This is the second time I've come here to The Heritage
Foundation to talk about the North American Free Trade Agreement
(NAFTA). The first time was back in December, and I was still
Secretary of Commerce.
I was also just off the campaign trail, where the rhetoric about
the NAFTA had been fierce. As I traveled through many states during
the campaign, I was frequently struck by the intensity of the fear
about job loss in some parts of our country generated by the mere
mention of the words "free trade."
As you know, this is a false fear. Trade is not a zero-sum game,
where someone wins and someone loses. It is a positive-sum game
where everyone wins. Expanding the global economic pie through
trade creates more jobs and prosperity for everyone, everywhere.
Here in the United States, we estimate that every one billion
dollars of merchandise exports supports more than 19,000 jobs.
Status of the NAFTA
Still, the fear is there. Opponents of the NAFTA are well
organized and have been filling the airwaves with negative
commentary for the past several years. Those of us who favor the
agreement have been much less organized and much less vocal. The
result is a grave imbalance in the information most people have
about the treaty.
We are paying for this. The NAFTA is in trouble on Capitol Hill.
If voted on today, the agreement would lose. That was succinctly
pointed out last week by President Clinton's budget director. Now,
we must turn this around, make the case for the agreement, and
redress the imbalance of information out there. The need to do this
is urgent. We have only weeks to change people's minds.
I was pleased to note the recent positive comments of the U.S.
Trade Representative and the Deputy Secretary of State about the
progress in the negotiations of the two parallel agreements -- on
worker rights and the environment -- and the desire to have the
NAFTA agreement to Capitol Hill in July and voted on favorably so
it can take effect early next year. In Mexico about ten days ago, I
talked with Secretary Jaime Serra Puche, who also expressed
optimism about the progress being made and indicated that the side
agreements could be finished by June. Our negotiators are doing
their jobs. Now, we must do ours. And, in the end, I believe
President Clinton will have to weigh in forcefully to ensure the
The Case for the NAFTA
The case for the NAFTA is compelling.
First, it will increase economic growth in each of the three
countries -- the U.S., Canada, and Mexico. More trade always does
this, and I believe this historic, state-of-the-art agreement will
lead to more trade.
As you know, the NAFTA creates a free trade area with a market
close to the European Community in size -- 360 million consumers
with a total output of $6.5 trillion. The NAFTA will unleash the
North American continent's abundant man-made and natural resources
-- from labor and technology to capital and energy. Projections are
that the agreement will increase U.S. economic growth alone by $35
billion in the next decade.
The NAFTA strikes down barriers to trade and investment. It
eliminates all tariffs over a phased-in period. It removes the 10
percent average duty in Mexico -- a duty that is two and one-half
times that of the United States. The agreement also reduces service
barriers, import licenses, local content and export
The agreement does all this while successfully balancing
legitimate environment and industry-specific concerns. It is the
first trade agreement to deal with environmental concerns. That, I
believe, will be a model for the future.
My own view is that the benefits of the NAFTA will be even
greater than we now expect because the volume of trade will exceed
expectations -- just as it has during the past several years.
Look at what the free trade agreement with Canada has done for
our two countries. Last year, total trade between the United States
and Canada reached a record of $201.9 billion. Canada exported a
record $98.5 billion to the United States, and Americans sent back
an unprecedented $90.6 billion in goods and services. Investment by
Canada in the United States -- and vice versa -- is at an all-time
Visualize the possibilities when we add Mexico to the mix.
Mexico is now the fastest growing major market for U.S. exports in
the world. It is also the second largest market for U.S exports of
manufactured goods, surpassing Japan for that honor in 1992. We
sent a record $40.6 billion in exports to Mexico last year. U.S.
exports across the southern border have risen at an average annual
rate of 22 percent since 1987 -- twice as fast as U.S. exports
The U.S. Department of Commerce estimates that the 1988
agreement with Canada has created well over 100,000 new jobs in our
country -- with a total of 1.5 million workers involved in exports
to Canada. And even without a free trade agreement, exports to
Mexico are estimated to support more than 700,000 U.S.
This leads to the second reason the NAFTA is important -- it
will create jobs here in the U.S. I have seen a variety of studies
about job loss and creation. The one I cite most often, by the
Institute for International Economics, estimates jobs lost at
150,000, jobs created at 325,000--for a net gain of 175,000 new
jobs. If the volume of trade exceeds our estimates, as I expect it
will, then so will estimates of jobs created. And, the jobs created
will be good jobs. The Department of Commerce estimates that
export-related jobs pay 17 percent more than the average
Last summer, the Commerce Department, on my watch, published a
book, U.S. Exports to Mexico: A State-by-State Overview, which
shows exports to Mexico by state and by product category for the
past five years. Many people have been quite surprised at these
data. I have found the book enormously useful in making the case
for increased job creation as a result of more trade. As one might
expect, Texas leads every other state in exports to Mexico by a
substantial margin, followed by California, Michigan, Illinois, and
Incidentally, it is a mystery to me that Ross Perot can be so
ardently against the NAFTA. How can anyone from Texas be against
what has been already a great economic boon for that state -- more
$15 billion in exports last year alone? His unfortunate comment
about the "great sucking sound" of jobs crossing the border has
been a very graphic and damaging sound bite.
The aggregate numbers of jobs created are not enough to compete
with media-styled sound bites like this. Nor are they enough to
allay the fears of many people about jobs being exported. This is
best done by citing concrete examples of job creation.
One story I like to tell is about the experience of the Falcon
Products company. Headquartered in Missouri, this company is a
commercial furniture maker with operations in both Mexico and the
United States. Falcon has had tremendous job growth on both sides
of the border in the last seventeen years. Beginning with ten
employees in Juarez, Mexico, in 1974, Falcon now has 130 in Juarez.
And the company has gone from sixty workers in St. Louis, Missouri,
to 600 all over the United States.
In addition to citing examples like this, we supporters of the
NAFTA need to highlight the real opportunities that U.S. companies
are finding in Mexico and their potential for job creation. For
example, environmental cleanup -- and the infrastructure that goes
with it -- are real opportunities for U.S. firms.
The bottom line, now matter how we explain it, is that the NAFTA
will create U.S. jobs.
Third, the NAFTA is the first step in an even greater and more
exciting vision -- the Enterprise for the Americas Initiative. That
initiative, first announced by President Bush in 1990, visualizes a
hemispheric free trade area extending from the tip of South America
to the tip of Alaska. Once again, the objective is more trade, more
economic growth, and more jobs -- for the U.S. and for people
everywhere throughout this hemisphere.
Latin America already is the fastest growing regional market for
U.S. exports -- faster by far than the markets of Europe or Asia.
We ran a $6.5 billion surplus with Latin America in 1992; exporting
$75.5 billion in goods and services to those countries last year.
This was a $12.5 billion increase over the $63 billion in exports
we sent south in 1991.
In recent years, many of the nations of the hemisphere have
moved toward freer markets. They have lowered barriers and
privatized. They have worked to control inflation, restructure and
pay off their debts, and stabilize their currencies. They have
moved toward more democracy and more stability. I remember going to
Argentina and Brazil just after the Enterprise for the Americas
Initiative was announced and being closely questioned about whether
the U.S. was really serious. Of course, the answer was yes. Those
nations took us at our word. The hope of becoming part of a
hemispheric free trade area gave momentum to their economic reforms
and helped soften and explain the accompanying sacrifices that
would have to be made.
But the NAFTA is the first step toward making this grand vision
a reality. We here in the U.S. have said as much. Last summer when
President Aylwin of Chile visited the U.S., President Bush promised
him that Chile would be next in line to join the free trade area --
once the NAFTA was ratified. I can tell you that while I was
Commerce Secretary, there was hardly a day that passed that a Latin
American country commerce or finance minister was not on the phone
or in the office wanting to make sure that his or her country was
also on the list.
President Clinton has said he will honor this promise to Chile.
He has also indicated his desire to proceed with the vision.
While we debate the NAFTA, our Latin American neighbors are
joining together in a network of bilateral and multilateral trade
agreements. The Central American Common Market, the Caribbean
Community and Common Market, the Andean Pact, and the Common Market
of the Southern Cone, which includes Argentina, Brazil, Paraguay
and Uruguay, are trading freely, creating jobs and stimulating
economic growth among their member nations. In addition, a number
of countries have reached or are negotiating bilateral economic
integration agreements that are precursors to free trade
agreements. Mexico already has agreements with Chile and Venezuela,
and Venezuela has one with Colombia. Others are being
Under President Bush, the United States was leading the way in
laying the groundwork for creation of a hemispheric free trade
zone. We negotiated sixteen "framework" agreements to liberalize
trade with Latin American and Caribbean countries and pave the way
for President Bush's visionary Enterprise for the Americas
The United States now has "framework" agreements with all the
nations of Latin America and the Caribbean except Haiti, Cuba, and
Guyana. For every country that has signed an agreement, a council
has been created to meet and work out agreements for removing trade
impediments. The councils are the vehicles for moving toward free
trade throughout the hemisphere. My understanding is that, under
the Clinton Administration, these councils are continuing to meet.
I hope so. We get more bang for our bucks by solidifying free trade
areas with Latin America than anywhere else in the world.
NAFTA As a Signal
If the NAFTA should fail to be passed, this would send a
terrible message to Latin America. It would be a shameful
indictment of U.S. leadership in this hemisphere and there could be
unfortunate repercussions. Those who advocated economic reforms
could be drowned out. Some backward steps could follow -- both for
free markets and for democracy. There could be some social unrest
and other negative consequences.
I just returned from a conference of Pan American CEOs and
government officials in Mexico City. I heard this message from them
loudly and clearly.
Of course, our friends in Mexico -- President Salinas and his
government -- are immediately at risk, and there could be, I'm
afraid, a political backlash in Mexico; if not now, then when
presidential elections are held next year. I spoke with President
Salinas at this conference. He said at one point -- I'm
paraphrasing -- that "when we started on this journey toward a free
trade agreement, we were worried about our strong and mighty
neighbor to the north. We were concerned about being overwhelmed.
Now, we hear from the north that you are concerned that the greater
linkage with our economy will cause massive displacement in yours.
We are, after all, the mightiest of partners."
One further point: We need to pass the NAFTA to lock in the
great gains the agreement makes in opening markets and freeing up
trade and investment flow. The same reasoning applies to the need
for a hemispheric free trade agreement.
The consensus at the conference I just attended seemed to be
that economic growth, trade, and investment among all the nations
of the Western Hemisphere would probably continue to grow with or
without the NAFTA and with or without a hemispheric free trade
agreement. But the pace would be faster, more certain, and have
more longevity with the NAFTA in place and the Enterprise for the
Americas Initiative on the horizon.
It is unthinkable to do anything other than pass this historic
agreement which will do so much for our hemisphere. But, there are
110 new members of Congress, and it is difficult to tell how each
one would vote on the issue. How they intend to vote will, of
course, depend, at least in part, on how their constituents feel.
And we are faced with the fact that we have no national consensus
supporting the NAFTA or free trade. Members of Congress -- and not
just the new ones -- need to learn now about the benefits and
job-creating potential of this agreement. So must their
constituents. So all of us who favor the agreement should be
visiting our representatives and encouraging our friends to do so
-- now. We are going to have to fight for this agreement if we want
it. And I hope President Clinton will lead the charge.
It is ironic that at the very time we here in the U.S. have
before us an unprecedented opportunity to look outward and reach
anew into all the new markets opening around the world, that we
seem to be looking inward and seem to fear what more trade will
The U.S. is the world's largest economy and the world's largest
exporter. Our objective should be to keep us number one. During the
last three years, exports have accounted for more than half of our
economic growth, increasing at 6 percent to 7 percent per year.
Merchandise exports now are a greater share of our economy than at
any time since World War II. Today, one of every six manufacturing
jobs in this country is tied directly to exports. And these are
good jobs, paying 17 percent more than the average manufacturing
But, the best is yet to come. Right now, only one in three
American manufacturing companies that could export actually does
so. Exports -- both goods and services -- account for only about 11
percent of our GDP. This compares to 15 percent to 30 percent for
our major trading partners. That leaves plenty of room for
There is clearly a window of opportunity open now with all the
new markets emerging around the world. But we need to decide, as a
nation, that we're going to "go for it"; that we're going to
continue to lead the world; that we're going to look outward, not
inward. As Commerce Secretary, I advocated setting a national goal
of increasing our exports as a percent of our GDP to 15 percent by
1996. This would create tens of thousands of new jobs here in the
I think we can do it.
Not only that, I think there is no other option if we are to
continue growing and creating jobs. Our long-term economic future
depends on it.