The editors of Outlook asked two leading participants in the debate over the North American Free Trade Agreement to address eight central issues. In the space below, Rufus Yerxa, Deputy U.S. Trade Representative and chief NAFTA negotiator, makes the case for the pact; Pat Choate, co-cauthor of Ross Perot's recent book, "Save Your Job, Save Our Country," presents the opposing viewpoint.

NAFTA will create or destroy U.S. jobs.


Mexico's currently high tariffs and trade barriers and lax enforcement of environmental and labor laws discriminate against U.S. workers. The Maquiladora program gives preferences to U.S. companies moving to Mexico and forces them to export products here. NAFTA and the recently signed side agreements on the environment and labor law, will strengthen -- not reduce, as Perot and Choate contend -- intellectual property and investment protections for U.S. interests, and, by levelling the playing field for U.S. workers, send more U.S. products south and create 200,000 jobs in the next two years. Jobs related to exports to Mexico are good ones: Their average wage is 12 percent above the national average.

Since 1986 when Mexico began reducing many trade barriers, our exports to Mexico tripled to over $40 billion in 1992 and 400,000 jobs were created in the U.S. -- bringing to 700,000 the total number of U.S. jobs supported by exports to Mexico -- and our trade balance with Mexico moved from a large deficit to a large surplus. That shows that America, even in the face of Mexico's low wages and current trade barriers, can compete and win.

If we say no to Mexico's and, ultimately, Latin America's desires for closer trade ties with America, they can look instead to Japan and the EC for closer ties.


If Congress ratifies NAFTA thousands of U.S. factories and millions of U.S. jobs will be lost to Mexico. The many "reputable" studies of NAFTA's effects miss what is going to happen because they are based on what has happened in the past. Mexico's explicit goal is to transform itself into a dynamic, industrialized nation with a strong manufacturing base. But Mexico is capital poor. NAFTA's real purpose is to attract capital to Mexico by making the country safe for foreign investors. It provides for prompt payment at market prices of expropriated properties, protects the intellectual property rights of investors, allows foreigners to repatriate their profits, resolves disputes through a process outside of Mexico's corrupt courts and locks these protections in an international agreement beyond the reach of Mexican politicians. Under NAFTA foreign corporations operating out of Mexico would have full protection for their investment, duty-free access to the rich U.S. market and a plentiful supply of productive Mexican workers whose average total compensation, including benefits, is only $2.35 per hour -- one-seventh that of U.S. workers. By Mexico's own estimates, investors gain $15,000 or more per U.S. job that is shifted to Mexico. For U.S. companies undecided about moving to Mexico, NAFTA removes the remaining impediments and doubts.

NAFTA will weaken or strengthen U.S. sovereignty


NAFTA preserves U.S., Mexican and Canadian sovereignty: We are free to enforce our environmental, health and safety standards. Moreover, good dispute settlement processes help America enforce its rights.

Efforts under NAFTA to make laws or standards compatible among the three countries must be done "without reducing the level of safety or of protection of human, animal or plant life or health, the environment or consumers." Under NAFTA, state and local laws may be more stringent than federal laws and Article 713 explicitly provides that the U.S. can maintain measures more stringent than international standards.

Supplemental agreements on environment and labor require only that each government enforce its own laws. Commissions established will help settle disputes occurring when a government is not enforcing its own laws with adverse impact on a company's ability to compete. If a pattern of lax enforcement continues, trade sanctions could ultimately be brought against the country. Moreover, NAFTA provisions on antidumping and countervailing duties are as open as any U.S. court proceeding. And, of course, we can withdraw from NAFTA with six month's notice.


NAFTA would weaken U.S. sovereignty. If the U.S. government determines that Mexico is dumping products in the U.S. market at prices below their cost to manufacture, NAFTA allows Mexico to challenge this finding. The text of the agreement (Article 1904) states, "Each Party {nation} shall replace judicial review of final antidumping and countervailing duty determinations with binational panel review." These panels would be appointed by the respective governments. U.S. panelists would be chosen by the president. None of these panelists, who are in effect international judges, would be confirmed by the U.S. Senate. They would deliberate in secret; their decisions would be final; and any appeal would have to be made to another international panel -- and then only under "extraordinary circumstances" To discourage constitutional challenge to these procedures, the president would be authorized to accept as a whole the decisions of the binational panel -- even if the Supreme Court declares their creation and operation to be unconstitutional. The net effect of NAFTA is to allow international bureaucrats to second-guess decisions of the U.S. government.

NAFTA will increase or decrease illegal immigration into the United States.


The best prospect for reducing illegal immigration from Mexico is sustained robust economic growth in Mexico. A 1991 study by Robinson and Hinojosa-Ojeda of the University of California reported that Mexico's internal reforms and free trade with the U.S. would combine to reduce migration by between 262,000 and 1.1 million. William Spriggs, a NAFTA critic at the Economic Policy Institute concluded in May 1991 that NAFTA would reduce U.S. immigration from Mexico from what it would have been in the year 2000 by 1.4 to 1.6 million persons. These studies also find that this lower immigration will produce real wage increases of as much as 6 percent for low-wage U.S. workers.

Perot and Choate apparently think that Mexicans are both "inefficient" and "high-quality, highly productive." Which is it?

NAFTA recognizes that opening Mexico to competitive U.S. agricultural products, especially grains, could displace Mexican farmers from the countryside more faster than they can be absorbed by Mexican urban centers. But NAFTA provisions are designed to minimize such problems. For example, Mexican corn import restrictions on corn imports will phase out over 15 years.


Mexico has vast underemployment. Under NAFTA, inefficient and highly subsidized Mexican corn farmers would be pitted against highly mechanized U.S. agribusiness. Inevitably, hundreds of thousands of Mexican farm families would be displaced. Mexico has no social safety net for these and other displaced workers. Unable to find work in Mexico, many of them would come to the United States as illegal immigrants. So long as Mexico's wages are dramatically lower than ours, the United States will be a magnet for legal and illegal immigration. Yet Mexico, which is keeping wages low to attract foreign capital, refuses to allow higher productivity to be linked to higher wages. Under NAFTA, therefore, the United States would have the worst of both worlds: factories leaving in search of low-wage labor and many more immigrants from Mexico arriving in search of higher pay and a better life.

NAFTA will help or harm the working people of Mexico:


Mexican workers will clearly be better off with the worker protections in the NAFTA supplemental agreements. The NAFTA countries have committed to unprecedented labor rights protections. According to a review of studies by the International Trade Commission, NAFTA will increase Mexico's economy by as much as several percentage points and raise both Mexican and U.S. employment and average real wages.

President Salinas has publicly committed to linking increases in Mexico's real minimum wage to productivity increases. Because of the importance of the minimum wage in Mexico, this linkage will tend to raise wages across the board. Mexican wages have risen steadily over the last five years -- by 21 percent in 1992 alone.

Without NAFTA, environmental clean-up in Mexico will not be possible, nor will we be able to aid the enforcement of workers' rights in Mexico.

Since NAFTA will spur both U.S. and Mexican job growth, rejecting it would hurt workers in both economies. This is not a zero-sum game. Trading goods and services -- instead of people and jobs -- will be better for both countries.


The Mexican Constitution gives workers the right to organize their unions and the right to strike. But these rights are uniformly denied since any union must be certified by the Mexican government. If an independent union is formed and strikes, the government has no hesitation to use brutal tactics to suppress free association. In one U.S. corporation's factory in Mexico, a strike was broken recently when goons from the official union entered the plant and randomly shot eight workers, one of whom died. Then state police came into the plant and restored order. The message that Mexico sends to foreign investors is clear: The government will keep pay low and workers in line.

In both the basic NAFTA agreement and the side agreements, Mexico refuses to allow any oversight of its enforcement of labor rights guaranteed by law. NAFTA would maintain the status quo of official unions under the thumb of the Mexican government. So long as this continues, the working people of Mexico will not be able to improve their living standards.

NAFTA will help or harm Mexico's environment.


With regard to environmental protection, the status quo -- not NAFTA -- is the problem. This is the most environmentally conscious trade agreement in history. No prior treaty has ever provided for trade sanctions for failure to enforce environmental laws. This is why NAFTA is supported by such major environmental groups as the National Wildlife Fund, the Audubon Society, the National Resources Defense Council and the Environmental Defense Fund.

The treaty itself contains provisions to maintain and enforce existing U.S. health, safety and environmental standards, as well as U.S. international treaty obligations to limittrade in controlled products, such as endangered species. NAFTA also expressly endorses the principle of sustainable development.

Importantly, NAFTA's signatories specifically renounce relaxing environmental, health and safety measures for the purpose of attracting or encouraging investment. In the unprecedented supplemental agreement on environmental cooperation, Canada, Mexico and the United States pledge to ensure that their laws and standards continue to provide high levels of environmental protection and to work cooperatively in enhancing protections -- a commitment backed up by a dispute settlement process.


Mexico has strict environmental laws, but enforcement is lax. As a result, many U.S. companies have relocated factories to Mexico as a means of evading U.S. environmental regulations.

Under the NAFTA side agreements, Mexico has a choice of either enforcing its own environmental laws or paying a fine of up to $20 million. While this would be a great deal of money for a company, it is trivial for a government. Before a fine can be assessed, moreover, a complex, time-consuming review process must be followed. It would be conducted by an international panel. And at the end of the day, the U.S. government could waive the payment of any fines that may be assessed. Under these toothless procedures, Mexico is likely to remain a haven for corporate polluters.

NAFTA is or is not equitable to U.S. investors.


Again, the status quo is inequitable for U.S. investors, workers and exporters; NAFTA fixes it. In the past, Mexico sharply restricted the access to its market of many U.S. exports while encouraging U.S. firms to invest in Mexico in order to sell there. This situation was most visible in the auto sector where, by complex investment rules, unfair performance requirements and high tariff barriers, U.S. firms were forced to set up operations in Mexico as the only means of serving the Mexican market. By eliminating such governmental manipulations of investment in Mexico, NAFTA is expected to boost U.S. auto exports to Mexico from 1,000 vehicles now to 60,000 vehicles in the first year of NAFTA alone. Likewise current rules nearly prohibit the sale within Mexico of products produced in maquiladora operations and provide substantial tariff incentives to set up such assembly operations. Both will be eliminated by NAFTA.

Choate complains above that NAFTA's investment rules are so strong they will cost U.S. jobs; here he complains there are too many exceptions or delays in those provisions. The right answer is that NAFTA's investment rules will protect our investors from unfair treatment while eliminating rules that distort investment decisions in favor of Mexican products.


NAFTA provides comprehensive protections for companies that locate factories in Mexico. But for other investors, NAFTA is a one-sided deal. The agreement, for instance, allows Mexican investors to hold 100 percent of the stock of U.S. trucking companies that do business in both countries just three years after the pact is ratified. By contrast, U.S. investors cannot hold similar ownership in a Mexican company until 10 years after ratification.

NAFTA allows Mexican investors to own 100 percent of construction companies in the United States, but limits U.S. investors to 49 percent ownership in Mexican construction companies for the first five years of the agreement.

Mexican banks are permitted to operate in the U.S. market. But under NAFTA, Mexico would keep its largest banks off limits to U.S. investors and would limit all foreign investors from controlling more than 15 percent of the Mexican market by 1999. If non-Mexican banks hold 25 percent of the Mexican market between the years 2000 and 2004, Mexico could freeze the foreign-owned market share until the year 2007.

NAFTA will strengthen or weaken the enforcement of U.S. labor, food, health and enviromental laws and regulations.


NAFTA will obligate Mexico to effectively enforce its health and safety laws. At the same time, NAFTA will specifically safeguard the ability of U.S. federal, state and local governments to set whatever levels of protection they deem appropriate to protect human, animal or plant life or health. Far from encouraging "downward harmonization," NAFTA and the supplemental agreements contain provisions to improve standards and their enforcement throughout North America.

Under the supplemental agreements, commissions for environmental and labor cooperation will ensure all three signatory nations enforce their own laws. Failure to enforce worker health, safety and minimum wage laws or child labor restrictions will subject all NAFTA countries to dispute settlement and trade sanctions. Moreover, since we retain all our enforcement rights at the border, a challenge to our food safety standards by Mexico will not succeed, contrary to Choate's contention.

The United States, Canada and Mexico are individually free to maintain more stringent rules than international standards. Nothing in NAFTA requires preemption of state laws. NAFTA and NAFTA dispute settlement decisions cannot change our law, only state and local governments and the U.S. Congress can do that.


Under NAFTA, the flow of produce and meat from Mexico to the United States would increase dramatically. Yet Mexico permits its farmers to use many pesticides that are outlawed in the United States. Today the United States inspects only 2 percent of produce imported from Mexico for the presence of U.S.-banned pesticides. While NAFTA allows the United States to set higher hygiene and food safety standards than Mexico, it also allows Mexico (or Canada) to challenge these standards. In such challenges NAFTA requires that the decision-making panels go beyond the relevant scientific evidence to take into account "the objective of minimizing negative trade effects." In other words, under NAFTA the trade relationship with Mexico becomes a consideration in the formulation and defense of U.S. health and safety regulations.

NAFTA will or will not increase U.S. exports.


NAFTA is a sure bet to increase U.S. exports just as the post-1986 reductions in Mexico's trade and investment barriers have transformed a $5.7 billion U.S. trade deficit with Mexico into a $5.4 billion surplus. Mexico has become our second leading market for manufactured exports and our third largest market for agricultural products.

Choate downplays our exports to Mexico saying they consist of components shipped to Mexico for assembly and returned here. In fact, an estimated 83 percent of the growth in U.S. exports to Mexico since 1987 has been for use there.

Capital goods -- ranging from hospital, medical and scientific goods to aircraft, telecommunications and electrical generating equipment -- accounted for 33 percent of U.S. exports to Mexico. Mexico has enormous unfulfilled needs for such goods. When America, rather than Europe or Asia, supplies such products to Mexico, U.S. workers benefit.

The success of the past six years has occurred even though Mexican trade barriers remain far higher than ours. Bringing down the remaining barriers -- which is what NAFTA does -- will ensure continued growth of U.S. exports to Mexico and jobs here at home.


Mexico is a poor country and its market is small, only 4 percent that of the United States. What Mexico really offers is not a large market for exports, but a plentiful supply of low-cost, high-quality labor.

Thus, a third of U.S. exports to Mexico in 1992 were not exports at all but components assembled in U.S.-owned factories and then returned for sale in the U.S. market. Another third of U.S. exports were capital goods used to establish export-based factories in Mexico. A large portion of those factories are U.S.-owned. Indeed, hundreds of those factories were once located in the United States, employing American workers. Now they employ Mexicans.

Only a tiny fraction of U.S. exports ever enter the Mexican consumer market. Put another way, it is impossible to do business with consumers who don't have money. And so long as Mexico holds down the wages of its workers, the people of Mexico will remain unable to buy U.S. products.

In sum, under NAFTA, the primary U.S. exports to Mexico will be factories and jobs -- with the U.S. government's seal of approval.