No one in the nation’s capital — or anywhere else, for that matter — can say with any certainty exactly how Nafta would affect the United States. This much is clear: Over time, by eliminating most tariffs and other trade and investment barriers dividing the United States, Canada, and Mexico, Nafta would create the world’s largest free-trade zone — a mammoth market of about 370 million consumers with $6.5 trillion in annual economic output.
But will Nafta create hundreds of thousands of new jobs for American workers, as its supporters claim, or will it send U.S. factories and the jobs that go with them to Mexico, in the eyes of Nafta opponents a land of cheap labor and lax government regulation? Will it open the doors of a hungry and fast-growing market to U.S. exporters, big and small, or give corporate America’s champion out-sourcers yet another unfair edge over smaller competitors that stubbornly cling to “Made in the U.S.A.”?
President Bill Clinton, who inherited Nafta from George Bush, used to count himself among the skeptics. During last year’s presidential campaign, Clinton said that he was dissatisfied with the agreement, which had been negotiated by Bush, Mexican President Carlos Salinas de Gortari, and former Canadian Prime Minister Brian Mulroney. As it stood, Clinton said, Nafta didn’t adequately protect American workers or the environment. Echoing the powerful statements of Sen. Daniel Patrick Moynihan (D-N.Y.) Clinton also expressed his deep concerns about human rights in Mexico.
Odd bedfellows
But a lot has changed since then. Moynihan, who became the chairman of the Senate Finance Committee in January (replacing Lloyd Bentsen of Texas, who is now Clinton’s treasury secretary), is now promising that he would “do what the president wants” on Nafta. U.S. Trade Representative Mickey Kantor filled in the blanks that the Bush administration left behind by negotiating Nafta’s all-important side agreements on labor and environmental issues, which were unveiled on August 13.
“With the completion of these side accords, we have turned Nafta into a path-breaking trade agreement,” Clinton said last summer. “This agreement helps our workers, our environment, our businesses, and our consumers.”
But well before that, in June, Thomas Donohue of the AFL-CIO, whom the Clinton administration had asked to advise it on Nafta-related labor issues, sent a letter to Kantor in which he said that all of organized labor’s hopes for meaningful measures to protect working people “have been dashed.” Kantor reportedly didn’t even bother to reply to Donohue’s letter. In July, Michael McCloskey, the chairman of the Sierra Club, complained that officials of the Clinton administration were “running a sales campaign for a product they have not yet designed. “
Consumer activist Ralph Nader, an outspoken critic of the proposed trade pact, unleashed his assorted watchdog outfits to nip away at Nafta. And Ross Perot, who may speak the language of small-business people better than any conventional politician, weighed in with a book: Save Your Job, Save Our Country: Why Nafta Must Be Stopped — Now! Perot has gleefully hit the hustings in a David-versus-Goliath drive to undo what had been widely viewed as a fait accompli.
Most Republicans like the treaty; most Democrats don’t. Senate Minority Leader Robert Dole of Kansas, for example, who has attacked Clinton on a host of issues and may run against him in 1996, stands four-square with the president on Nafta. But House Majority Leader Richard A. Gephardt of Missouri, who is one of Capitol Hill’s most influential thinkers on trade matters, opposes the treaty, as does House Majority Whip David E. Bonior of Michigan. In the House, Clinton must bank on the support of at least 110 Republicans to have a fighting chance of getting Nafta through.
Spin cycle
Then there’s Democrat John J. LaFalce ofNew York, the chairman of the House Small Business Committee. He opposes Nafta, too, but not necessarily for the reasons one might guess.
“Does the United States,” LaFalce asks, “want to link co-equal economic arms with a country that flaunts democratic principles, makes a mockery of human rights, and ignores basic freedoms of its people?”
It was LaFalce who invited Perot to Capitol Hill on March 24 to testify about Nafta. “Our committee has held five previous hearings on Nafta in an attempt to ensure that Congress hears all sides ofthe issue,” he said. “Other congressional committees also have focused on Nafta, but their witnesses for the most part have supported Nafta. The Small Business Committee has attempted to bring a modicum of balance to the review process. “
Even before it had ended, LaFalce’s hearing impelled a gaggle of pro-Nafta lawmakers to stage their own press conference in the House Radio and Television Gallery.
“Perot is heavy on the soundbites and light on the facts,” said Democrat Bill Richardson of New Mexico. And Democrat Robert T. Matsui of California, who is coordinating the Clinton administration’s in-House lobbying for Nafta, took aim at both LaFalce and Perot. “Some committees don’t have anything to do,” Matsui groused. “They may want a little attention, and so they call somebody like Ross Perot to show up so that all of a sudden we can get a national story out of it.”
Lost in the shuffle, for the most part, was perhaps the most powerful exchange of the morning: “Mr. Perot,” LaFalce asked, “you are a prominent businessman, but virtually every business group in America seems to be in favor of this Mexican-American free-trade agreement, and you’re opposed. Would you care to comment on why they favor it and why you oppose it?”
“Well,” Perot replied, “I think that it will be very profitable for U.S. companies. If you have your narrow special interest of your company in mind, if you want to break the union somewhere in this country, if you want to teach them to stop chasing cars and get in line, and you’ve got this 58-cent-an-hour slave labor down there . . . and you can go cheaper, there are other countries we can get cheaper than that. We can go to Thailand and get child labor. If you haven’t seen the pictures of those children at work, make sure some of your staff members get them for you. It’ll break your heart. You’ll say, ‘I thought this stopped 200 years ago.’ No, it’s alive and well around the world. And you and I are wearing those shirts.”
Just the facts?
If Perot has been “light on the facts,” Nafta’s proponents haven’t done much better. Consider the question of how many jobs it would create.
This from the U.S. Chamber of Commerce: “Every job directly supported by U.S. exports to Mexico is backed by two additional jobs in supporting industries. And every $1 billion increase in exports to Mexico will create 19,000 more jobs in the United States.”
And this from G. Edward Powell, a managing partner in the Houston office of Price Waterhouse & Company: “Economists will tell you that for every $10 billion the U.S. exports, it generates 300,000 jobs. So what that tells me is that 600,000 jobs were created in five years.”
What the Nafta boosters typically fail to mention, however, is the number of jobs that might be lost. The International Trade Commission, after reviewing studies that took into account the flow of jobs both ways, projected that Nafta would lead to a net gain for the United States of somewhere between 35,000 and 93,000 jobs.
The other side
Leading the charge for Nafta is USA*NAFTA, which bills itself as “a coalition of 2,700 large and small businesses and associations.” The group has raised and spent more than $2 million since it was formed in October 1992, and it recently mounted a drive to raise another $5 million for an eleventh-hour pro-Nafta advertising blitz.
Although USA*NAFTA likes to emphasize that its members include firms of just about every size and shape (from the A-l Mattress Factory in El Paso, Texas, to U.S. Axle Inc. in Pottstown, Pa. ), the Business Roundtable, which lobbies for the heavyweights of corporate America, is heavily represented in its leadership. When Lawrence Bossidy, the CEO Allied-Signal Inc., became USA*NAFTA’s new chairman in early September, he also took over the Business Roundtable’s working group on Nafta. And all 10 members of USA*NAFTA’s finance committee are drawn from the Roundtable’s ranks.
USA*NAFTA counts the U.S. Chamber of Commerce among its members, but not the National Federation of In- dependent Business, one of Washington’s most powerful small-business lobbies. NFIB, which methodically surveys its 600,000-plus members, has found them to be sharply divided over Nafta.
Little wonder. So far, the Clinton administration’s sales pitch to the nation’s small businesses has been downright anemic. Consider Kantor’s testimony to the House Ways and Means Committee on September 16. “Small businesses,” he said, “stand to be among the major beneficiaries
of Nafta.”
Why exactly? Here is Kantor’s explanation, in toto: “Small businesses are not well-equipped to employ attorneys and other professionals to wrestle with the tariff and licensing requirements which presently block the way to the Mexican market. With tariffs reduced or eliminated and non-tariff barriers coming down, U.S. small business, which makes up a growing share of U.S. exports, will be able to sell into the Mexican market.”
“It’s the cornerstone of the Clinton administration’s trade policy, and not just for the largest corporations,” added Commerce Secretary Ronald H. Brown. “This would be an incredible breakthrough for small and mid-sized companies, too. “
The big enchilada
An incredible breakthrough for small businesses? That’s not what some Capitol Hill lawmakers were hearing during Congress’s August recess. Rep. Eric D. Fingerhut (D-Ohio), for example, announced shortly before he returned to Washington that he will vote against Nafta because it would steal jobs from the Cleveland area, which he represents.
GOP leaders on Capitol Hill, who saw their pro-Nafta head count shrink by 30 following the recess, chalked it up to an unexpected wave of grass-roots hostility.
“We’re getting beat about the ears,” said Rep. Dick Armey of Texas, the chairman of the House Republican Conference and a Nafta supporter.
No kidding. In waxing rhapsodically about the beauty of a tariff-free playing field stretching from Canada to Mexico, Nafta’s top architects and advocates seem to have grossly overestimated the willingness of ordinary Americans to trust broad generalizations. They should have known that small-business people, in particular, are especially skeptical of such political promises. The proponents of Nafta will have to come from behind and put more meat on the bone if they are to win a close vote in the House in November.
This column originally appeared in the November/December 1993 issue of D&B Reports.
Down to the Wire
No one in the nation’s capital — or anywhere else, for that matter — can say with any certainty exactly how Nafta would affect the United States. This much is clear: Over time, by eliminating most tariffs and other trade and investment barriers dividing the United States, Canada, and Mexico, Nafta would create the world’s largest free-trade zone — a mammoth market of about 370 million consumers with $6.5 trillion in annual economic output.
But will Nafta create hundreds of thousands of new jobs for American workers, as its supporters claim, or will it send U.S. factories and the jobs that go with them to Mexico, in the eyes of Nafta opponents a land of cheap labor and lax government regulation? Will it open the doors of a hungry and fast-growing market to U.S. exporters, big and small, or give corporate America’s champion out-sourcers yet another unfair edge over smaller competitors that stubbornly cling to “Made in the U.S.A.”?
President Bill Clinton, who inherited Nafta from George Bush, used to count himself among the skeptics. During last year’s presidential campaign, Clinton said that he was dissatisfied with the agreement, which had been negotiated by Bush, Mexican President Carlos Salinas de Gortari, and former Canadian Prime Minister Brian Mulroney. As it stood, Clinton said, Nafta didn’t adequately protect American workers or the environment. Echoing the powerful statements of Sen. Daniel Patrick Moynihan (D-N.Y.) Clinton also expressed his deep concerns about human rights in Mexico.
Odd bedfellows
But a lot has changed since then. Moynihan, who became the chairman of the Senate Finance Committee in January (replacing Lloyd Bentsen of Texas, who is now Clinton’s treasury secretary), is now promising that he would “do what the president wants” on Nafta. U.S. Trade Representative Mickey Kantor filled in the blanks that the Bush administration left behind by negotiating Nafta’s all-important side agreements on labor and environmental issues, which were unveiled on August 13.
“With the completion of these side accords, we have turned Nafta into a path-breaking trade agreement,” Clinton said last summer. “This agreement helps our workers, our environment, our businesses, and our consumers.”
But well before that, in June, Thomas Donohue of the AFL-CIO, whom the Clinton administration had asked to advise it on Nafta-related labor issues, sent a letter to Kantor in which he said that all of organized labor’s hopes for meaningful measures to protect working people “have been dashed.” Kantor reportedly didn’t even bother to reply to Donohue’s letter. In July, Michael McCloskey, the chairman of the Sierra Club, complained that officials of the Clinton administration were “running a sales campaign for a product they have not yet designed. “
Consumer activist Ralph Nader, an outspoken critic of the proposed trade pact, unleashed his assorted watchdog outfits to nip away at Nafta. And Ross Perot, who may speak the language of small-business people better than any conventional politician, weighed in with a book: Save Your Job, Save Our Country: Why Nafta Must Be Stopped — Now! Perot has gleefully hit the hustings in a David-versus-Goliath drive to undo what had been widely viewed as a fait accompli.
Most Republicans like the treaty; most Democrats don’t. Senate Minority Leader Robert Dole of Kansas, for example, who has attacked Clinton on a host of issues and may run against him in 1996, stands four-square with the president on Nafta. But House Majority Leader Richard A. Gephardt of Missouri, who is one of Capitol Hill’s most influential thinkers on trade matters, opposes the treaty, as does House Majority Whip David E. Bonior of Michigan. In the House, Clinton must bank on the support of at least 110 Republicans to have a fighting chance of getting Nafta through.
Spin cycle
Then there’s Democrat John J. LaFalce ofNew York, the chairman of the House Small Business Committee. He opposes Nafta, too, but not necessarily for the reasons one might guess.
“Does the United States,” LaFalce asks, “want to link co-equal economic arms with a country that flaunts democratic principles, makes a mockery of human rights, and ignores basic freedoms of its people?”
It was LaFalce who invited Perot to Capitol Hill on March 24 to testify about Nafta. “Our committee has held five previous hearings on Nafta in an attempt to ensure that Congress hears all sides ofthe issue,” he said. “Other congressional committees also have focused on Nafta, but their witnesses for the most part have supported Nafta. The Small Business Committee has attempted to bring a modicum of balance to the review process. “
Even before it had ended, LaFalce’s hearing impelled a gaggle of pro-Nafta lawmakers to stage their own press conference in the House Radio and Television Gallery.
“Perot is heavy on the soundbites and light on the facts,” said Democrat Bill Richardson of New Mexico. And Democrat Robert T. Matsui of California, who is coordinating the Clinton administration’s in-House lobbying for Nafta, took aim at both LaFalce and Perot. “Some committees don’t have anything to do,” Matsui groused. “They may want a little attention, and so they call somebody like Ross Perot to show up so that all of a sudden we can get a national story out of it.”
Lost in the shuffle, for the most part, was perhaps the most powerful exchange of the morning: “Mr. Perot,” LaFalce asked, “you are a prominent businessman, but virtually every business group in America seems to be in favor of this Mexican-American free-trade agreement, and you’re opposed. Would you care to comment on why they favor it and why you oppose it?”
“Well,” Perot replied, “I think that it will be very profitable for U.S. companies. If you have your narrow special interest of your company in mind, if you want to break the union somewhere in this country, if you want to teach them to stop chasing cars and get in line, and you’ve got this 58-cent-an-hour slave labor down there . . . and you can go cheaper, there are other countries we can get cheaper than that. We can go to Thailand and get child labor. If you haven’t seen the pictures of those children at work, make sure some of your staff members get them for you. It’ll break your heart. You’ll say, ‘I thought this stopped 200 years ago.’ No, it’s alive and well around the world. And you and I are wearing those shirts.”
Just the facts?
If Perot has been “light on the facts,” Nafta’s proponents haven’t done much better. Consider the question of how many jobs it would create.
This from the U.S. Chamber of Commerce: “Every job directly supported by U.S. exports to Mexico is backed by two additional jobs in supporting industries. And every $1 billion increase in exports to Mexico will create 19,000 more jobs in the United States.”
And this from G. Edward Powell, a managing partner in the Houston office of Price Waterhouse & Company: “Economists will tell you that for every $10 billion the U.S. exports, it generates 300,000 jobs. So what that tells me is that 600,000 jobs were created in five years.”
What the Nafta boosters typically fail to mention, however, is the number of jobs that might be lost. The International Trade Commission, after reviewing studies that took into account the flow of jobs both ways, projected that Nafta would lead to a net gain for the United States of somewhere between 35,000 and 93,000 jobs.
The other side
Leading the charge for Nafta is USA*NAFTA, which bills itself as “a coalition of 2,700 large and small businesses and associations.” The group has raised and spent more than $2 million since it was formed in October 1992, and it recently mounted a drive to raise another $5 million for an eleventh-hour pro-Nafta advertising blitz.
Although USA*NAFTA likes to emphasize that its members include firms of just about every size and shape (from the A-l Mattress Factory in El Paso, Texas, to U.S. Axle Inc. in Pottstown, Pa. ), the Business Roundtable, which lobbies for the heavyweights of corporate America, is heavily represented in its leadership. When Lawrence Bossidy, the CEO Allied-Signal Inc., became USA*NAFTA’s new chairman in early September, he also took over the Business Roundtable’s working group on Nafta. And all 10 members of USA*NAFTA’s finance committee are drawn from the Roundtable’s ranks.
USA*NAFTA counts the U.S. Chamber of Commerce among its members, but not the National Federation of In- dependent Business, one of Washington’s most powerful small-business lobbies. NFIB, which methodically surveys its 600,000-plus members, has found them to be sharply divided over Nafta.
Little wonder. So far, the Clinton administration’s sales pitch to the nation’s small businesses has been downright anemic. Consider Kantor’s testimony to the House Ways and Means Committee on September 16. “Small businesses,” he said, “stand to be among the major beneficiaries
of Nafta.”
Why exactly? Here is Kantor’s explanation, in toto: “Small businesses are not well-equipped to employ attorneys and other professionals to wrestle with the tariff and licensing requirements which presently block the way to the Mexican market. With tariffs reduced or eliminated and non-tariff barriers coming down, U.S. small business, which makes up a growing share of U.S. exports, will be able to sell into the Mexican market.”
“It’s the cornerstone of the Clinton administration’s trade policy, and not just for the largest corporations,” added Commerce Secretary Ronald H. Brown. “This would be an incredible breakthrough for small and mid-sized companies, too. “
The big enchilada
An incredible breakthrough for small businesses? That’s not what some Capitol Hill lawmakers were hearing during Congress’s August recess. Rep. Eric D. Fingerhut (D-Ohio), for example, announced shortly before he returned to Washington that he will vote against Nafta because it would steal jobs from the Cleveland area, which he represents.
GOP leaders on Capitol Hill, who saw their pro-Nafta head count shrink by 30 following the recess, chalked it up to an unexpected wave of grass-roots hostility.
“We’re getting beat about the ears,” said Rep. Dick Armey of Texas, the chairman of the House Republican Conference and a Nafta supporter.
No kidding. In waxing rhapsodically about the beauty of a tariff-free playing field stretching from Canada to Mexico, Nafta’s top architects and advocates seem to have grossly overestimated the willingness of ordinary Americans to trust broad generalizations. They should have known that small-business people, in particular, are especially skeptical of such political promises. The proponents of Nafta will have to come from behind and put more meat on the bone if they are to win a close vote in the House in November.
This column originally appeared in the November/December 1993 issue of D&B Reports.
Nafta North American Free Trade Agreement