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The continental development and trade initiative.

We face a challenge no other generation of people living in the U.S., Canada, and Mexico have encountered: to prepare for the future by creating a framework of genuine continental cooperation. If we succeed in establishing a mechanism for equitably sharing our respective talents and resources, our economies will be strengthened and our people will live better, not at one neighbor's expense, but thanks to the prosperity of all. However, we must not be misguided by false illusions or self-indulgence; such compatible and equitable prosperity will not come automatically.

To have a new relationship, to do things the right way, Mexicans and North Americans [the term generally used by Mexicans to refer to U.S. citizens -- Eds.] in particular must acknowledge that the existing premises of our economic integration are not necessarily adequate to build a just and viable new relationship. The exploitation of cheap labor, energy and raw materials, technological dependency, and lax environmental protection must not be the basis upon which Mexico establishes links with the U.S., Canada, and the world economy.

We cannot be satisfied with the kind of future that would emerge from simple economic liberalization. This would extend present trends and exacerbate present vices. Instead, we must take visionary action to see and meet -- not simply wait for -- the future. Let us be responsible and prudent: not just any kind of trade is a mutually advantageous exchange; not just any type of investment is going to transform our productive foundations and create the jobs and incomes we want for our people; not just any kind of industry is going to make optimum use of our resources and protect our habitat; not just any profitable business is a responsible enterprise. Economic liberalization is not our objective, it is one of our tools. Development, social justice, and a clean environment are our objectives.

We favor a broad continental trade and development pact that primarily includes free trade between Mexico, the U.S., and Canada. This pact also must serve the interests of Mexico's development and not compromise U.S. or Canadian standards of living.

We know that some regard any agreement as better than no agreement. They believe that for Mexico, any access to the U.S. market is reason enough for indiscriminately accepting U.S. demands, since such access is both a necessary and sufficient condition for Mexican development. We reject that position. Trade, we insist, must be a tool of development, not an end in itself.

Due to the inertia of past and present tendencies, together with errors committed in carrying out our development strategies (a lack of vision, the absence of any democratic credibility, corruption, poor administration, and demagoguery), our country, for the most part, has yet to resolve its secular social problems. The state-party regime and distorted development have produced social backwardness and state atrophy. They also have created equally distorted enterprises and markets. Thus far, privatization and liberalization of the Mexican economy have not been accompanied by self-sustained economic drive and have not improved business initiative or national technological innovation. Nor have they fostered more open or more competitive markets. Instead, they have brought about a greater concentration of wealth and greater dependency on foreign capital and creativity.

We want Mexican markets to function; we support increased and more equitable competition within Mexico and between Mexico and the rest of the world; and we know that these changes cannot be achieved simply by privatizing state monopolies. It is necessary to foster the growth of a progressive, modem, and vigorous business class, which never developed in Mexico. A large part of the national private sector will have to learn how to support itself and how to benefit from its initiative and competitiveness, rather than sharing in the corruption of high-level government functionaries.

Development should translate into economies of scale -- large firms when the needs of production and sales require them, and medium and small businesses sprinkled throughout the country. Preserving the core of the Mexican state's ability to regulate should not be a point of negotiation. We must carry out a national development strategy to overcome social backwardness and to transform the entire economic system.

It is absolutely unacceptable for the international division of labor between these three countries to leave Mexico the role of permanently supplying cheap labor. One of the principal reasons for seeking new forms of economic integration is to raise Mexican wage levels and working conditions in the general direction of those prevailing in the U.S. and Canada, rather than to systematically reduce our wages and incomes to attract reluctant investors.

We know that today's challenge is to convert the struggle against poverty into a real economic force through which wealth will not only be distributed, but will also be generated by the very effort to eradicate nursery. To do this, we also understand that we cannot confuse productive investment with social investment and cannot expect from one what only the other can provide.

Development is not just about developing a particular nation. Today it is clear to everyone, but especially to North Americans, that a nation cannot isolate itself from the misery, want, injustice, and environmental degradation of its neighbors. If the North does not readopt a humanist ideal of development, international cooperation will be blocked by contamination, urban deterioration, crime, drugs, and intolerance. Moreover, the market alone is not responsible for resolving these interrelated problems.

We also need to ensure that the development process is compatible with the needs of millions of impoverished Mexicans as well as with the interests and welfare of North Americans and Canadians. The core of a development pact should be the creation of well-paid jobs in Mexico and increased labor productivity in all three countries.

False prophets of economic determinism say that we have no choice but to enroll ourselves in an already determined economic bloc. However, there is one matter about which nations like Mexico have no choice: we must redistribute income and promote social development by creating new strategies in harmony with the world economy. We cannot accept the present order without trying to negotiate the best possible conditions for our gradual international integration.

The continental trade and development pact we propose offers an opportunity to engage in a new North-South dialogue, not only to draft declarations, but also to sign economic pacts and share actual development commitments. We do not wish to create defensive blocs or exclusive clubs, but rather a new system of cooperation and integration between developed and developing countries.

Recent difficulties at the Uruguay round of the General Agreement on Tariffs and Trade (GATT) discussions reinforced the position of those favoring bilateralism in trade relations. We must not give in to this temptation. We reject the notion that the free trade agreement (FTA) between the U.S., Canada, and Mexico is the first step toward a series of bilateral free-trade treaties between the U.S. and its Latin American neighbors. If Mexico, the U.S., and Canada are able to mold their respective development goals into an unprecedented understanding, this consensus could then be the core of a new, alternate process of multilateral negotiations for hemispheric integration. The Caribbean and Central American countries could join first, followed by the Andean and southern-cone nations of South America, which could simultaneously proceed with their own regional economic integration projects.

To accomplish this and other goals is a challenge to our ability to keep a step ahead of our times. We do not need a rigid free-trade agreement that reproduces the unsatisfactory model of the FTA already signed by the U.S. and Canada. Yet neither can we pursue a conventional common-market model. If the inclusion of Canada in the talks means that Mexico will simply be another signatory to the FTA between Canada and the U.S., with few adjustments or modifications, then we firmly oppose such an accord. The existing pacts include only vague references to what we really need. In the current case involving Mexico, the U.S., and Canada, we are facing an unprecedented attempt to reach agreement among three extremely different economies.

We propose an ambitious negotiation for a coherent, integrated, global approach conducive to a broad, long-term, continental free trade and development pact. The proposed FTA currently on the table, though nowhere near as broad-ranging as the one we propose, is certainly not a strict trade deal. It includes the American agenda items linked to trade -- investment, services, intellectual property, and energy -- but none of the Mexican agenda items linked to trade - compensatory financing, labor mobility, the environment, and a social commitment.

We propose an alternate agreement that consists of five clearly defined negotiating packages:

1. Strictly trade-related matters;

2. Adoption and harmonization of norms regarding investment, antitrust

regulations, commitment to social goals, the environment, and intellectual


3. Compensatory financing;

4. Dispute-settlement mechanisms; and

5. Labor mobility.


The guiding criterion for bringing about free trade must be that reciprocity is not yet applicable except under very specific, exceptional circumstances. U.S. and Canadian access to Mexican markets in still-protected areas must be gradual, selective, and cushioned with adequate additional resources. On strictly trade matters, this agreement must be, above all, an agreement that removes or reduces U.S. nontariff barriers.

Due to existing disparities between the two economies, and to the fact that Mexico, rightly or not, has already done so much to concede access to its markets, it must have more time than the U.S. to eliminate subsidies, remove the restrictions that remain, and be able to protect new industries as well as entire branches of existing industry and services. At the same time, Mexico must determine which parts of its economic activity can be competitive on the world market while niches for them are being developed. Mexico is particularly vulnerable in the area of services, where full competition with U.S. firms -- in banking, engineering, insurance, and other fields -- would destroy vital parts of its service industries. Frequently, the possibilities available to a given country are determined by creative ability, initiative, or even arbitrary reasons, as well as by the opportunities created by international trade. Mexico has some areas in which it is already competitive: glass, cement, beer, and automotive parts. Other areas are determined by natural factors -- the most significant being oil (from energy to the petrochemical industry). In the field of services, Mexico has a broad horizon before it. The agreement should include provisions that allow Mexico to select those industries and determine how and when to develop them.

Likewise, provisions should also be established through which the social policies of Mexico -- subsidies, education, housing, health care -- are not considered disloyal trade practices during an important period.

As a first and very important step in its general development strategy, Mexico's aim should be to change the entire maquiladora scheme. Rules regarding the origin of a product should be designed with this purpose in mind. After more than 25 years of operation, the maquiladoras' linkages to Mexico's productive apparatus remain virtually nonexistent. The maquiladoras have created nearly a half million jobs in 25 years and generate some support for the balance of payments. However, a large number of them cause serious environmental damage. Nowhere is the gap between productivity growth and wages as dramatic and in no other sectors have real wages remained so low for so long a period. Therefore, under this type of arrangement, neither Mexican wages nor living conditions can be expected to rise significantly.

Subsistence agriculture, which produces most of Mexico's basic grains, must be removed from the bargaining table. Millions of peasants will be thrown off the land if their inefficient, backward, and noncompetitive forms of production are suddenly exposed to the volatile world commodities market. The modernization of Mexican agriculture will not be achieved by following a path that any successful industrial country would reject for itself. Mexico cannot proceed any faster in terms of agricultural trade than the GATT, and it should probably proceed even more slowly, given the factors of migration and the social effects that undoubtedly would arise from the mass desertion of unirrigated, unproductive lands. We need a radically new agricultural policy, one that goes beyond mere trade liberalization.


Investment: We must learn to see foreign investment not as an unavoidable evil, but as a desirable opportunity and even a necessary tool to attract resources, to close technological gaps, and to move decisively into world markets. The partnership we want will not be created if we do not redefine the rules governing foreign investments in Mexico. Such broad redefinition should emerge from frank, truly open, and pluralistic national debate.

We believe that those laws and regulations limiting foreign investment in Mexico must be maintained, particularly those concerning access to natural resources and the strategic sectors of the economy, mainly oil. The existing state monopoly on the exploration, extraction, refining, and industrial transformation of Mexico's oil must remain intact and be excluded from any negotiation. This obviously includes, from our point of view, any commitment to a guaranteed supply of oil to the U.S., in contrast to what Canada accepted in the U.S.-Canada Free Trade Agreement. On the issue of oil, Mexico's negotiating position should be inflexible; any deviation from this norm is unacceptable and could lead to deep political divisions. The oil industry is to Mexico what the military and aerospace industries are to the U.S. -- a question of national security.

Commitment to Social Goals: The existing disparities among the three economies imply that a substantive, central objective of these negotiations should be the gradual but decisive standardization of trade-related norms. First and foremost among these must be a social commitment, ensuring that workers in the three countries enjoy -- in reality, and not merely on paper -- the same work-site conditions, collective bargaining rights, legal framework, and occupational health and safety standards in order to avoid exploitation of Mexicans and to prevent unfair competition with their U.S. and Canadian counterparts. Uniformity of wages cannot be decreed, but the conditions under which wages are set and the framework in which labor and management relations take place can be harmonized.

The Environment: Harmonization of norms should also be implemented with respect to the environment. The agreement should limit each other's access to natural resources. Mexico cannot become a chemical waste or garbage dump for U.S. or Canadian industries trying to circumvent environmental restrictions in their own countries. Laxity in the enforcement of environmental laws in Mexico must cease to be an advantage for companies investing in Mexico. One of the main contributions of a continental pact of international cooperation would be that the responsibilities and costs of protecting the environment are understood as development costs and investments.

It is also necessary to harmonize consumer-protection norms. It is unacceptable that products, substances, and procedures deemed dangerous, unfit, or toxic in the industrialized nations should be considered fit for the underdeveloped ones. Harmonization of environmental norms does not mean the immediate adoption of exactly the same norms by the three countries, but rather their fastest possible evolution in the same direction.

Special consideration should be given to the question of intellectual property, an issue that the U.S. demanded be included in the negotiations with Mexico from the beginning. Given the fact that existing international legislation on this issue is, in many regards, detrimental to Mexico's development needs in fundamental social areas, there should be an effort made to adopt a set of norms that would create a more equitable system of technology transfer and intellectual rights.

Compensatory Financing

In a process of economic integration such as the one now underway, the economy with the most disadvantages is inevitably the one that has to make the most -- and the most costly -- adjustments. It is also the economy that suffers more dislocations in the short term. These effects tend to be felt immediately throughout the weaker economy, whereas in the richer economies, the effects tend to be more limited and manageable in the long run.

The disparities among the three economies mean that, beyond the market-induced funds that could come as a consequence of the FTA, Mexico will require substantial funding to finance the following areas: first, the adjustment process (including needed investments in infrastructure and education so as to absorb additional new investments), second, the harmonization of norms, and, third, the provisions of a social commitment.

We know that financing is not easy, but making the fundamental disparity among the three economies the cornerstone of the agreement means making compensatory financing its centerpiece.

Settlement of Disputes

The mechanism that is set up to handle disputes directly related to trade, in addition to or in place of the GATT mechanism, must include provisions that the three countries can utilize on equal terms. International verification and the duty to comply with the agreed-upon processes for harmonization are also necessary. The way to achieve this is simply by extending the authority of the tripartite mechanism for settling trade disputes. The basic tool for demanding compliance should be the threat of exclusion from the benefits of the treaty.

Concurrently, provisions must be adopted to allow verification of compliance, such as equal access to the dispute-settling mechanisms for all concerned parties: manufacturers, growers, unions, environmental associations, consumer groups, human-rights associations, etc. Together with these trilateral entities, international organizations such as the United Nations, the Organization of American States, the International Labor Organization for labor issues, or the United Nations Environmental Program (UNEP) for specifically environmental controversies, could serve as channels through which just solutions to these problems may be found.

Labor Mobility

Genuine economic negotiations between Mexico and the U.S. cannot conceivably avoid the controversial issue of labor mobility across the border. This is the most significant economic, social, and human exchange between our two countries and should be at the top of our agenda.

Those who propose a narrow free-trade agreement have lobbied hard to remove this issue from the discussions, arguing that it impedes initiating any agreement and would contaminate the negotiating process to such an extent that it would make any treaty impossible. In fact, the issue of labor mobility was explicitly excluded from the negotiations between the Mexican and U.S. governments, and anyone who insists on its inclusion is seen as an enemy of free trade.

We understand the difficulties and recognize that there are deep cultural sensitivities and even racist resistance toward Mexican and Latin American immigration. Ideally, Mexicans should not have to leave their country to find jobs in the United States. Creating economic opportunities for all is no doubt our greatest aspiration. A free-trade agreement is seen by many on both sides of the border as a bold economic move needed to stem immigration flows at their source by creating jobs for Mexicans in Mexico. Furthermore, some believe that an FTA with no social conditions attached to it will create the best of all possible worlds for U.S. industry: direct access to a permanent pool of cheap labor on the other side of the border. However, free trade alone might very well give further impetus to the migration process instead of killing it.

According to all accounts, since the recent economic liberalization of Mexico began, migration to the United States has increased substantially. Demographic trends and labor scarcity in the U.S. offer ample work opportunities to migrants. All empirical evidence gathered by U.S. and Mexican researchers shows that Mexicans are most influenced in their decision to emigrate by the possibility of a higher wage. Today, the typical profile of the new economic migrant from Mexico is not that of the unemployed illiterate, but rather that of a semiskilled worker who moves from a very low-paying job in Mexico to a much higher-paying job in the U. S. By itself, a simple free-trade agreement could not easily change this situation.

It is understandable that many in the U.S. do not want an open border with Mexico. It is equally understandable that Mexicans wish to do away with the humiliating and often repressive controls and limitations on border crossings. The very reason for negotiating on this issue is to find an intermediate, common ground between open borders and undocumented immigration that is beneficial to both parties. Legal and broad access to the U.S., on realistic and socially acceptable terms from both a U.S. and a Mexican standpoint, is surely possible.

It will take time to construct a continental agreement on development and trade. Our two countries have the time, even if the current Mexican administration does not. A good accord, which takes more time to reach, is better than a bad accord accomplished under duress and time pressure. Progress on questions of concern to one country should be linked to progress on questions of concern to the other.

A shortsighted, narrow trade agreement will only bring prosperity for the few and a loss of hope for the many. Trade liberalization conceived and implemented within the framework of a real development alternative, however, will mobilize the enthusiasm and commitment of many social groups in Mexico, who today see themselves excluded from every benefit. We have the obligation to succeed in using this opportunity to achieve true progress and fruitful cooperation between our nations.

Cuauhtemoc Cardenas is the leader of the Partido Revolucionario Democritico (Monterrey 50, Colonia Roma, Mexico 06700, D.F.) and was a presidential candidate in the 1988 Mexican elections. This article is based on a speech given in New York City on February 8, 1991. Translated by Ed McCaughan.
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Title Annotation:Latin America Faces the 21st Century
Author:Cardenas, Cuauhtemoc
Publication:Social Justice
Date:Dec 22, 1992
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