Mexico basks in triumph of free trade agreement

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The Independent Online
YESTERDAY'S announcement of a North American Free Trade Agreement, the culmination of 14 months of arduous negotiations, is being hailed as a political triumph for President Carlos Salinas of Mexico as much as for his American counterpart.

Mr Salinas floated the idea of a new basis for the often difficult relations between the two countries even before his inauguration in 1989, and he has had a great deal of political prestige riding on the project since.

The symbolic importance of the deal for Mexico is hard to exaggerate. The government sees it as further certification of the country's economic rehabilitation after the debt crisis of 1982 drove it into a kind of international purdah.

The toughness of the negotiations in recent months is regarded in Mexico as confirmation of how seriously the US takes its southern neighbour these days.

The agreement is the first of its type between a developing country and an industrialised neighour. Despite the obvious imbalance between the two economies, Mexico has a lot to offer.

Mexico's official view is that the impressive growth of the past few years - Mexico is now the 13th largest economy in the world - would continue even without a free trade agreement. But it is important as a means of accelerating the modernisation of the Mexican economy, which is Mr Salinas's main objective.

The US is Mexico's main trading partner by a long way, supplying 68 per cent of its imports in 1990 - dollars 19.3bn ( pounds 10bn) - and taking 69 per cent of Mexico's exports, or dollars 18.1bn.

Much of the hard bargaining of the past year has been about giving adequate cushioning to vulnerable sectors such as Mexico's oil, financial services and agriculture while trying to secure as favourable a deal as possible for strongly competitive industries such as cars and car parts.

The balance of gains and losses in jobs and investments will take some time to become apparent.

American fears that thousands of unskilled jobs will go to Mexico seem real enough, and the Mexicans are embarking on a determined programme of upgrading education and training to make sure that it is not only the dirty work that ends up south of the Rio Grande.

But growing trade with its southern neighbour seems certain to create many jobs in the US, too, even in the motor industry, in which labour costs in Ford's Mexican plant are one-fifth of those in Detroit.

US exports to Mexico are expected to grow by 20-30 per cent a year up to 1996 under the new agreement.