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New export opportunities: trading with Mexico.

NEW EXPORT OPPORTUNITIES

Last year Utah companies exported more than $30 million in goods to Mexico, directly employing more than 12,000 people in the process. Of Utah's total exports to the world, Mexico's share is just less than 3 percent. Mexico in 1989 ranked 12th among Utah's 123 export markets, and third among all U.S. markets. By the year 2000, Mexico will be a market of 100 million people.

Emerging Markets for Utah Exporters

Ongoing trade negotiations with Mexico's President Salinas will significantly open up new markets for Utah exporters. Presently, companies such as Kennecott, Jetway Systems, Novell, and mining-equipment manufacturers are selling products to Mexico. Utah's leading exports to Mexico are scientific measuring equipment, paper, rubber, plastics, computers, industrial machinery, and food products.

Congress voted on May 23 to approve H.Res. 146, thereby extending the fast-track procedure regarding trade relations with Canada, Mexico, and more than 100 other nations. Fast track grants flexible authority to the president to negotiate international trade agreements without intervention from Congress. The U.S. and Canada negotiated similar fast-track procedures two years ago, resulting in the elimination of most duties.

"That policy expired June 1 of this year, and Congress has extended the two-year authority to 1993, allowing the White House and Latin America," said Dennis Tenney, foreign trade executive with the International Trade Division of the Utah Department of Economic Development. "If either House had voted no, fast track would have been discontinued.

"Utah companies have a tremendous opportunity that did not exist as recently as three or four years ago for exporting Utah products to Mexico," Tenney reported.

A Boost to GATT Talks

The U.S. Mexico, and several other countries are members of the General Agreement on Tariffs and Trade (GATT), having agreed to reduce their tariffs and open their borders in a uniform fashion to facilitate trade. With fast track renewed, Bush now has congressional approval to continue negotiations in Geneva aimed at strenghthening GATT talks and negotiating a free-trade agreement with Mexico.

The Bush Administration has the goal of creating a North American Free-Trade Area joining Mexico, Canada, and the U.S. Successful free-trade talks could create a cohesive market with a combined GNP of $6 trillion. Supporters of fast track maintain that an eventual free-trade agreement with our southern neighbor would be the end result, creating jobs and prosperity on both sides of the border.

Free-Trade Agreements

As governed by the U.S. Constitution, actual free-trade treaties must be ratified by both houses of Congress. The fast-track procedure, originally developed in the 1970s and enacted with Canada two years ago, allows the president to submit implementing legislation resulting from the trade agreement for Congressional consideration under a closed rule. In short, the House and the Senate must vote yes or no on any agreement within 90 days of receiving a proposal from the president, with no amendments allowed.

Streamlining Trade Negotiations

According to Dan Mabey, director of Utah's International Trade Office, "Fast track is not a short cut or a detour, but a way to expedite trade agreements straight from the president to Congress, without meandering through several [congressional] committees."

"With fast track, instead of having 365 House members plus 100 senators approve [every article in the] agreement, you simply receive final approval from Congress," Tenney explained. Asked if the extension of fast track is a precursor to total free-trade relations, Tenney replied, "Not absolutely, but generally it has in the past."

He clarified that the approval of fast track "wasn't a vote for free-trade itself, but it granted the president two-year authority to negotiate trade agreements with Mexico. As a result of fast track, however, when a trade agreement is finally hammered out in the next few years, President Bush will bring the proposal back to Congress, which has 90 days to vote yes or no without amending it. Then Mexico will have to approve it," said Tenney.

"The Administration is always involved in trade negotiations," added Rob Morse, legislative assistant to Rep. Wayne Owens. "What makes fast track unique is that once Congress authorizes negotiations under the fast-track guidelines, the U.S. trade representative does not have to come back to consult with Congress during the negotiations. Instead, the agreement simply comes to the floor for a "yes" or "no" vote. Congress cannot modify it, though for political reasons, the Bush administration likely will informally consult with the House leadership during the negotiations."

"Congress must either agree or disagree with the pending trade agreement in its entirety," explained Dave Saybolt of Rep. Bill Orton's office. Fast track is necessary because international agreements are not binding until any changes made by Congress are also agreed to by the other country. The problem with international trade negotiations is they are so massive and complex; if Congress makes extensive changes, then the other country perceives we're going back on a deal."

According to Saybolt, fast track is sought so that Congress will not pick apart the agreement.

All or Nothing

Fast track applies to all trade agreements, not just to those with Mexico. Many law-makers expressed a wish for a separate, specific resolution regarding Mexico by itself, since any vote against fast-track procedures with Mexico would have killed the fast track for the GATT talks overall. Because of the enormous complexity of the 107-nation talks, the majority of congressional leaders support the fast-track concept as a method for expediting agreements through Congress. Yet some outspoken members are against fast track with Mexico, saying they oppose giving up the right of Congress to amend a U.S.-Mexico agreement.

The administration, however, says congressional powers and input on the negotiations will be maintained under fast track. Under the terms of the resolution, the administration must continually consult Congress during negotiations. As with actual trade treaties, Congress has the ultimate power to approve or reject trade agreements designed under fast track.

"In these new agreements, some people and some states may lose a little, but free trade usually brings the majority to a better position," said Mabey.

Heavy Opposition

Though the resolution to extend fast track was passed 231-192 in the House and 59-36 in the Senate, it prevailed over much opposition from organized labor lobbyists and pro-labor, farm-state, textile-state lawmakers, industrial state and pro-environmentalists. They argued that the fast track will prevent Congress from having the authority needed to amend existing trade agreements. Members who voted against the extension of fast track want to retain the power to protect U.S. jobs and the environments, and to persuade Mexico to make improvements to its minimum-wage, air, and water standards and child-labor laws.

Opponents to fast-track procedures with Mexico argued that the lure of lenient manufacturing controls and low labor costs will entice U.S. companies to move south of the border. Free-trade with Mexico, according to the Economic Policy Institute, could put as many as 55,000 Americans out of work - especially workers in the industries of automaking, textiles, and agriculture. Furthermore, opponents say the agreement could lower the U.S. GNP by $36 billion by the year 2000. In addition, consumer groups are concerned that food grown in Mexico, especially vegetables and fruit, lack sufficient inspections for pesticides and other hazards.

Promises from the Administration

The administration debates those concerns, saying objectives were included in the bill (see sidebar) that require the administration to make good on its promise to extract a commitment from Mexico that the country will take action to protect its air and water, OSHA, child-labor, and minimum-wage standards, as well as America's intellectual property rights. Mexico must also enforce point-of-origin rules, ensuring that Mexican goods really come from Mexico.

Opponents contend, however, that these promises from the administration apply only to the Mexico talks, and that the promises will not be part of the actual trade agreement. There is no mechanism, they say, for enforcing the administration's commitments.

The Benefits of Free Trade

Proponents, on the other hand, are convinced that without fast track, the U.S. can't get the kind of agreements that serve U.S. interests. "Unquestionally there will be some U.S. jobs lost [to Mexico]," Tenney admitted. "However, there will be substantially more high-paying U.S. jobs created, though not necessarily in manufacturing. For every $1 billion in new U.S. exports to other nations, the U.S. Department of Commerce estimates that 20-25,000 new U.S. jobs will be created. Just in the last three years, U.S. exports to Mexico increased by 14 billion new dollars, creating 300,000 to 350,000 new U.S. jobs as trade between our countries has become more open."

Other alternatives were discussed, too, including a provision that would require the Bush administration to report on the progress of fast-track trade relations with Mexico on May 1, 1992. But the plea failed and, as reported in congressional reports, the extension of fast track became inevitable. Labor leaders backed down somewhat when they were assured that elected representatives from their automobile- and textile industry states would be included in the actual trade negotiations.

North American Free-Trade Area

Many Democrats who initially opposed the resolution eventually aligned - albeit reluctantly - to vote for the extension once it included the objectives outlined in the attached sidebar (as introduced by House Majority Leader Richard A. Gephardt, of Missouri, and Ways and Means Committee Chairman Dan Rostenkowski, of Illinois), and its approval appeared inevitable. Rep. Owens and Rep. Orton of Utah, for example, voted for the extension as a good faith effort toward a mutually profitable trade relationship between the U.S. and Mexico.

"A dynamic North American economy is unquestionably in our national interest," Owens stated to Congress. "Increasingly, our struggling economy will have great difficulty competing world markets without stronger economic ties to our large southern neighbor."

"Free and fair trade is so vital to our national interest that the administration must be given an opportunity to formulate a trade agreement. Hence, my vote today is, in a very real sense, an act of faith, but it is faith which will be accompanied by careful surveillance," Owens stated.

"Trading with Mexico is very positive - much more so than it has been in past years," said Tenney. Mexico joined GATT in 1985. Since then the country has made a radical change in its economic policy and its political environment. "They've shifted substantially away from a command economy to a market economy," stated Tenney. "A few years ago Mexico had 1,200 state-owned companies which they since have sold and divested; today the country has only 265 state-owned companies."

Mexico has reduced its maximum import duty from 100 percent to 20 percent maximum The average tarrif has been reduced from 25 percent to 9 percent. Tenney noted, however, that the country still has some protected industries, such as agriculture, transportation, and petroleum.

Saybolt stated that the Mexican trade talks are just beginning. "Congressman Orton plans to follow this issue through the sub-committee on Forein Affairs as it develops." He said Congress could revoke fast-track authority at any time, if it felt strongly enough."
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Title Annotation:the federal fast-track trade procedure and how it affects Utah's international trade
Author:Smith, Cheryl
Publication:Utah Business
Date:Sep 1, 1991
Words:1848
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