The trouble with Nafta

MENTION trade liberalisation on Capitol Hill just now and one acronym comes to most people's minds. It is not - as Europeans might expect - Gatt but rather Nafta, the North American Free Trade Agreement.

Politically, for most Democrats anyway, it spells 'trouble'. Signed by the leaders of Canada, the United States and Mexico in the last weeks of the Bush presidency, the Nafta treaty is scheduled to come into effect at the start of next year. It must first be ratified by the US Congress, however, and its prospects here appear less than certain.

You can discern this partly from the recent rush of heavyweight articles promoting Nafta's cause in the New York Times and the Washington Post. The authors are not unknowns. They have included Henry Kissinger and Lawrence Eagleburger, the former acting Secretary of State. Their message is that we would torpedo the pact at our peril.

At stake is no paltry agreement, but a pact between the three nations to create a single trading zone, free of tariffs and other barriers to trade, within 15 years. The outcome would be a single market of 370 million consumers - eclipsing even the European Community's market - with a combined gross national product of dollars 6,000bn a year.

The case for the treaty is basically that for free trade itself: that open borders lead to benefits for all, prompting increased economic activity, more jobs and more prosperity. In this instance, the political fate of Mexico is tossed into the mix. Deny Mexico the treaty, Mr Kissinger and others warn, and its journey under President Salinas towards democracy and a free-market economy would be derailed, perhaps even reversed.

The opposing camp has been inspired by Ross Perot, the loquacious Texan billionaire and former presidential hopeful. Enact Nafta, he claims, and the result would be a 'giant sucking sound' as American jobs drain south to Mexico with its cheap labour and minimal regulation. The image is potent.

President Clinton has committed himself to Nafta. Backing away from it would make a mockery of the free- trade, economic-growth credentials he so carefully paraded at last month's industrialised summit in Tokyo. The administration is making some efforts, however, to sweeten the pact for doubters. It is in the final stages of negotiating protocols with Mexico and Canada to set down loose rules on labour protection and environmental standards.

Last week, US trade officials also said they had reached provisional agreement on creating a joint agency to raise funds, through bond issues, to pay for the environmental clean-up of the heavily abused US-Mexico border corridor.

Not enough, says Bob Filner, a Democratic freshman in the House of Representatives, who predicted last week that on current form, the Nafta treaty would fail to win the necessary votes in Congress. He reports that among the 63 freshmen Democrats - who joined Congress this year - 60 are determined to oppose it.

His view is particularly strong, perhaps, because his district is the southern half of San Diego, pressed hard against the Mexican border and a first landing stage for illegal immigrants pouring into southern California at the rate of almost 1,000 a day.

'All that my constituents see in the agreement is jobs going south over the border and raw sewage coming north,' says Mr Filner, who reports that every day his district postbag comes stuffed with anti-Nafta sentiment. Roughly 16 million gallons of untreated excrement is carried by river into his district each day. 'They see nothing but problems.'

Mr Filner's reservations are fairly typical. Like Mr Perot, he does not buy the argument that in the long run the treaty will mean more jobs for Americans. That, he says, sounds like the 'trickle-down' school of economics beloved by the Republicans. 'Trickle-down is hard to sell at the moment,' he explains. 'I believe it is a trickle-down treaty designed by and designed for the interests of big corporations.'

Nor does the congressman believe that losing jobs is the only risk. Another danger, he argues, is that as American corporations flee south in search of lower wage and labour protection costs, they will be able to force down similar costs in the US, reducing the conditions and wages of American workers to Mexican levels.

These considerations beg a debate not dissimilar to those familiar in Brussels and Westminster. For Nafta to benefit ordinary American and Mexican people, should it be accompanied by generous US grants to help Mexico upgrade its physical and social conditions, as well as by a full- blown social chapter to prevent the exploitation of Mexico's workforce?

To some extent the issue is being confronted in the negotiation of the two side protocols. Europeans will not be surprised to hear, however, that these talks quickly became snagged on the question of sovereignty and how any punishment would be meted out in cases where labour protection and environmental standards are violated.

In that case, is Nafta destined to die? The warnings of Mr Kissinger and others notwithstanding, the administration itself - and in particular the President - has not yet fully engaged itself in the fight to save the treaty. Once the present struggle to push the Clinton economic programme through Congress is done, however, that may change.

Clinton loyalists are already urging him to put off any consideration of Nafta until the health package has been successfully handled. But that would almost certainly not be until the end of this year. So at the very least, the deadline for enacting Nafta by next January is in doubt. If, that is, the treaty is to survive at all.