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Ambassador Kantor 



Mr. Chairman, members of the committee, I am pleased to appear before you 

 today, along with Secretary Espy, to set forth the Clinton administration's case for 

 the North American Free Trade Agreement (NAFTA), with the recently negotiated 

 supplemental agreements. As some of you know, last Wednesday, I presented testi- 

 mony to the Senate Finance Committee on this issue with Secretary of State War- 

 ren Christopher and Secretary of the Treasury Lloyd Bentsen. A week ago today, 

 I appeared before the House Committee on Ways and Means with the Secretary of 

 Labor Robert Reich and EPA Administrator Carol Browner. 



Over the next few weeks, I and my cabinet colleagues will be participating in 

 other hearings focusing on the NAFTA in both the House and the Senate. We appre- 

 ciate these opportunities to present the administration's case on why the approval 

 of NAFTA is strongly in the national interest. 



NAFTA AND THE ADMINISTRATION'S ECONOMIC STRATEGY 



Against a background of intense debate, a mountain of misinformation, and con- 

 siderable hyperbole, it is important to remember NAFTA really does a very simple 

 thing. It eliminates over time tariffs and nontariff barriers among the United 

 States, Mexico and Canada, creating the wfirld's largest market: 370 million people 

 and $6.5 trillion of production. 



NAFTA will reinforce and enhance the free trade agreement negotiated between 

 the United States and Canada and will help equalize the terms of trade between 

 the United States and Mexico. Current rules clearly are in Mexico's favor. Mexico's 

 trade-weighted tariffs average 10 percent, compared with 4 percent for the United 

 States. Mexico is also a major beneficiary of the Generalized System of Preferences 

 (GSP). This means that a significant portion of its exports to the United States 

 enter duty free under this GATT-sanctioned tariff preference program for developing 

 countries. The GSP program is a one-way tariff preference program. 



In the agricultural sector, Mexico maintains an extensive system of licenses is- 

 sued at the government's discretion which control imports of a broad range of farm 

 goods. In most cases, Mexico's agricultural import licensing requirements were es- 

 tablished specifically to protect against the threat of unrestricted imports from the 

 United States. While the United States also maintains nontariff barriers on certain 

 agricultural products (Section 22 quotas on dairy products, peanuts, certain types 

 of cotton, and sugar-containing products, as well as potential restrictions on beef 

 and other meats under the U.S. Meat Import Law), Mexico is not a major exporter 

 of any of these products. In our bilateral relationship, the maintenance of these non- 

 tariff barriers helps Mexico much more than than it helps us. Conversely, the elimi- 

 nation of these barriers will be more beneficial to the United States than to Mexico. 



The vast new market created by NAFTA also makes us more competitive against 

 Europe and Japan and will result in the creation of new jobs. And it is a vital ele- 

 ment of the President's overall economic strategy. 



President Clinton and this administration are committed to building the strong- 

 est, most productive, most competitive economy in the world. By doing so, we will 

 expand high wage and high skill job opportunities for United States workers and 

 for their children who will be entering the work force. 



We are finally facing the fact that our economy, as well as the global economy, 

 is changing. 



As all of you are all too aware, over the last 20 years, real wages and job opportu- 

 nities for unskilled workers in manufacturing have declined. But at the same time, 

 technological advances have made American workers more productive. Technology 

 has revolutionized the world, as well. Our economy is no longer self-contained. We 

 compete in a global economy, where capital and technology are mobile. These trends 

 are here to stay. The question is not whether we adapt to them, but how. 



Our economic strategy started with the President's economic package: putting our 

 economic house in order by attacking the budget deficit, increasing public and pri- 

 vate investment, and undoing some of the unfairness in the tax code by making 

 upper income taxpayers pay their fair share of the burden. We are beginning to see 

 the benefits of Congress s approval of the package last month: Interest rates at a 

 30-year low, job creation, and a growing economy. 



Our drive for health care reform is fundamentally motivated by the desire to se- 

 cure for every American access to the health care that they and their families need. 

 But the soaring cost of health care also makes our strongest corporations uncompeti- 

 tive and threatens the existence of many small businesses. Similarly, our initiative 

 to reinvent government is intended to make government more effective and acces- 

 sible, but it will also reduce the size and cost of government, freeing up resources 

 that can be used for productive investment. 



