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JOB GROWTH AND TRADE WITH MEXICO 



Starting in 1986, Mexico, recognizing that its economic policies had been disas- 

 trous, began to lower trade and investment barriers. The results have been dramatic 

 for the United States: 



• From 1987 to 1992, we transformed a $5.7 billion trade deficit with Mexico into 

 a $5.4 billion trade surplus. 



• U.S. exports to Mexico increased from $12.4 billion in 1986 to $40.6 billion in 

 1992, with increases coming across the board from computers to services to agri- 

 culture. 



• Mexico has become our third leading export market, and our second leading 

 market for manufactured exports ($34.5 billion) and our third largest market for ag- 

 ricultural products ($3.7 billion). 



• Eighty-four percent of this growth in exports has been exports for Mexican con- 

 sumption. 



• Four hundred thousand U.S. jobs related to exports to Mexico were created. 



The success of the past 7 years has occurred even though Mexican trade bar- 

 riers — tariff and nontariff— remain far higher than ours. Bringing down the remain- 

 ing barriers, which is what NAFTA does, will ensure continued growth of U.S. ex- 

 ports to Mexico, which have been such a bright spot in our economic picture for the 

 past 7 years. 



Virtually every responsible study — and there have been over two dozen — con- 

 cludes that NAFTA will produce a net gain in jobs or an increase in real wages in 

 the United States. The consensus is that with NAFTA, an additional 200,000 jobs 

 related to exports will be created in the United States by 1995. While the studies 

 acknowledge that there will be some jobs lost in certain sectors, they agree that the 

 jobs lost will be a relatively small number compared to the jobs that are lost in the 

 United States overall, because of defense conversion, corporate downsizing, and 

 technological change. This is true because Mexico's economy is only one-twentieth 

 the size of ours and our tariff and nontariff barriers are already low. 



Despite the overwhelming evidence, some have argued that 5.9 million U.S. jobs 

 are at risk if NAFTA is adopted. They got that number simply by calculating the 

 number of U.S. jobs in industries where wages account for more than 20 percent 

 of the value of output. It includes high wage, nigh skill sectors such as sonar equip- 

 ment, aerospace, medical equipment and telecommunications where credible studies 

 agree that there will be a future job gain due to NAFTA. It also includes nontraded 

 sectors, such as bakers, which do not compete with Mexico at all. 



We believe the critics are looking at the future through a rearview mirror. To the 

 extent that there has been job loss to Mexico, it is precisely because of trade distor- 

 tions in the current trade relationship with Mexico, which we seek to change 

 through NAFTA. 



NAFTA AND THE STATUS QUO 



The status quo in our trade relationship with Mexico is, quite simply, unaccept- 

 able. NAFTA will level the playing field for U.S. workers. It makes the rules fair 

 and ends an unbalanced trading relationship that has existed between the United 

 States and Mexico that has worked to disadvantage U.S. companies and workers 

 producing in the United States. 



Historically, Mexico has been a closed, state-controlled economy. To shield its in- 

 dustry and agriculture from competition, it relied on tariffs as high as 100 percent 

 and a full range of nontariff barriers, including domestic content requirements, re- 

 strictions on investment, performance requirements to keep out exports, and import 

 licensing requirements. The result was that Mexico was largely closed to imports. 

 Its economy was characterized by inefficient, protected producers, which contributed 

 to widespread poverty and did not serve the interests of Mexico's people. 



Perhaps the closed Mexican economy reflected the historical Mexican mistrust of, 

 and antagonism toward, the United States. For whatever reason, Mexico remained 

 largely closed to U.S. business until U.S. and Mexican law combined to produce the 

 maquiladora program. But this program hardly resulted in an open Mexican mar- 

 ket. 



The maquiladora program resulted in trade preferences and incentives for compa- 

 nies to locate assembly plants in Mexico to produce for the U.S. market. It gave 

 products assembled in Mexico these preferences while at the same time maintaining 

 all of Mexico's trade and investment barriers. In fact, these maquiladora plants 

 were not allowed to sell in the Mexican market. The program thus created an artifi- 

 cial "export platform" in Mexico, with products assembled in maquiladora plants 

 being required to be exported to the United States. By 1992, there were over 2,000 



