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NAFTA [2]
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90
4
11
2
September 21, 1993
MEMORANDUM
To:
George Stephanopoulos
David Gergen
Mark Gearan
Paul Tobac
Michael Waldman
From:
Ann Walker and Dan Meyer
Subj:
DEBRIEF ON GEPHARDT PRESS CONFERENCE, NPC
Today at the National Press Club, Representative Gephardt's announced
opposition to the current NAFTA terms was packed with media and Washington
personalities. I counted eight (8) rolling cameras ABC, CBS, NBC, CSPAN,
Canadian, and Mexican networks; six (6) still cameras including several
freelancers for the environmental press; and 11 microphones one of which was
NPR. Dellums, Obey, Levin and several others members were also present. One
may have been Eva Clayton (D-NC) and the other possibly Sherwood Boehlert (R-
NY).
Representative Gephardt read, via teleprompter, a fourteen (14) page restatement
of his position. The concise thesis is that while significant environmental concerns
have been addressed, labor in both Mexico and the United States is poorly
served by this trade agreement. As a high standard of living is the primary goal
of the government, an agreement that lowers the standard of living of the
working class in both nations is unacceptable.
Representative Gephardt repeatedly mentioned that his opposition is to the
agreement as it now stands. And though he seemed to hold out the hope of a
"NAFTA Done Right," he was pessimistic given his recent "discussions with the
Administration."
1
The questions that followed his reading of the enclosed text centered on:
(1) Was there room for him to negotiate with the president?
(4 questions)
(2) Was he aware of the damage he was doing to the POTUS?
(2 questions)
(3) Was he, in a cloaked manner, asking for a reopening of the agreement?
(2 quesions).
(4) Was he aware that not passing the agreement was a condoning of the
existing problems on the border? (2 questions asked by the Mexican and
the Canadian press.)
Gephardt's response asserted that
(1) There is always room for negotiation and he did want to see
a "NAFTA done right."
(2) Issues are not linked in Washington. Both health care reform
and the president would survive a loss on NAFTA.
(3) As for condoning the miserable status quo, the critical
question one has to ask before deciding on this issue was
whether the working class in Canada and Mexico were better
off with, or without, NAFTA.
Under the existing terms, Gephardt reaffirmed that his conscience dictated "without."
2
NEWS FROM THE HOUSE MAJORITY LEADER
For Release Upon Delivery
Congressman Richard A. Gephardt
September 21, 1993
H-148, U.S. Capitol
Speech on the
North American Free Trade Agreement
delivered to the National Press Club
I'm happy to appear before you you today. I have come to discuss something
which seems to be the subject of the week in Washington, but which has been a major
subject of concern for me for several years.
In fact, for more than three years, I have been outspoken on the North American
Free Trade Agreement negotiations. I have travelled to Mexico on seven separate
occasions. I have written numerous letters -- both public and private -- to President
Bush and to President Clinton and to their Administrations on this important issue.
From the start, I said that I would make my decision on one basis and one basis
alone -- that the only decision that I could justify was one based on the substance of the
Agreement. My bottom line test was whether or not I was convinced that the final
NAFTA would be a force for progress in all three countries. I have reached a decision,
and I am here to state it and explain it.
Despite the best efforts of President Clinton and his Administration to remedy the
flaws in the Bush negotiated NAFTA, the Agreement is not a sufficient force for
progress. So today, I am announcing that I will vote against this NAFTA.
The issues are too important and the stakes too great to pass a deficient NAFTA.
And, no NAFTA is preferable to a deficient NAFTA. Once approved, we will not have
the opportunity to easily revisit this issue.
No member of Congress is unaware of the importance of the vote we will all cast
on this issue. It is a decision of great consequence. So I have tried to take great care in
making it.
Unfortunately, for a number of reasons, this NAFTA falls short. Others will
disagree: I respect their views. At the same time, I hope that they will respect mine.
The basis of democracy is open, honest debate. In fact, our democracy is strengthened
by our ability to weather debates such as the one our country is going through.
1
What Should Our Goal Be?
I believe we should begin this debate with a premise: in economic affairs our
guiding national goal should be a high and rising standard of living, and a long-term
policy of ensuring better jobs at better wages.
This may sound obvious, but too many policy debates don't set this basic goal at
the outset. Without a strong economy, America cannot lead. Not only because of
limited resources, but because of limited resolve. The American people are right to ask
their representatives to put their interests first. At the same time, America has a
conscience. We are a community, and part of a larger community. Being self-interested
does not have to mean being selfish. From Bosnia to Mexico to Somalia to other areas
around the world, America can continue to lead. But our capacity depends not just on
our moral strength, but on our economic strength.
As David M. Potter, author of People of Plenty said, we conceive "of democracy
as an absolute value, largely ideological in content and equally valid in any environment,
instead of recognizing that our own democratic system is one of the major by-products of
our abundance, workable primarily because of the measure of our abundance."
In sum, the first thing we must do is agree as a society that our prime goal is a
high standard of living. For the past 12 years that goal has shared equal billing with
others like free trade, private markets, social justice, lack of government interference or
an unwillingness to offend allies. But we cannot achieve our best hopes in the wider
world unless we first do our best for our people.
Under this Agreement, we will not be doing the best for our people -- we will
reduce our abundance. By not addressing key issues, like water, our wages and our
standard of living will seek its own level. And, drawn down by the lower wages in
Mexico, our standard of living will continue to stagnate or decline.
We face great challenges in this global economy. Indeed, Mexico is not the only
competitor we face with highly productive, quality oriented productive capacity and low
wages. Thailand, China and other countries all pose enormous competitive threats to
our standard of living.
But there is an important difference: We are not seeking to complete a free
trade agreement with these countries. By promoting freer and more open trade with
Mexico -- with the changes they will make in their own laws -- we are going to stimulate
investment in their country. That's why Mexico supports the Agreement. Mexico also
has the tremendous advantage of a common border with our country that makes the
integration that much more attractive, and threatening. We want a healthier Mexican
economy, but not at the expense of our own.
2
And, we need to recognize that we must get it right in this Agreement, both for
what it means to us on its own and because Chile and other countries are waiting in line
for similar agreements. They will expect that the NAFTA will be airdropped into place
for quick ratification. This Agreement has repercussions beyond its current scope.
Numerous studies have been conducted on the effects of the NAFTA in terms of
jobs. Those who support the Agreement, will say that every "reasonable" study shows net
job gains. And those who oppose the Agreement will say that every "reasonable" study
shows net job losses.
I am as concerned as anyone with job losses -- whether they be net or gross. A
lost job should not simply be an economic debating point. To the person who loses that
job, the consequences are devastating.
But, change will occur whether we like it or not. We are losing good paying jobs
and that will continue with or without a NAFTA.
The much greater threat is to our wages and our standard of living. And, on this
important point, there can be no doubt that the NAFTA, as drafted, will only increase
the downward pressure.
In short, the goal that I outlined earlier a high and rising standard of living, and
a long-term policy of ensuring better jobs at better wages -- won't be achieved under this
Agreement. On the contrary, this Agreement will undermine that goal.
And, all of the goals that we share with regard to Mexico -- proponents and
opponents alike that it, too, be a strong nation, with a rising standard of living, will not
be possible if our own economic strength is put at risk. For the ability to share our
wealth with others, our ability to promote progress around the globe, our ability to offer
democratic opportunity to the people of all nations depends and, indeed, is rooted in our
economic strength.
This Agreement undermines the very roots of outwardly directed foreign and
economic policies.
utanst"
What A Good NAFTA Would Do
In March of 1991 I wrote a lengthy letter to President Bush outlining the yardstick
against which I would measure any NAFTA. Since that time, while I have offered
proposals to help measure the result, I have refused to make that standard either more
or less difficult. Since that day, I have consistently and persistently advocated the only
kind of policies which I believe would allow us to integrate our three economies --
Mexico's, Canada's and the United States' while increasing growth and opportunity in
each.
3
As I wrote President Bush,
"I want the Mexican economy to flourish and grow. Relying on low
wages and unsafe working conditions as comparative advantages to lure
away high-paying American jobs will not save the Mexican economy -- but
it will further weaken the American economy. In order for Mexico to
prosper, America must prosper. So for a free trade agreement to be of
meaningful benefit to both nations, it must contain provisions that will stem
any hemorrhage of American jobs across the border.
"For that reason I request that you not limit the talks to what used
to be traditionally, known as "trade issues" -- tariffs, trade-related
investment restrictions, dispute resolution and the like -- but rather that we
address North American Free Trade systematically.
"To do so will require discussing issues like transition measures, wage
disparity, environmental protection and worker rights."
While I was doubtful that President Bush would negotiate an agreement that
would win my support and, in an ironic way, he didn't let me down, I voted for fast track
authority because I thought NAFTA, done right, would be in our best interests.
Free trade is an important and ongoing project. But, theory and reality are often
different. Many have argued for the Agreement based on economic theory, as if that
theory had the force of defined and indisputable dogma. Unfortunately, most economists
haven't taken the time to travel to Mexico and see what's happening on the ground.
In Mexico, I have met twice since the beginning of negotiations with President
Salinas. I have met numerous times with members of his cabinet. I applaud President
Salinas' commitment to his people. When I had dinner with the President, he talked
about the results of the Solidaridad program that has brought electricity, water and
dignity to many communities. I have seen change on the ground. But, much, much
more needs to be done.
On both sides of the border I have seen families forced to live in squalor -- in
homes with cardboard walls, dirt floors and roofs made from scrap wood and metal.
Poverty is always cruel, but for these workers, it is especially tragic. They work in
some of the most advanced manufacturing plants in the world. While they use
computerized machinery on the job, they don't have water they can bathe in, let alone
drink, off the job.
They build some of the most sophisticated TV sets in the world, yet their homes
are, at times, built from the packing materials.
4
I have talked to workers who have moved from the interior of Mexico seeking a
better life, then to find that they are forced to live or barely live on subsistence wages. I
have talked to workers who have been fired for trying to form a union. I have walked
through plants and seen safety violations that jeopardize the health and welfare of
everyone there. I have seen the inside of barracks where hundreds of young Mexican
workers are forced to live, through economic necessity, virtually on top of one another
with no privacy, no dignity and no real future.
Mexico is a great nation with strong, determined, admirable people who deeply
deserve change and progress no less than our people.
A NAFTA, done right, could be a force for progress in all these areas and in all
three countries. It could increase growth and opportunity for workers. It could provide
a basis for cleaning up environmental degradation, and protect against future problems.
It could be the basis for a hemispheric wide trading community that would enhance our
ability to compete with any nation or trading bloc. It could add tremendously to the
synergy of trade by developing new efficiencies of production.
It is on these important issues that the Bush Administration fell flat on its face.
They did not understand, as President Clinton did, that addressing labor and
environmental issues was essential to a successful NAFTA. I commend President
Clinton for the vision he has shown -- as no President before him has -- and the
diligence with which he has pursued it since his campaign speech last October.
What are the causes and effects of the challenge he set out for himself?
Mexican wages are kept artificially low because of the actions, and inactions, of
the government. Government rules and procedures set both minimum wages and
maximum wage increases for the vast majority of hourly workers in their manufacturing
industries. And they have kept these wages low to help their economy grow. They have
sought to combat inflation and to attract investment from companies seeking low wage
labor as the way to cut costs.
Mexican wages must rise because it is the right thing for the people. They must
also rise because we want to make them better consumers of Mexican and U.S. products.
And, if their wages don't rise, the downward pressure on our wages will continue.
Official data from the Mexican Government tell the story best. Since 1980, real
hourly compensation has fallen by 32% in Mexico, while manufacturing productivity has
increased by more than 30%. Economists tell us that wages should roughly track
productivity increases. Yet, Mexican workers are producing more, and getting less.
5
What does this mean to a Mexican family? The flip side of low earnings is low
purchasing power. A survey conducted early this August showed that a worker would
have to work about an hour to buy a half-gallon of milk, two and a half hours for a
pound of beef, almost an hour for a dozen eggs and almost two hours for baby formula.
In other words, workers are finding that they work simply to eat. The chance of a better
life is simply out of reach.
After spending countless hours reading and examining this Agreement and
studying this issue, I truly believe that this Agreement falls short in terms of reaching the
goal I've outlined.
There are a number of reasons for that.
Why This NAFTA Is Deficient
Does this NAFTA do enough to ensure that while companies may be attracted to
Mexico's high quality labor force or lower wage structure, we have done all that we can
to eliminate artificially low wages in Mexico?
The answer, unequivocally and undeniably, is no. In the area of labor, this
NAFTA is actually worse than the status quo for two reasons.
Under the NAFTA the Mexican Government refused to allow industrial relations
the right to strike, the right to bargain collectively and the right to freely associate -- to
be covered under the dispute resolution procedures of the free trade Agreement. This is
a glaring and critical omission. It is equivalent to an environmental agreement that
excludes air and water.
What the Mexican Government has said is that they are unwilling to allow
oversight of whether they are enforcing their most important labor laws. We're not
talking about imposing U.S. labor laws on Mexico. I simply want them to enforce their
laws.
Mexico's laws are actually quite good. Their Constitution provides basic labor law
protections. It includes family and medical leave. It includes striker replacement
limitations.
But, you can have the best laws on the books-- and if they aren't enforced, they
aren't worth much. That's the case in Mexico. The largest union federation -- which
covers the vast majority of workers, acts as a quasi-governmental entity. Each year they
enter into what is known as "El Pacto" that sets minimum and maximum wages.
6
A conscious decision has been made in Mexico to keep wages artificially low to
continue to attract investment. That hurts their people. It also hurts our people by
attracting our jobs to Mexico and putting downward pressure on our wages and by
preventing Mexicans from becoming good consumers of our products.
The second reason why NAFTA is worse than current law is that Mexico currently
is a beneficiary of the Generalized System of Preferences program -- known as GSP. In
short, what this means is that we grant duty-free access on hundreds of products to help
stimulate economic growth in Mexico. At the same time, we impose a number of
conditions on this concession.
One of the key conditions of GSP is that a beneficiary must afford their workers
internationally recognized worker rights -- the right to strike, the right to organize and
the right to freely associate.
At this point, the leverage of the GSP appears to have been lost because the
Administration has not decided to retain it. I hope that in drafting the NAFTA they
decide to keep the leverage of GSP on labor rights, and commit to use it aggressively as
a tool to force Mexico to live up to its laws.
So, passing this NAFTA will ratify and even worsen the status quo.
Economists argue that open trade will help. There is no evidence that trade has
helped to really address the problems in Mexico. Wishful thinking is no substitute for
using the major opportunity for integration of our generation as a force for progress on
the most important fundamental problems facing the U.S. and Mexico.
Some will say that this Agreement will truly be effective. They believe that
sunshine, open markets and growth in the long term will raise Mexican wages and living
standards. That's the curious thing about this Agreement. It seems to me that every
time someone doesn't have an answer to a problem they point to the long-term. The
long-term, invoked in that way, is not a point in time, but a debating point -- and a day
that may never come.
Where is the proof? What are the forces that will convert present losses in jobs
and present lowering of wages into sweeping future progress? Why should we believe
that the process will raise Mexico's standards, and not lower ours -- so that in the end,
our wage rates meet in the middle, -- in the long-term, of course? The evidence is that
in the last decade, where free trade has largely existed in the maquiladora program,
wages have fallen.
This is not the long term that I want for the United States of America.
7
Mexico at least made an effort on the environment during the negotiations. We
saw a number of high profile enforcement activities. They closed a refinery in Mexico
City. They conducted an environmental enforcement effort on the border.
But, in the area of labor law, Mexican officials did not even make a good faith
effort at change; instead they showed that the status quo will continue. They arrested
and confined Don Agapito, a Mexican labor leader who was fighting for higher wages in
Matamoros. They helped break a strike at the Volkswagen plant. At no time did they
show a genuine commitment to carry out their own labor laws on behalf of their workers.
President Clinton did achieve some important progress -- child labor and health
and safety are to be covered under the dispute settlement system.
The Mexicans agreed, in the closing hours of the negotiations, to allow minimum
wages to be subject to dispute resolution. In addition, they also appear to have agreed --
unilaterally, and therefore the concession is not subject to our review -- to tie minimum
wages to productivity.
This is a step in the right direction and from the Mexican point of view, a big
step. But in the manufacturing sector -- where we face the greatest competitive pressure
-- few workers actually work at the minimum wage. Thus, their actions will do little to
reduce the pressure on our jobs and standard of living. The real issue is wages in the
export sector and average wages, not minimum wages.
As you well know, despite increasing our minimum wages, our average wages have
fallen. According to data from the Bureau of Labor Statistics, real average hourly
earnings have dropped by almost sixty cents between 1980 and 1992. That's despite an
increase in the minimum wage of $1.15 per hour.
So, you have two problems in Mexico: On the one hand, you have workers who
aren't able to exercise internationally recognized workers rights; on the other hand, you
have the government setting both minimum wages and maximum increases for many
workers. The space in between has become an economic vise.
The result in Mexico is that you've got workers whose hands are tied behind their
backs except when they're working on the government's terms. Even if they were to be
granted greater rights, the right to organize, bargain collectively and freely associate, they
would be limited through the wage setting mechanism.
We want to help Mexico raise its' standard of living because it is the right and
smart thing to do. We want to make Mexicans better consumers of our products. We
want to reduce the downward pressure on our wages. We want to increase jobs, not lose
them.
8
This Agreement won't do that. The Agreement fails to satisfy the most important
challenges a NAFTA faced -- getting Mexican average wages up through the present
system or creating a new open system, or both.
Let me also talk about an issue that is of increasing importance here in the U.S.
immigration. Some would have you believe that the Agreement would help. But in fact,
according to a number of responsible studies, illegal immigration is expected to increase
in the short-term.
Mexican farmers, who have a low efficiency of production as compared to ours,
will find they can't live off the land, and they will move to industrial areas -- principally
the border region. While industrial growth is expected to increase in this area, it won't
be able to increase fast enough to accommodate all of those seeking work. The only
choice then will be to cross the border, as free trade leads to free immigration.
I've talked to Mexican workers about this issue. They don't want to cross the
border, but economic conditions force them to. The best solution to the problem of
immigration is increasing the standard of living in Mexico -- and again, this Agreement
doesn't do enough.
Let me turn now to the important issue of the environment. From now on,
environmental issues will always have a place on any trade negotiating agenda.
For we can and must use the leverage of our marketplace and access to it as an
incentive to clean up the land, air, and water of this earth. We do a disservice to our
people and people everywhere if we fail to pursue sustainable development policies. No
nation, developed or lesser developed should be encouraged to poison the future in
order to pay for false progress or prosperity. We need to understand that without
pressure, environmental protection can be seriously damaged in the quest for economic
growth. There is profit in pollution unless we help to stop it.
Environmental degradation on both sides of the border has had a tremendous
impact on our people's health.
In terms of border cleanup, the status quo may become better under the
environmental portion of the NAFTA, but only marginally so. And, the NAFTA will
certainly not live up to expectations. The financing mechanism that has been developed
includes no assured source of funding -- it will be forced to compete against education,
crime and other demands on our budget. Creative financing has existed for years, as has
bonding authority in the border states. The real issue is not whether you know how to
deliver money, it's whether you can find it in the first place, and whether you have the
resources to pay it back in the long term. This Agreement will do little to address this
problem. And, there is no integrated border plan to require that the cleanup occur.
9
But, the need for border cleanup, at its core, is the result of lax enforcement of
environmental laws in Mexico. On the books, the laws look quite good. But they aren't
adequately enforced.
The enforcement regime the negotiators agreed to, which also applies to certain
labor issues, follows a tortuous route. While it includes a trade sanction at the end of
the day, one must get the consent of another party to even proceed with a case, and the
sanction is essentially intended just as a collection mechanism for the fine.
Let's recognize that imposing a trade sanction means that the system has failed --
that a country isn't enforcing its laws. But, the more accessible a trade sanction is, the
more likely that enforcement will occur: Under the scheme the negotiators decided
upon, sanctions may never be available.
We've got to address the environmental issue for the sake of people's health on
both sides of the border and the future of our environmental assets.
But, we've also got to address the lax environmental enforcement problem in
Mexico because of the economic impact it has on our people.
We need to understand that low environmental standards and lax enforcement
can create a competitive advantage. It has been documented that U.S. companies have
gone to Mexico to avoid environmental laws here. That is unacceptable. We must not
allow countries to auction off their environmental assets to attract our jobs.
As I have said on countless occasions, I will not support an Agreement that isn't
paid for. There needs to be a guaranteed stream of funding for the NAFTA.
The funding needs associated with NAFTA are substantial.
First, the Administration must replace up to $3 billion in tariff revenues that will
be lost under the Agreement. Under our budget rules, those funds will have to come
from spending cuts or from higher taxes.
Second, the Administration needs to find a guaranteed funding source for border
cleanup, an issue I've already discussed.
A third component is paying for the training and retraining needs of our workers.
Addressing this issue is vital.
We need a triggerless training system that doesn't require workers to prove why
they are dislocated, but allows them simply to establish that they are dislocated. A
reasonable program should include training, income support and placement services.
10
Our workers are skeptical that the money will be available for training and
retraining and they are right. Commitments have been made in the past, and then
funding has been shamefully inadequate. In fact, Ronald Reagan proposed "zeroing-out"
funds for Trade Adjustment Assistance in one budget proposal. Workers are entitled to
help. While I know that the Administration is committed to helping these workers, they
have yet to find a funding source.
There are other fiscal needs that must be met. New border crossings must be
built. Additional Customs inspectors and Border Patrol officers must be hired.
I believe that ultimately the total cost of NAFTA will be between $30-40 billion
over the next ten years, of which $6 billion or more must come from the federal budget
over the next five-years. And, if the states can't pay their fair share, the federal cost may
be higher.
It's important to step back and understand that there are some very real
transitional costs -- and these issues shouldn't be swept under rug.
We should learn a lesson from the integration efforts of the European
Community. This year alone they will spend almost $25 billion on transition needs --
most of it going to the lower-wage countries of Spain, Portugal and Greece. Since 1986,
Europe has spent more than $120 billion on integration. And, that is the cost of
constructing a free market with countries whose standard of living is much closer than
that of the U.S. and Mexico.
I proposed a cross-border transaction fee as one approach to paying for the costs
of the Agreement. To date, no one has offered a better idea. As the New York Times
said of this proposal last year, "(a)sking traders to pay some of the costs of the trade
agreement is a tolerable price for Congressional approval."
The logic and politics are compelling. It seeks, in a rough sense, to ask the
beneficiaries of trade to pay for the costs. For the truck driver I met on the border who
waited 26 hours to cross, the fee would be used to help build new roads and border
crossings. Certainly, there are substantial opportunity costs involved in that 26 hour wait
as well as the pollution that results from idling that entire time.
It would also build political support by not forcing NAFTA-related costs to
compete directly with other programs in the budget: education, crime prevention, health
care and others. At the end of the day, this may be one of the toughest problems to
solve.
We must stop spending all of our time deciding how to spend money and start
giving proper attention to how we are going to raise the money.
11
Last year I spoke out on the Bush-NAFTA and said that I did not believe that it
was good enough. At the same time, I supported then-Governor Clinton's call for
supplemental agreements because I wanted to support a NAFTA.
In supporting Governor Clinton's position, I reluctantly agreed that I would
support the basic agreement if he could address the problems left unresolved -- the
effects on the environment, jobs and wages.
There are a number of other problems, all of which are important, that also have
been largely ignored.
Any benefits of the NAFTA can be quickly reduced if Mexico decides to devalue
the peso. I asked that this issue be addressed through discussions between our two
governments. To date, I am unaware of any agreement in this area.
The political system in Mexico continues to need reform. We need to press for
continued change in this important area, including fair elections in 1994.
During the upcoming debate, so-called "facts" will be used by each side to sell
their position. Let me take a minute to dispute two of the points the proponents are
using to herald the benefits of NAFTA.
First, the proponents say that the average Mexican buys $450 of U.S. goods. This
is simply false. The real number is closer to $60, in terms of direct consumer purchases,
unless you believe that the average Mexican is buying robot welders for his home or
large industrial equipment. And $21 billion that are claimed as exports are really
products we ship to maquiladoras and export plants for inclusion in products sent right
back to us.
Second, supposedly 700,000 jobs are created by the exports we ship to Mexico.
Again, the proponents are wrong. As Harley Shaiken, a visiting professor at the
University of California, Berkeley says, "At least 360,000 of these jobs, however, produce
parts which might be classified as 'industrial tourists': They are shipped from U.S.
factories to Mexico, assembled into finished products, and then immediately shipped
back to the U.S." The real number of U.S. jobs related to U.S. exports is closer to
330,000 at most, according to Professor Shaiken. It's important to recognize that in the
short time since President Salinas requested a free trade agreement, tens of thousands of
new jobs have been created in maquiladoras -- plants who ship the bulk of their products
to the U.S. market.
12
Just Saying No Shouldn't Be the Only Option
My support for a NAFTA continues.
I want the political and economic reforms in Mexico to continue. I want the
Mexican economy and people to prosper. I want to support an effort at creating a
hemispheric trade block. I look toward a better future, not an unacceptable past.
But, for the reasons I have outlined, I can't support this NAFTA.
The Agreement isn't sound, and our economy isn't ready for it. In fact, the
greatest failures in the Agreement could exacerbate our worst economic problems:
disappearing jobs and declining real incomes. Against the economic backdrop of the
last 12 years people are right to be concerned about the future.
President Clinton is helping to change that. Regardless of what the President's
opponents think of his deficit reduction plan, they must acknowledge his courage and
resolve in pushing it through. Interest rates have continued to decline. Each month,
homeowners, consumers and businesses save billions through lower interest costs --
money that can help restore economic growth.
Bill Clinton is also committed to a skills strategy that will ensure that our workers
can compete against the world.
But restoring economic growth and upgrading skills will take time.
The NAFTA that is before us fails to provide this needed transition.
Members of Congress who are opposed to this NAFTA aren't protectionists. We
aren't against Mexico. We simply believe that passing a NAFTA that fails to insure
sensible Mexican wage increases and that provides no guaranteed funds for necessary
structural adjustment during integration is worse than no NAFTA at all.
As Jorge Castaneda said in his recent Foreign Affairs article, without these
provisions we are "missing an excellent opportunity to attack the key obstacle to Mexico's
development."
I believe that there is a way both to promote growth in Mexico and to promote
growth here.
We should take a chapter out of the European Community's integration efforts.
Before prospective nations such as Spain, Portugal and Greece were allowed to join the
EC, they were required to initiate reasonable political and economic reforms.
13
I believe we could follow a similar course. We should ask Mexico to enforce its
own laws so that our companies aren't lured away by the possibility of profit through
inadequate environmental codes or insufficient worker protections. We should seek
specific political and economic reforms in Mexico.
We should cooperatively clean up the border region and produce assured
revenues to accomplish it.
We should require our companies to set an example in Mexico -- by adhering to a
Code of Conduct much like the Chemical Manufacturers Association has already
adopted.
How would Mexico benefit? We could unilaterally reduce tariffs on Mexican
products by 10% a year as long as continued progress on these issues is achieved. After
this period, we could enact a NAFTA that would promote economic growth and benefit
ordinary people in all three countries.
During this period, we would continue the reforms that are necessary in our
country. We would allow the Clinton Economic program time to work, thereby restoring
growth and opportunity. We would be able to put in place a comprehensive training
program that would ensure our workers that if they are displaced, there is hope for a
brighter future.
Conclusion:
Since day one, I have been clear about what I believed a successful NAFTA must
achieve to be a real force for progress. I respect the decision of those who want to
support the Agreement that will soon be before us. I hope that they will respect my
decision, and that of others, who truly believe that this Agreement is not the best that we
can do.
There are those who will argue the merits of this agreement based on economic
theories. I'm more interested in economic reality. The reality is that the nature of
Mexico's economic and political system is such that workers will be asked to bear the
burden of an Agreement that doesn't address the most important issues. The reality is
that the Agreement could have achieved more to be a force for progress.
To those who say that opposing the present Agreement will simply leave us with
the status quo, I say that the process doesn't have to be over. Chairman Arafat and
Prime Minister Rabin showed us clearly that people of will, persistence and vision can
accomplish anything.
14
To those who say that on balance, at some future time, under certain conditions,
the problems unsolved in the Agreement will be solved, I say why leave it to promises,
good wishes and chance? Don't our people deserve better?
President Clinton knows of my support for him and his Administration in other
areas. I helped him achieve success on his economic plan, and I will be there by his side
on health care, education, Russian aid and countless other issues. On this issue, as it
stands, however, I must part company.
Now is the time for an open, honest debate. I will participate actively in this
debate. I will engage those who argue this Agreement is the best that we could achieve.
We could, and we can, do better.
As Thomas Jefferson said, "reason and free inquiry are the only effectual agents
against error."
Let the debate begin.
(30)
Press Contacts:
Laura Nichols/Dan Sallick (202) 225-0100
15
Cannot
fill Came/Camen
Mianghones
SIGNING OF NAFTA SUPPLEMENTAL ACCORDS
September 14, 1993
It is a distinct honor for me to be joined by my
predecessor, President George Bush, who took the major steps in
negotiating a free trade pact; President Jimmy Carter, whose
vision of hemispheric development animates our efforts; and
President Gerald Ford, who has argued cogently for free trade and
whose counsel I value. These men -- differing in party and
outlook -- join us today because we all recognize the stakes for
our nation.
Yesterday, we saw the sight of an old world dying, and a
hopeful new one being born. Peoples who for decades were caught
in a cycle of war and frustration, chose hope over fear.
Today we turn to face the challenge of change in our own
hemisphere.
In a few moments, I will sign three agreements that will
complete our negotiation with Mexico and Canada to create a North
American Free Trade Agreement, NAFTA. In coming months, I will
submit this pact to Congress for approval. It will be a hard
fight, but I will be there every step of the way. We will make
our case as hard and as well as we can. And I know we will win.
Let me say at the outset: NAFTA means jobs -- good paying,
American jobs. If it didn't, I wouldn't support it.
***
As President, it is my duty to speak frankly to the American
people about the world in which we now live.
Fifty years ago, at the end of World War II, an
unchallenged America was protected by the oceans and our
technological superiority. We chose to create a new world of
free trade. As a result, global trade grew from $200 billion in
1950 to $800 billion in 1980. And the American middle class grew
and prospered as a result.
Ours is now an era in which commerce is global and capital
is mobile. Factories or information can flash across the world
in the flicker of a computer screen. For two decades, the winds
of global competition have buffeted American workers and
businesses. The world has changed. But in too many ways, we
have not.
The only way to pass prosperity on to our children is to
make this new world economy work for us -- not by pretending it
doesn't exist.
We will never thrive by erecting walls against competition.
Even if we wanted to, we could not. The only way to preserve and
create American jobs is for American workers to be the best
trained and most productive in the world. We must compete, not
retreat. And we must lead the fight for open markets and
vigorous trade.
Fifty years after visionary statesmen built a new world
economy out of the rubble of World War II, we stand uniquely at
the center of world leadership. America has an opportunity --
and an obligation -- to once again create prosperity at home by
expanding trade abroad.
That is what the North American Free Trade Agreement is
about. It poses the question of whether America's days of
leadership are behind us, or ahead of us. With NAFTA, we will
choose hope over fear.
Let me explain why I believe NAFTA is vital for the American
economy, American leadership and America's future.
We are a trading nation. One of the only bright spots on
our economy in recent years has been exports. And export-related
jobs pay more than other jobs.
NAFTA will create 200,000 new jobs for Americans over the
first two years alone. It will create 1 million new jobs in the
first five years. This is many more than might be lost to
competition.
NAFTA will generate these jobs by fostering an export boom
to Mexico. It does this primarily by tearing down tariff walls
that keep our products out.
Mexico is a potentially massive market for American
products. Already, Mexican consumers buy more per capita from
the United States than any other consumers in the world. The
average Mexican buys $450 worth of our goods every year -- more
than the average Japanese, German or even Canadian buys [or, if
we could say it: more than the average German, Swiss and Italian
put together].
We have a taste of how NAFTA will work. Several years ago,
Mexico partially reduced its tariffs. In 1987, Mexico exported to
the US $5.7 billion more than we exported to them. Today, we
have a $5.4 billion trade surplus. Expanded exports to with
Mexico have already created 400,000 new US jobs.
When Mexican consumers and businesses buy more U.S.
electronics and telecommunications equipment made in California -
- a category of exports that rose by more than 200% between 1987
and 1992 --the - workers who make this equipment gain job security.
When Mexico boosts its consumption of refined petroleum products
from Louisiana -- as it did by about 200% in that period --
Louisiana refinery workers gain job security. And when Mexico's
purchases of industrial machinery and computer equipment made in
Illinois increase -- as they did by more than 300% in those same
years-- the workers who build that equipment gain job security.
[NOTE: THIS GRAF IS CRIBBED FROM REICH'S SPEECH]
Forty-eight out of fifty states boosted exports to Mexico
during this time. That is one reason why 41 governors -- the
officials who day in and day out worry about providing jobs for
their citizens -- support the trade pact.
Many Americans are worried that this agreement will increase
the movement of jobs south of the border. I believe with all my
heart that it will not.
There have been nineteen serious economic studies of NAFTA,
by liberals and conservatives alike. Eighteen of these concluded
that NAFTA will not lead to job loss.
[
Businesses do not choose where to locate based solely on
wages. If they did, then Haiti and Bangladesh would be world
export powers.
Businesses do choose where to locate based on the skills and
productivity of the workforce, the roads and railroads to deliver
products, the communications networks nearby. That is America's
strength. And that will continue to be America's strength.]
Moreover, there are specific provisions in the agreement
that remove current incentives to move south.
[
For example, today Mexican law requires U.S. automakers who
want to sell cars to Mexicans to build them in Mexico. Under
made NAFTA, cars
in Detroit can at last be sold in [Mexican city
beginning with D]. This year, we will export only 1000 cars to
Mexico. Under NAFTA, the Big Three auto makers expect to ship
60,000 cars to Mexico in the first year alone.]
And in a few moments I will sign side agreements to NAFTA
that will make it harder than it is today for businesses to
relocate in search of cheap wages or lax environmental rules.
The side agreement on the environment will, for the first
time ever, apply trade sanctions against any of these countries
that fails to enforce its own environmental laws. This
groundbreaking agreement is why NAFTA is supported by
environmental groups ranging from the Audubon Society to the
Natural Resources Defense Council.
The second ensures that Mexico enforces its laws in areas
that include worker health and safety, child labor and minimum
wage.
And the third agreement protects American industries against
export surges from one of our trading partners.
Economic change has often been cruel to the middle class
over the past two decades. Hard working families worry that
their jobs will leave, and that they will bear the inevitable
cost of progress without ever reaping the benefits.
NAFTA imposes an obligation cn the government to ensure that
American workers are the best prepared in the world, that any
citizen who loses their job due to trade is given assistance and
training. We will propose a comprehensive worker training
program to serve as a platform of opportunity for those who need
it.
Together, efforts of two administrations have created a
trade agreement that moves beyond traditional notions of free
trade. We have sought to ensure that trade pulls everybody up,
instead of dragging them down. We have put the environment at
the center of this, and future, agreements. And we have sought
to avoid a debilitating contest for business where countries seek
to lure businesses by slashing wages or despoiling the
environment.
*
NAFTA will create jobs thanks to trade with our neighbors,
and that is reason enough for Americans to support it.
But there are other reasons, too, that cut to the core of
our national interest.
NAFTA is an essential element in America's competitiveness
with Europe and Japan.
Across the globe, our competitors are consolidating,
creating huge trading blocs.
This pact will create a free trade zone stretching from the
Arctic to the tropics -- the largest in the world, a $6.5 million
market of 370 million people. This large market will let
American businesses be more efficient, better to compete with our
rivals around the world.
And NAFTA is essential to American leadership in the
hemisphere and world.
Having won the Cold War, today we face the more subtle
challenge of consolidating our victory.
For decades, we have preached greater democracy and open
markets in Latin America. NAFTA offers and opportunity to extend
and cement these trends. Passage of NAFTA will lock in a market
economy throughout the continent, and set our hemisphere on a
path to growth. It is a historic opportunity to open the gateway
to Latin America.
This explains why the five living former president have come
together in an extraordinary display of unity to support NAFTA.
Their philosophies are diverse, and their points of views may
differ. But they love their country. And they know that America
is at its best when America leads.
* * *
I am well aware that this trade pact is controversial.
It is no secret that both the Democratic party and the
Republican party are divided on this issue. But that is what
happens in a time of change. Old alliances give way; new forces
take shape; long-familiar terrain takes on a new aspect. When
the new path is uncertain, people seek to cling to the old way.
Demagogues peddle fear -- and NAFTA has already created a boom
among defeated politicians and demagogues.
But leadership forces us to cut through the fog -- to spurn
the naysaying of narrow interests, and to boldly embrace the
national interest. We must put aside labels of party and pull
together for our country.
The fight over NAFTA is not a contest between left and
right, Democrats and Republicans. It is fundamentally a choice
between hope and fear -- between an America confidently facing
the world, and an America past its prime, grimly clinging to the
old way in the forlorn hope that things will turn out all right.
If our nation fails to rise to this occasion, if we listen
to the voices of the past and spurn the promise of tomorrow, we
will turn inward at the very moment that the world looks to us
for leadership.
If NAFTA is defeated, we risk destabilization,
authoritarianism and a turn from market reforms in Latin America.
We risk a world trading system where nations slam shut
markets and build walls of protectionism, leading to less trade
and low growth. That's what happened in the 1930s.
And we will assuredly lose the opportunity to create jobs
here at home.
America is an optimistic nation. We have been at our best
when we grappled with the day's challenges. The fight over NAFTA
is fundamentally this: in the face of change, will America
flinch? Or will it lead? Will it retreat? or will it compete
and win?
I pledge to you that I will expend every ounce of my energy,
and use all the persuasiveness of my office, to win passage of
this pact. It will not be easy. But it is the right thing to
do. And I am confident that we will prevail.
JOBS
Question:
Will NAFTA result in massive U.S. job losses to low-wage Mexican workers?
Answer:
No. NAFTA will increase jobs, productivity and wages in the United States as well as in
Mexico and Canada. If lower wages were the only reason that companies moved to other
countries, Haiti or Bangladesh would be economic powerhouses by now. Other factors such as
much high worker productivity in the United States and high non-wage costs in Mexico
(including transportation, infrastructure, and support service costs) make U.S. workers more
competitive than their Mexican counterparts.
Moreover, under NAFTA's rules of origin, only products that have substantial North American
materials will have preferential treatment. With the free and fair trade and investment
environment created by NAFTA, workers in all three North American countries will be better
able to succeed in competition with non-North American producers.
Question:
How many workers would need assistance because of NAFTA?
Answer:
NAFTA will create many more jobs in the United States than are lost. The number of positions
that will be lost due to NAFTA is likely to be very small. American workers are strongly
competitive in world markets; U.S. barriers to imports from Mexico are already very low;
Mexico's productive capacity is very small relative to that of the United States and will - even
with healthy growth - remain so for decades to come.
Since NAFTA will be phased in over a fifteen year period, a substantial part of the position
losses is likely to be absorbed by attrition through voluntary retirement or resignation. Certainly
any job displacement of working Americans by NAFTA will be barely perceptible relative to
other changes in the U.S. economy, such as defense conversion, technological advance and
changes in the consumer tastes.
While the net benefits are clear, the Administration recognizes that some U.S. workers may
suffer dislocation. For any U.S. worker who is in fact displaced by NAFTA, the Administration
is committed to provide the assistance needed for him or her to adjust to changing market
conditions.
Question:
Will wages in the United States fall in order to compete with lower wage Mexican labor?
Answer:
High wages in the United States reflect the productivity of American workers, which is the
highest in the world. Because U.S. jobs supported by exports are, on average, higher paying,
requiring higher skills than other jobs, and NAFTA's promotion of exports will lead to net job
creation, NAFTA will strengthen rather than depress U.S. average real wages.
Without NAFTA, hundreds of thousands of Americans will lose opportunities to find good-
paying jobs producing exports for the Mexican market.
Question:
How can Mexico, a low-income country, be such a large market for U.S. exports?
Answer:
Mexico now is our third-largest trading partner. Although Mexican per capita incomes are low
relative to the United States, Mexico is a country of 85 million people (who prefer U.S. to other
foreign products) and a developing country with an improving economic outlook. On a per
capita basis, Mexico purchases more U.S. products than our trade partners in the European
Community. NAFTA will help the United States take further advantage of the growing Mexican
market for U.S. exports.
Question:
Are the benefits of recent U.S. export expansion overstated? Is most of this growth due to
exports of parts which are assembled in Mexico and then shipped back to the United States?
Answer:
Not at all. Mexico is our third largest overall export market, and recently passed Japan to
become the number two agriculture market. An estimated 83 percent of the growth in U.S.
exports to Mexico in the last five years was for Mexican consumption, not re-export.
Most U.S. exports to Mexico are for consumption in the Mexican market and not for return to
the United States. In 1992, U.S. exports of component inputs for production sharing
arrangements in Mexico (i.e. Maquiladoras) comprised an estimated 23 percent of all U.S.
exports to Mexico, compared to 32 percent in 1987. While incorporated into products
eventually exported back to the United States, these components still support U.S. jobs related
to their production.
2
Question:
Is the United States primarily exporting machinery and equipment that Mexico would use to
create industries which could then lead an export assault on our markets?
Answer:
Unlikely. Mexico imports a smaller percentage of capital goods than most trading partners. In
percentage terms, capital goods have been the slowest growing major export category to Mexico
in the last 5 years. Although still the largest component of U.S. exports to Mexico, capital
goods have decreased from 40 percent of total U.S. exports to Mexico in 1987 to 33 percent in
1992. In contrast, capital goods comprise 40 percent of U.S. exports to all developing countries
and 39 percent of U.S. exports to the world. The United States enjoys a significant competitive
trade advantage in many areas of capital goods.
In any event, U.S. exports of capital goods to Mexico should not be viewed as a liability for the
U.S. economy. Such exports support production and high paying jobs in the United States and
will do so for many years to come. Mexico's need for imported capital goods is likely to
continue as long as the Mexico maintains a healthy, expanding economy. Even the United
States, the world's most productive economy, must expand and replace a part of its capital
equipment each year.
Finally, U.S. capital goods are on the cutting edge of technology. Exports of capital goods
support good, high-paying jobs.
3
LABOR
Question:
What does this Administration plan to do for those who lose jobs because of the NAFTA?
Answer:
The Administration will soon introduce legislation to authorize a new comprehensive worker
adjustment program that will serve all dislocated workers - regardless of the cause of their job
loss. The new program will reflect the learning gained from experience regarding which
services work best in quickly re-employing dislocated workers.
The new program is planned for implementation in FY 1995 and will expand our capacity to
serve workers. It is estimated that by 1998 1.3 million workers will be served each year -
those who want and need basic adjustment services and those who need training or retraining
to qualify for a new job.
In addition, the new program will include a national reserve account for targeted responses to
industries, firms and communities affected by major structural changes such as NAFTA and
other trade agreements.
Through FY 1995 we will respond to the NAFTA by using the Trade Adjustment Assistance
(TAA) program to serve trade impacted workers. Enhanced services also will be available to
other individuals affected by trade using additional Economic Dislocated Worker Adjustment
Assistance (EDWAA) funds under the Job Training Partnership Act.
Question:
Will adequate income support be provided to enable workers to take long-term training?
Answer:
Yes. The majority of dislocated workers will receive unemployment insurance (UI) benefits.
Also, income support following exhaustion of regular UI will be available for experienced
workers who enroll in training early in their UI benefit period.
We also are reviewing options for the flexible use of UI benefits that include enabling some
workers who are eligible for UI benefits to use these for business start-up.
5
ENVIRONMENT
Question:
What steps does the Clinton Administration intend to take to insure effective implementation of
the environmental provisions of the North American Free Trade Agreement goes into effect on
January 1, 1994?
Answer:
Although NAFTA has gone far beyond any other trade agreement in history in its recognition
of environmental factors, as they relate to trade, new mechanisms are currently being explored
to insure compliance with the environmental laws and standards of NAFTA member countries.
The United States, Canada, and Mexico began negotiations on March 17 on an environmental
side agreement that will be presented to Congress as part of a larger NAFTA package. The side
agreement on the environment will establish a North American Commission on the Environment
(NACE) that will provide for more effective national enforcement of national laws, transparency
in carrying out these laws, and an important forum for trinational cooperation on a wide range
of environmental matters.
Question:
What guarantees are there that following ratification of NAFTA, support from Washington D.C.
and Mexico City for border environmental problems will not diminish?
Answer:
The Clinton Administration remains committed to developing creative long-term solutions to the
environmental problems found along our common 2,000 mile border with Mexico. The over
$230 million pledged in FY-1994 represents a portion of a sustained U.S. commitment to
respond to existing problems on the Border and to probable future environmental impacts on
communities located along the U.S. - Mexico border.
Question:
Do U.S. government agencies work with the Mexican government to correct these problems?
Describe any cooperative programs.
Answer:
Both the United States and Mexico recognize the seriousness of the environmental problems in
the border area and, in fact, have worked together for more than ten years to develop
collaborative approaches for solving the problems. These initiatives include:
7
1983 U.S.-Mexico Border Environmental Agreement:
Formal efforts between Mexico and the United States to protect and improve the
environment in the Border Area began in 1983 with the adoption of the U.S.-Mexico
border Environmental Agreement (otherwise known as the "La Paz Agreement"). This
Agreement outlines the primary objectives of common border environmental cooperation:
establishes a mechanism for additional agreements, annexes, and technical actions; and
encourages environmental cooperation between the two countries. The La Paz
Agreement also establishes formal communication and procedures and the establishment
of binational working groups in the areas of water, hazardous waste, air, and emergency
response. Recently, work groups covering enforcement and pollution prevention have
also been established.
1992 Integrated Environmental Plan for the U.S.-Mexico Border:
EPA and SEDESOL (The Mexican Secretariat for Social Development) are currently
carrying out a set of activities recommended in the Border Plan released in February
1992.
The goal of the Border Plan is to strengthen efforts to protect human health and natural
ecosystems within the Border Area, defined as the area 100 km (60 miles) on either side
of the border. Key objectives of the plan include: strengthened enforcement of existing
environmental statutes; reduction of pollution through new initiatives; increases
cooperative planning, training, and education; heightened public awareness of the border
environment; and increased public and state/local government participation in Border
Plan implementation.
A progress report and revised set of priorities for the coming year are being prepared for
the Binational Coordinator Meeting scheduled for August 27, 1993.
Question:
The current Border Plan does not address many of the environmental concerns raised by the
North American Free Trade Agreement nor is it an action program. How does the Clinton
Administration propose to address these issues in the future?
Answer:
EPA and other Federal agencies involved in border area environmental and natural resource
protection efforts are developing a new Border Action Program. The program will focus on
actions to clean up the border and to assure that future growth and environmental protection go
hand in hand. Specific projects will be proposed to clean up current contamination near the
border, to provide needed infrastructure, to enforce environmental laws and to prevent and
control pollution. Its objective is to assure equitable access to environmental and public health
services for minority and disadvantaged people living in the Border.
8
EPA has already taken steps to assure that the activities of all the U.S. Federal agencies with
programs in the Border area are included in a New Border Plan. The New Plan outlining
activities for the period 1995-2000 will be developed over the next 6 to 9 months.
9
NEPA COURT DECISION
On June 30, 1993, U.S. District Court Judge Charles R. Richey ruled that the United States
Trade Representative (USTR) is required to prepare an environmental impact statement on the
North American Free Trade Agreement (NAFTA) under the National Environmental Policy Act
(NEPA). The Court of Appeals, at the request of the Administration, has agreed to an expedited
review of Judge Richey's decision.
The Administration is confident that the court's decision will be reversed by the Court of
Appeals. The Administration believes that the decision is an unacceptable encroachment on the
President's authority to negotiate international agreements and to conduct the foreign relations
of the United States.
President Clinton has long recognized the need to safeguard the environment while providing
for economic progress, and has taken significant steps to enhance the NAFTA with adequate and
progressive environmental protection. The President's position on the supplemental agreement
on the environment has received strong support not only from the Congress, but also from key
environmental groups and leaders in the environmental community.
Question:
Does the NEPA decision halt progress on the NAFTA?
Answer:
No, the decision does not halt progress on the NAFTA. The Administration will continue the
negotiations on the supplemental agreements, which were not affected by the court's decision,
and will continue to prepare for Congressional consideration of the NAFTA. In the meantime,
we will also work to comply with the court's order directing USTR to prepare an environmental
impact statement on the NAFTA, pending resolution of our appeal of the court's decision.
Question:
Is the Administration required to file an environmental impact statement?
Answer:
The court has ordered USTR to prepare an environmental impact statement on the NAFTA. The
United States has appealed the court's decision and is confident that the decision will be
reversed. However, USTR will work to comply with the court's order pending the outcome of
the appeal.
11
Question:
What is the schedule for the appeals process?
Answer:
All briefs are scheduled to be filed by August 10 (the United States filed its first brief on July
19, the appellees filed their brief on August 2, and the United States files its final brief on
August 10). The court has scheduled the hearing on the case for August 24. We hope the court
will issue its opinion shortly thereafter.
12
AGRICULTURE
Question:
Will U.S. agriculture benefit from the NAFTA?
Answer:
Yes. According to projections by USDA, by the end of the 15-year transition period, annual
U.S. agricultural exports will likely be $2.0 billion to $2.5 billion higher than they would be
without NAFTA. More agricultural trade will also expand employment in related areas of
processing and transportation and the economy as a whole. Agricultural exports to Mexico
already account for 81,000 American jobs. Increased exports from the new pact will add an
estimated 50,000 agricultural jobs to the U.S. economy.
Question:
Is Mexico a major market of U.S agricultural products? What are the recent trends in our
agricultural exports to Mexico?
Answer:
Mexico ranks as our third largest single-country market for agricultural products, and is one of
our fastest growing major export markets. Our agricultural exports to Mexico rose from a low
of nearly $1 billion annually in the mid-1980's to nearly $4 billion in calendar year 1992. These
export gains were largely the result of unilateral liberalization in Mexico, our natural
comparative advantages, and the relatively strong Mexican economic performance (averaging
3.6 percent income growth for the past three years). NAFTA will lock in Mexican liberalization
for the benefit of U.S. farmers. Primarily a bulk commodity market prior to 1987 (mostly
coarse grains and soybeans), Mexico is now one of the United States largest and fastest growing
high-value markets. Consumer-oriented food products have gained the most with meat and
poultry, horticultural products, dairy products, and snack foods among the leaders. Other high-
value products doing well include live animals, cattle hides, feeds and fodder, and soybean meal.
Question:
If our agricultural exports to Mexico have increased so rapidly, why do we need a NAFTA?
Answer:
NAFTA will assure that this growth in U.S. agricultural exports to Mexico will continue by
eliminating trade barriers that still exist. Additionally, improved economic activity resulting
from the agreement will boost income and stimulate demand for greater amounts and a greater
diversity of food and feed products. Importantly, the NAFTA would also help prevent a return
13
by Mexico to policies that limit trade and economic growth.
Question:
How will NAFTA benefit U.S. grain and oilseed products?
Answer:
NAFTA assures the United States initial duty-free access under a tariff quota of 2.5 million
metric tons into the Mexican corn market, well above 1992 exports of 1.1 million. This duty-
free quota will grow 3 percent each year. Imports above the duty free quota level initially will
have a high tariff (215 percent), but this over-quota tariff rate will be reduced to zero over a 15-
year period. Under NAFTA, as the tariffs are reduced and incomes grow, U.S. corn exports
to Mexico will increase steadily over the longer term. NAFTA is likely to result in a small
increase in U.S. corn prices and production.
U.S. grain sorghum exports to Mexico (4.9 million metric tons in 1992) will increase due to the
immediate elimination of the sorghum tariff. U.S. wheat exports to Mexico are expected to
grow to 1.5 million tons per year within a decade.
Under NAFTA, Mexico will reduce its 15 percent seasonal duty on soybeans to 10 percent,
which will then be phased out over 10 years. The United States has traditionally supplied three-
fourths of Mexico's imports of soybeans and meal. Mexico's demand for grains and oilseeds
for feeding is expected to increase as its livestock and poultry sectors expand. The elimination
of the seasonal duty will help increase the U.S. share of Mexico's soybean and product imports.
Question:
Won't the NAFTA damage U.S. producers of horticultural products?
Answer:
U.S. horticultural imports from Mexico are seasonal and generally enter the United States during
the winter months. Under NAFTA, tariffs on selected horticultural commodities during some
of the least import-sensitive seasons will be eliminated immediately. Other tariffs will be phased
out gradually. The longer phaseout periods apply to tariffs during specific seasons during which
when Mexican imports compete with production in the United States. The agreement also
includes quantity-based safeguards to protect U.S. producers of import-sensitive fruits and
vegetables from import surges.
Mexican income growth will increase that country's consumption of fruits and vegetables, thus
limiting Mexico's export potential to the United States and expanding the market for U.S.
produce in Mexico.
14
NAFTA will provide increased market opportunities for U.S. horticultural products from
reduced barriers and income growth in Mexico. The most significant gainers will include fresh
apples, pears, and peaches. U.S. exports of fresh vegetables to Mexico (counter-seasonal to
their production) will also increase as Mexican consumers increase demand for high-quality fresh
produce. U.S. tree nut exports to Mexico, already growing from $8 million to $28 million
during 1987-92, will continue to expand as NAFTA eliminates Mexico's 15-20 percent tariffs.
Question:
How will the sugar provisions of the NAFTA work and what will be their likely impact on the
U.S. sugar industry?
Answer:
NAFTA will have virtually no effect on the U.S. sugar industry during the first six years.
Under NAFTA, the United States and Mexico will phase out barriers to sugar trade between the
two countries and harmonize border protection from the rest of the world. During the 15-year
transition period, any additional access to the U.S. market beyond Mexico's current 7,258 ton
quota will be conditioned upon Mexico becoming a net surplus producer of sugar. Mexico is
currently a large net importer of sugar and is expected to maintain that status in the foreseeable
future.
Even if Mexico were to achieve net surplus producer status during the first six years of the
transition, its access to the U.S. market during that period would be limited to the amount of
its net surplus production, but not more than 25,000 tons. In year 7 of the agreement, the
maximum duty free access quantity becomes 150,000 tons. In each subsequent year of the 15-
year transition period, the maximum quantity of Mexican sugar allowed duty-free access will
be increased by 10 percent. However, this limit may be exceeded under certain conditions:
Beginning in year 7, the United States will provide duty-free access to the full extent of
Mexico's projected net surplus for that year if: (1) Mexico has been a net surplus producer for
any two consecutive marketing years (including years 1 through 6 of the agreement); or if (2)
Mexico has been a net surplus producer during the previous year and is projected to be a net
surplus producer in that year.
In summary, the NAFTA will have virtually no effect on the U.S. sugar industry during the first
six years of the transition. During the remaining nine years, Mexico's ability to expand exports
of sugar to the United States will continue to be constrained by its ability to achieve net surplus
production status. The Mexican sugar sector will require substantial investment and appropriate
financial incentives to become an efficient surplus producer of sugar. Forecasts that far into the
future of conditions that might prevail in a very dynamic industry are tenuous. However,
present circumstances suggest that it Mexico will have difficulty reaching that status even during
the years 2000-2008.
15
Question:
What does NAFTA mean for the U.S. livestock and meat industry?
Answer:
Mexico is one of the fastest growing export markets for U.S. meat, especially
fresh/chilled/frozen and processed meat products. Beef trade will undoubtedly increase with
NAFTA, which will restore a zero duty for U.S. exports of beef to Mexico.
U.S. poultry exports have increased rapidly in recent years from $16 million in 1987 to over
$153 million in 1992, and Mexican demand is expected to continue to grow. U.S. exports will
benefit from the removal of Mexico's import licensing requirement. Until Mexico adequately
addresses problems with Hog Cholera and Exotic Newcastle Disease, it will be unable to export
hogs, chickens, or their meat (with the exception of cooked pork) to the United States.
Question:
What does NAFTA mean for the U.S. dairy industry?
Answer:
Mexico is the world's largest market for milk powder and represents the most important outlet
for U.S. nonfat dry milk exports. NAFTA will increase Mexican income growth and Mexican
demand for dairy products. Strong provisions on rules of origin will ensure that the open
border with Mexico does not lead to a circumvention of U.S. import quotas from third country
transshipments. Overall, NAFTA will allow the United States to obtain a larger share of the
Mexican dairy import market, because other suppliers, including Canada, will still be subject
to import license requirements.
Question:
Will the NAFTA eliminate U.S. standards for products imported from Mexico?
Answer:
Absolutely not. Under NAFTA, the United States will maintain its stringent standards regarding
health, safety, and the environment. We will continue to prohibit imports that do not meet U.S.
standards. NAFTA also allows states and local governments to enact tough standards without
restriction, so long as these standards are scientifically defensible.
The United States will not change its existing sanitary and phytosanitary requirements on
horticultural imports. Furthermore, the United States will take all measures necessary to assure
that imports are safe from pesticide residues. The NAFTA will not require changes in U.S.
16
minimum import requirements for grade, size, and quality which currently apply to imports of
some fruits and vegetables.
Question:
Won't NAFTA result in the end of Section 22 quotas?
Answer:
NAFTA will liberalize trade with Mexico in all products, including those now protected by
Section 22 quotas. Import quotas will continue to be used for imports from all other countries.
Mexico will be granted a small duty-free quota for Section 22 products entering the U.S. market
- and they will be charged a high tariff based on the 1989-91 level of protection for any sales
over that amount. The duty-free quota will grow at a 3-percent compounded annual rate over
the NAFTA transition period while the over-quota tariff will be gradually phased out. For dairy
products, cotton, and sugar-containing products, this phase-out period will be 10 years, for
peanuts, the phase-out will be 15 years.
Question:
Doesn't the NAFTA contain a special safeguard provision for certain import-sensitive products?
Answer:
All products are eligible for the general NAFTA safeguard provision. In addition, each of the
three nations will apply a special agricultural safeguard to a selected list of products specific to
each country. The NAFTA special safeguard will apply between the United States and Mexico
and Canada and Mexico. Trade between Canada and the United States will continue to be
governed by the U.S.-Canada Free Trade Agreement. The United States will have a special
agricultural safeguard for seven tariff line items, which accounted for about $340 million in
imports form Mexico in 1991. Mexico will have a special agricultural safeguard for 17 tariff
line items which include live swine, most pork products, apples, and potato products. Imports
of these items from the United States were valued at about $100 million in 1991. The value of
imports from Mexico of the commodities the United States will apply the safeguard is about 15
percent of U.S. agricultural imports from Mexico (roughly two-thirds of the amount is
tomatoes). The safeguard would not restrict trade under normal circumstances but would be
available to limit the impact of sudden import surges.
17
DEMOCRACY
Question:
The Clinton Administration says it supports democracy in the hemisphere. Why should it sign
a free trade agreement with a country like Mexico, where one party has so much control?
Answer:
Experience shows that economic and political reform go hand in hand, and NAFTA will
accelerate this positive, modernizing trend, expanding the growing middle class which wants
political reform and efficient, honest government. Despite publicized shortcomings in the
Mexican political system, under recent reforms the opposition has made significant gains at
national, state and local levels. For example, the opposition National Action Party (PAN) today
governs three of Mexico's states - Baja California Norte, Chihuahua and Guanajuato - and
holds 180 seats in the national legislature.
As part of its reforms, the Mexican Government is spending $1 billion this year on a nationwide
voter identification system which has already proved successful in recent state elections.
Mexican legislation now pending would regulate campaign financing, provide greater access to
the media for political parties, improve voter registration and further level the playing field for
the opposition. There are also plans to give greater political rights to residents of the Mexico
City federal district. President Salinas recently reversed a longstanding policy against allowing
foreign groups to conduct exit polls, an important way to verify election results.
Question:
What's the United States doing to support political reforms in Mexico?
Answer:
The governments of the United States and Mexico enjoy an ongoing, candid, high-level dialogue
on this and other important bilateral issues. We feel that the best way to support the positive
things we see happening in Mexico is by these continuing contacts: in Mexico, in Washington,
indeed, wherever U.S. and Mexican officials meet.
As NAFTA and other shared concerns draw the countries of North America closer together,
Mexico's reforming trend - and our ability to support it - can only improve. For example,
NAFTA requires Mexico to use greater transparency in the government's regulatory process.
19
DRUGS
Question:
Will the NAFTA increase drug traffic?
Answer:
Both the United States and Mexico are taking serious steps to fight the drug war, and we are
cooperating extensively. Approval of NAFTA will increase that cooperation, and improve its
results. Our Customs Services have anticipated the potential for increased drug smuggling and
have taken steps to significantly upgrade customs inspections facilities and personnel on the
border. The U.S. Customs Service is coordinating with both the U.S. and Mexican border trade
communities to establish training and provide safeguards for the legitimate commerce that is
expected to expand with NAFTA.
Question:
What is Mexico doing to counter the drug trade?
Answer:
The Mexican Government is hiring new Customs officers, providing better training and
equipment for them, expanding the use of sniffer dogs, and making better use of information.
It has raised salaries for Customs Inspectors by nearly 10 times the old salary and is rotating
Customs inspectors every 21 days to maintain higher Customs inspection standards. Only
through cooperation will we be able to get a handle on drug traffic. Mexico has tripled its
counter narcotics budget since 1989, and NAFTA will generate resources to continue the counter
narcotic effort.
The United States and Mexico cooperate extensively to fight drug trafficking through
intelligence, law enforcement customs inspection programs. Our Mutual Legal Assistance
Treaty enables us to obtain evidence and witnesses in narcotics investigations and prosecutions.
Mexico has sponsored comprehensive counter-narcotics crime legislation in its Congress based
on Organization of American States model regulations covering money laundering, asset seizure
and forfeiture, and precursor chemicals. The legislation also authorizes payment of rewards and
court-ordered wire tapping. Mexico is taking the lead in proposing new measures at the United
Nations to broaden international cooperation in combatting narcotics trafficking.
21
IMMIGRATION
Question:
Won't NAFTA worsen the flow of illegal immigration to the United States from Mexico through
more open borders?
Answer:
No. Nothing in the NAFTA changes any U.S. immigration law. The United States maintains
the right to implement its own immigration policies and protect the security of its borders.
Illegal Mexican migration to the United States should decrease as investment in Mexico
increases, job opportunities increase and the standard of living rises. These factors should
alleviate pressures on illegal immigration.
Mexico's ability to generate jobs is the most important factor affecting illegal immigration to the
United States. NAFTA will stimulate economic growth in all three countries by removing tariff
and non-tariff barriers over a 15-year period. A January 1993 study by the U.S. International
Trade Commission states that NAFTA will expand the number of jobs in Mexico by as much
as 6.6 percent and increase average wages from 0.7 to 16.2 percent in the long-run.
Without economic development, pressure to migrate is certain to increase. More than half of
all Mexicans are under the age of 20 and the population is growing at a rate that will double
approximately every 30 years. Only with a vibrant economy will Mexico be able to better
absorb new entrants into the labor force. Even though NAFTA opens up Mexico for U.S. and
Canadian agricultural exports, it provides a 15-year phase in period for products which compete
with Mexico's most import-sensitive agricultural sectors. This lengthy transition period should
help marginal farmers displaced from their lands as a result of NAFTA to find jobs in a growing
Mexican economy.
Question:
What is the Government of Mexico doing to improve social services?
Answer:
Under the Salinas Administration, the Mexican government launched a major social program
known as Solidarity to improve the quality of life in rural and poor urban areas.
Through Solidarity, Mexico's central government makes grants to fund local development
initiatives. The Mexican government has built new schools and provided funding for more
teachers in poorer areas, helped medical school students to fulfill their military obligations by
practicing medicine in rural clinics, built more modern roads, and brought running water,
electricity and irrigation projects to underdeveloped areas. Mexico should be better able to meet
the needs of its poorest people with the resources NAFTA will generate. With NAFTA, a
higher quality of life and higher wages will reduce the incentives for Mexicans to migrate to the
United States.
23
MEDICAL PROFESSIONALS
Question:
NAFTA will allow Mexican doctors, dentists and other medical professionals to practice in the
United States without meeting the same requirements that U.S. medical professionals must meet.
How can you allow this?
Answer:
The NAFTA does not let Mexican or Canadian medical professionals circumvent licensing and
certification procedures in the United States. The procedures currently in use in the United
States to test, evaluate and certify professional competency will continue. Any one who wants
to practice medicine or dentistry in the United States must be licensed by the appropriate
regulatory bodies.
However, NAFTA does obligate each Party, at both the federal and state government level, to
eliminate any citizenship or permanent residency requirement that a Party maintains for licensing
or certification of professionals.
The NAFTA provides each country the opportunity to demonstrate that its licensing and
certification requirements should be recognized by another NAFTA partner. It also
encourages-only encourages-all three countries to work towards recognizing each others'
licenses and certifications. In some areas of the professional services sector, we are already
engaged in this exercise. For example, there are several Canadian medical schools that are
accredited by professional bodies in the United States. However, the NAFTA does not require
the U.S. government or state governments to accord recognition to education, experience,
licenses or certifications obtained in Canada or Mexico.
Question:
Why do NAFTA's temporary entry provisions let Mexican doctors and dentists into the United
States to practice based on a Mexican certification or license?
Answer:
Temporary entry and providing a service-medical or otherwise-are two different and distinct
issues covered in the NAFTA. The services chapter of the agreement contain the provisions on
providing a service, including the obligations of the United States concerning licensing and
certification procedures. In short, the procedures currently in use in the United States to test,
evaluate and certify professional competency will continue. Any one who wants to practice
medicine or dentistry in the United States must be licensed by the appropriate regulatory bodies.
25
In addition, there are provisions in the NAFTA relating to temporary entry which allow eligible
individuals to enter the United States, Canada or Mexico under certain conditions, but do not
convey a right to perform or provide a service.
In Chapter 16, NAFTA provides specific rights for temporary entry of business persons-citizens
of the United States, Canada, and Mexico-who engage in trade in goods, the provision of
services and the conduct of investment activities. In regard to professional services providers,
the specific entry rights are given to certain categories of professionals who meet minimum
educational requirements or possess alternative credentials, and who seek to engage in business
activities at a professional level in the country they wish to enter.
The categories are set out in a new schedule that tracks the one currently in effect between the
United States and Canada. There is an annual numerical limit for temporary admission of
Mexican professionals. In essence, we have waived the pre-entry "test" to determine whether
a national is available for the position as a requirement for entry into the United States for these
professionals. These provisions, however, do not substitute for valid licenses to practice
medicine, engineering, accounting or other licensed professionals which are recognized by
the appropriate regulatory bodies in the United States.
26
STANDARDS-RELATED MEASURES AND
SANITARY AND PHYTOSANITARY MEASURES
The North American Free Trade Agreement (NAFTA) includes an agreement on standards-
related measures and on sanitary and phytosanitary measures.
Standards-related measures ("SRMs") deal with voluntary and mandatory product standards and
the procedures used to determine whether a particular product meets the standard. Sanitary and
phytosanitary measures ("S&P") generally deal with protecting human, animal and plant life and
health from risks of plant- and animal-borne pests and diseases, and additives and contaminants
in foods and feedstuffs.
The NAFTA explicitly recognizes that countries have a legitimate need for product standards
and for regulations to protect human, animal and plant life and health. The NAFTA provisions
are designed to preserve the ability of governments to act in this area while guarding against the
unjustified use of these types of measures as a way to protect domestic industry. In each case,
the NAFTA sets up requirements and procedures that will help to distinguish legitimate measures
from protectionist measures.
Question:
Will the NAFTA "harmonization" provisions weaken U.S. food safety by creating strong
pressure for the United States to use less stringent Codex Alimentarius standards or Mexican
standards?
Answer:
No. The NAFTA SPS provisions were specifically negotiated to be clear that there would be
no "downward harmonization" of SPS measures.
It also explicitly provides that nothing in this requirement "shall be construed to prevent a Party
from adopting, maintaining or applying. a sanitary or phytosanitary measure that is more
stringent than the relevant international standard, guideline or recommendation."
Question:
Will the NAFTA severely restrict a country's ability to establish the level of protection it
considers appropriate for human, animal and plant life and health? In particular, does it only
allow a country to establish one level of protection for all its food safety standards?
27
Answer:
No. The NAFTA explicitly recognizes the right of each country to establish whatever levels of
protection from risk that country deems appropriate.
Question:
Will NAFTA lead to challenges to food safety standards that are not based on risk assessment,
but rather on policy determinations, such as the Delaney clause zero risk of cancer standards for
food additives and pesticide residues which are based on policy not science?
Answer:
No. This concern is unfounded because it confuses two basic concepts.
The level of protection of human health that a society deems appropriate, such as that there
should be a zero risk of cancer from food additives and pesticide residues, is not a scientific
question and there is no requirement in the NAFTA that it be based on science.
As noted above, NAFTA specifically allows a country to determine the levels of risk it is willing
to tolerate, including zero risk. So the Delaney clause, in establishing a zero level of risk, is
consistent with the NAFTA.
However, in general NAFTA does require that before we ban a particular food additive or
pesticide residue under the Delaney clause, we should have at least some scientific basis for
concluding there is a cancer threat.
Question:
Does the NAFTA require that S&P measures be the least trade restrictive?
Answer:
No. This concern arises because of the inclusion of the word "necessary" in the S&P text.
Some GATT panels have construed the GATT Article XX general exceptions, which refer to
"necessary" measures, to mean that in order for a measure to be determined to be "necessary"
measures for purposes of qualifying for the exception, no GATT consistent measure is
reasonably available and of the GATT-inconsistent measures available, the country chose the
measure that is the least inconsistent with the GATT.
Some groups mistakenly read this as meaning we must adopt the "least trade restrictive" possible
health, safety and conservation measures. In the NAFTA, the United States successfully resisted
the inclusion of any "least trade restrictive" test in the NAFTA.
28
Furthermore, although the term "necessary" appears in the NAFTA S&P text, the way in which
the term is used makes clear that there it does not create any "least trade restrictive" test.
Question:
Does the NAFTA prohibit S&P measures based on the manner in which food or other
agricultural products are produced?
Answer:
No. There is no such prohibition in the NAFTA. In fact, the definition of an S&P measure
specifically includes "a product-related processing or production method."
Question:
Will the NAFTA undermine state S&P measures because of its least trade restrictive obligation
and because countries can only have one level of protection?
Answer:
No. The NAFTA safeguards the rights of states to have S&P measures, but these measures are
subject to the same requirements as federal measures (e.g., are based on scientific principles,
are not disguised restrictions on trade, do not arbitrarily discriminate).
As noted above, there is no least trade restrictive obligation in the NAFTA nor are countries
limited to only one level of protection.
Question:
Does the NAFTA standards text give precedence to the existing GATT Standards Code over the
NAFTA standards text where the two conflict?
Answer:
No. The Parties merely agreed that they would not disturb their rights and obligations under
the GATT standards code. NAFTA uses very different language when it gives precedence to
other international agreements.
Question:
Would the NAFTA's procedural harmonization provisions eliminate public notice and comment
on standards?
29
Answer:
No. Nothing in the NAFTA would eliminate existing U.S. public notice and comment
requirements. In fact, the standards text in general requires public notice and comment for
standards and is modeled after U.S. practice.
Question:
Will the NAFTA limit environmental standards to the lowest common denominator and inhibit
the development of more stringent regulations if they are needed to protect human health or the
environment?
Answer:
No. The NAFTA is specifically drafted to ensure the ability of each country, including its state
and local governments, to maintain stringent environmental standards.
In particular, the NAFTA recognizes the right of each country to enact and enforce laws and
regulations that protect human health and the environment.
Furthermore, the agreement specifically provides that each country may establish those levels
of safety and protection of human, animal and plant life and health, of the environment and of
consumers that it considers appropriate.
Where the NAFTA calls on the three countries to collaborate on health and environmental
standards it deliberately refers to joint efforts to "enhance" protection, not lower it.
In addition, the agreement states clearly that any efforts to make environmental or health
standards compatible among the three countries should be undertaken "without reducing the
level of safety or of protection of human, animal or plant life and health, the environment and
consumers.
Furthermore, the NAFTA also specifically preserves each country's right to apply more stringent
environmental or health measures than those provided under internationally-agreed standards.
Question:
Does the NAFTA's language that requires the federal government to take "all necessary
measures" to give effect to NAFTA's provisions "including their observance by state and
provincial governments" mean that if, for example, California's Proposition 65 toxic labeling
requirement was challenged as a non-tariff trade barrier, the "all necessary measures" provision
would require the federal government to pre-empt California's more stringent regulation?
30
Answer:
No. Nothing in the NAFTA would cause or require federal environmental or health standards
to preempt California's standards.
The NAFTA requires each country to take "all necessary measures" to ensure that state and
provincial governments observe those provisions of the agreement that apply to them. This
language is drawn directly from the U.S.-Canada Free-Trade Agreement, which has been in
effect since 1989 and has never been construed to preempt state measures.
The language simply reflects an understanding among the three countries that they intend to
apply the agreement equally at the federal and state level, with exceptions to that general rule
in certain areas. Thus, for example, the S&P text applies fully to federal, state, and provincial
government measures.
One area in which there is somewhat less stringent application at the non-federal level is that of
standards. In the SRMs text, the federal government is simply obligated to "seek, through
appropriate measures" to ensure that states observe the relevant NAFTA rules.
This lesser degree of obligation, set out in Article 902, reflects an understanding among the
three countries that the NAFTA should not intrude unduly on the ability of states to regulate in
this important sphere.
Neither Article 105 nor Article 902 - nor any other provision of the NAFTA - creates an
obligation that states adopt the same measures as the federal government. Accordingly, there
is no basis under the NAFTA for challenging a state measure simply because it is more stringent
than a relevant federal measure.
Furthermore, nothing in the NAFTA requires the federal government to take legal action against
state measures that NAFTA dispute settlement panels may determine to be inconsistent with
trade obligations.
Under the NAFTA, panel opinions are advisory only. If the defending country loses, it is not
required to remove or change the offending measure.
It may offer trade compensation instead or simply permit the other country to take retaliatory
action of equivalent effect.
As has been the case under the GATT, in those rare instances where state rules may be
successfully challenged under the NAFTA, the federal government will work cooperatively with
the states to seek a satisfactory resolution of the matter. Under the NAFTA, each country will
retain full discretion, under our own political and legal system, to determine how to satisfy our
trade obligations.
31
Question:
Is it true that the harmonization process does not require that we come to final agreement on
particular standards? That is, if Canada and Mexico refuse to change their standard, can we
insist on retaining ours as well?
Answer:
Yes. The NAFTA does not require that the United States change any particular standard.
Instead, the NAFTA creates a process by which the three countries can try to reach greater
compatibility of standards among the three countries, but that does not require us to agree to any
particular change in our standards.
Further, if the Administration believed that changes were desirable, whether because of
discussions under the NAFTA or for any other reason, we would consult fully with Congress
and domestic interests. Congress alone votes to change U.S. laws.
No "harmonization" process can ever force us to agree to standards we find unacceptable, nor
could Congress be bound by any result it found unacceptable. Congress would need to pass
specific legislation to effect a change.
Question:
Does the NAFTA preserve state standards that are more stringent than federal standards?
Answer:
Yes. From the beginning of the NAFTA negotiations, a fundamental objective of U.S. policy
was to ensure that the NAFTA did not result in lowering U.S. health and environmental
protection standards, including state and local standards. The Agreement secured that objective.
The agreement does apply to state laws and regulations in most respects. But it does so not by
mandating compliance with federal law but by requiring that state measures comply with the
rules set out in the agreement. Just as the federal government will be free to maintain or
change its laws, subject to NAFTA rules, so will state and local governments.
The NAFTA is drafted as a set of prohibitions. Unless the NAFTA prohibits a certain type of
measure or practice, a NAFTA country is free to maintain or impose it.
Since nothing in the NAFTA precludes states from maintaining or adopting standards that are
higher than federal rules, they will continue to have the right to do so.
The NAFTA negotiators specifically used the plural "levels" (in Article 904(2) and in the
equivalent provision of Chapter Seven (Article 712(2)), which talk in terms of each Party's right
32
to set the levels of health, safety, or environmental protection that it sees fit), in part in order
to account for the fact that each country may have a multiplicity of levels due to differences
among the states and between the states and federal government.
Article 105 requires each country to take "all necessary measures" to ensure that state and
provincial governments observe those provisions of the agreement that apply to them. This
language is drawn directly from the U.S.-Canada Free-Trade Agreement ("CFTA"), which has
been in effect since 1989.
It simply reflects an understanding among the three countries that they intend to apply the
agreement equally at the federal and state level, with exceptions to that general rule in certain
areas.
This language is not meant to suggest - and has not been interpreted under the CFTA to mean
- that state or provincial regulation must conform with federal standards.
Question:
How, when, and by whom will a state be notified if one of its environmental laws is challenged
under NAFTA? What forum and procedures will be utilized in hearing such challenges? In
what way will a state be allowed to defend its laws under NAFTA?
Answer:
It is the practice of the federal government to notify state governments directly and promptly
upon learning that another government intends to challenge a state measure, including an
environmental law, under the dispute settlement procedures of our international trade
agreements. This practice will continue under the NAFTA.
The NAFTA dispute settlement procedures are the avenue for formal government challenges
against a state measure. Those procedures are detailed in Chapter 20 of the NAFTA.
These include consultations between the countries involved, recourse to the good offices of the
NAFTA Trade Commission and, if no settlement can be reached, referral of the matter to non-
binding arbitration.
In addition, there are a number of other procedures available to try to resolve disputes over
either state or federal measures. For example, the NAFTA establishes trilateral committees to
facilitate consultations and avoid or settle disputes regarding standards.
In the case of agricultural and food safety standards, the countries concerned may also have
recourse to the good offices of relevant international organizations for purposes of resolving their
differences.
33
As is the case under existing international trade agreements, USTR will work closely with state
government representatives at all stages of a dispute settlement proceeding in preparing the
defense of any state measure challenged under the NAFTA.
34
TRANSPORTATION
Question:
What impact will the implementation of the North American Free Trade Agreement (NAFTA)
have on U.S. transportation companies and their employees?
Answer:
The implementation of NAFTA will provide U.S. motor carriers significant new market
opportunities, enhance the land transportation provisions competitiveness of U.S. goods and
services, and help to alleviate congestion and environmental concerns along the border.
For the first time, NAFTA opens the international market in Mexico for U.S. motor carriers.
Eighty-five percent of U.S. trade with Mexico is transported over land, with a large percentage
of that carried by truck. Total trucking revenues on U.S.-Mexico trade are estimated at more
than $3 billion annually.
U.S. trucking companies will have the right, for the first time, to use their own drivers and
equipment for shipments into Mexico, a cross-border market that is now completely controlled
by Mexican carriers.
Question:
Will increased access to the United States for Mexican vehicles affect highway safety or
environment?
Answer:
No provision of NAFTA exempts Mexican or Canadian commercial vehicles from U.S.
environmental or safety standards. The agreement specifically states that each country retains
the right to adopt and enforce standards more stringent than those in the other countries.
Mexico, working closely with U.S. federal and state officials, has adopted and is now enforcing
commercial driver license requirements much like those adopted by the United States. Its
hazardous materials transportation regulations are modeled on international standards that are
also a model for U.S. regulations. Mexico also conducts roadside inspections according to the
same criteria used in the United States and Canada.
A joint federal-state group will address potential needs for increased enforcement due to
NAFTA's implementation. Also, the Department of Transportation's Federal Highway
Administration (FHWA) will examine the effectiveness of motor carrier enforcement among the
border states.
35
Question:
Will NAFTA result in changes in U.S. truck size and weight requirements?
Answer:
NAFTA does not require the United States to change its size and weight limits. It does,
however, include a commitment from the three countries to work toward compatible technical
and safety standards. Any future changes in U.S. size and weight requirements must be
consistent with U.S. law.
Foreign-based trucks must comply with all federal and state size and weight requirements when
operating in the United States.
Question:
Will Mexican motor carriers' lower operating costs - particularly for driver wages - give them
an unfair edge in competition with U.S. companies?
Answer:
In fact, operating costs for Mexican carriers are, for many facets of their business, significantly
higher than those of U.S. carriers. Costs for purchasing new vehicles, spare parts and tires and
for financing new capital acquisitions are significantly higher than in the United States.
Department of Transportation data indicates that the differential in driver wage rates between
U.S. and Mexican drivers is smaller than has been alleged - approximately 20 percent.
Many shippers find service quality to be more important in their selection of a carrier than
differences in price. In this area - total transit time, reliability of pickup and delivery, response
in emergency situations, handling of expedited shipments, shipment tracking and accountability
- U.S. carriers are particularly well-equipped to compete with the Mexican industry. Lower
wage rates alone will not lead to job loss for truckers.
Question:
Will NAFTA necessitate infrastructure improvements at border crossings?
Answer:
As required by the Intermodal Surface Transportation Efficiency Act of 1991 (ISTEA), FHWA
is conducting a study to determine the current conditions of border crossings and any known
problems with the ability of the existing system to handle the increased trade and traffic flows
that will result from NAFTA.
36
The study will also consider need for a discretionary funding program to improve border
crossing facilities.
The final report on the study will be submitted to Congress by August 31, 1993.
37
SUPPLEMENTAL AGREEMENTS
Question:
Is border funding part of the environmental side agreement?
Answer:
No, it will be developed as a separate bilateral agreement between the U.S. and Mexico.
Question:
Will the Environment Secretariat be independent?
Answer:
Yes. The parties have agreed to create one central, independent Secretariat. Its executive
director, appointed by the Parties, will be able to select his or her own staff.
The Secretariat has a large degree of discretion in setting its priorities and organizing its work,
subject to appropriate oversight by the Council. For instance, the Secretariat prepares its own
annual program and budget, and enjoys broad responsibility for implementing the Commission's
workprogram.
The Secretariat receives and considers submissions from the public on any matter, including
allegations regarding a Party's failure to effectively enforce its environmental laws. The
Secretariat determines which enforcement-related submissions warrant the development of a
factual record, based on a combination of mandatory and discretionary criteria, and subject to
the Council's approval. That factual record is used by the Parties in deciding whether to take
a matter to dispute settlement.
Question:
What kind of investigative authority will the Environment Secretariat have for investigating
nonenforcement?
Answer:
The Secretariat has broad authority to gather the information it needs to prepare reports and
investigation allegations of nonenforcement. This includes information provided by the Parties
and by public submissions, gathered from independent experts, or otherwise developed by the
Secretariat.
39
Parties are obliged to promptly provide information in their possession, and to take all
reasonable steps to make other information available. The Agreement protects against
excessively burdensome information requests by the Secretariat, and protects national security,
enforcement sensitive, and confidential business information.
Question:
Does the Environment Agreement ensure that states can have more stringent standards than
federal?
Answer:
This Agreement does not alter States' ability to have standards more stringent than the federal
standards, consistent with the NAFTA. No specific provisions were considered necessary to
address this point because the NAFTA itself, similarly, does not prevent states from having more
stringent standards.
The NAFTA is drafted as a set of prohibitions. Unless the NAFTA prohibits a certain type of
measure or practice, a NAFTA country is free to maintain or impose it.
Since nothing in the NAFTA precludes states from maintaining or adopting standards that are
higher than federal rules, they will continue to have the right to do so.
The NAFTA's language is not meant to suggest - and has not been interpreted under the related
CFTA to mean - that state or provincial regulation must conform with federal standards.
Question:
What role will States play in this new Commission?
Answer:
The U.S. federal government will work closely with the States throughout the implementation
and operation of this Agreement.
The Agreement recognizes each Party's right to create a governmental advisory committee for
subfederal governmental representatives.
It is the practice of the federal government to notify state governments directly and promptly
upon learning that another government intends to challenge a state measure, including an
environmental law, under the dispute settlement procedures of our international trade
agreements. This practice will continue under both the NAFTA and this Agreement: The U.S.
40
Council Member will work closely with state government representatives at all stages of a
dispute settlement proceeding in preparing the defense of any state enforcement action or
inaction challenged under this Agreement.
Question:
How will American workers or companies that have complaints about Mexico or Canada use the
mechanism of the NAFTA labor supplemental?
Answer:
Members of the public in the United States will be able to communicate concerns about labor
standards and their enforcement in Mexico and Canada to the U.S. National Administrative
Office (NAO).
Each country will be allowed to design its own NAO. The Administration is consulting closely
with Congress on the design of the U.S. NAO. Some basic activities that the NAO is expected
to undertake include examining each communication received from the public, gathering
information from various sources, and carrying out an assessment of the matter. The U.S. NAO
would also engage in consultations with other NAOs to attempt to resolve issues.
The U.S. NAO will be open and responsive to the public. It will provide a meaningful vehicle
for the public to raise concerns about labor practices in Canada and Mexico.
Question:
Why do the Labor Agreement and Environment Agreement create Commissions with different
structures and mechanisms for handling the public's concerns?
Answer:
Because there exist different laws, different institutions, and different political sensitivities
between labor and the environment. In an effort to craft a process that would be most successful
at meeting the President's concerns, the Administration negotiated for each agreement structures
that offered the best approach for reaching the joint objectives of providing effective cooperation
and enforcement in each area. The end result for each is the same: new institutions to ensure
that each country effectively enforces its labor and environmental laws, and to provide
opportunities for public concerns to be raised and addressed.
Question:
What labor issues are covered by the side agreement?
41
Answer:
The National Administrative Offices and Ministerial Council are able to study and discuss all
labor issues.
The dispute settlement process covers key labor areas such as health and safety, child labor, and
minimum wages. Industrial relations, such as collective bargaining and the right to organize,
are not subject to dispute settlement panels. Industrial relations is a very sensitive issue in the
current environment and is politically charged for Mexico. The Administration believes it may
have more success addressing our concerns in this area by working informally through other
channels between our governments.
One of the keys of this Agreement is that it brings sunshine onto the process of how laws are
made and enforced. The public pressure brought on by opening up labor practices to public
scrutiny will encourage countries to take unilateral action to address areas of concern. Already,
discussion of the wage-productivity linkage in Mexico has encouraged President Salinas to make
his August 13th announcement linking the minimum wage with gains in Mexican productivity.
Question:
What good is the Mexican commitment to increase the real minimum wage by the rate of
productivity growth if Mexican minimum wages only cover 15-20 percent of Mexican workers?
Answer:
All Mexican workers are subject to minimum wage legislation. That only 15-20 percent of
workers receive just the minimum wage is because the rest of the workers receive higher wages.
Average wages are substantially higher than the minimum wage and have been rising at a faster
rate in real terms in the last several years.
Many wages and benefits in Mexico are denominated in multiples of the minimum wage and are
traditionally increased at least a much as minimum wage increases, for both union and non-union
workers. Thus an increase in the rate of minimum wage normally ripples through the entire
economy.
Question:
Are Canada's provinces covered by the Labor and Environmental Agreements?
Answer:
These Agreements bind Canada for all matters subject to its federal control, including the
enforcement of national environmental laws throughout the provinces, and including all Crown
industries (representing 10 percent of the workforce).
42
Canada's constitutional system limits its ability to accept the Agreements' obligations on behalf
of a province for matters under provincial control. To redress this imbalance among the Parties
and to encourage provincial participation, the Agreement commits Canada to take all necessary
measures to bring the provinces into this Agreement, and limits its ability to take advantage of
dispute settlement procedures according to the extent of provincial participation.
The Administration fully expects Canada's provinces to be brought on board, and will be
following closely their progress in this regard.
Question:
How does the trade-related test fit into dispute settlement?
Answer:
Under both the environment and labor agreement, the Parties, in deciding whether to establish
an arbitral panel, will look to see if the alleged persistent pattern of failure to effectively enforce
the law is related to trade or investment between the Parties. Under the labor agreement, an
Evaluation Committee of Experts is to be established only if the matter is trade-related.
"Trade-related" merely means that the good or industry sector involved is traded within the
NAFTA Parties or competes with a traded good or service. There is no requirement of a
showing of trade injury.
Question:
How big is the fine under the agreements?
Answer:
A panel can impose a monetary enforcement assessment against the government of up to $20
million in the first year. The maximum monetary enforcement assessment is indexed to the total
trade among the Parties, and will rise in the following years as NAFTA increases the volume
of trade in the free-trade area.
Question:
Who determines the amount of the fine?
Answer:
The panel will determine the amount of the monetary enforcement assessment, taking into
account such factors as the pervasiveness and duration of the Party's failure to enforce or the
43
reasons for non-implementation of an action plan.
Question:
Who pays the fine?
Answer:
The government of the country that has failed to enforce its law pays the monetary enforcement
assessment.
Question:
Where does the fine go?
Answer:
Any monetary enforcement assessments go into a fund established by the Council and are to be
spent to improve environmental or labor law enforcement.
Question:
Is a country off the hook once it pays its fine?
Answer:
No. If a Party is not fully implementing the action plan, it remains liable to ongoing
enforcement actions.
Question:
Why is there a different rule for Canada than there is for the United States and Mexico on
enforcing the payment of fines and implementation of action plans?
Answer:
Canada, which has a tradition of domestic court enforcement of orders of other tribunals,
preferred to make available its domestic courts in this instance rather than be subject to potential
suspension of NAFTA benefits. We, however, were unwilling to cede our sovereignty and take
44
the unprecedented step of granting standing under domestic law to the decisions of an
international tribunal.
Question:
How do you decide what sector is involved for purposes of applying trade sanctions?
Answer:
If the failure to enforce involved enforcement in a particular sector, then a Party would first look
to that sector in deciding what benefits to suspend. However, if it is not practicable or effective
to suspend benefits in the sector involved in the non-enforcement (for example, because there
is no identifiable sector involved), then a Party could look to suspend benefits in any sector.
45
9/3/93
15 pm
TALKING POINTS FOR PRESIDENT CLINTON ON
APPOINTMENT OF BILL FRENZEL AS SPECIAL ADVISER FOR NAFTA
Today I'm pleased to welcome an important new asset in our bipartisan
fight for expanded trade.
The North American Free Trade agreement, along with the environmental
and labor side agreements we have negotiated, is essential to American
competitiveness and long-term growth. NAFTA will create hundreds of thousands
of new jobs here in the United States by opening up the Mexican market to our
products. And for the first time, we will have enforceable mechanisms in place to
ensure that companies don't move jobs to take advantage of weaker environmental
or labor standards in another country. Economic change is never easy. But we
must rise above partisanship if we are to do what we must to remain the world's
leading economic power.
Last month I announced that Bill Daley will be serving as my Special
Counsellor for NAFTA, to coordinate our fight for its ratification.
Today I am delighted to announce that former Congressman Bill Frenzel of
Minnesota will join our effort as Special Adviser to the President for NAFTA. Bill
was the ranking Republican on the House Ways and Means Committee and an
economic leader for that party during his twenty years in Congress. He is now a
Guest Scholar at the Brookings Institution. As a trade expert with a genuine
commitment to economic growth, he will be especially helpful in working with his
fellow Republicans who support this pact.
There is one central fact in this debate: NAFTA creates American jobs.
Today I was pleased to receive a letter, signed by 284 prominent economists,
liberal and conservative, who agree that NAFTA creates jobs and growth. Among
them were twelve Nobel Prize winning economists. They know that our prosperity
depends on our ability to export and compete. I am pleased that this
overwhelming consensus of our top economists confirms that NAFTA means jobs.
September 1. 1993
President Bill Clinton
The White House
Washington, D.C.
Dear Mr. President
As economists, we feel it is necessary to set the record straight
in the costs and benefits of the North American Free Trade Agreement.
while we may not agree on the precise employment impact of NAFTA.
we do concur that the agreement will be a net positive for the United
States, both in terms of employment creation and overall economic growth.
Specifically, the assertions that NAFTA will spur an exodus of U.S. jobs
to Mexico are without basis. Mexican trade has resulted in net job
creation in the U.S. in the past, and there is no evidence that this trend
will not continue when NAFTA is enacted. Moreover, beyond employment
gains, an open trade relationship directly benefits all consumers.
A recent review by the Congressional Budget Office fairly
summarizes professional opinion:
H
NAFTA, if passed, would produce both winners and losers, but
that the total gain to winners would be larger than the total
loss of the losers in both Mexico and the United States. The
effects on the U.S. economy both good and bad would be small
for many years because (1) U.S. tariffs and other trade barriers
are already small, (2) elimination of the tariffs and other
barriers would be phased in slowly, and (3) the Mexican economy
is only about 4 percent of the size of the U.S. economy. The
benefits would grow over time, however. as the Mexican economy
[grows] larger. "
Working with our neighbors to build a strong partnership in North
America is a desirable parallel track to multilateral efforts for an open
world trading system. We urge your support for the North American Free Trade
Agreement.
Sincerely,
LIST OF ECONOMISTS WHO SIGNED THE LETTER TO THE PRESIDENT IN SUPPORT OF NAFTA.
AN ASTERIX MARKS (*) NOBEL LAUREATES IN ECONOMICS.
Henry J. Aaron
Brookings Institution
Joshua Aizenman
Dartmouth College
Christine Amsler
Michigan State University
Torben G. Andersen
Northwestern University
James E. Anderson
Boston College
Kenneth J. Arrow
Stanford University
Patrick R. Asea
U.C.L.A.
David K. Backus
New York University
Philip Bagzoni
Brookings Institution
Jushan Bai
M.I.T.
Martin Neil Baily
University of MD
David S. Bates
University of Pennsylvania
A. Benavie
University of NC-Chapel Hill
Andrew Bernard
M.I.T.
Ernst R. Berndt
M.I.T.
Jess Benhabib
New York University
PAGE.004
Marcelo Bianconi
Tufts University
Gary A. Biglaiser
University of North Carolina
Mark Bils
University of Rochester
Robert Bishop
M.I.T.
Stanley W. Black
University of North Carolina
Margaret Blair
Brookings Institution
Olivier Blanchard
M.I.T.
Zvi Bodie
Soston University
Michael Bordo
Rutgers University
Barry Bosworth
Brookings Institution
Kenneth D. Boyen
Michigan State University
S. Lael Brainard
M.I.T.
William Brainard
Yale University
William Branson
Princeton
Bryan W. Brown
Rice University
Cary Brown
M.I.T.
Donald J. Brown
Stanford University
Drusilla Brown
Tufts University
PAGE.005
Ralph Bryant
Brookings Institution
< James Buchanan
George Mason University
Gary T. Burtless
Brookings Institution
Ricardo Caballero
M.I.T.
John Campbell
Princeton University
Geoffrey Carliner
NBER
Stephen G. Cecchetti
Ohio State University
A. Chakraborty
Boston College
Judy Chin
Tufts University
Menzie Chinn
University of CA-Santa Cruz
Richard H. Clarida
Columbia University
John Colhrane
University of Chicago
Harold Cole
Federal Reserve Bank of Minneapolis
Susan M. Collins
The Brookings Institution
Patrick Conway
University of NC-Chapel Hill
Joyce Cooper
Boston University
Richard Cooper
Harvard University
Russell Cooper
Boston University
PAGE . 006
Donaid Cox
Boston College
Roger Craine
University of CA-Berkeley
Betty Daniel
SUNY Albany
Steven J. Davis
University of Chicago
Alan V. Deardorff
University of Michigan
* Gerard Debreu
University of CA-Berkeley
Robert F. Dernberger
University of Michigan
Peter Diamond
M.I.T.
Avinash K. Dixit
Princeton University
Evsey D. Domar
M.I.T.
Rudi Dornbusch
M.I.T.
Kathryn Dominguez
Harvard University
Jonathan Eaton
Boston University
Janice Eberly
University of Pennsylvania
Richard Eckaus
M.I.T.
Barry Eichengreen
University of CA-Berkeley
Randall Ellis
Boston University
Charles Engle
University of Washington
9172534098 PAGE.007
Robert Engle
Iniversity of CA-San Diego
Ray C. Fair
Tale University
Joseph Farrell
University or CA-Berkeley
R. Feenstra
University of CA-Davis
Alfred J. Field. Jr.
University of North Carolina
Stanley Fischer
M.I.T.
Franklin M. Fisher
M.I.T.
Ronald C. Fisher
Michigan State University
Albert Fishlow
University of CA-Berkeley
Peter Fortune
Tufts University
Jeffrey A. Frankel
University of CA-Berkeley
* Milton Friedman
Hoover Institution
Kenneth Froot
Harvard University
Richard Froyed
University of NC-Chapel Hill
James Galbriath
University of TX-Austin
R. E. Gallman
University of NC-Chapel Hill
Peter M. Garber
Brown University
David Genesove
M.I.T.
Mark Certler
New York University
Henry N. Goldstein
University of Oregon
Frank Gollop
Boston College
Linda S. Goldberg
New York University
Claudia Goldin
Harvard University/Srookings Institution
Robert J. Gordon
Northwestern University
Edward Gramlich
University of Michigan
oAnna Gray
University of Oregon
Zvi Griliches
Harvard University
Gene M. Grossman
Princeton University
Herschel Grossman
Brown University
Jonathan Gruber
M.I.T.
May Hagiwara
University of North Carolina
Brian J. Hall
Harvard University
Daniel Hamermesh
University of TX-Austin
Gordon Hanson
University of TX
Arnold C. Harberger
University of CA-Los Angeles
Peter R. Hartley
Rice University
9172534099 FAGE.209
Jerry Hausman
H.I.T.
Stephen Haynes
University of Oregon
Miguel A. Herce
University of North Carolina
Richard J. Herring
University of PA
Robert J. Hodrick
Northwestern University
Harry J. Holzer
Michigan State University
Hendrik S. Houthakker
Harvard University
Robert Glenn Hubbard
Columbia
Dale W. Jorgenson
Harvard University
Paul Joskow
M.I.T.
Charles Kahn
University of Chicago
James A. Kahn
University of Rochester
Anil Kashyap
University of Chicago
J.R. Kearl
Brigham Young University
Tim Kehoe
University of MN
Peter B. Kenen
Princeton University
Miles Kimball
University of Michigan
* Lawrence R. Klein
University of PA
A172534095
Michael Klein
Tufts University
Jan Kmenta
University of Michigan
Sam Kortum
Boston University
Lawrence Kotlikoff
Boston University
Carsten Kowaiczyk
Dartmouth College
Melvin Krauss
Hoover Institution
Michael Kremer
M.I.T.
Kala Krishna
University of PA
Randy Kroszner
University of Chicago
Anne 0. Krueger
Stanford University
Paul R. Krugman
M.I.T.
Corine M. Krupp
Michigan State University
Kenneth Kuttner
Federal Reserve Bank of Chicago
David A. Lam
University of Michigan
Kevin Lang
Boston University
Lester B. Lave
Carnegie Mellon University
Robert Lawrence
Harvard University
John V. Leahy
Harvard University
8122531096 PAGE.011
Bruce N. Lehmann
University of CA-San Diego
+ Wassily Leontief
New York University
Donald Lessard
M.I.T
Jack Lettichi
University of CA-Berkeley
Richard Levich
New York University & NBER
Philip I. Levy
Stanford University
Karen Lewis
University of Pennsylvania
Susan J. Linz
Michigan State University
Glenn Loury
Boston University
Linda D. Loury
Tufts University
Robert E. Lucas, Jr.
University of Chicago
Nora Lustig
The Brookings Institution
Richard Lyons
University of CA-Berkeley
Louis Maccini
Johns Hopkins University
Thomas MaCurdy
Stanford University
N. Gregory Mankiw
Harvard University
Richard L. Manning
Brigham Young University
Nancy P. Marion
Dartmouth College
A172534096 PAGE.312
Jane Marriman
Boston College
David Marshall
Northwestern University
Richard C. Marston
University of PA
K. Matsuyama
Northwestern University
Steven J. Matusz
Michigan State University
Bennett T. McCallum
Carnegie-Mellon University
Rachel McCullouch
Brandeis University
David McFarland
University of NC-Chapel Hill
Thomas G. McGuire
Boston University
Warwick J. McKibbin
Brookings Institution
Ronald McKinnon
Stanford University
Allan H. Meltzer
Carnegie Mellon University
Claudio Mezzetti
University of North Carolina
Peter Mieszkowski
Rice University
Raymond F. Mikesell
University of Oregon
* Merton Miller
University of Chicago
Jeffrey A. Miron
Boston University
Frederick S. Mishkin
Columbia University
PAGE 013
Y Franco Modigliani
M.I.T.
Guillermo Mondino
University of Chicago
Wallace P. Mullin
Michigan State University
Michael A. Murphy
Tufts University
Robert G. Murphy
Boston College
Charels R. Nelson
University of Washington-Seattle
Daniel Nelson
University of Chicago
Victor Ng
University of Michigan
William D. Nordhaus
Yale University
Maurice Obstfeld
University of CA-Berkeley
David H. Papell
University of Houston
Sam Peltzman
University of Chicago
George Pencavel
Stanford University
John Pender
Brigham Young University
Lynne Pepall
Tufts University
George L. Perry
Brookings Institution
Harold A. Peterson
Boston College
Kerk L. Phillips
Brigham Young University
6172534096 PAGE.014
Stephen Craig Pirronz
University of Michigan
Steve Pischke
M.I.T.
Keith T. Foole
Carnegie Mellon University
William Poole
Brown University
Rulon Pope
Brigham Young University
James Poterba
M.I.T.
Joseph F. Quinn
Boston College
Matthew Rabin
University of CA-Berkelev
Michael R. Ransom
Brigham Young University
Carol Rapaport
University of North Carolina
Robert H. Rasche
Michigan State University
Peter C. Reiss
Stanford University
j. David Richardson
Syracuse University
Dani Rodrik
Columbia University
Kenneth Rogoff
Princeton University
Christina Romer
University of CA-Berkelev
David Romer
University of CA-Berkeley
Andrew Rose
University of CA-Berkeley
PAGE.015
Nancy Rose
M.I.T.
B. Peter Rosendorff
University of Southern CA
Robert W. Rosenthal
Boston University
Julio Rotemberg
M.I.T.
Michael Rothschild
University of CA-San Diego
Nouriel Roubini
Yale University
Paul A. Ruud
University of CA-Berkeley
Jeffrey D. Sachs
Harvard University
Xavier Sala-I-Martin
Yale University
Michael K. Salemi
University of North Carolina
G. Saloner
Stanford University
Dominick Salvatore
Fordham University
* Paul A. Samuelson
M.I.T.
Huntley Schaller
Carleton University
Fario Schiantarelli
Boston College
Richard Schmalensee
M.I.T.
Catherine Schneider
Boston College
Charles L. Schultze
Brookings Institution
6172534096 PAGE.016
Anna J. Schwartz
N.B.E.R.
G. William Schwert
University of Rochester
* Theodore W. Schultz
Univeristy of Chicago
* William F. Sharpe
Stanford University
John B. Shoven
Stanford University
Mark Showelter
Brigham Young University
Larry Singell
University of Oregon
Ken Singleton
Stanford University
Gordon W. Smith
Rice University
Ronald Soligo
Rice University
* Robert Solow
M.I.T.
David E. Spencer
Brigham Young University
Robert W. Staiger
University of Wisconsin
Doug Steigerwald
University of CA-Santa Barbara
Ernesto Stein
University of CA-Berkeley
Robert M. Stern
University of Michigan
Institute of Public Policy Studies
Chandler Stolp
University of TX-Austin
8178534098 PAGE.017
James H. Stock
Harvard University
Alan C. Stockman
University of Rochester
Joe A. Stone
University of Oregon
Thomas M. Stoker
M.I.T.
Nancy L. Stokey
University of Chicago
Federico Sturzenegger
U.C.L.A.
Robert S. Sullivan
Carnegie Mellon University
John B. Taylor
Stanford University
Chris Telmer
Carnegie Mellon University
Peter Temin
M.I.T.
Linda L. Tesar
University of CA-Santa Barbara
Richard H. Thaler
Cornell University
Mark Thoma
University of Oregon
Lester Thurow
M.I.T.
* James Tobin
Yale University
Kenneth Train
University of CA-Berkeley
Stephen Turnovsky
University of Washington & NBER
Henning Ulodt
Kiel Institute of World Economics
5173534096 PAGE.018
Andres Velasco
New York University
Raymond Vernon
Harvard University
Anne Vila
Boston University
Mark W. Watson
Northwestern University
Roger N. Waud
University of NC-Chapel Hill
Shangjin Wei
Harvard University
E. Roy Weintraub
Duke University
Sidney Weintraub
University of TX-Austin
William Wheaton
M.I.T.
W. Wilson
University of Oregon
Larry T. Wimmer
Brigham Young University
Frank Wolak
Stanford University
Holger Wolf
New York University
Michael Woodford
University of Chicago
Janet Yellen
University of CA-Berkeley
Kei-Mu Y1
Rice University
David Yoffie
Harvard University
Jeffrey Zabel
Tufts University
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DRAFT 7:15pm
Statement of Ambassador Mickey Kantor
United States Trade Representative
NAFTA AND THE PEROT-CHOATE BOOK
September 2, 1993
with the supplemental agreements completed last month,
the public and Congressional debate over NAFTA begins in earnest.
It is important to cut through the mountain of misinformation
and sheer lack of understanding of this complex issue to
recognize what is at stake in NAFTA.
The foremost commitment of President Clinton, and this
Administration, is to rebuild the strength of our economy, to
create new and better jobs and opportunities for United States
workers and for their children who will be entering the work
force.
We plan to do that through an integrated economic
strategy that begins by facing up to our problems at home:
starting with the President's economic program, continuing with
the drive to reform the health care system, and complemented by
the effort to re-invent government. Trade agreements are no
substitute for dealing with fundamental domestic problems that
have weakened our country for too long.
But in the intensely competitive global economy, a
trade policy is an indispensable part of our economic strategy.
The President and I have repeatedly stated the objectives of our
trade policy: to compete, not retreat behind our borders, and to
ensure that the markets of other countries are as open to our
products and services as the U.S. market is to theirs. Our
prosperity, and that of our children, depends on our ability to
compete and win in a global marketplace. We will not accept an
unbalanced trading relationship, and we will no longer
subordinate our economic interests to foreign policy and defense
concerns.
The companies, farmers and workers of the United States
are world-class competitors. We lead the world in everything
from computers and telecommunications to financial services and
soybeans. We have regained our position as the world's leading
exporter. But assuring that markets are open for our
manufactured goods, our services, and agricultural products is
absolutely critical to building our economic success.
This Administration did not negotiate the NAFTA.
Moreover, Bill Clinton as a presidential candidate was critical
of the economic and trade policy of his predecessors. When we
studied NAFTA during the presidential campaign, we approached it
skeptically. There were powerful political reasons for opposing
it.
EP 1 '93 19:23 FROM
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2
But when we studied it further, we found that NAFTA
strengthened by supplemental agreements would be in the
economic interest of the United States. It is not a favor for
Mexico. It is in our economic interest. And it is an important
piece of an economic strategy to build a high-wage, high skill
competitive economy.
The administration has the responsibility to convince
Congress and the country that NAFTA is in our economic interest,
and we intend to do so. We will succeed because we have the
facts on our side, but also because we understand- as least as
well as our opponents do---the fears of American working people
that their economic future, and their children's, are not secure;
that their standard of living has declined; and that their
prospects are diminishing. NAFTA is part of the solution,
rather than part of the problem, and we intend to show it.
I have spent a significant amount of time over the last
few days reading through and thinking about the Perot/Choate
book. The book contains several major themes with which I
fundamentally disagree:
PEROT THINKS AMERICAN WORKERS CAN'T COMPETE
At the heart of Perot's book is the belief that U.S.
workers can't compete with low wage countries like Mexico.
President Clinton believes that American workers and businesses
can compete anywhere that the rules are fair and markets are
open.
Wages are one factor, but they are not alone
determinative. We compete based on the productivity and the
skills of our workers, the excellence of our products and
services, and the strength of our transportation and
communications system. That is the formula for success that
Germany and Japan have followed, and that is the natural path for
our country.
It was certainly hard to compete when Mexico's markets
were completely closed to our products, as they were prior to
1986. But since Mexico began opening its markets, we have
transformed a $5 billion trade deficit with Mexico into a $5.4
billion trade surplus. Mexico has already become our third
leading export market, and the second leading market for our
manufactured exports. We have succeeded even though Mexican
trade barriers tariff and non-tariff- remain far higher than
ours. This is clear evidence of our ability to compete.
PEROT CHOOSES THE STATUS QUO OVER CHANGE
In opposing the agreement, Perot is opting for the
status quo which operates to the disadvantage of U.S. workers and
companies. Despite Mexican progress in voluntarily opening
markets, Mexican tariffs remain, on the average, 2 1/2 times
higher than ours. Numerous Mexican non-tariff barriers, such as
performance and trade balancing requirements, force U.S.
companies to move to Mexico in order to sell there. Maquiladora
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industries distort U.S. business decisions to the disadvantage of
U.S. workers. The lack of intellectual property protection
hampers our motion picture and recording industries, as well as
computer software and others. Meanwhile, Mexico enjoys virtually
unlimited access to the U.S. market.
This unacceptable status quo is what the opponents would
lock in. Our alternative is NAFTA, which brings down Mexican
trade barriers, levels the playing field for U.S. companies and
workers; it will no longer be necessary for companies to move to
Mexico to sell there. The Big Three auto companies, which
presently export only 1,000 cars to Mexico annually, predict an
increase to 60,000 cars from the U.S. in the first year.
Through the supplemental agreements, NAFTA gives us new ways to
insure that Mexico will enforce the strong environmental
protection and labor laws that it has on the books.
PEROT CHOOSES PROTECTIONISM AND DEFEATISM OVER EXPANDED MARKETS
AND EXPANDED GROWTH
Perot--by opposing NAFTA--chooses a defeatist path
which will reduce U.S. economic growth and job creation. In the
past few years, export-led growth has been the brightest spot in
the U.S. economy---accounting for [ ] & of the total growth.
Mexico, and Latin America beyond it, represent potential markets
of 400 million people. By calling for the defeat of NAFTA, and
in fact advocating higher tariff walls against products from
Mexico, Perot risks the gains we have seen, as well as additional
gains we expect from NAFTA and the completion of the Uruguay
Round.
In seeking to raise the walls around our economy, Perot
ignores the lessons of history. More than 60 years ago, when our
economy was much more self-contained, the United States tried to
insulate ourselves from competition through high tariffs. The
Smoot-Hawley tariff contributed to the Great Depression. Today,
with about one quarter of our economy involved in trade of goods
and services, the course of action Perot advocates would be
devastating to the U.S. and the world economy.
This is clearly the wrong path for America. The issue
before us is simple: how do we create good jobs and competitive
industries in a rapidly globalizing economy. We believe this can
only be done by reaching outward, not looking inward, and by
opening the markets of the future. As President Clinton has said,
we must compete, not retreat behind our borders.
PEROT RELIES ON INACCURACIES AND MISLEADING INFORMATION
Beyond the major misconceptions in the Perot book, it
is riddled with mistakes, misconceptions, and oversights--we
found over [ 1. Among the most serious:
O
Perot states that 5.9 million jobs are "at risk" because of
NAFTA. The methodology for reaching the 5.9 million figure
is fundamentally flawed. The authors simply identify, from
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4
Census data, industries where wages account for more than 20
percent of the value of output. Under the Perot/Choate
scenario, the "at risk" jobs include high wage, high skill
jobs in our most competitive sectors, including aerospace,
medical equipment, and sonar equipment--sectors where we are
in no danger of losing jobs and in fact will increase
employment with NAFTA. The authors also describe as "at
risk" jobs which face no competition from Mexico such as
bakers and wood-pulp millers.
The book quotes the previous Secretary of Labor stating that
NAFTA will cost 150,000 U.S. jobs. The book ignores the
fact that the same Secretary of Labor, citing the same
study, went on to say the NAFTA will create 325,000 jobs--a
net increase of 175,000.
Perot states that NAFTA will lower U.S. health and
environmental standards. In fact, nothing in the NAFTA
could even be construed as lowering any federal, state or
local standard. NAFTA specifically insures the ability of
each country, including its state and local governments, to
maintain as stringent environmental and health standards as
it considers appropriate. Morecver, the supplemental
agreements include specific commitments from the three
nations to harmonize standards upwards--not downwards.
Perot claims that the U.S. auto industry is on the
"endangered" list. In fact, independent studies done by the
Congressional budget office and the Office of Technology
Assessment show that U.S. auto companies and workers will
both gain under the NAFTA, thanks to the dismantling of the
Mexican performance, trade balancing, and local content
requirements, as well as the elimination of Mexico's current
20% tariff on auto imports. Indeed, the OTA study found
that the total cost of delivering a car to the U.S. market
is higher for a plant in Mexico than for one located in
Michigan--despite the wage differential.
The book creates a thrilling-but fictional-scenario about
the Administration sneaking an extension of fast track
authority for NAFTA through the Congress this year. In
fact, fast track authority for NAFTA was obtained after a
spirited and extended public debate in 1991, and no
extension was needed for NAFTA. This years fast track
extension pertained only to the Uruguay Round of the GATT.
0
Perot once again criticizes but fails to provide specific
alternatives. He only offers platitudes like "Do not
violate National Sovereignty," and "Negotiate with Complete
Integrity." The one specific recommendation he suggests is
to impose a "social tariff." Yet increasing tariffs is
exactly the opposite the aim of NAFTA's. The experience of
Smoot-Hawley in the 1930s, and the depression which
followed, teaches us that high tariffs and protectionism is
defeatist and harms economic growth.
Nafta
The White House
Office of the Press Secretary
For Immediate Release
November 12, 1993
STATEMENT BY THE PRESIDENT
Today, we saw a profile in courage. Leo Purcell, President
of the Massachusetts Building Trade Council, endorsed NAFTA in a
letter to fellow union workers.
In addition to saying, as I have, that this is a choice
between change and status quo, Purcell wrote, "No longer can
nations afford to build invisible walls at their borders because
there are no longer national borders to free trade." "
I applaud Mr. Purcell for his leadership, courage and vision
and for his strong confidence in the American worker.
#
TEL:
NOV 12,53 NO
Massachusetts Building Trades Council
256 FREEPORT STREET
BOSTON, MA 02122-3538
617/436-3551
FAX 617/436-4163
PRESIDENT
LEO J. PURCELL
DEPARTMENT
TRANS
VICE PRESIDENT
COUNCIL
EDWARD C. SULLIVAN
SECRETARY-TREASURER
LOUIS A. MANDARINI
LEGISLATIVE DIRECTOR
JOHN.F. X. DAVOREN
November 9, 1993
FIELD REPRESENTATIVE
JOSEPH A. DART
Dcar Sir and Brother:
I all writing to express my concern over the issue of the
North American Free Trade Agreement (NAFTA). This includes the
hysteria from both opponents and proponents, and the potential
for chaos, whether it passes or fails in Congress on November 17.
The issue of NAFTA has become emotional, and in many cases,
misleading. will the removal of tariffs and other barriers to
free trade between the United States and Mexico create a
situation as NAFTA opponent Ross Perot claims "the hemorrhage of
American jobs across the border" ? Well, we know the U.S.
companies can relocate across borders today whether in Mexico or
Korea or wherever. That doesn't mean that we should be pleased
with that fact; however, it is a reality. And, is free-trade
good for America and its workers ?
We've heard and learned the term "new world economy" over the
past several years, and it is fact. No longer can Nations afford
to build invisible walls at its borders because there are no
longer national borders to free-trade. I'm sure that most of us
would want to return to the days of the high-volume industrial
giants where American workers had only to compete with other
American workers to produce products purchased by American
consumers. We know that that world of work has changed and all
we need to do is look closely at G.E., 'the Big Three, U.S. Steel
and other powerful engines of the U.S. economy and see how they
have adjusted to change within the U.S. economic capitalist
system. NOW, one can say he doesn't like the capitalistic system
and that's his choice.
Workers in the U.S. have a right to be suspicious of trade
and government, but it should he well placed and it's our
responsibility as leaders to not add to their paranoia, but to
prepare them educationally and emotionally for the challenges of
tomorrow.
Building Our Communities the Union Way
TEL:
NOV 12,90
Affiliates: NAFTA
Page 2
November 9, 1993
Let's face it, President Lane Kirkland of the AFL-CIO would
probably not support NAFTA regardless of what side agreements
were negotiated. We, in our business, understand political
expediency on tough decisions. And, I believe that what he faced
was a politically no-win situation. Personally, I wish he had
taken a different approach.
of course, there are statistics ad-nauseum on this debate,
but there are some that stand out. In 1986, prior to Mexico
loosening its trade barriers, the U.S. had a trade deficit of
approximately $5 billion with Mexico. In 1992, the U.S. enjoyed
a $5.4 billion surplus. Will NAFTA depress American wages ?
Mexico provided only 7% of our imports and it already has largely
free-trade with the U.S.
Newsweek recently reported that "NAFTA will not succeed or
fail on a few years' trade statistics. Its real promise is to
foster a more middle-class Mexico and reduce immigration to the
United States."
The environment is a major concern of all Americans and
Mexico's abuse is well documented but improving. NAFTA is
supported by six major environmental organizations, including the
National wildlife Federation, the Environmental Defense and the
National Audobon Society. They believe that the U.S. will have
better control over the Mexican environmental habits with NAFTA
rather than without.
I must say that the political arm-twisting (something that
we in the building trades excel at) has gone to the extreme.
Particularly, when long-time friends such as Joe Kennedy is
attacked by a Boston Central Labor Council official as having
"caved in to big business and investment bankers" That is
absolutely outrageous and is no way to treat a friend who time
and time again has supported issues of workers and those who are
unable to fend for themselves. We can never become a one issue
organization and ignore the fact that from time to time a friend
might disagree with one of our issues, particularly, in
Congressman Joe Kennedy's case. I believe that what the
Congressman did was out of a belief he was acting in the best
interest of the country and its workers. If a person's history
is symbolic of his character, we know that Joe Kennedy doesn't
cave in to any one.
I'm worried that we are allowing some to get so caught-up in
NAFTA, and maybe for the wrong reasons, that they would applaud a
demagogue like Ross Perot, while at the same time, create an
environment, whereby, a Democratic President - one we worked SO
hard to elect-will be handcuffed in the International arena. My
greatest fear is that we could contribute to the demise of his
ILL.
0101
Affiliates: NAFTA
Page 3
November 9, 1993
Administration as well. And, then what ? I'm convinced that if
NAFTA is defeated that it will be a pyrric victory at best.
President Clinton has recognized that we must prepare for
tomorrow, and he should bo admired for his leadership and
courage. This is the first Democratic Administration in 12
years, and the first Administration in many years, to tackle the
tough issues that were left by the Republicans. President
Clinton is trying to improve on the status quo; his opponents,
perhaps without knowing it, are defending the status quo. It is
up to us, I believe, to support him, as we did in his election,
and to inoure that tho rrcoident 10 ablc to make change the
friend of the worker -- not the enemy. Let that be his legacy.
The casy road for the Tresident would have been to abandon
NAFTA and retreat from the world. But, the President knew that
Americans aren't quitters; they are winners. He knew that when
the playing field is level, American workers can compete and win
with any nation in the world. NAFTA's opponents don't think that
is true, but I believe they are wrong. I have confidence in the
American worker. President Clinton has bet that American workers
are the best and most productive workers in the world. The smart
money's on him. That's why on this issue, my money is with the
President.
These opinions are mine and I would be less than honest if I
did not share them with you. On a recent cable T.V. show in my
town of Whitman, I expressed my views on a program that was
devoted in part to NAFTA. I stated, however, that I was speaking
personally and not in behalf of the organization I represent or
the labor community. Perhaps, I could have taken a walk and some
might say that my position is heretical, but those who know me
better, understand that I was never one to duck a tough issue.
Fraternally yours,
Leo J. Purcell
President
LJP/jd
VALIS ASSOCIATES
October fee 14, 1993
Mark Gearan-
are
active we and
on
The Honorable James Jones
U.S. Ambassador to Mexico
c/o Office of Mexican Affairs
allerging
U.S. Department of State, Room 4258
Washington, DC 20520
Dear Jim,
Many thanks for your kind note and all your good work on
NAFTA. Thanks also for your help with the National
Association of Wholesaler-Distributors (NAW) and Citizens for
a Sound Economy (CSE).
As a direct result of your call to NAW and your
discussions with Mack McLarty and Howard Paster, Bill Daley
met last week with NAW President Dirk Van Dongen, Senior Vice
President Alan Kranowitz and me. Daley will appeal to the
NAW Board on October 25 and should the Board concur, which it
almost surely will, NAW will be an active and important ally
for President Clinton. Their grassroots are very effective.
In addition, CSE President Paul Beckner is scheduled to
meet with Bill next week. CSE continues to be very active at
the grassroots level with rallies and press conferences on
behalf of NAFTA in key cities in Florida, Illinois, New
Jersey, New York, Oklahoma, Pennsylvania, Texas and Virginia.
In fact, CSE is underway with its "Citizens for NAFTA."
I'll be sure to keep you posted on all our COMET
activities. Yesterday, we met with Frenzel, who gave us the
"charge." Thanks again for all your help.
With best wishes,
worpre
Wayne Valis
VIACTA
1747 Pennsvlvania Avenue, N.W.
Suite 850
Washington, D.C. 20006
TRADE
ASSOCIATION
LIAISON
COUNCIL
October 19, 1992
The Honorable Bill Daley
OFOB Room 111 1/2
Washington, DC 20500
Dear Bill:
Thank you for agreeing to meet with the Trade
Association Liaison Council (TALC) at 2:00 p.m. on Tuesday,
November 2nd in the old Executive Office Building, Room 476.
I have urged our members (see attached) to get active on
NAFTA, and you can drive that message home. If you have
specific names or states that need to be worked, please share
that information with us.
TALC special guests usually informally address, while
seated, our members for 20 to 30 minutes and then entertain a
question and answer period.
Again, thank you for meeting with our group. I must say
that Cory Alexander in your office has been extremely helpful
and thorough in getting this meeting set up. He is a
pleasure to work with and you are lucky to have him.
I look forward to seeing you on the 2nd.
Sincerely,
Wayne
Wayne H. Valis
WAYNE VALIS
1747 Pennsylvania Avenue NW
Suile 850
Washington. DC 20006
202.833.5055
Fax 202.833.9625
Executive Director
VALIS ASSOCIATES
Wegin
Advanture
of
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1983
D.C
PRIMETER
5182488 US
The Honorable Mark Gearan
Assistant to the President
The White House
Washington, DC 20500
1747 Pennsylvania Avenue, N.W.
Suite 850
Washington, D.C. 20006