Leading Article: Bush's tonic for free trade

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The Independent Online
GEORGE BUSH is not receiving many bouquets at the moment. But he deserves one for pushing through to yesterday's successful conclusion the long, complex and contentious negotiations required to create a North American Free Trade Agreement (Nafta). It embraces the United States, Canada and Mexico and, with 360 million consumers, is the biggest free trade area in the world (though the European Economic Area, which includes the European Free Trade Association and comes into effect next January, will top it with 380 million). President Bush, who was anxious to have the agreement tied up before next week's Republican convention, believes it can be presented as a tonic for the sluggish American economy.

It is, however, far from risk-free. Its opponents fear that far from creating jobs in the US, it will encourage their exportation to Mexico, where labour is cheaper and environmental protection laws laxer. Some losses are inevitable. Indeed, the American automobile industry has been among the agreement's strongest advocates because it hopes to take advantage of those lower costs, and compete more effectively with the Japanese.

The expectation is that it will be the dirtier jobs that head south, while jobs that require greater skills will be created in the US by increased exports. If that proves to be the case, it might reduce the level of illegal immigration from Mexico. It would also tend to swell the ranks of America's unskilled, unemployed underclass. But the assumption may prove wrong. The Mexicans are a determinedly upwardly mobile and adaptable people. Some highly skilled jobs will head south, too. The process will be gradual, since tariffs on sensitive goods are being phased out over five to fifteen years. Naturally, there will also be large gains to the US, as its exports displace less competitive and hitherto protected products in a Mexican market of 82 million consumers.

If President Bush's genuine belief in the value of free - or freer - trade is to his credit, so a fortiori is that of his opponent, Bill Clinton. With trade unionists bulking large in their constituency, the Democrats are traditionally more protectionist than the employer-oriented Republicans. Mr Clinton is about as free trade a Democratic candidate as could reasonably be expected. He has publicly approved the Nafta concept. Its critics have been led by the Democratic Congressman Richard Gephardt. He wants, inter alia, a cross-border transaction tax to raise funds to train displaced workers, enforce environmental protection and boost infrastructure development.

The pact will have to be ratified in all three countries. In the US, that will be well after the presidential election, and could result in serious emasculation by Congress. For world trade as a whole, the chief danger is that it creates a market big enough to encourage the idea that protectionism might be a viable strategy: that is the basis of America's fear of the EC; and of Japan's fear of Nafta, where the minimum North American content of duty-free cars has been sharply raised. Nafta could, in short, do real damage if it reduced the determination of a new administration to clinch the long-running negotiations for the further reduction of global trade barriers within the General Agreement on Tariffs and Trade.

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