42 



Ambassador Kantor. The hammer can only be exercised upon 

 certain things happening, as you know. 



Senator Harkin. And we have exercised it. There is a 4-percent 

 tariff. The white goods industry is so competitive, 4 percent means 

 a lot. It is not so much the 20 percent. Four percent could mean 

 a lot. 



You put that 20 to nothing without our ability to impose those 

 GSP tariffs, and we give up the hammer that we hold. And they 

 know because we have done it before. We put on a 4-percent tariff. 

 They know if they sharply increase shipments, we will impose a 

 GSP tariff on refrigerators or other appliances as we did on stoves. 



If we don't have that tariff hammer — because it is such a com- 

 petitive industry — 3, 4, 5, years is a lot of lead time for Mexican 

 production even though you may be starting to phase Mexican tar- 

 iffs out. But if you don't have an acceleration, I can tell you 

 Amana, Maytag, and Frigidaire are really going to be hurt. If I am 

 not mistaken, the ITC predicts that we are going to reduce our em- 

 ployment in the home appliance sector, I think by upwards of 10- 

 15 percent, just as it is now. 



I say to you that in that smaller sector of the major appliances — 

 stoves, refrigerators, things like that — it is going to be a very dam- 

 aging blow unless we have Mexican tariff reductions accelerated or 

 unless we keep that hammer that we have of putting that GSP tar- 

 iff on if they exceed a certain amount of exports to the United 

 States. 



That is a big issue for us in Iowa. That is a lot of jobs. And they 

 are important jobs, and I just don't think it is fair. 



Ambassador Kantor. Well, I am not going to be defensive at all. 

 We have agreed to try to reach agreement with the Mexicans for 

 a negotiation to decelerate those tariffs, and we will continue those 

 discussions. We hope, before the Senator I am talking to has to 

 vote, we accomplish that. 



Senator Harkin. Well, I still haven't decided how to vote on this 

 agreement yet. I see good in it, and I see bad in it, and I just have 

 to see how the scales tip. 



Thank you. 



The Chairman. Senator Boren. 



Senator Boren. Mr. Ambassador, first of all, I want to com- 

 pliment you on the job that you have done, I think, to improve this 

 agreement and to strengthen it since the time you took over these 

 responsibilities and your colleagues working with you. I think you 

 have made a very strong case that, on balance, trie agreement is 

 in our national interest. If we have a situation where the tariffs are 

 2V2 times as high on our products coming into Mexico as our tariffs 

 and duties are on theirs coming into this country, that clearly 

 shows that, from a big-picture point of view, we are better off to 

 get rid of those barriers. 



I think that some of the scare tactics that have been used, as you 

 have well pointed out, certainly overstate even the temporary 

 losses to our country. The idea that an economy 4 percent the size 

 of ours is somehow going to overwhelm us simply I think is not 

 something that really bears close scrutiny when we think about it. 

 And, of course, the long-term relationship between our two coun- 

 tries is so incredibly important to us — in fact, to all three countries. 



