Trading blows: many proponents say President Salinas needs NAFTA. Maybe President Clinton needs it more.

Many proponents say President Salinas needs NAFTA. Maybe President Clinton needs it more.

NOT KNOWING whether to laugh or cry, Latin America follows the NAFTA comedy of errors with its huge cast of players. There are, of course, the traditional enemies of free trade: labor leaders struggling for the survival of trade unions, and the "fair trade, anti dumping" crowd of Rustbelt industrialists fearful of foreign competition. There are also various odd-balls in patriotic guise: WASPs scared to death of cafeau-lait hordes invading the country; born-again populists fueling fears through 20-second television spots. But these have been joined by new and more subtle opponents of free trade, some of whom support NAFTA in order to hobble it with regulatory strings. Of these the new "green" socialists determined to keep Latin America as their own playground of pre-Industrial Revolution purity are the most influential.

It is difficult to explain to Latin Americans how the United States can be so nervous of free markets, immediately after American capitalism's victory over Soviet socialism. But if there is one person responsible for NAFTA's troubles, it is President Clinton. He arrived in Washington playing politics and trying to please everyone by negotiating side agreements, but ended up pleasing no one and doing lasting harm to U.S. relations with Latin America especially, to the champions of free markets, the rule of law, and property rights in Mexico and the rest of our hemisphere.

His ineffectual position on NAFTA has an ideological basis. Industrial policy, regulations, and wealth redistribution are much more difficult under free trade because, as the economy becomes less efficient, foreign products and services gain the upper hand; and the people bear the full cost of those policies in unemployment when capital moves toward lower-cost economies. As the Canadian economic professor Jean-Luc Migue has recently written, "it is the ability to restrict international movements of factors and goods which enables government to engage in costly redistributive policies .... A free-trade agreement . . . curtails the ability of government to spread special favors against the will of the people, while enhancing the incentives to make efficient decisions."

Level Playing Field?

THE Clintonistas' idea of copying European "harmonization" policies via NAFTA's side agreements-or, as they say in Washington, "leveling the playing field" is an attempt to override this economic logic. Their goal is for trading partners to pursue identical regulatory rules, especially on working conditions and environmental standards. In the EEC, this is paradoxically welcomed by the poorer nations, since the more inefficient they become, the greater the subsidies flowing in from Brussels. But since there is no way that American taxpayers will subsidize Mexican "harmonization," beyond paying a bigger share of border clean-up costs, Mr. Clinten's impositions raise the cost of doing business in Mexico and so act as a tariff benefiting U.S. special interests.

Hence the United States is becoming a grossly unreliable business associate. Who ever heard of someone buying a car, signing on the dotted line, and then, before writing the check, insisting on going over the service-department procedures for disposal of used engine oil or demanding to see the dealership books to make sure that the cute girl cleaning the showroom is getting the legal minimum wage? Trade agreements among free nations should be concerned with the interchange of goods and services. We Latin Americans resent the new type of American imperialism, which uses its economic might to impose its own environmental religion and labor standards on poorer nations. If the object is to erase all competitive advantages between countries and to avoid the broadening of choices to consumers, the whole purpose of international trade is summarily destroyed.

If nineteenth-century Britain had imposed Fabian socialism on its former North American colonies as a condition of sending over the capital to build the railroads and many early industries, the development of the United States would have been closer to that of Brazil. Today, just as the Social Charter has played havoc with the economies of less advanced members of the EC, like Spain (which is suffering from a 22 per cent unemployment rate), there is no way that Latin America can grow quickly enough to employ and feed its population if burdened with U.S. labor and environmental regulations.

We see the same protectionist impulses in other areas of the world and other aspects of human life. The Europeans, burdened with a horribly expensive and inefficient welfare state, are shutting their borders to Latin American bananas, East European manufactured goods, and immigrants from everywhere, The celebration of the fall of the Berlin Wall was rather short. The new wall is pointing the other way, to keep East European goods and people, as well as nonwhites, from the European center of high civilization and culture.

In the United States Chinese marine gangsters and Mexican "coyotes" profit from the illegal transportation of human beings willing to pay $500 to travel a hundred miles of Western desert or $30,000 for an ocean trip halfway around the world. But just as DEA officers have made multi-billionaires of Medellin thugs, INS officers are working hard to do the same for the new Chinese Mafia.

Somehow the world under Pax Britannica (from 1815 to 1914--Waterloo to Sarajevo), when people could travel around the world without passports or visas (excepting in autocratic Russia and Turkey) and settle wherever they pleased seems a much more civilized world than that under Pax Americana. It was only when our civilization fell under the hand of social-engineering bureaucrats, after the First World War, that human beings became numbered cattle to border guards. Not coincidentally, world trade as a proportion of world GNP only recently returned to its pre-World War I level.

This problem is directly related to the growth of government and the imposition of the welfare state in the more "advanced" regions. Californians, who annually underwrite $1 billion worth of health services for illegal aliens, cannot help hating these people. Probably many individual Californians would gladly give help themselves, but when government takes over, institutionalizing welfare and corrupting its beneficiaries, the citizen deeply resents paying high taxes for social programs. As Tim Ferguson wrote in the Wall Street Journal: "In California, in particular, Mexican immigration has exploded as a gripe, and NAFTA's fate may ride on how it is seen in that context."

The majority of Texans, including the state's Democratic governor, favor NAFTA. Not coincidentally, Texas has far fewer problems with immigration because of much lower state welfare benefits, proving that the problem is not with brown men, goods, and services, but with plain bad government policies. A respected Texan, Treasury Secretary Bentsen, would have been the ideal man to blow the NAFTA bugle of free trade, but he has been completely absorbed with the Clinton budget and will soon be buried under the heavier task of selling Mrs. Clinton's health plan.

Look East

SINCE THE West is shutting its doors and abandoning free markets, perhaps Latin America had better start looking to the Far East and Central Europe as future trade partners. If Latin America unilaterally dismantles its own trade barriers and forcefully supports economic stability through property rights and the rule of law, billions of dollars in new investments will flow into the area. For capital carries no passport, and it is increasingly unhappy with American and European controls, regulations, and sky-high taxation. Latin Americans, meanwhile, are rapidly moving away from the "correct" thoughts imposed by the old nomenklatura, which was a mixture of socialist politicians and intellectuals together with mercantilist unions and businessmen. (Sound familiar?)

Even with its side agreements, NAFTA's extension of free trade makes it a net benefit on both sides of the Rio Grande. If it passes, the likely result will be three nations rich enough to sustain even Mr. Clinton's regulatory mania. If NAFTA fails, however, the result could be more interesting: competition between a U.S. burdened by ever-increasing regulation and a Mexico enlivened by everincreasing economic liberty. No prizes for guessing the winner.