless, it is important that the United States and Mexico
intensify their efforts to address these issues in parallel with the FTA
negotiations. Achieving real progress and substantive results on the
environment and workers rights must be a high priority of an
enhanced U.S.-Mexican relationship in the years to come.
OFFICE OF THE UNITED STATES
TRADE REPRESENTATIVE
EXECUTIVE OFFICE OF THE PRESIDENT
WASHINGTON
20506
File Fill Trade
December 3, 1991
Mexico
MEMORANDUM
FROM:
Torie Clarke
NAFTA
202-395-3350
SUBJECT:
North American Free Trade Agreement
In an effort to keep the NAFTA interagency team apprised of
developments in the negotiations, we have collected some recently
produced documents you may find of interest and use.
Included are the following:
O
A letter sent to all Members of Congress
summarizing the negotiations thus far
O
Updated fact sheets on the NAFTA, its benefits
and related issues (e.g. the environment)
O
A summary of recent NAFTA activities undertaken by
the Small Business Administration
It is absolutely vital that all agencies stay in touch as the
negotiations progress. Please let us know of any NAFTA related
issues on your front; we'll make sure your colleagues know about
them.
A NAFTA WOULD CREATE ONE OF THE WORLD'S LARGEST FREE TRADE AREAS
A North American Free Trade Agreement (NAFTA) would create
an enormous market, encompassing some 360 million consumers
and total output of more than $6 trillion.
The progressive elimination of barriers to the flow of
goods, services and investment, and strengthened protection
of intellectual property rights would benefit a broad
spectrum of businesses, workers, farmers and consumers.
The successful implementation of a NAFTA would be a catalyst
for economic growth and development in the United States,
Mexico and Canada through increased trade, investment and
jobs.
THE IMPORTANCE OF NORTH AMERICAN TRADE
Canada and Mexico are America's first and third largest
trading partners, respectively. In turn, the United States
accounts for over two-thirds of their total trade. In 1990,
three-way trade came to about $237 billion.
Since 1980, U.S. exports to Mexico and Canada have doubled,
rising from $55.3 billion to $111.4 billion. Our exports to
our neighbor have grown substantially faster than those to
the rest of the world.
REMOVAL OF BARRIERS WOULD CREATE NEW TRADE AND INVESTMENT
OPPORTUNITIES
Since Mexico joined the General Agreement on Tariffs and
Trade (GATT) in 1986 and started its unilateral policy of
lowering trade barriers, U.S. exports have more than
doubled, growing from $12.4 billion to $28.4 billion.
-- U.S. agricultural exports to Mexico totalled $2.5
billion in 1990, our third largest market.
--
Consumer goods exports from the United States to Mexico
have tripled since 1986, rising from $1 billion to $3
billion.
--
U.S. exports of capital goods have grown from $5
billion in 1986 to about $9.5 billion last year.
We can do better. Mexico has greater barriers to U.S.
exports than we impose on Mexican shipments to the United
States. For example:
--
Mexican tariffs average 10 percent, compared to the
average tariff of 4 percent we impose on Mexican
exports to us.
-2-
--
Mexico still maintains a restrictive import licensing
regime, one which affects 40 percent of U.S.
agricultural exports to Mexico.
In addition, while Mexico has liberalized its investment
regime, it is still closed to many U.S. investments, both in
manufacturing and in services, and performance requirements
distort export opportunities for U.S. products.
Mexico has already pledged to improve its protection for
intellectual property rights, and we expect action on those
pledges in the near future. A NAFTA will make those reforms
secure.
A NAFTA OFFERS BENEFITS TO U.S. PRODUCERS, WORKERS, AND CONSUMERS
Economic analyses show that a NAFTA will have a positive
impact on the U.S. economy and U.S. employment.
U.S. producers and workers will benefit from a NAFTA through
increased sales opportunities, improved operating
efficiencies and strengthened competitiveness against
competitors in Asia and Europe.
U.S. consumers will enjoy increased access to lower-cost,
higher quality products.
A NAFTA STRENGTHENS THE BROADER NORTH AMERICAN RELATIONSHIP
A NAFTA would help cement the extensive historical,
familial, cultural and language links the United States has
with both Mexico and Canada.
More prosperous neighbors are better neighbors and better
customers for U.S. goods and services.
We have a broad agenda with both Mexico and Canada that goes
well beyond trade, economic and investment links. By
boosting economic prosperity in all three nations, a NAFTA
will help us make progress on issues such as the
environment, drugs and immigration.
JOB CREATION, COMPETITIVENESS AND INVESTMENT
OVERALL IMPACT OF NAFTA ON U.S. EMPLOYMENT SHOULD BE SMALL, BUT
POSITIVE
Nearly 20 formal economic studies have concluded that a
NAFTA will be favorable to U.S. employment overall. Studies
which assume full employment in the U.S. economy suggest
that a NAFTA would increase U.S. average real wages. Other
studies suggest small gains in overall U.S. employment.
Two or three studies -- at variance with the majority --
suggest significant losses to U.S. employment from a NAFTA,
but their results must be read with caution.
-- For example, it is difficult to make a judgement about
the negative employment findings in the study by the
Economic Strategy Institute (ESI) since -- unlike many
other published studies -- the ESI analysis contains
little information on its methodology.
--
In another example, reduced employment in the United
States cited in a study from the Economic Policy
Institute results not from rising U.S. unemployment,
but from a reduced number of immigrants from Mexico
seeking employment in the United States as a NAFTA acts
to improve living and working conditions in their home
country.
An econometric analysis prepared for the Department of Labor
suggests that a FTA with Mexico would result in a net
increase of 44,000 to 64,000 jobs in the United States over
10 years, the bulk of these in manufacturing.
The overall impact of a NAFTA on U.S. employment should be
positive, but small. The Mexican economy is only about 1/25
the size of the U.S. economy and imports from Mexico now
account for only about 6 percent of total U.S. imports.
And, since we have a FTA in place with Canada, additional
effects on our trade with Canada would be limited.
Mexican trade barriers are higher than those in the United
States. Eliminating these barriers should result in
increased U.S. exports, exports that will help generate jobs
in the United States.
:
Since Mexico started its trade liberalization in 1986,
U.S. exports to Mexico have more than doubled -- from
$12.4 billion in 1986 to $28.4 billion in 1990. It is
estimated that each $1 billion worth of merchandise
exports generates over 19,000 U.S. jobs.
-2-
U.S. WORKERS ARE AMONG WORLD'S MOST PRODUCTIVE
U.S. manufacturing investment and production grew strongly
through much of the 1980s. In 1988, the latest year for
which constant dollar data are available, manufacturing's
share of the U.S. economy stood at a post-World War II high
(23.1 percent).
U.S. workers are among the most productive in the world.
U.S. labor productivity in manufacturing showed strong
growth in 1990 (up 2.5 percent).
--
Since 1980, output per person employed in U.S.
manufacturing has grown 2.5 times faster than in
Mexico.
Some computations suggest that the United States is as much
as 5 or 6 times more productive than Mexico.
Higher real incomes and wages in the United States reflect
superior U.S. productivity.
THE UNITED STATES IS AMONG THE WORLD'S MOST ATTRACTIVE LOCATIONS
FOR INVESTMENT
Both U.S. and foreign investors will continue to invest
heavily in the United States because low wage levels alone
are inadequate to assure competitiveness. Among the factors
that help compel investment in the United States are:
-- an educated, skilled, and highly productive U.S. work
force;
--
a fully developed and reliable transportation,
communications, and business and financial
infrastructure;
-- proximity to high quality, dependable suppliers;
--
proximity to the marketplace in which one sells; and
-- political and economic stability.
-3-
These U.S. advantages will not disappear in a NAFTA. Nor
will the manufacturing sector be weakened. Rather, the
elimination of trade and investment barriers will expand
market opportunities for exports for all three countries.
The U.S., Mexican and Canadian manufacturing sectors are
likely to be strengthened, in terms of production volumes
and average real wages.
INVESTMENT IN MEXICO CAN BOOST U.S. COMPETITIVENESS
When U.S. firms do invest in Mexico, such investment
strengthens their ability to meet the global competitive
challenge.
A 1988 study by the U.S. International Trade Commission
revealed that the vast majority of the 900 firms surveyed
felt that assembly in Mexico had improved their overall
international competitiveness.
Most of the firms indicated that the alternative to moving
part of their labor-intensive assembly operations to Mexico,
where a substantial amount of U.S. components are used, was
to move their U.S. operations to East Asia, which would
result in the usage of fewer U.S. components and machinery.
INVESTMENT IN MEXICO HELPS SAVE U.S. JOBS
A NAFTA would help save U.S. jobs by strengthening the
ability of U.S. firms to compete against Asian and European
companies.
Joint production arrangements with Mexico have helped save
existing U.S. jobs and even created new jobs. For example:
:
As a result of a move of part of its operations to
Mexico, a U.S. electronics company's sales rose 400
percent and its U.S. employment by 50 percent. One
medical equipment company says it would be out of the
health care business without its Mexican operations,
which are supported by millions of dollars in U.S.
sales.
--
USTR has received a petition requesting duty-free GSP
treatment for ceramic magnets imported from the Mexican
subsidiary of a U.S. company. These magnets are used
in electrical motors that, for example, power air
conditioners and heater blowers in automobiles. The
local U.S. labor union (representing some 3,000
employees) supports the petition, arguing that Mexican
magnets help/the U.S. facility to be more competitive.
-4-
Investment in Mexico is likely to provide greater links back
for U.S. exports. of every dollar Mexico spends on imports,
70 cents goes to purchase U.S. goods.
As investment in Mexico boosts the income of Mexicans, it
enhances their ability to buy U.S. exports.
TRANSITIONAL MEASURES WILL FACILITATE ADJUSTMENT
In cases where immediate elimination of tariffs or non-
tariff barriers would create hardship for U.S. producers, we
will negotiate transitional measures, such as phase-in
periods and safeguard procedures, to minimize adjustment
pressures.
October 1991
NAFTA and the Environment
U.S. ACTIONS
Public Participation:
Representatives of non-governmental environmental
organizations will be appointed to the Advisory Committee on
Trade Policy and Negotiations and have been appointed to
five subsidiary Policy Advisory Committees:
Intergovernmental, Services, Investment, Industry and
Agricultural.
Environmental Review:
USTR has completed a first draft of a comprehensive review
of U.S. -Mexico Environmental Issues, addressing the possible
environmental effects of a free trade agreement. The Review
makes recommendations for treatment of environmental issues
in the parallel cooperation program and (in some cases) in
the negotiation proper.
Three important conclusions emerge from the study:
Our findings indicate that a NAFTA should not lead to
systematic shifts in investment based on expected
differences in pollution abatement costs between the
countries.
It is possible that removal of trade barriers through a
free trade agreement would reinforce the recent
tendency of maquiladora-type plants to locate in the
less congested, less expensive Mexican interior,
modestly reducing future environmental stress on the
border.
Over the long term, a NAFTA will contribute to the
generation of higher economic growth that will be of
great importance to Mexico in generating resources for
environmental investment, particularly in the border
areas.
Integrated Border Environment Plan:
The initial draft of the U.S. -Mexico Border Plan was
released for public comment August 1. As part of the
-2-
process for public comment, EPA and SEDUE held well-attended
public hearings on the plan in sister cities along the
border. The plan is being revised based on public input.
Appropriation requests in support of the plan will be
included in the President's FY '93 budget request.
Enforcement:
A new bilateral Working Group on Enforcement has been
established as part of the cooperative process for
consultation on enforcement. The Working Group is
developing a work program to enhance cooperative efforts in
enforcing environmental regulations in both countries.
Enforcement actions by the U.S. and Mexico have increased,
especially in the border region.
Technical Cooperation and Training:
A U.S. -Mexico Business Environmental Committee has been
established with the initial goal of helping Mexican
business in the Border Area and Mexico City to meet priority
goals regarding compliance with environmental regulations.
U.S. and Mexican agencies are working together in a wide
range of activities in this area, including: the
comprehensive study of Mexico City air pollution, which is
entering its next phase; training of Mexican enforcement
officials; and, establishing an environmental technology
clearinghouse in Mexico City.
The National Park Service met with Mexican officials in July
and made progress on establishing sister parks along the
border. Cooperative work on forest conservation and
resource management issues is proceeding between the U.S.
Forest Service, the Agency for International Development and
the National Marine Fisheries Service and their Mexican
counterparts.
NAFTA Negotiations:
U.S. environmental officials have been included on NAFTA
negotiating teams, at all levels. EPA is represented on
interagency policy committees.
EPA and FDA officials co-chair negotiating subgroups on
agricultural product standards and health and environmental
standards.
-3-
MEXICAN ACTIONS
Public Participation:
To gather public comment on the Integrated Border
Environment Plan, Mexico held its first ever public policy
advisory hearings. The Mexican Government has announced
that the next draft of the Plan will be the object of a
second round of public comment.
Environmental Review:
Mexico is conducting its own environmental review of the
NAFTA, which is expected to be completed by late November.
The Mexican Government has allocated additional financial
resources to SEDUE (Mexico's secretariat with environmental
protection responsibilities) for this Review, to allow use
of consultants and technical experts. Canada is also
preparing an environmental review of the NAFTA.
Border Infrastructure Improvements:
Even in advance of completion of the Border Plan, President
Salinas has directed that $460 million be allocated to
priority environmental infrastructure projects in the border
area over the coming three year period. Nearly $142 million
will be provided in 1992 alone.
These funds will be allocated as follows: water supply and
wastewater treatment: $223 million; municipal solid waste:
$26 million; highway, bridge and border crossing projects:
$120 million; and provision of housing areas with necessary
utilities: $44 million.
Additional funding will be available for lines of credit for
acquisition of public transport equipment and Interamerican
Development Bank loans.
Enforcement:
Mexico has decentralized SEDUE, providing the border zone
office with increased staff and authority. By the end of
1991 there will be 200 trained environmental inspectors on
duty in the border area. SEDUE Secretary Chirinos has
announced that funding for border zone environmental
monitoring and enforcement will be $6.2 million in 1992, an
increase of 450% over 1991.
-4-
NAFTA Negotiations:
Mexico has included its regulatory agencies, including SEDUE
on its NAFTA product standards negotiating teams.
- Conservation:
In September, President Salinas announced a new national
program for dolphin conservation. This included Mexico's
commitment to limits on total dolphin mortality incidental
to commercial fishing operations by penalizing fishermen who
exceed new and strict "incidental take" limits set by the
government. The President also committed to have 100
percent observer coverage on board Mexican tuna vessels.
The United States will train Mexican observers in November;
Mexico will place the observers on board the tuna fleet by
the end of 1991.
In addition, President Salinas said Mexico would devote
greater priority and resources to research into equipment
and techniques designed to reduce dolphin mortality.
To stem the trade in endangered and threatened species, the
Government of Mexico acceded to the Convention on
International Trade in Endangered Species (CITES) in July.
The Fish and Wildlife Service is working with Mexican
officials on CITES procedures and other wildlife issues.
THE NEGOTIATING GROUPS
As the chart below shows, the structure of the negotiations is
broken into six broad negotiating areas, with 19 working groups.
Some of the groups are sector-specific, while many cover cross-
cutting issues. In general, each of the groups has met three to
five times since June. Not all of the groups will necessarily
result in a specific agreement. In some cases, particularly in
the sector-specific groups, an important role is to give guidance
and support to the cross-cutting groups such as tariff
negotiations.
There follows a listing of the objectives of the various
negotiating groups and some background on each issue.
NAFTA NEGOTIATING GROUPS
MARKET ACCESS
Tariffs/non-tariff barriers
Rules of origin
Government procurement
Agriculture
Automobiles
Other industrial sectors
-Textiles
-Energy
TRADE RULES
Safeguards
Subsidies and trade remedies
Standards
-Sanitary/Phytosanitary
-Health/Environment
-Industry
SERVICES
Principles for services
-Temporary Entry
Financial
Insurance
Land transportation
Telecommunications
Other services
INVESTMENT (Principles and
restrictions)
INTELLECTUAL PROPERTY RIGHTS
DISPUTE SETTLEMENT
1
TARIFFS/NONTARIFF BARRIERS
U.S. Objectives: Through the NAFTA, we seek the immediate or
phased elimination of all tariffs (duties) among the United
States, Mexico and Canada. We also seek the reduction of
nontariff trade barriers (NTBs), whether imposed at the border or
not. For both tariffs and NTBs, our goal is to maximize the
gains from liberalizing trade while minimizing adjustment
pressures in sensitive sectors through gradual phase-ins and
other measures.
Background: This exercise is one of the most labor-intensive
underway, with over 27,000 tariff line items under negotiation.
The average tariff in the United States is 4 percent, versus 10
percent in Mexico.
Initial, conditional tariff offers were made in Dallas on
September 19. Tariff elimination will proceed from actual
applied rates as opposed to nominal rates. In addition, all
three countries have agreed that no products would be excluded
from the tariff negotiation. In their conditional offers, each
country proposed an allocation of products to immediate, medium-
term or long-term staging categories, depending on the
sensitivity of the various products. We have been analyzing
these proposals and in November started a line-by-line review of
how each country thinks tariffs should be eliminated. Our aim is
to negotiate a balanced and mutually advantageous schedule for
tariff elimination.
The group also is responsible for examining non-tariff trade
barriers. Non-tariff measures under review include import
licenses, quotas and other practices that burden imports as
opposed to domestically-produced goods. In functional areas
(government procurement, standards, services, investment and
intellectual property rights), and in sectoral areas
(agriculture, autos, textiles and apparel, and
energy/petrochemicals), the appropriate NAFTA work group will
deal with the NTBs in its area of responsibility.
RULES OF ORIGIN
U.S. Objectives: We plan to build on the rules of origin in the
U.S.-Canada Free Trade Agreement, which generally employs a
"change in tariff classification" rule as the basis for
determining substantial transformation. In addition, we will
seek to strengthen the value-content-based rule of origin in
certain sectors, such as automobiles. All three parties wish to
ensure that NAFTA rules of origin maximize benefits for North
American producers, and are seeking one set of rules of origin to
cover trade among all three countries for tariff preference
2
purposes. The United States also seeks the elimination, over
time, of drawback and performance-related duty remission
programs. Finally, we seek to harmonize Customs procedures and
documents, to facilitate entry of goods in all three countries.
Background: Rules of origin determine a product's country of
origin for purposes of duty assessment, import programs, and
statistics. With companies increasingly sourcing their
components from different parts of the world, this is not as easy
a question as it might appear. So far, the parties have reviewed
the rules of origin for about half of the chapters in the tariff
schedule with the Mexicans and Canadians. Work also is
proceeding in the area of developing a more precise, and less
costly to administer, value-content rule (where such a rule is
applicable).
With respect to duty drawback, the United States has set out its
position that such programs should be eliminated, but the parties
have not yet agreed on the issue.
GOVERNMENT PROCUREMENT
U.S. Objectives: The United States is seeking to apply the rules
of the U.S.-Canada government procurement agreement to Mexico and
to achieve greater liberalization when feasible. A key objective
is to provide greater transparency, and predictability in the
competition for supplying goods to governments and parastatal
enterprises by firms from any of the NAFTA countries.
Background: The government procurement measures in the U.S.-
Canada Free Trade Agreement are based on GATT Government
Procurement Code provisions (to which the United States and
Canada belong but Mexico does not). The CFTA, however, provides
for a lower-than-GATT threshold for goods and it includes
services, so the scope is much broader that the GATT Code. In
addition, there is an effective set of bid protest procedures
which do not exist now under the Code.
AGRICULTURE WORK GROUP
U.S. Objectives: The U.S. goal is to enhance the free flow of
agricultural products by eliminating tariff and nontariff
barriers to trade in North America. We also seek an effective
transition mechanism to enable sensitive sectors to adjust to
trade liberalization, as well as a timely safeguard provision for
certain agricultural items.
Background: Agriculture is an important component of North
American trade, with U.S. trade with Mexico and Canada totaling
$13 billion in 1990. Trade flows are affected by a host of
3
government policies in all three countries. Many of these
policies are under multilateral negotiation in the Uruguay Round,
and the Round may be the most appropriate forum for handling
certain issues, such as subsidies. The group therefore is
focusing its initial efforts in areas such as designing a special
NAFTA safeguard for certain agricultural items.
AUTOMOTIVE WORK GROUP
U.S. Objectives: The NAFTA should result in an integrated,
rationalized and competitive North American automotive industry,
chiefly by eliminating government practices that distort trade
and investment. Specifically, the United States seeks to
eliminate restrictions under the Mexican Automotive Decrees,
including investment restrictions, export performance
requirements, and import restrictions. The parties agree that
there should be transition provisions to allow adjustment to
increased competition. We also seek a stronger rule of origin
than in the U.S.-Canada FTA.
Background: Automotive trade (including parts) comprises about
$59 billion in three-way trade for the NAFTA members. It also is
a sector in which government policies -- including the Mexican
Auto Decrees and the U.S.-Canada Auto Pact -- have had a major
impact on trade and investment flows. The principal task is to
liberalize trade and investment in the sector and to make the
U.S. and North American industry more competitive vis-a-vis the
rest of the world.
OTHER INDUSTRIAL SECTORS -- TEXTILES AND APPAREL
U.S. Objectives: The parties wish to eliminate trade-distorting
practices in textile and apparel trade, but with a sufficiently
strong origin rule to ensure that the advantages of tariff
elimination accrue to North American producers. In addition, the
United States seeks a transition period so that U.S. companies
and workers will have time to adjust.
Background: We have reached conditional agreement on the
definition of the textile and apparel sector for purposes of the
NAFTA negotiations, exchanged information on country practices,
and had preliminary exchanges of views on the timing of phase-
outs on tariffs, quotas and licensing requirements. We have also
discussed, but not yet agreed on, rules of origin, safeguards,
customs cooperation and enforcement, and labeling requirements.
4
OTHER INDUSTRIAL SECTORS -- ENERGY AND PETROCHEMICALS
U.S. Objectives: We seek to incorporate provisions in the NAFTA
that strengthen the important role of energy and energy products
in North America, while respecting Mexico's constitutional
restraints.
Background: Energy/petrochemicals is an important, and
sensitive, area in the NAFTA negotiations. The United States and
Canada have agreed that they would respect Mexico's
constitutional provisions on energy, but there still remain
important areas in which progress could be made to enhance
cooperation in this sector in all three countries.
SAFEGUARDS
U.S. Objectives: In the NAFTA, the United States seeks a two-
track safeguard system:
(1) a bilateral provision that would allow parties to
respond effectively and quickly if there are
injurious increases in imports from either NAFTA
partner in any industry or farm sector; and
(2) a global provision that will maintain the ability
to limit NAFTA imports as part of a safeguard
action on imports from all sources, provided the
NAFTA products are partly responsible for the
injury.
Background: While the NAFTA should result in new export
opportunities for many sectors in America, the Administration is
committed to easing the adjustment pressures that might be
created by trade liberalization.
Each country agrees that it is important to have certain
"safeguards" in place in case imports of a certain good increase
to such an extent that they harm a domestic industry. or farm
sector. The focus of the trilateral discussions has been on
ensuring that the safeguard process is transparent, including
rights for private parties to make their views known.
ANTIDUMPING, SUBSIDIES AND COUNTERVAILING MEASURES
U.S. Objectives: We seek better cooperation between the
authorities in each country and greater transparency of laws and
regulations against unfair trade (i.e., making them easier to
understand). Our goal is to maintain strong and effective
defenses against unfairly traded goods, without unduly burdening
business in North America.
5
Background: All three sides have laws against unfair pricing and
subsidized goods, but there are significant differences in the
administrative and judicial procedures related to these laws.
Mexico has questioned the applicability of AD/CVD laws in a free
trade area, arguing that the economic logic of the laws is no
longer viable when trade barriers are eliminated. The United
States believes that without the practical experience of a
completely liberalized trading area, it is inappropriate to have
separate AD/CVD regimes for the NAFTA as compared to the rest of
the world. So far, there have been extensive discussions of the
administrative/procedural aspects of each country's AD/CVD laws.
STANDARDS
U.S. Objectives: The United States wants the NAFTA to contain
disciplines that prevent the use of product standards and
technical regulations as discriminatory or unnecessary trade
barriers. An equally important goal is to preserve the U.S.
right to apply standards and technical regulations, including
those that are more stringent that international standards, to
protect human, plant or animal health or safety and to protect
the environment. Those standards must be based on a scientific
justification and a level of risk that the party issuing the
standards considers appropriate.
Background: Disciplines for standards setting and enforcement
are needed to deal with the possibility that, as tariffs and
other trade barriers are eliminated, standards might be used to
establish unwarranted barriers to trade to protect affected
domestic producers in agriculture and industry.
The standards groups is not negotiating about specific standards
per se, but rather on the process by which standards and
technical regulations are established. This includes elements
such as transparency, equal treatment, scientific basis, risk
assessment and other aspects of the standards-setting process.
We also are working to encourage the enhancement of standards,
consistent with law and regulation in all three NAFTA countries.
SERVICES WORK GROUPS
U.S. Objectives: We seek to eliminate barriers to trade in
services in NAFTA to the maximum extent possible. This includes
removing barriers to investment in services within North America,
as well as removing barriers that prohibit trade of services
across the border. It will likely also include specific rules
for a limited number of sectors, such as insurance, financial
services, telecommunications, and land transportation.
6
Background: NAFTA negotiators are wrestling with the same issues
as are being considered in the GATT Uruguay Round of multilateral
trade negotiations. Services trade comprises multiple sectors,
such as insurance, financial services, transportation,
telecommunications, professional services (doctors, lawyers,
accountants) and others.
The various working groups on services -- Services (Principles),
Financial Services, Insurance, Land Transportation,
Telecommunications, and Other Services -- are attempting to
eliminate unnecessary hurdles to service providers so far as
possible. A key tenet is national treatment: foreign service
companies should have the right to establish and operate a
company and to offer services in the country on the same basis as
a country national. The same holds true for individual service
providers, but subject to each nation's immigration requirements.
As practical examples, a foreign bank should be able to establish
its operations under the same prudential guidelines as a domestic
institution; and an accountant ought to be able to audit and
prepare corporate reports without being a national of the
country.
So far, information about trade in services and existing barriers
has been exchanged. After consultations with the Congress and
the private sector, the United States presented a draft in
November that is designed to achieve the goals described above.
There are also working groups on specific services sectors, as
follows:
The Financial Services group has focused on the list of
services and financial institutions that will be
covered by the agreement and the rules that will govern
trade in financial services, specific barriers to be
eliminated, and cross-border transactions. All parties
recognize that there may be exceptions to any rules as
well as a transition period.
The Insurance group seeks a similar set of rules on
insurance as to that in the financial services group.
It is anticipated that the rules will be substantially
the same in all areas.
The Land Transport group is charged with negotiating
liberalization of current restrictions on the
transportation industry, such as laws prohibiting
foreign-owned or -operated motor carriers from doing
business in a country, and addressing other barriers
that impede transportation efficiency among the three
countries. The parties have agreed that for discussion
purposes, the scope should include railroads,
local/intercity transit service, trucking, warehousing,
7
non-petroleum pipelines, arrangement of freight
services, vehicle maintenance and repair, and passenger
transportation for the bus and rail industry (with a
few other categories still under discussion), as well
as a possible transition period. A subgroup is
addressing questions involving enhancement of technical
and operating safety standards.
In Telecommunications Services, we seek to ensure
access and use of the services of the public
telecommunications network for the provision of covered
goods and services. Additionally, we want to ensure
the greatest possible liberalization of the Mexican and
Canadian telecommunications sectors.
Finally, in Other Services, the Parties are discussing
barriers to service providers in miscellaneous fields,
most important of which may be regulations pertaining
to professionals (doctors, lawyers, accountants,
architects, and engineers). Canada and the United
States have urged that, with respect to the
professions, the U.S.-Canada FTA provides a good
blueprint.
Finally, a subgroup on the temporary entry of professionals has
been created under the Services (Principles) group. The
objective is to facilitate the temporary entry within North
America of NAFTA-country professionals and managers who are
engaged in trade and investment activities. In recognition of
the special trading relationship which the U.S.-Canada Free Trade
Agreement created, that accord created new arrangements and
procedures for easing the temporary entry of business visitors,
traders and investors, professionals and intra-company
transferees between the signatory countries. In similar fashion,
the NAFTA subgroup is addressing current practices within the
three countries with a view toward simplifying temporary entry
procedures for persons engaged in business activities.
INVESTMENT WORKING GROUP
U.S. Objectives: The United States seeks to establish a
foundation of principles to apply to investment in all goods and
services industries. For the United States, this means the
principles customarily included in bilateral investment treaties,
such as national treatment, right of establishment, right to
repatriate profits, guarantees against unfair expropriation, and
access to arbitration for settlement of disputes.
Background: The parties generally agree that North American
firms should be able to establish subsidiaries or branches,
operate partnerships or take over other companies in any of the
8
three nations. Each side recognizes that there may have to be
certain sectors in which open investment is "off limits," but the
United States wants to keep these to the minimum necessary to
ensure the protection of vital national interests. The parties
have agreed that the principles negotiated by the investment
group would govern investment in all goods and services, with
exceptions to be negotiated.
INTELLECTUAL PROPERTY
U.S. Objectives: The United States seeks to codify obligations
on accession to the current texts of the Paris, Berne, Geneva,
Patent Cooperation and UPOV Conventions; according national and
MFN treatment among the NAFTA countries; providing adequate and
effective protection for patents, trademarks, copyrights, trade
secrets and integrated circuit lay-out designs; and, establishing
measures necessary for timely and effective border and internal
enforcement.
Background: The protection of intellectual property is one of
our chief global trade goals. Fortunately, President Bush's
commitment to strong IPR protection in North America is shared by
President Salinas and Prime Minister Mulroney.
So far, the Parties have exchanged information on national laws
and practices in areas of enforcement and protection of
intellectual property rights and identified issues which need to
be resolved. We have generally agreed on the structure of the
chapter on intellectual property, and the United States presented
an initial text of an intellectual property rights chapter in
November.
DISPUTE SETTLEMENT
U.S. Objectives: We wish to create a flexible, pragmatic
oversight and consultation mechanism for the NAFTA. When
consultations are not sufficient to resolve a problem, we seek
establishment of fair, speedy, and effective panel procedures for
the resolution of controversies. Since the United States
generally has a more open market, it is in our interest to see an
effective dispute settlement mechanism incorporated in the NAFTA.
Background: One of the keys to a successful trade agreement is
swift and fair dispute settlement procedures. Business leaders
have frequently called for such procedures to handle their
complaints. Nevertheless, actual drafting of text will probably
have to take place at a later stage of the negotiations, once the
substantive and legal framework of the NAFTA becomes clearer.
9
LABOR AND THE ENVIRONMENT
While the NAFTA negotiations proper are about reducing
impediments to trade and investment in North America, the
President has an equally strong commitment to ensuring that
progress is made across the broad range of issues affecting U.S.,
Mexican and Canadian relations, especially in the areas of labor
issues, environmental concerns, and matters concerning
infrastructure development at the borders.
LABOR ACTIVITIES
Occupational Safety and Health
A general comparison of each country's occupational safety
and health systems is underway.
Mexican and U.S. officials responsible for occupational
health and safety will hold a conference on a high hazard
industry (iron and steel) on December 16-17, in Mexico city.
The conference will include participants from industry,
labor and government. Similar conferences on the
construction and chemical industries are contemplated for
1992.
A Mexican technician visited the OSHA industrial hygiene
testing laboratory in August for information on how a
similar testing program might be established in Mexico.
Until such time as the Mexican program is better
established, OSHA will provide industrial hygiene testing
for selected specialized Mexican samples.
U.S. and Mexican officials agreed to exchange visits of
inspection personnel to observe enforcement methods.
During October and November, OSHA assisted its Mexican
counterpart in presenting a series of seminars on health,
safety and medical programs for managers of maquiladora
plants.
OSHA will send expert personnel to Mexico to conduct a
series of training courses for Mexican inspectors and
technicians in late 1991 or early 1992.
OSHA and its Mexican counterpart have agreed to distribute
English translations of Mexican occupational safety and
health laws and regulations to multinational firms operating
in Mexico.
10
Employment Standards/Child Labor
A meeting of enforcement officials from both countries was
held on May 31 to exchange information on enforcement
programs and techniques.
A joint child labor study should be completed in late
November. Plans are to present the results at a conference
in early 1992.
The Departments of Labor and Education will collaborate with
Mexican counterparts to assess stay-in-school policies and
programs and how they affect child labor.
Labor Statistics
The Department of Labor and Mexican agencies responsible for
national statistical programs have collaborated in
developing a series of activities that will modernize
Mexican social and economic data collection and analyses.
Workplace Training
In mid-September 1991, a delegation of Mexican officials,
led by their Director of Employment Services, visited
Employment and Training Administration sites in California,
New York and Puerto Rico for further information on training
and other employment services programs.
Quality and Productivity
U.S. and Mexican officials met in September to exchange
information on productivity and human resources.
Discussions covered high performance workplaces, trends in
labor/management relations and innovative reward systems.
The discussions included case studies and site visits.
Informal Sector
The United States and Mexico have agreed to analyze the
economic and social policy effects of the informal sector
and implications for workers, economic growth, and trade
development. The first meeting was held on November 7 in
Mexico City.
Worker Rights-Labor Management Relations Systems
The Department of Labor and its Mexican counterpart agreed
to hold discussions to gain further mutual understanding of
how each country provides basic worker rights -- freedom of
association and the right to organize and bargain
collectively, including the cultural, legal and economic
11
context as well as the prevailing labor management relations
policies, processes and practices.
Worker Adjustment Programs in the United States
The Administration is committed to working with the Congress
to ensure that an effective, adequately funded worker
adjustment program is in place when the NAFTA takes effect.
ENVIRONMENTAL ACTIVITIES
Public Participation
Representatives of non-governmental environmental
organizations have been appointed to the Advisory Committee
on Trade Policy and Negotiations and to five subsidiary
Policy Advisory Committees: Intergovernmental, Services,
Investment, Industry and Agricultural. These groups provide
direct input to the negotiators of the NAFTA, as well as to
all trade policy negotiations.
Environmental Review
In October, USTR released a study, in c rdination with EPA
and other concerned agencies, addressing the possible
environmental effects of a free trade agreement, drawing in
particular on our analysis of border environmental issues.
Mexico has announced that it will undertake a similar
review. USTR seeks public comment on the study, which is
available from USTR, in order to issue a final report in
December.
Integrated Border Environment Plan
The initial draft of the U.S.-Mexico Border Plan was
released by EPA for public comment on August 1. As part of
the public comment process, U.S. and Mexican environmental
officials held public hearings on the plan in sister cities
along the border during September. The plan is expected to
be finalized by late fall.
Border Infrastructure Improvements
Even in advance of the completion of the Border Plan, Mexico
announced that $460 million will be allocated over the next
three years for environmental infrastructure projects along
the border, with over $142 million to be provided in 1992
alone.
The funds will be allocated as follows: water supply and
wastewater treatment: $223 million; municipal solid waste:
12
$26 million; highway, bridge and border crossing projects:
$120 million; and provision of housing areas with necessary
utilities: $44 million.
Enforcement
O
A new bilateral Working Group on Enforcement has been
established as part of the cooperative process for
consultation on enforcement. The Working Group has met
several times and is developing a work program to enhance
cooperative efforts in enforcing environmental regulations
in both countries.
Technical Cooperation and Training
O
A U.S.-Mexico Business Environmental Committee has been
established with the initial goal of helping Mexican
business in the Border Area and Mexico City to meet priority
environmental protection goals.
U.S. and Mexican agencies are working together in a wide
range of activities in this area, including: the
comprehensive study of Mexico City air pollution, which is
entering its next phase; training of Mexican enforcement
officials; and, establishing an environmental technology
clearinghouse in Mexico City.
Conservation
To stem the trade in endangered and threatened species, the
Government of Mexico acceded to the Convention on
International Trade in Endangered Species (CITES) in July.
The Fish and Wildlife Service is working with Mexican
officials on CITES procedures and other wildlife issues.
The National Park Service met with Mexican officials in July
and made progress on establishing sister parks along the
border. Cooperative work on forest conservation and
resource management issues is proceeding between the U.S.
Forest Service, the Agency for International Development and
the National Marine Fisheries Service and their Mexican
counterparts.
BORDER CONGESTION & INFRASTRUCTURE
In addition, with increased trade flows as a result of a NAFTA,
land transportation traffic levels are expected also to increase,
with potential environmental consequences. The draft U.S.-Mexico
Environmental Review examines and makes recommendations in regard
to these consequences, including safety and environmental
13
protection for transport of hazardous wastes and materials, noise
levels, and pollution from trucks and buses.
Beyond the environmental impact, there are concerns about
infrastructure from representatives and citizens on both sides of
the border, including concerns about delays crossing the U.S.-
Mexico border. The U.S. General Services Administration (GSA)
has undertaken an ambitious Southwest Border Capital Improvements
program, to be completed in 1994, that should provide sufficient
physical inspection facilities at virtually all ports of entry.
Despite this program, there are concerns that existing border
facilities, including customs inspection stations, access roads,
bridges, and related infrastructure have not kept pace with the
increase in traffic, including commercial traffic, in recent
years. It is said that limitations on inspection agency staff,
inadequate coordination between U.S. and Mexican Customs
agencies, and delays resulting from clearance procedures for
trucks entering the United States have further contributed to the
border congestion problem.
In some instances, the solution to any such problems may lie in
relatively low-cost measures. For examples, delays going into
Mexico at Nuevo Laredo were substantially ameliorated by the
installation of additional computer equipment by Mexican Customs
and expansion of the Mexican import compound.
The Department of Transportation, GSA, and the U.S. Customs
Service -- working with other relevant agencies, such as the
Immigration and Naturalization Service and the Department of
Agriculture -- are evaluating each of these border infrastructure
and congestion problems and will recommend solutions for
negotiation either within or in parallel to the NAFTA.
THE UNITED STATES TRADE REPRESENTATIVE
Executive Office of the President
Washington, D.C. 20506
November 25, 1991
THE FOLLOWING LETTER WAS FORWARDED TO ALL MEMBERS OF CONGRESS
With the Congress about to recess and knowing of your and your
constituents' keen interest in our negotiations with Mexico and
Canada for a North American Free Trade Agreement (NAFTA), I
thought it might be useful if I shared with you an overview of
what has happened since the negotiations started in June and what
work lies ahead.
This letter summarizes the major developments in our work over
the past five months, both with respect to the negotiations and
our consultations with Congress and the public. I also am
enclosing a summary of the objectives of each of the negotiating
groups, and additional complementary activities in the fields of
labor and the environment as foreseen by the Administration in
its "Response to Issues Raised in Connection with the Negotiation
of a North American Free Trade Agreement
We also will be publishing a NAFTA newsletter within the next few
weeks. This newsletter will be the first in a series designed to
keep you, your staff, and the public abreast of progress in the
NAFTA and related activities.
Status of the Negotiations
As you are aware, we initiated NAFTA negotiations on June 12 in
Toronto. My counterparts, Mexico's Secretary of Commerce and
Trade, Dr. Jaime Serra Puche, and Canada's Trade Minister,
Michael Wilson, and I agreed to form 19 working groups to carry
out the detailed work of the negotiations (chart attached). My
Deputy, Ambassador Julius Katz, is our chief negotiator, and
experts from USTR and other agencies are serving as leaders for
the U.S. side of the groups.
During the summer and early fall, the working groups largely
focused on organizing their work, exchanging information, and
setting out the issues for the negotiation. When my counterparts
and I met in Seattle in August, we agreed that while the groups
had made a good start, more work needed to be done, both in terms
of trilateral discussions and with our respective legislatures
and private sectors, before we could begin to exchange initial
negotiating texts.
2
On October 25-28, my counterparts and I met for the third
trilateral ministerial, this time in Zacatecas, Mexico. We used
this meeting to try to get a better understanding of some key
areas in the negotiation, including tariffs/nontariff barriers,
autos, textiles, duty drawback, investment/services, antidumping
and petrochemicals/energy.
We decided at Zacatecas that the time had come to put pen to
paper in many of the negotiating areas. In fact, following
consultations with the Congress and committee staff, as well as
the private sector, the United States last week shared with
Mexico and Canada draft texts in the areas of tariff and
nontariff border measures, services, investment, and intellectual
property rights. I should note that there are gaps even in some
of these proposals, and there is much work ahead. We will
continue to do drafts in other areas in December, while drafts
for sectoral areas such as agriculture and autos will come some
time thereafter. That said, I can assure you that all three
ministers are determined that the substance will drive the timing
of the negotiations, and not the reverse.
Congressional and Public Outreach
In developing our initial proposals, we are relying heavily on
the advice we obtain from the Congress and the private sector.
Forty advisory committees, composed of over 1,000 private sector
representatives (and one committee of state and local government
officials) provide us with continuing advice on all our trade
negotiations.
In an effort unprecedented in its scale, we held public hearings
in six cities during late August and early September to solicit a
broad spectrum of advice from the public. Our hearings were
conducted in San Diego, Houston, Atlanta, Cleveland, Washington
and Boston. We received oral testimony from 289 witnesses
ranging from farming to manufacturing interests. Additionally,
we received written submissions from 150 individuals. Even
beyond these formal solicitations of views, we are constantly
receiving and evaluating a steady stream of advice from
individual citizens, companies, unions and associations.
In addition to the private sector consultations, we have been
holding extensive consultations with members of Congress and
Congressional committee staff with jurisdiction over the
negotiations and will continue to do so throughout the
negotiating process. Our meetings have covered all areas under
negotiation including rules of origin, textiles, energy, autos,
tariffs and services. We are consulting with approximately 18
House and Senate committees, and have held almost 90 staff
consultation sessions since the negotiations commenced. The
issues under negotiation are many and complex, and my staff has
spent substantial time with Congressional staff reviewing them.
3
I have met with a number of committees and members, and expect to
be actively engaged in consultations throughout the negotiating
process. I welcome the chance to discuss with you our objectives
in these negotiations as well as hear your concerns and guidance.
Labor and the Environment
At all three ministerials to date, I have discussed with my
counterparts the key areas of labor and the environment. Each
time, I have reiterated the importance of continuing progress on
these issues. We are proceeding to implement each one of the
Administration's commitments in both of these areas. Labor
Secretary Martin has been working with her Mexican counterpart on
a number of issues of mutual concern, as summarized in one of the
attached reports. These activities include the organization of a
conference in December on a high hazard industry (iron and
steel), with additional conferences planned for 1992 on the
construction and chemical industries. Moreover, OSHA has agreed
to perform industrial hygiene testing of certain Mexican samples
until Mexico can establish its own testing lab. OSHA is
assisting Mexican officials in setting up this testing facility.
On the environment, the Administration is pursuing a
comprehensive, multi-agency program with Mexico. On August 1,
EPA set out for public comment the initial draft of the U.S.-
Mexico Border Plan. EPA currently is working with Mexico to
revise the Plan in light of the comments received. In October,
USTR released a draft review of the U.S.-Mexico environmental
issues, including an evaluation of the possible environmental
effects of a NAFTA. In addition, we have added a number of
prominent environmental experts to key private sector advisory
committees. We have been consulting with environmental groups as
we proceed in our NAFTA negotiations and in the parallel efforts
promised in the "Response of the Administration to Issues Raised
in Connection with the Negotiation of a North American Free Trade
Agreement."
Conclusion
We are determined to negotiate an agreement which is in the best
economic interest of the United States. At the same time, we are
well aware that the Congress and the public will be evaluating
our efforts in addressing labor and environmental concerns, and
indeed the broader state of our relationship with Mexico on a
spectrum of other issues.
I hope the attached summaries of the work groups and related
activities will give you more detail on the range of issues
involved in our negotiations. We firmly believe, and the
evidence shows, that the NAFTA will lead to greater export
opportunities and jobs in the United States. The NAFTA will give
us the chance to eliminate tariffs in Mexico, which are two-and-
4
one-half times as high as in the United States; it will open up
North America to our services providers and to our investors; it
will ensure solid protection for our intellectual property rights
holders; and it will strengthen the ability of our companies and
our farmers to compete against Asian and European producers.
In the months ahead, we will continue to consult on a detailed
basis with the Congressional committees responsible for the
various issues under negotiation, as well as with our private
sector advisory committees. Let me again affirm my commitment
to regular, meaningful and substantive consultations as these
negotiations proceed. A strong consultative mechanism is
integral to the success of our negotiations and the fast-track
process. I welcome your thoughts and advice, and strongly
encourage you to follow our progress and let me know your views
as these negotiations intensify.
Sincerely,
Carla A. Hills
Attachments
MAQUILADORA EXPERIENCE
MAQUILAS HAVE IMPROVED U.S. COMPETITIVENESS, SALVAGED JOBS, AND
GENERATED BUSINESS FOR U.S. FIRMS
Maquilas are export-oriented assembly plants that operate
under special Mexican regulations and U.S. tariff codes that
allow the maquila to import components duty-free from the
U.S. and re-export finished and semi-finished products to
the U.S. subject to import tariffs only on the non-U.S.
components and Mexican value-added.
Production sharing has enabled firms to become or remain
price competitive, expand their sales and line of products,
and hire more U.S. workers to produce them.
Many firms have said that they would have been forced to
shut down their U.S. operations without the maquila program.
The assembly in Mexico of U.S. components has created or
maintained thousands of U.S. production jobs that would have
been lost if production has been shifted to the Pacific Rim.
A survey of San Diego firms showed that 15 percent do
business with maquilas; 12 percent of that group's
employment stems from sales to maquilas.
THE JOBS RETAINED IN THE U.S. ARE BETTER-PAYING
By placing the most labor-intensive and low-paid operations
in Mexico, the U.S. plants can retain and create the higher-
skilled and more capital-intensive operations that have
higher paid jobs and avoid shifting entire operations to
Asia in order remain competitive.
MOST U.S.-AND JAPANESE-OWNED MAQUILAS COMPLY WITH MEXICAN
ENVIRONMENTAL REGULATIONS
Large U.S. and Japanese parent companies are careful to
abide by standards that meet EPA specifications and conduct
audits to ensure compliance.
The smaller companies are usually the culprits.
To guard against abuse, the Mexican government issued a
maquiladora decree in 1989 that tightened regulations on the
disposal of industrial waste and scrap materials.
On-site inspections, and the planned creation of new
inspector positions and increased funding, should strengthen
enforcement of environmental regulations.
-2-
WORKING CONDITIONS ARE OFTEN COMPARABLE TO THOSE IN THE U.S.
Maquila workers' right of association and right to strike
are guaranteed under Mexico's Constitution and labor
legislation: however, relatively few maquilas are
unionized.
.
Mexico's child labor laws set a minimum working age of
fourteen (versus 15 in the U.S.), and efforts to verify
that applicants meet the minimum age requirements appear
adequate.
Maquilas tend to uphold the same standards as their parent
company--ventilation. lighting, safety notices, and
protective gear are usually comparable to similar plants in
the United States.
MAQUILAS SUPPLEMENT WAGES WITH COMPETITIVE NON-WAGE BENEFITS
Although many maquila workers earn the minimum wage, their
hourly compensation is effectively higher than the minimum
wage once fringe benefits are included.
Competition for labor and a high turnover rate have
prompted maquila owners to draw up non-wage packages aimed
at attracting and keeping workers.
Many maquiladoras extend benefits other Mexican firms do
not provide, such as transportation allowances, subsidized
lunches, savings plans, food coupons, and bonuses for
attendance, productivity, and punctuality.
ECONOMIC DEVELOPMENT/BORDER
A North American FTA offers Mexico the stability in its
economic environment to better manage and plan growth along
the U.S./Mexico border, thereby avoiding some of the
problems of the past.
For example, communities along the border will want to
improve sewer systems and enforcement of health
regulations. Federal as well as state and local officials
already are striving to catch up on the infrastructure gap
created by the maquiladora boom of the late 1980's.
Cooperation on border issues has improved substantially in
recent years, in part as a result of the growing economic
interdependence of the border states.
The International Boundary and Water Commission (IBWC) is
working to resolve border sanitation problems.
-- The IBWC is constructing a joint sewage treatment
plant in Nuevo Laredo to greatly improve the quality
of water in the Rio Grande.
--
A major expansion of the international waste water
treatment plant at Nogales, Arizona will be completed
in 1992.
--
A long-awaited joint sewage treatment project has
begun in the Tijuana/San Diego region and studies are
underway for cleaning up the waters of the New River
near Mexicali, Baja California/Calexico, California.
The 1983 La Paz Border Environment Agreement set up a
comprehensive process for environmental coordination and
problem solving through action-oriented annexes and the
establishment of joint working groups on air pollution,
water pollution, problems of hazardous waste, emergency
response to chemical and other hazardous spills, and
environmental enforcement.
At their November 1990 Monterrey meeting, Presidents Bush
and Salinas instructed their environmental authorities to
develop a comprehensive, integrated plan to deal with
border pollution problems.
-- That plan has been completed in draft and underwent
intensive public review in September. Accordingly,
the plan is being extensively revised prior to
developing its financial underpinning and publication
in early 1992.
-2-
A NAFTA WILL SPUR GROWTH THROUGHOUT MEXICO, NOT JUST ON THE
BORDER.
In the past, maquiladoras were viewed as a border
phenomenon. Unlike the maquiladora program, a NAFTA will
be from its inception a national program.
Because it will be a national commitment to increased
trade, as opposed to a regional one limited to northern
Mexico, Mexico's federal government will be more involved
in anticipating and addressing development problems.
As Mexico liberalizes the economy, in part through a solid
NAFTA, more and more of the "informal" (untaxed and
unregulated) economic activity will come above ground.
This will enable better enforcement of existing and future
laws. For example, a NAFTA should bring improved
cooperation on customs issues which would expedite trade
between the two countries.
Mexico and the U.S. have separately conducted environmental
reviews of the impact of the NAFTA in each country. The
U.S. review has been subject to extensive comment by
interested parties. These comments are being incorporated
into the final U.S. report.
Economic development goes hand in hand with sound
environment and labor practices. Development brings both
an awareness of the importance of living conditions and the
added resources to develop and enforce higher standards.
NORTH AMERICAN FREE TRADE AGREEMENT
AUTOMOTIVE SECTOR
A NAFTA WILL REMOVE IMPEDIMENTS TO TRADE AND INVESTMENT
The further integration of North American manufacturing
facilities and the resulting product rationalizations would
increase trade and the competitiveness of U.S. producers.
U.S. companies operating in both Mexico and the United
States will be able to reduce costs through product
rationalization. They will no longer have to make the same
vehicle, or the same parts for those vehicles, in two
countries.
Removal of internal distortions and the resulting economies
of scale would enhance the international competitiveness of
the North American automotive industry.
A NAFTA should increase exports of U.S. motor vehicles to
Mexico by removing high Mexican trade barriers to U.S.
exports such as tariffs, local content requirements and
other distortions mandated in the Automotive Decrees. (U.S.
trade barriers on automotives are already low.)
Consumers would benefit from the lower car prices that could
result from the greater efficiency of the North American
automotive industry.
AND ENHANCE AUTOMOTIVE EXPORT OPPORTUNITIES
Ending protection of Mexico's parts industry would create
increased export opportunities for U.S. parts producers.
Increased access to the Mexican market would eliminate
incentives to move to Mexico to avoid the many existing
barriers to U.S. exports.
Production planning and investment decisions would be
determined by economic factors and not by artificial
government barriers.
There would be greater certainty and longer term perspective
in making investment decisions.
A NAFTA WILL EXPAND AND CREATE OPPORTUNITIES FOR U.S.-AUTO
COMPANIES
A NAFTA would give the "big Three" manufacturers an
incentive to produce in Mexico themselves those entry-level
products currently produced in the Far East for them by
their joint-venture partners.
-2-
MAJOR STEEL TRADE ASSOCIATIONS SUPPORT NEGOTIATION OF A
SATISFACTORY NORTH AMERICAN FREE TRADE AGREEMENT.
The American Iron and Steel Institute, which represents
companies accounting for 80 percent of domestic raw
steelmaking capacity, and the Steel Manufacturers
Association, whose members include most minimills, endorsed
extension of fast track authority to enable negotiations of
a North American Free Trade Agreement.
Industry interests in a Free Trade Agreement include
maintaining strong trade laws related to subsidies and
antidumping, improving market access, and developing rules
of origin similar to those under the U.S. -Canada FTA.
MANY OF THE MARKET OPENING OBJECTIVES OF AN FTA WILL COMPLEMENT
CURRENT NEGOTIATIONS TO INCLUDE A MULTILATERAL STEEL AGREEMENT.
The United States is currently negotiating a multilateral
steel agreement with virtually all major steel trading
partners, including Mexico. The principal objective is to
achieve a meaningful agreement eliminating trade-distorting
practices in the steel sector. The agreement would prohibit
most subsidies and most nontariff barriers to trade, and
commit signatories to eliminate tariffs, inter alia.
In 1989, Mexico signed an open-ended bilateral agreement
with the United States that prohibits most subsidies to the
steel industry and includes a commitment to eliminate most
nontariff barriers and reduce or eliminate tariffs.
NORTH AMERICAN FREE TRADE AGREEMENT
AND
UNITED STATES/MEXICO STEEL TRADE
U.S. EXPORTS OF STEEL MILL PRODUCTS WILL VERY LIKELY INCREASE IF
MEXICO'S TRADE BARRIERS ARE REMOVED.
Mexico's relatively high tariffs on steel mill products (8.2
percent on a trade-weighted average vs. 4.7 percent for the
United States) are frequently cited by steelmakers as the
greatest impediment to increasing exports to that country.
The boost to the Mexican economy from implementation of the
North American Free Trade Agreement will probably increase
demand for certain steel products. Demand for oilfield pipe
and tube products also will increase along with
infrastructure needs. In the early 1990's, Mexican
producers are not expected to have sufficient capacity to
meet domestic demand for a number of products, including
structurals and flat-rolled products.
Elimination of Mexico's "Buy National" regulations
pertaining to projects by Mexican government and parastatal
companies would open up this market to American exports.
Pipe and tube products for energy development and structural
products for construction should be the major beneficiaries
of this liberalization.
THE UNITED STATES STEEL INDUSTRY IS COMPETITIVE WITH MEXICO IN
MANY STEEL PRODUCTS, ESPECIALLY HIGH VALUE PRODUCTS.
For several years the United States has maintained a large
trade surplus (measured in dollars) in steel mill products.
U.S. exports to Mexico totaled $486 million in 1990 or 75
percent higher than U.S. imports from Mexico that year.
Mexico is an important market for American steel, especially
high value products such as sheet and strip and certain
structurals. Mexico counted for nearly 18 percent of the
total exports (measured in dollars) in 1990. Only Canada,
with a 42 percent share, is a larger export market.
Imports from Mexico did not fill the current quota under the
President's voluntary restraint agreement. Mexican steel
products have been subject to a VRA since President Reagan's
steel program was implemented in September, 1984. The
agreement limits steel imports to 1.5 percent of the
domestic market in 1991. The ceiling was approximately
three-quarters filled in 1990. The VRA will expire in March
1992.
-2-
This could:
-- strengthen U.S. companies' competitive position vis-a-
vis the East Asians;
--
increase sourcing from U.S. parts producers;
-- transfer jobs and wealth from the Far East to Mexican
consumers, who buy more U.S. products than workers in
the Far East.
A stringent rule of origin will ensure that Mexico is not
used an export platform to the United States by third-
country producers.
U.S. parts producers, who now must manufacture under
minority ownership provisions in Mexico, will have the
opportunity to buy majority ownership or liquidate their
Mexican operations and attempt to supply their customers
from existing U.S. plants.
A NAFTA WOULD ENHANCE U.S. AUTOMOTIVE JOBS
Increase U.S. exports of parts and motor vehicles would
enhance job opportunities in the United States.
An integrated North American motor vehicle market would
increase U.S. vehicle manufacturers' overall competitiveness
and thus job security.
A NAFTA would not pull jobs and investment from the United
States because lower labor costs in Mexico are offset by
costs associated with Mexico's underdeveloped infrastructure
and relatively lower productivity. Furthermore, labor costs
are a decreasing component of automotive manufacturing
costs.
LABOR LAW AND PRACTICE ISSUES
MEXICAN LABOR LAW IS COMPREHENSIVE
on a legal, statutory basis, Mexico's labor standards
are for the most part comparable to those in the United
States, Europe, and other industrialized countries.
These rights and standards apply throughout Mexico,
including maquiladora operations.
In terms of the labor standards most frequently referred to,
Mexico provides:
Freedom of Association and Right to Organize and Bargain
Collectively: Article 123 of the Mexican constitution
guarantees workers and employers the right to form unions
and professional associations of their own choosing.
Workers are protected against anti-union discrimination.
Mexican unions may freely form federations and belong to
international associations.
Mexican workers have the right to strike.
child Labor: Mexican law provides that children must be 14
to work, can only work a maximum of six hours/day and in
non-hazardous jobs until sixteen--these laws are observed
strictly in large and medium-sized firms.
Forced or Compulsory Labor: Mexico is a signatory to
International Labor Organization ILO) conventions
prohibiting forced or compulsory labor and there have been
no complaints of violations of these conventions for many
years.
Health and Safety at the Work Place: Mexico has very
detailed and comprehensive occupational safety and health
regulations.
Most firms are legally required to set up plant-level health
and safety monitoring bodies.
Mexico has ratified 67 ILO conventions dealing with worker
health and safety standards.
Minimum Wage: The Constitution provides for a minimum daily
wage, set by a tripartite body with labor representation.
The current national average minimum is 10,786 pesos per day
(about $3.64) In the industrial areas of the north, the
minimum wage is 11,900 (about $4.20). In 1989, the average
Mexican industrial worker received a wage equivalent to 4.5
times the minimum wage.
SOME MEXICAN LABOR STANDARDS EXCEED U.S. STANDARDS
The Mexican social security system, for example, provides
medical and maternity care, pensions, and payment for
temporary and permanent disability.
.
The Mexican social security system contains benefits which in
the U.S. would be negotiated in collective bargaining
agreements. Instead, the Mexican system serves as a guarantor
of minimal benefits and protection for all wage earners,
leaving it to management and trade unions to bargain about
possible supplemental benefits.
ENFORCEMENT OF MEXICAN LABOR PRACTICES COULD BE IMPROVED
Safety and health enforcement strategies differ in the United
States and Mexico.
-- Overall, the U.S. Occupational Safety and Health
Administration (OSHA) places greater emphasis on
targeting violators and assessing penalties, an approach
that is designed to deter other employees from committing
similar violations.
-- In Mexico, emphasis is placed on achieving compliance
through negotiation and conciliation with employers.
-- Authority exists to impose sanctions--including fines and
closure of plants--but these penilties are imposed only
as a last result if all else fails.
In the twenty-two industry and service sectors subject to
Federal jurisdiction, each workplace is legally required to
set up a joint labor-management health and safety
committee. These committees, which are the backbone of the
Mexican safety and health enforcement system, perform several
functions, including monthly worksite surveys, investigations
of accidents and illnesses, and safety and health training.
The joint labor-management safety commissions tend to be most
effective, and more easily established, in large firms which
have stronger union representation. In practice, only about
20 percent of the workplaces covered by federal jurisdiction
have formed such committees. Mexican officials are developing
procedures to increase the number of safety and health
committees.
In some cases, Mexican safety and health inspectors do not
have adequate training in industrial hygiene. The U.S. is
providing Mexico technical assistance in that area through our
bilateral cooperation program on labor issue (see below).
Observers consistently report that firms in Mexico's export
sector frequently exceed existing standards. This is
particularly true of maquiladora plants, which compete for
both skilled and unskilled workers through fringe benefit
packages.
DIALOGUE WITH MEXICO ON LABOR ISSUES
On May 3, Secretary of Labor Lynn Martin and her counterpart,
Mexican Secretary of Labor and Social Welfare Arsenio Farell
Cubillas, signed a Memorandum of Understanding (MOU) calling
for cooperative activities in various areas such as
occupational safety and health measures; general working
conditions, including labor standards and their enforcement;
labor statistics; and resolution of labor conflicts.
Activities in the critical areas of child labor and
occupational safety and health have received priority
attention. A high level meeting of child labor enforcement
officials was held in May and a joint study of child labor is
underway. A joint tripartite conference on a high hazard
industry (iron and steel) is scheduled for early December in
Mexico city.
On September 9, representatives of the Mexican Department of
Labor and Social Welfare (STPS) and the U.S. Department of
Labor concluded the first formal meeting of the labor working
group under the auspices of the U.S. -Mexico Binational
Commission. At the meeting, agreement was reached to expand
cooperative activities into two new areas--the informal sector
and basic worker rights, such as the right to organize and
bargain collectively and freedom of association.
PROGRAMS TO ASSIST DISLOCATED WORKERS
A free trade agreement with Mexico will benefit the U.S. economy
and increase access to an expanding market for U.S. manufacturing
goods. Under Mexico's trade liberalization program, U.S. exports
of labor-intensive manufactures, like steel and textiles, have
increased. While concerns have been expressed about the loss of
U.S. jobs, recent studies are demonstrating that an FTA with
Mexico is likely to have a positive net effect on U.S.
manufacturing employment and that any worker dislocation is
unlikely to be substantial. These analyses suggest that concerns
about employment losses are exaggerated.
Nonetheless, there is an obvious need to assist any dislocated
workers who may have difficulty returning successfully to
employment. Effective programs are in place to address this
need, should dislocations occur.
EDWAA -- A FLEXIBLE PROGRAM FOR ALL DISPLACED WORKERS
There are currently two major programs for assisting workers who
lose their jobs:
The Unemployment Insurance (UI) system which provides
at least 26 weeks of wage replacement to eligible
workers, and
The Economic Dislocation and Worker Adjustment
Assistance Act (EDWAA--Title III of JTPA) a flexible,
comprehensive program for all dislocated workers whose
job loss (for any reason) means they are unlikely to
return to their previous industries or occupations.
EDWAA was crafted with broad bipartisan Congressional and
Administration support as the program of choice for assisting
dislocated workers now and in the future.
It was enacted in 1988 when the Omnibus Trade and
Competitiveness Act amended Title III of JTPA,
It has been successfully applied to such major
industries as auto, timber, electronics, copper, food
processing, aerospace, defense, and steel.
Funding has nearly doubled in the last two years. Program year
(PY) 1989 funding was $284 million; in PY 1991, this was
increased to $527 million. EDWAA uses a local delivery system to
meet the unique needs of different states and communities:
Eighty percent of total funds are allocated to every
State and sub-state area. Funds are thus immediately
available to assist workers in every State, county, and
Congressional District.
2
Twenty percent of funds are retained for discretionary
use by the Secretary of Labor to assist workers
affected by multi-state or industry-wide dislocations
and for areas of special need.
EDWAA is a highly flexible, comprehensive system. Eligibility is
broad-based, easy to determine and covers:
All workers who have been terminated or laid off from
their job (or have received notice) for any reason, who
are unlikely to return to their previous industry or
occupation. Any worker in any company/industry is
eligible without need of time-consuming certifications.
EDWAA offers a comprehensive set of flexible services including:
Rapid Response: on-site rapid response to plant
closing and mass layoffs.
Basic Adjustment Services: outreach and intake,
development of individual readjustment plans, labor
market information, job development, job search and
placement, supportive services relocation assistance
and pre-dislocation readjustment programs.
Retraining Services: includes classroom, occupational
skills, and/or on-the-job training, basic and remedial
education, and entrepreneurial training.
Needs Related Payments: because services are provided
so rapidly under EDWAA, many workers are able to
complete training before exhausting UI benefits.
However, dislocated workers who have exhausted UI may
receive needs-related payments to help complete
training if they were enrolled in training by the 13th
week of their initial UI benefit period.
The program has been highly successful since its inception. Over
the past three years it has served over 700,000 workers. Fully
66 percent of participants served were placed in jobs identified
by the local business community, at an average wage of $7.50 per
hour. The cost per individual served is approximately $1,200.
TRADE ADJUSTMENT ASSISTANCE--COSTLY, NARROW, ENTITLEMENT
Trade Adjustment Assistance (TAA) is much less effective at
meeting the needs of displaced workers:
It is considerably more costly than EDWAA and results
in significantly lower placement rates.
3
--
Under TAA, average cost per participant estimated
as approximately $7,000. This compares to $1,200
for EDWAA training.
-- This difference occurs largely because TAA workers
often do not enter training until well after their
dislocation and UI benefits are ending. This
often leads to unsuccessful training and a much
lower success rate in obtaining employment.
-- In contrast, under EDWAA workers enter training to
get retrained and much earlier after their
dislocation, while UI benefit eligibility remains
substantial.
--
As a result, 32 percent of TAA-assisted workers
obtained jobs, compared to 66 percent under EDWAA.
C
TAA requires a time-consuming, complex investigation/
certification process to determine a select group of
workers eligible for program benefits.
--
TAA benefits are available only to displaced
workers in companies where increased imports
contributed importantly to decreased sales or
production;
:
Unlike EDWAA, where workers can get benefits even
before plants close, the TAA certification process
can only begin after plant closing or job loss
occurs and takes about two more months to
complete; and
--
TAA results in inequities by discriminating among
workers doing similar tasks in the same plant and
by excluding entirely secondary and tertiary
workers.
O
In short, TAA is a costly entitlement program which, by
targeting only a narrow group of workers, is
considerably less effective in addressing worker
dislocation.
MEXICO'S ANTI-NARCOTICS EFFORTS
MEXICO IS COMMITTED TO THE WAR ON DRUGS
President Salinas, recognizing that illegal narcotics pose
a national security and public health threat to his own
people as well as those of the United States, has committed
his government to an aggressive campaign against drugs.
Salinas instructed his Attorney General to ensure that
counter-narcotics operations are conducted with respect for
human rights and the law.
--
New Attorney General Ignacio Morales Lechuga has moved
to root out corruption, end human rights abuses,
improve efficiency, and increase the
professionalization of the federal police.
--
We would hope to see continued progress in the
reduction of human rights violations and corruption.
MEXICO TAKES THE INITIATIVE
In 1991 Mexico took unprecedented steps to further the
effectiveness of the war on drugs, including passage of new
drug laws with stiffer penalties for traffickers and
corrupt officials.
More than five hundred government employees, including
several high-ranking officials, have been removed from
office for corruption.
Major trafficking figures, previously believed above the
law, were arrested, convicted and jailed.
:
Rafael Caro Quintero, implicated in the murder of DEA
agent Enrique Camarena, remains imprisoned after a
Mexican court upheld his conviction on other criminal
charges.
OPERATION HALCON
Under the rubric of Operation Halcon, Mexico initiated the
Northern Border Response Force, an elite rapid response
force which uses helicopters and sophisticated aircraft
acquired from the United States and seized from traffickers
during interdiction operations.
Operation Halcon has become an effective deterrent to
cocaine smugglers.
:
Since April 1990, Operation Halcon has seized over 36
tons of cocaine having a U.S. street value well over
one billion dollars.
O
More one hundred Mexican police officers and military
personnel have lost their lives in the fight against drugs.
THE UNITED STATES AND MEXICO: WORKING TOGETHER TO CONTROL DRUGS
O
Although marijuana and opium production and cocaine
transshipment remain a major concern, cooperation between
the United States and Mexico has improved significantly in
the last year.
-- The U.S. and Mexico have signed a Mutual Legal
Assistance Treaty and formed a Mixed Permanent
Commission on Drug Abuse, greatly enhancing
antinarcotics coordination.
COOPERATION BRINGS RESULTS
O
Under Salinas the Attorney General's Office (PGR) has
seized:
-- 135 tons of cocaine
--
513 kilograms of heroin
--
1,467 kilograms of marijuana
--
172 aircraft, 34 boats
:
9,884 vehicles
--
9,688 firearms of various calibers
-- The PGR has arrested 44,672 drug suspects, and
destroyed 56 heroin labs.
-- More than 1,000 clandestine strips have been destroyed.
Concrete steps to improve eradication programs produced a
major reduction in marijuana production, and increased
opium eradication.
While more can be done, the United States and Mexico have
forged an effective partnership that has produced concrete
results in the war on drugs.
IMMIGRATION
U.S. immigration interests with Mexico are facilitation of
legitimate cross-border traffic for trade and other
interchange, and control of illegal migration.
--
The North American Free Tree Agreement (NAFTA) will
not substantially affect U.S. immigration law.
--
However, improvements in the Mexican economy from
NAFTA should reduce the impetus for illegal migration
of Mexican workers seeking employment opportunities in
the United States and stimulate legal border traffic.
Illegal Immigration
The resident illegal population in the U.S. is estimated to
be between 1.5 and 3 million. Mexican nationals constitute
about 90 percent of the resident and nearly 100 percent of
the seasonal illegal populations.
--
In 1991, there will be an estimated 1.1 million
apprehensions for illegal entry along the U.S.
southern border, up from a recent low of 900,000 in
1989 after the enactment of employer sanctions.
:
Mexicans account for 90 percent of these apprehensions.
The Commission for the Study of International Migration and
Cooperative Economic Development reported to Congress and
the President in 1990 that economic growth in the home
countries of migrants is the single most important
long-term remedy to the problem of unauthorized migration
to the United States.
:
Lack of jobs in Mexico and the availability of jobs in
the US at better wages will continue to be the
greatest inducements for undocumented migration into
the US.
NAFTA, by stimulating economic growth in both countries,
will make it easier for the Mexican economy to absorb new
entrants to its labor market and will improve the
opportunities available to all Mexican workers at home.
--
A February 1991 study by the International Trade
Commission states that a free trade agreement would
likely decrease slightly the economic disparity
between the U.S. and Mexico, diminishing the incentive
for migration from Mexico to the United States.
Facilitation of Legal Cross-border Traffic
The United States has agreed with Mexico that labor
mobility and U.S. immigration laws are not on the table in
NAFTA talks, with the possible exception of a narrow
provision facilitating temporary entry of certain
professionals and managers.
:
A subgroup of the Services Principles Negotiating
Group has been formed to discuss the issue of
temporary entry.
U.S. immigration law requires that every Mexican citizen
wishing to visit the U.S. have a visa or border crossing
card.
In fiscal 1990, over one million applications for
nonimmigrant visas were received by the U.S. Embassy and
consulates in Mexico, the great bulk of which were for
tourist visas.
-- NAFTA is expected to stimulate the demand for tourist
and business travel to the United States at the same
time it reduces illegal migration.
Increases in travel between the United States and Mexico
will mean additional work loads at U.S. Consulates in
Mexico and at ports of entry along the border.
BORDER VIOLENCE
SHARED CONCERNS OVER VIOLENCE
Both the U.S. and Mexico have expressed serious concern
about acts of violence directed at Mexican citizens
crossing the border as well as violence which is directed
against U.S. citizens in Mexico.
This problem is a long-standing one and should be kept in
perspective as the vast majority of border crossings and
the vast majority of U.S. tourist visits to Mexico are
safe. The proper treatment of citizens in each country is
a question of reciprocal interest, and mutual consultation.
Both Governments want to control the criminal elements on
either side of the border which contribute to the border
violence problem.
PRESIDENTS TAKE LEAD IN SEEKING SOLUTIONS
During their summit meeting in Monterrey, Mexico in
November 1990, Presidents Bush and Salinas directed their
respective officials to develop recommendations and
mechanisms to deal with the problem of border violence.
Following these instructions Mexico's Undersecretary for
Foreign Relations, Sergio Gonzalez Galvez, led a delegation
of Mexican Officials to Washington on October 25, for a
full day of talks on border violence. That meeting
resulted in the following actions:
--
Special coordinators for border violence issues in the
US Department of Justice and the Mexican Foreign
Ministry were appointed. The coordinators will begin
meeting soon to consider the proposals made at the
October meeting.
--
The Government of Mexico offered to host a follow-up
to the October 25, meeting. This meeting will held in
Monterrey, Mexico, sometime within the next few months.
COOPERATIVE RESPONSE TO THE PROBLEM
Although incidents still occur, joint U.S. -Mexican efforts
- especially at the state and local level - are having
positive results. The level of border violence decreased
during the past twelve months.
-2-
The US Border Patrol, in cooperation with military reserve
units, is repairing and replacing dilapidated fencing along
the border near San Diego. This, along with the
installation of powerful floodlights, has contributed to
the decline in violent incidents.
In addition, the Border Patrol continues to review its
training and field tactics to determine in an effort to
reduce or eliminate injury or deaths along the border.
Mexican law enforcement agencies established a special
force - called "Grupo Beta" - for dealing with crimes along
the border. US law enforcement authorities give Grupo Beta
high marks for its success.
O
The Mexican Government has also indicated that its newly
established National Commission on Human Rights will look
into complaints of abuse of U.S. citizens or mistreatment
of prisoners made by the United States.
TEXTILES AND APPAREL IN A NORTH AMERICAN FREE TRADE
AGREEMENT
THE TEXTILE AND APPAREL SECTOR CAN GAIN FROM A NAFTA
We are exporting apparel fully made in the United States to
Mexico (as well as yarns, fabrics and household furnishings
such as carpeting). In fact, we had a bilateral trade
surplus for the second year in a row in textiles and
apparel. For 1990, U.S. exports were nearly $1 billion and
our trade surplus amounted to $16 million. We expect this
trend to improve as trade barriers come down.
Imports of apparel from Mexico will continue to be an
important source for our apparel industry. This trend,
along with co-production arrangements, i.e., apparel
assembled in maquiladora operations from American fabrics,
will be key to the long run competitiveness of our apparel
industry.
As Mexico's largest trading partner, we have been a major
beneficiary of their recent trade liberalization measures.
Our exports of textiles and apparel have increased at an
average annual rate of 25 percent from 1986 -- when Mexico
became a member of the GATT -- to 1990. The textile mill
sector, which employs 700,000 workers in the United States,
has played a significant part in this growth. This is just
an indication of the potential gains from a NAFTA.
Mutually beneficial trade under a NAFTA will depend on a
number of critical issues such as rules of origin, improving
the conditions for market access in Mexico and the timing of
the phase-out of tariffs and quotas.
UNITED STATES OBJECTIVES IN THE NAFTA
The U. S. will seek to eliminate trade distorting practices in
textile and apparel trade. Specifically, we will seek to:
Promote U.S. exports by eliminating Mexican tariffs and
non-tariff barriers;
Phase out U.S. quotas and tariffs gradually over a
sufficient transition period;
Work with Rules of Origin group on establishment of
rules of origin that insure that NAFTA benefits accrue
principally to NAFTA partners;
Create effective methods to prevent illegal
transshipment and fraud; and
Negotiate a transition period so that U.S. companies
and workers will have time to adjust.
MEXICO'S ECONOMIC REFORMS
TRANSFORMATION OF THE ECONOMY
Under the direction of Presidents de la Madrid and Salinas,
Mexico has instituted far-reaching economic reforms based
on fiscal discipline, trade liberalization, deregulation,
and privatization.
--
Mexico now ranks as one of the world's more open,
outward-looking and market-oriented countries.
--
Protectionist barriers are disappearing, and Mexico's
participation in the North American Free Trade
Agreement will complement its commitment to
liberalized trade embodied in its 1986 GATT accession.
More than 25 different areas of the Mexican economy have
been deregulated or are currently being reviewed for
deregulation.
--
For example, Mexico has deregulated trucking; rates
have dropped by an average of 25% (some by 50%). The
liberalizing effect of new trucking rules on the
maquiladora industry is likely to reduce costs and
improve economies of scale.
-- Financial services, transport, and communications have
also been deregulated.
In a sweeping privatization process expected to be
completed by 1992, the Mexicans have been withdrawing or
dramatically scaling down its presence in a wide variety of
sectors, including airlines, steel, drugs, chemicals,
mining, food processing, and construction materials.
-- Recent highly successful sales included the
telecommunications monopoly TELMEX, sold to a
consortium of Mexican and foreign firms, including
Southwestern Bell, and 9 of the 18 commercial banks
nationalized in 1982. The major divestitures planned
for 1992 include steel interests and the remaining
commercial banks.
--
In 1982, the Mexican Government owned 1,155 entities.
By late 1991, that had declined to 269. Government
ownership and control is expected to continue in such
sectors as petroleum; electricity and railroads,
although private sector involvement in various ways is
increasing.
- 2 -
-- Government expenditures as a percentage of GNP --
another measure of the size of the state sector --
dropped from 50% in 1982 to 28% in 1990.
GREATLY REDUCED IMPORT BARRIERS
O
Mexico has reduced its maximum applied tariff from a level
of 100% in 1986 to a current le'vel of 20% or less. The
trade-weighted average Mexican tariff is now only about 10%.
Since acceding to the GATT, Mexico has moved from an
extremely restrictive import regime in which some 4,500
import classifications were subject to an import permit, to
an open system in which import licenses are required for
only about 211 products, primarily affecting agricultural
products.
Mexico is reforming its customs service in a serious effort
to improve the technical competence and professional
integrity of its customs officials. While problems remain,
they have made impressive progress.
The changes in Mexico's tariff laws has allowed our trade
with Mexico, our third leading trade partner, to grow
substantially. Our exports to this fast growing market
more than doubling in the past 4 years. We supply almost
70% of Mexico's imports; of every dollar of additional
growth in Mexico, 15 cents is spent on U.S. goods.
Mexico signed an FTA with Chile in September. This is
strong evidence of Mexico's commitment to trade liberalism
and willingness to move to a free trade agreement with the
U.S. and other countries.
IMPROVED ACCESS FOR FOREIGN INVESTORS
O
In May 1989, Mexico made substantial reforms to its rules
governing foreign investment, providing for greater
transparency, increased foreign participation, and greater
efficiency in the application process.
The new regulations broadened the range of economic sectors
expressly open to 100% foreign ownership (e.g., glass,
cement, iron, steel, and cellulose).
O
In an effort to deregulate the petrochemical industry and
provide greater opportunities for private investment,
Mexico announced on August 14, 1989, that it would permit
foreign ownership of up to 40% of companies manufacturing
secondary petrochemicals.
- 3 -
)
Allowable foreign investment in Mexican insurance firms has
been raised from 15 to 49%. In 1989 and 1990, new
regulations opened Mexican financial intermediaries to
limited foreign participation.
Under certain conditions, foreign investors may obtain up
to 49% ownership of most financial intermediaries. Banks
and stock brokerages are exceptions (30% limit on total
foreign participation).
A 1989 decree established a single a single government
contact point for negotiations with potential maquiladora
investors and extended indefinitely the term for
maquiladora licenses (previously limited to 2 years).
REDUCTION AND MANAGEMENT OF DEBT
In 1989, Mexico reached agreements for large new loans from
the IMF and World Bank and for debt rescheduling in the
Paris Club.
In 1990, the Mexican government signed an agreement for
debt reduction and new money from commercial banks.
As a result of these agreements, the Mexican government
estimates that net external financial transfers will fall
from an average of 5.75% of GDP during 1982-88 to an
average of 2.43% of GDP, or by $4 billion annually.
Mexico's external debt, $103 billion in 1991, fell as a
ratio to GDP from 74 % in 1987 to an expected. 38 % in 1991.
One of the major benefits in 1991 of the 1990 debt
agreement, besides its direct impact on the balance of
payments, has been greater confidence in Mexico among
investors and creditors, which has resulted in large
capital inflows and the reopening of international credit
markets to Mexican borrowers at progressively more
favorable terms.
REFORMS MEAN STRONGER ECONOMY WITH GOOD GROWTH PROSPECTS
O
The Mexican gross domestic product (GDP) is expected to
grow 4.5% in 1991, the highest rate in ten years--as
compared to 3.9% in 1990 and 3.1% in 1989. President
Salinas attributes this growth to policies of sound
monetary policy, strict control of public spending, a
competitive tax system, debt reduction, deregulation of
trade, extensive structural reforms, and the promotion of
investments and exports. Increased business confidence has
spurred the return of flight capital.
- 4 -
Rapid growth and investment will also lead to a large
increase in Mexican imports, most of which come from the
United States. The Mexicans have run a larger trade
deficit in 1991, supported by capital inflows. For the
first 8 months of 1991, the U.S. has had a trade surplus
with Mexico of $1.2 billion compared to a deficit of $1
billion in the first 8 months of 1990.
Since the May 1989 decree liberalizing foreign investment,
new foreign investment totaling $3.5 billion has been
approved. The investment growth rate in recent years has
been three times that of the economy as a whole,
registering more than 12% annually.
Inflation has reached a 16-year low, from 159% in 1987, to
30% for 1990, to about 17% expected in 1991, due to a
multi-year economic stabilization pact, sound monetary
policies and tight fiscal policies.
The Mexican Government budget deficit has fallen (16% of
GDP in 1987; under 2% expected in 1991) thanks to strict
fiscal discipline, increasing tax revenue collection, and
privatization.
POLITICAL REFORMS UNDER SALINAS
O
In concert with his widely acclaimed economic program,
President Salinas has launched a number of key political
reforms. Economic development and modernization support
these reforms and encourage greater political participation
by creating incentives for increasingly larger segments of
the population to be actively engaged in political issues.
President Salinas' reforms - aimed at guaranteeing clean
elections and wider voter registration - have bolstered the
credibility of the political process and strenghtened the
position of his party, the PRI.
--
In a sweeping victory in the August mid-term
elections, the PRI received more than sixty-one
percent of the total national vote. The voter turnout
- about 65 per cent - was exceptionally high.
--
The PRI won 290 of the 300 federal deputy races,
31 of 32 contested senate seats and four of six
governorships in the August 18 midterm elections.
The National Action Party (PAN) lost ground, winning
only a few important seats, including one senate seat,
and only 10 deputy seats nationwide by majority vote.
--
The senate seat in Baja California was a first
for the PAN, and reflects that party's strength
in the state where in 1988 it won its first
governorship.
--
The Party of the Democratic Revolution (PRD), led by
Cuauntemoc Cardenas, did not win any directly-elected
federal deputy seats, and lost two senate seats.
O
President Salinas and PRI president Luis Donaldo Colosio
issued strict instructions to party members and candidates
that the 1991 elections should be clean and the voters will
should be respected.
--
Opinion and exit polls conducted by reputable U.S.
firms mirrored the official results, particularly in
the Federal District, where the PRI made its strongest
comeback.
--
Credible opposition claims of irregularities surfaced
in two state gubernatorial elections and several
mayoral races.
--
In the case of two contested gubernatorial
elections in the states of Guanajuato and San
Luis Potosi, Salinas used political clout and the
moral suasion of the Presidency to encourage the
replacement of the PRI candidates, whose
victories were challenged, with interim governors.
--
In Guanajuato a popular PAN mayor was chosen to
serve as interim governor; in San Luis Potosi,
where opposition leaders acknowleged that even
though fraud had occurred, the PRI candidate
would have legitimately won the election, a PRI
interim governor was named and new elections were
scheduled for April 1993.
The victory of the PRI in the 1991 elections contrasted
with the 1988 elections where the opposition, profitting
from widespread public discontent with the economy and
perceptions of corruption, made significant gains.
With his personal popularity reaching unprecedented levels
and his mandate for reform strengthened by the August 18
results, Salinas wants to maintain a "national dialogue"
with a credible, democratic opposition.
In his November "State of the Nation" address Salinas
announced his intention to adopt futher reform measures to
guarantee clean elections, such as improved voter
credentials, and better vote-counting and registration
procedures.
Conclusion of the NAFTA is a key part of President Salinas'
reform efforts. The NAFTA will not only consolidate
economic reform but is likely to reinforce and stimulate
the process of political and social change. Throughout the
world, market liberalization and democratic development
have often gone hand in hand, mutually reinforcing each
other.
HUMAN RIGHTS
O
Human rights abuse, particularly involving the police, has
traditionally been a problem in Mexico, and after 1988
began to draw increasing criticism from human rights
organizations such as Amnesty International and Americas
Watch.
--
Both Amnesty International (AI) and Americas Watch
(AW) issued reports in 1991 which were critical of
human rights practices in Mexico, and alleged that
torture was practiced with impunity.
-- The AI and AW reports drew, heavily on old cases that
had either been resolved or previously investigated by
the Mexican government.
--
In spite of the critical tone adopted by AI and AW,
President Salinas thanked both organizations during
his November 1991 State of the Nation address for
their contributions.
--
In fact, Salinas had already taken many concrete
steps to address the complaints raised by the two
organizations.
-- Salinas' Attorney General also admitted that
torture had been employed in the past but stated
emphatically there would be no impunity for
coercion or torture, present, past, or future.
O
Under President Salinas' strong leadership, Mexico has made
significant progress in protecting human rights by
developing institutions and new laws designed to protect
individuals and taking specific steps to reduce instances
of torture and extrajudicial killings.
--
In 1991 Salinas appointed a new Attorney General who
has aggressively investigated and prosecuted cases of
official abuse, torture, forced confessions and
corruption.
-- The President and the Attorney General have publicly
stated that official impunity will not be permitted,
and human rights violators and corrupt officials will
be prosecuted.
National Commission on Human Rights
O
To promote human rights reform, Salinas established the
National Commission on Human Rights (CNDH) in May 1990.
O
The politically-independent Commission, headed by respected
jurist Jorge Carpizo, has received wide support for its
work in identifying and correcting human rights violations.
The Commission's efforts have been applauded by human
rights organizations and international jurists.
--
President Salinas announced his intention to amend the
constitution in order to make the CNDH an independent
entity with its own budget authority.
Mexican human rights activists and the political
opposition applaud this approach which removes the
CNDH from the control of the Secretariat of Government.
The CNDH has conducted special investigations on
disappearances, attacks on journalists and prison reform,
among others.
--
It also helped push through a key change in the
Federal rules of evidence that makes confessions
inadmissible unless both a judge or prosecutor and a
representative of the accused are present during
interrogation.
O
Perhaps the CNDH's greatest contribution over the year has
been the significant strides it has made, with full
Presidential support in changing what Dr. Carpizo and other
human rights activists call the "culture of human rights
abuse" and in breaking the shield of impunity that has
surrounded abusers.
Curbing Abuse
O
In October 1990, Salinas announced a twelve-point plan to
curb torture and ensure that the Mexican police respect
human rights in their treatment of detainees. Since that
time, violations have dropped significantly.
O
A large number of cases of alleged abuse involved the
anti-narcotics police forces. Many of those officials
involved in human rights abuses have been arrested or
dismissed.
--
Criminal attorneys report a decline in pretrial
torture because of the change in the admissibility of
confessions and the fact charges of torture are being
brought against police.
--
Our consulates report a downturn of more than thirty
percent in reports of abuse of U.S. citizens arrested
in Mexico this year.
--
In September 1990, Dr. Carpizo announced that seventy
seven public servants have been sanctioned as a result
of CNDH recommendations: Penal action has been taken
against thirty eight; eighteen have been dismissed and
21 have been suspended from their jobs.