85 



Mexico. The study stated that U.S. milk production is unlikely to move south in 

 order to take advantage of the cheap labor once the border is open because Mexico 

 doesn't have a large enough supply of water to support modern facilities. With a 

 cost of capital at 20 percent or more, poor infrastructure, and expensive inputs, 

 there isn't much incentive to move south. For similar reasons the beef industry is 

 not expected to shift south to Mexico. U.S. feedlots do not use much labor, and are 

 located near abundant feed supplies. Mexico just does not have the natural re- 

 sources necessary to support grain-fed beef. 



After a 15-year transition period, U.S. exports of all dairy products are projected 

 to total $250-300 million, about 15 percent higher than without NAFTA. Exports 

 of U.S. milk powder are projected to increase 50 percent, resulting in a gain of about 

 $36 million. Mexican import licenses are now the most significant trade barrier; 

 NAFTA will eliminate them immediately. The effect on U.S. producer prices can be 

 significant as powder is the residual or last resort use of milk. It, along with cheese, 

 sets the floor price for U.S. milk and milk products. 



So what does this mean to Vermont? Less pressure to downsize agriculture than 

 there would be without NAFTA; more U.S. jobs; more income in Mexico to spend 

 on U.S. value-added products of agriculture. NAFTA allows for easier flow of value- 

 added products into Mexico, which has a sizable middle class already established. 

 Mexico has enjoyed very favorable access to the U.S. market. One-fourth to one- 

 third of Mexicans have relatively high incomes creating a market nearly the size 

 of Canada for U.S. goods. Mexicans already purchase more per capita from the Unit- 

 ed States than the Japanese or Europeans. 



Many U.S. products currently carry heavy tariffs. Even so, the United States has 

 a trade surplus with Mexico of $5.4 billion in 1991 and $11.46 billion in 1992 com- 

 pared with a trade deficit of over $75 billion with Asia for 1991 — so much for less 

 jobs because of NAFTA. 



In 1991, the Mexican economy measured in terms of real domestic product (GDP) 

 grew 3.6 percent, while it fell in both the United States and Canada. During 1992, 

 in the midst of a worldwide recession the gain in real GDP slowed to 2.8-percent 

 real GDP. It is expected to grow by 3.2 percent and 4.2 percent in each of years 

 1993, and 1994.7 



NAFTA makes trade a two-way street. If we turn down NAFTA, we are relin- 

 quishing a $3.8 billion (1992) market for U.S. agricultural products to other provid- 

 ers, such as the EC. In addition, there is the potential for Mexico's shifting its cur- 

 rent trade with the United States to another partner as well. Currently, Canada 

 and Mexico are the second and third largest U.S. markets for agricultural exports. 



Remember in considering NAFTA and free trade in general— Vermont is an ex- 

 porter of products, goods, and services, whether it be to other States, or in the inter- 

 national arena. Cabot, Ben and Jerry's, IBM, Vermont Granite and Marble, forest 

 products, tourism, all would substantially decrease in business activity if operating 

 in an isolated mode. According to "The Economist" July 3 business section, Vermont 

 exports grew from $1 billion in 1988 to over $4 billion this year. I don't think we 

 want to change that trend. Americans can compete if the field is level, and if there 

 are established rules of play. Ten to fifteen years does allow time for adjustment. 

 Vermont industries have become quite flexible and noted for being innovative and 

 forward thinking. 



One final point, agriculture has a 4.5- to 7-percent multiplier effect on the econ- 

 omy of Vermont. Most agricultural products bring dollars into the State, and then 

 those producer dollars are spent several times over right here in the State. This is 

 true for beef and milk nationally as well. 



Value-added products will continue to be the success stories. U.S. grain will be 

 converted in the United States to these products creating jobs at home. According 

 to several dairy economists, NAFTA could put as much as $1 billion more income 

 into dairy farmers' pockets, and generate as many as 10,000 new jobs throughout 

 the dairy industry in this country. 



Allen Parker, of Ben & Jerry's Ice Cream, succinctly put the debate over the 

 NAFTA issue in perspective when he stated that, "NAFTA has become the lighten- 

 ing rod for a number of social issues." 



I trust that you will base your decision on the facts and what is good for the long- 

 term interest of this country. NAFTA means U.S. jobs. NAFTA means a stronger 

 American agriculture. NAFTA will help maintain and revitalize rural America. 

 NAFTA is a win/win situation for every American, Canadian, or Mexican, whether 

 they be a laborer, a farmer, a consumer, or an environmentalist. 



'Consensus Economics, Consensus Forecasts, (London: Consensus Economics, March 17, 

 1993), p. 362. 



