NAFTA: The Pros, the Cons and the Compromises

Harvard professors reactions yesterday to the House approval of the North American Free Trade Agreement varied from ringing endorsement to scathing disdain.

NAFTA, which will consolidate the United States, Canada and Mexico into the world's largest trading bloc, passed by a vote of 234-200.

Professors contacted last night agreed that the immediate consequences of the treaty will be minimal, and mostly symbolic, in the U.S.

"The impact is going to be very small in terms of the direct effect on jobs," said Donald R. Davis, assistant professor of economics.

Associate Professor of Government Lisa L. Martin agreed saying, "I think the treaty will not have very large economic effects in the U.S."

Professors said the imminent approval of the treaty was a giant political step forward for the U.S.

"The biggest effect is that it will improve the U.S. bargaining position in other international trade associations," Martin said. "It shows the President is able and willing to get Congress to ratify trade negotiations."

Davis said the treaty's value may be symbolic as well as economic.

"The signal it sends is that we do want to be integrated into the world economy," said Davis. "We do want an open trading system."

"This opens up the possibilities for concluding the Uruguay Round Treaty and also possibly for moving toward new trade negotiations like the Far East," he said.

The ongoing Uruguay Round of General Agreement on Tariffs and Trade Treaty would lower trade barriers throughout the world, but most importantly, between the U.S. and the European Community, according to Davis. Clinton met yesterday with the leaders of 15 Asian nations to discuss possible trade agreements.

But Barker Professor of Economics Stephen Marglin said he believes the treaty will provide American investors with additional financial opportunities.

"The main purpose is to open Mexico to American investment," he said.

Marglin added that NAFTA's main effect is "to put international guarantees on American investment in Mexico, and make it more effective for our corporations to go to Mexico to set up shop."

While professors said NAFTA opened up investment opportunities and increased bargaining power, they said White House concessions to gain support in the House significantly weaken the treaty's impact.

The White House has agreed to several deals in a last-ditch attempt to gain lawmakers support for NAFTA.

An agreement with Mexico in recent weeks to protect Florida's sugar cane and citrus fruit, and an 11th hour concession to protect vegetable growers lured a majority of the 23-member Florida delegation.

The White House has made other concessions including protection of glass manufacturers, liquor companies and agricultural interests, according to the Boston Globe.

"I think these agreements weaken the treaty, but it's not a hollow treaty," said Martin.

But Davis called the treaty as it stands now a "partial retreat."

In addition to the concessions, Marglin said that the lack of benefits for Mexicans weakens the treaty.

"The only sure thing is that it is going to put the last nail in the coffin for Mexican rural communities," he said. "The small farming communities will not be able to compete with the corporate large scale farms of Illinois and Iowa."

Marglin said although Mexico's small scale production largely satisfies its needs, Mexicans "do have to sell some of their produce to buy things they need from cities."

"The communities will be destroyed," Marglin said, because Mexicans are largely grain producers who will not be able to compete with the U.S.

He said that Mexicans will move to cities to find jobs--if unsuccessful, they will come North to the U.S.

"One way or the other, it will be a great dislocation," he said.

Still, he conceded that some Mexicans will benefit from the treaty.

"No doubt some Mexicans will benefit if they get jobs with U.S. firms that move to Mexico," Marglin said.

"But I don't think they outweigh the almost certain cost that will have to be borne by small farming communities is Mexico," he added.

The agreement, if approved by the Senate where it is considered a virtual lock, will take effect on January 1, 1994.

The treaty will eliminate almost all tariffs over a 15-year period, with industries facing the stiffest import competition given the longest time to adjust.

Tariffs on half of currently taxed products will be dropped immediately, as would all Mexican import licenses, which cover one-fourth of U.S. exports.