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NAFTA? Delaying the inevitable.

The great debate over whether the United States is ready to accept the consequences of melding it, Mexico, and Canada into a single market by accepting the North American Free Trade Agreement is approaching fever pitch. It's as if the US really has a choice. We don't.

The idea of a single North American market is not new. Nor is it radical. It's been happening. A rejection of NAFTA won't stop it. It simply continues a three-decade evolution of removing trade and investment barriers among the three countries. If anything, NAFTA will help the US to better control the impact of the restructuring the economy is suffering through because of the globalization of business. As Coopers & Lybrand partner David Eisenhart reminds in Actionline, published by the Automotive Industry Action Group, "If we are to remain competitive in the world marketplace, continued North American economic integration is unavoidable."

The emotionalism of the NAFTA debate in the US centers on the loss of jobs to Mexico's low-wage workforce. The fear is that US automakers and other manufacturers will flee south. The truth is that the Big Three already have 14 manufacturing facilities there. History has shown that, if economics warrant it, more manufacturing will be set up there, with or without NAFTA.

But setting-up shop in Mexico is no cake walk. It's questionable if Mexico's lagging infrastructure--limited highway system, poor telephone network, inadequate sea and airport facilities, and antiquated railroads, not to mention unskilled labor--is conducive to triggering any great job "sucking" that most critics fear.

Beyond that, the reality of US job loss carries another dimension. Asian and European manufacturers are eyeing Mexico as a base to further target the North, South, and Latin American markets. That translates into more job dislocation from imports and loss of US export-related jobs.

There's little doubt that with a stagnant economy already swelling the jobless ranks, NAFTA's impact--and there will be some--on the economy is ill-timed. What gets lost in the shuffle is the reality that the evaporation of jobs is rooted in the restructuring that's being forced on the world's economies--a force much larger and more pervasive than jobs lost to a more traditional economic recession. Many jobs lost won't come back with an economic rebound. A healthier economy will only ease, not eliminate, the impact of that restructuring and permit US employers to create new jobs through new industries, new niches, and new foreign markets.

What the United States is facing is not unique. We saw it in Japan last November while visiting manufacturers and the Japan Machine Tool Show. The problems of restructuring are even more pervasive in Europe as evidenced in Hannover at the European machine tool exposition. Manufacturers in Toronto were crying the same blues as they met at the Canadian Machine Tool Show. The difference seems to be that, in Japan and Europe, the inevitability of economic and market restructuring is being faced up to; steps are being taken to regroup. Their regrouping includes a bigger interest in the United States.

The question remains: Are enough US manufacturers including the rest of the world in their own regrouping plans? Or are they waiting for the return of the good old days? Will there ever again be a good time for NAFTA? Or is this simply another example of the US delaying the inevitable and digging itself an even deeper restructuring hole it'll have to eventually dig out of anyway?
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Copyright 1993 Gale, Cengage Learning. All rights reserved.

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Title Annotation:North American Free Trade Agreement
Author:Modic, Stanley J.
Publication:Tooling & Production
Article Type:Editorial
Date:Nov 1, 1993
Words:571
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