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been to the Atlanta Saw Company, and we have talked to the 

 owner of Quaker Fabrics, in Fall River, Massachusetts, and we 

 have talked to Springs Industry in South Carolina, Keva Plastics 

 in Phoenix, Arizona. And they all come up with the same story. 

 Many of these are smaller businesses. They are going to do great 

 under NAFTA, and they are looking forward to it. 



Secretary Espy. Mr. Chairman, if I could just add a word? 



The Chairman. Yes, certainly. 



Secretary Espy. You know how concerned I am about jobs in 

 rural America and increasing the supply of jobs, and you also know 

 my background. I am from rural Mississippi, the Mississippi Delta, 

 an area that many would consider to be a prime target for the ex- 

 port of jobs from that region into Mexico. 



In addition to what the Ambassador has said, with the obvious 

 benefits of a prime market to supply for agricultural products 

 which will increase jobs in rural America, just let me say, Mr. 

 Chairman, that there are many other reasons why a small firm 

 would choose not to relocate from a rural area into Mexico that go 

 beyond the productivity and the wage issues. You have to look at 

 rural America and rural Mexico and consider that we have huge 

 advantages in transportation, huge advantages in infrastructure 

 development. As much as we lament it, it is to be said to our credit 

 that we are a lot better than some areas down there. We have huge 

 advantages when it comes to research and being close to research- 

 oriented universities and 1890 colleges; huge advantages in inter- 

 est rates and what it costs to set up a firm down there; and cer- 

 tainly, as has been said before, huge advantages in productivity of 

 workers. 



So I just don't see this immediate rush, even from areas such as 

 mine, down into Mexico. 



The Chairman. Thank you. I also know that we have to wonder 

 about some of the lost revenues. I realize Mexico has higher tariffs 

 on balance than we have on theirs, but when Secretary Bentsen 

 testified — I believe at the same time you were there — he told the 

 Finance Committee that we would lose about $2.5 billion in tariffs. 



What is our intention? I am thinking of the budget package we 

 just passed. How do we make up that $2.5 billion? I guess that is 

 $2.5 billion every single year. 



Ambassador Kantor. No, it is not. It is $2.5 billion over 5 years, 

 Mr. Chairman. 



The Chairman. Okay. How do we make it up? 



Ambassador Kantor. We are working on that right now with 

 both the Senate Finance Committee and the House Ways and 

 Means Committee. Obviously it is the largest cost of the NAFTA 

 given the pay-go system. We can, of course, take into account the 

 Fact that we will create about $6 billion a year in Government reve- 

 nues from the increased exports and imports that result in in- 

 creased business and agricultural activity. 



However, we believe that there is — through certain savings in 

 certain programs and other ways, we will be able to make up about 

 $500 million. It is less in the first year, as you might imagine. It 

 slowly will kick in, and then by year 5 it would have averaged $500 

 million for 5 years. But we would like to work with not only those 



