The Nafta nuance

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The Independent Online
THE PRICE of Esteban Torres's vote was a new multi-million-dollar North American Development Bank. Kweisi Mfume, head of the Democratic black caucus, was offered thousands of dollars in federal job grants but he rejected the deal. In the White House 'war room', millions of dollars in agricultural assistance are on offer for midwestern and far-west congressmen willing to come off the fence.

This is the cost of a North American Free Trade Agreement (Nafta), which is turning out to be the biggest 'pork barrel' political project in recent US history. Scores of congressmen like Torres and Mfume are lining up to negotiate their votes as the White House struggles to win over a simple majority of 218 House members by 17 November. Nafta has become one of the defining moments of Bill Clinton's presidency.

To understand the Nafta rumble and the political roar, it is useful to think in terms of these popular catchlines: 'economic security', 'global restructuring' and 'political entrepreneurs'.

The latter are attempting to fill vacuums created by the failure of traditional parties to articulate values and rules that allay the insecurities of a post- Cold War world. Hence the rise of unsavoury themes designed to win votes: separatism, foreigner-induced joblessness, union-bashing, ethnicity and nationalism, racism and the like.

'Economic security', a term coined by former US secretary of state James Baker, was the motivation of the Bush administration in proposing a vast, North American free trade zone, including Canada and Mexico, to rival the powerful economic bloc that would result from European integration. The Clinton administration inherited the Nafta proposal and supported it - but almost as an afterthought.

Eventually, the futuristic promises of Nafta of market openings, job gains and more buoyant growth collided with the realities of rising joblessness, wholesale corporate retrenchment and sluggish economic growth in the industrial world associated with 'global restructuring'. In Canada, these themes were used to bring down the governments of Brian Mulroney and his successor, Kim Campbell. In the US, they have become the rallying cry of organised labour. The entrepreneurial Ross Perot gains points by depicting low-wage Mexico as a giant Hoover machine that will suck jobs out of the US. If voters believe him then the congressmen who vote for Nafta may well lose their seats during next year's mid-term elections.

The Clinton administration appears to have blundered recently by trying to sell Nafta on the negative aspects of 'economic security'. The line is that if the US does not negotiate an agreement with Mexico then Japan and Europe will move quickly to profit from such a deal, thus threatening the US economy on its very borders. Far better to emphasise the positive aspects as articulated by fervent supporters like John Welch, chairman and chief executive of General Electric Co, the third most profitable US company.

Welch talks of a seismic shift in GE's 'centre of gravity' to China, India, Mexico and other developing countries where it is selling goods at a rapid rate that matches their big economic growth rates. The plant that GE built in lower-wage Mexico now produces 30 per cent of the gas stoves bought in the US. However, GE's Mexico strategy is not a one-way street; plants in the US are also benefiting from Mexico's huge appetite for washing machines and refrigerators.

According to GE's calculations, it exported dollars 5bn ( pounds 3.4bn) more than it imported last year. In Mexico alone, its operations imported dollars 750m in US goods compared with exports to the US of dollars 500m. GE's total exports of dollars 8bn last year supported 160,000 jobs in the US. That is the positive message to sell.

For every job lost upfront domestically, there is the potential for a future job gain based on growth elsewhere. It is a risky business to cut the domestic umbilical cord just as Nafta is a risky political accord. But there can be no question that these opening- up strategies are the right way to go.

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