[Congressional Record Volume 141, Number 156 (Tuesday, October 10, 1995)]
[House]
[Pages H9767-H9769]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                        THE ADVANTAGES OF NAFTA

  The SPEAKER pro tempore. Under the Speaker's announced policy of May 

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  12, 1995, the gentleman from California [Mr. Dreier] is recognized for 
60 minutes as the designee of the majority leader.
  Mr. DREIER. Mr. Speaker, I thank my friend, the gentleman from Texas 
[Mr. Doggett], for agreeing to my unanimous-consent request.
  Mr. Speaker, in light of the arrival this week of Mexico's President, 
Ernest Zedillo, I would like to take a few minutes to talk about a very 
controversial issue and one which has gotten a great deal of attention 
over the past several months, and that is the North American Free-Trade 
Agreement.
  We all know there was a very serious crisis which took place last 
December with devaluation of the peso, and many people have, I believe, 
mistakenly claimed that the problems that have existed have been 
because of the North American Free-Trade Agreement. Over the next few 
minutes I would like to make the case as to why this has not happened 
because of the North American Free-Trade Agreement.

                              {time}  1600

  Quite frankly, I believe that the North American Free-Trade Agreement 
has been one of those key items which has played a role in actually 
diminishing the potential negative impact on the economies of both the 
United States and Mexico, the reason being that the North American 
Free-Trade Agreement locks in the kinds of economic reforms which 
heretofore have not existed in Mexico.
  A short-term analysis of United States-Mexico economic relations does 
not do justice to the North American Free-Trade Agreement, which is, 
and I underscore this, Mr. Speaker, a long-term agreement to promote 
greater economic efficiency, job creation, and regional economic 
integration within the Americas.
  President Zedillo, as I said, is in town, and in the aftermath of the 
currency crisis that took place earlier this year, the critics have 
been out there flooding the intellectual mainstream with anti-NAFTA 
pollution. NAFTA has lived up to its four major promises.
  First, it has increased United States exports beyond where they would 
be without the lower tariff barriers; it stopped Mexico from raising 
trade barriers, which cost United States jobs in response to their 
internal economic difficulties; third, it has helped increase the 
efficiency and health of many United States companies involved in 
production sharing to compete with Asian companies; and, fourth, it has 
provided United States firms with a tangible advantage over competitors 
from Europe and Asia.
  Let me take this issue, because I know many people are concerned 
about the fact that some jobs have moved from the United States to 
Mexico. I know you, Mr. Speaker, have suffered greatly in your 
district, and several others have, but let me lay some facts out.
  During NAFTA, we have seen an increase in U.S. exports. In the first 
year of the North American Free-Trade Agreement, United States-Mexico 
trade surged at a record pace from $80 billion in 1993 to $100 billion 
in 1994. United States and Mexican exports to the other's markets rose 
more than 20 percent, or about $10 billion each. So we have had this 
increase in the flow of goods and services between the two countries 
increase to the tune of about $10 billion each. Even using the most 
conservative export jobs multiplier, this has created more than 100,000 
United States jobs, added to the 700,000 United States jobs already 
tied to our exports to Mexico.
  United States export growth has been temporarily slowed because of 
Mexico's financial problems. We all acknowledge that. Yet despite the 
peso crisis, United States exports to Mexico for the first half of 1995 
still exceeded the export level they were before the North American 
Free-Trade Agreement.
  Let me say that again. In spite of the peso crisis, we have still 
seen an increase in our exports to Mexico, and it is at a level above 
what it was before implementation of the North American Free-Trade 
Agreement.
  NAFTA has helped keep Mexico from raising trade barriers in response 
to the peso crisis. This is what I was alluding to at the outset. It is 
a fact that in the past Mexico often responded to their internal 
economic problems by closing their markets to foreign products. For 
example, back in 1982 when we saw the major debt crisis exist there, 
the Mexican Government essentially closed the country to imports from 
the United States. U.S. exports dropped back in 1982, following their 
closure, dropped a whopping 50 percent and it took 6 years to recover 
from their decision to basically close their markets.
  Well, this knee jerk protectionist response represented what was 
clearly very bad Mexican economic policy. It is important to note that 
shutting out existing U.S. exports cost some Americans their jobs.
  With NAFTA, Mexico is legally committed to keeping its market open to 
United States goods. Let me underscore that again. If it were not for 
NAFTA, the chance for Mexico to completely close down its market, 
dropping tremendously our opportunity to export into Mexico, would have 
been on the horizon. But NAFTA ensured that those things would be 
locked in.
  By preventing a repeat of that protectionist measure that was taken 
in 1982 by the Mexican Government, we clearly protected literally 
hundreds of thousands of United States jobs. Rather than pursuing their 
past knee jerk course of action, namely, closing off their economy, 
Mexico has responded to financial problems by accelerating the sale of 
parts of the government-owned railroads, airports, and oil monopoly.
  As we talk regularly about decentralization, trying to privatize and 
deregulate, the Mexican Government, in the wake of their financial 
crisis, moved toward privatization of sectors of, as I said, the 
railroad, the oil monopoly, and their airports. With liberalized 
foreign investment laws, United States companies are also now major 
players in the Mexican banking and telecommunications industry. We know 
that that has existed, because many people in the United States have 
been involved in those areas.
  The other point that I raise is NAFTA has promoted production sharing 
with manufacturing occurring in both the United States and Mexico, 
which has helped increase the efficiency and the health of many United 
States companies competing with efficient Asian companies.
  One of the major goals of the NAFTA is to spur business partnerships 
and global competitiveness among the North American countries, among 
firms in North America. Production partnerships are critical to a 
growing U.S. job market.
  The United States International Trade Commission believes that United 
States-Mexico production sharing is critical to countering the fierce 
trade competition which faces this country from Asia and Europe. Goods 
made in conjunction with operations in Mexico contain much more United 
States content than similar goods made elsewhere in the world. That 
means that as more manufacturing is located in low wage countries, a 
trend that clearly is inevitable, more United States jobs are 
maintained by sourcing these facilities in Mexico rather than in 
countries in the Pacific rim. So we need to realize that there is a 
great benefit to U.S. jobs by sourcing within this hemisphere, rather 
than on the other side of the world.

  Economic theory is one thing, but yesterday's New York Times in an 
article on the NAFTA described a classic example of production sharing 
and the complexity of trade's impact on our economy.
  Key Tronic Corp. is a large manufacturer of computer keyboards in 
Spokane, WA. The company faces its stiffest competition from Japanese 
competitors. We often hear people on this House floor talk about the 
problems of Japan and the fact that they have access to our markets and 
yet we do not have access to theirs. So we know there is a great deal 
of competitiveness that comes from Japan.
  That is obviously the case for Key Tronic. This company recently laid 
off 277 workers who were employed assembling the keyboards for Key 
Tronic, and they moved those jobs to Mexico.
  NAFTA critics hailed this as a great sign that NAFTA has failed, 
because these 277 jobs failed Spokane and moved to Mexico. The keyboard 
manufacturing operation in Mexico is clearly more efficient than it is 
in Spokane. That was a business decision that Key Tronic made.

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  Due to the increased efficiency of this one aspect of Key Tronic's 
operations, the company's sales have surged. They have gone way up. The 
company today is much healthier, because they were able to take 
advantage of a more efficient operation within this hemisphere, rather 
than seeing those jobs move to the Pacific rim or other low-wage 
countries.
  The components for the keyboards assembled in Mexico largely come 
from plants, where? Around Spokane, WA. Due to the increased keyboard 
sales, those plants have all increased output and employment. The 
overall employment level in Spokane related to Key Tronic sales is 
actually up. It is up because they took advantage, because they took 
advantage of this efficiency that existed in Mexico.
  Now, key points from the Key Tronic experience that I think we need 
to learn, Mr. Speaker, the keyboards are being made more efficiently 
for lower cost. American computer manufacturers who purchase keyboards 
will now be able to offer more competitive prices to their consumers. 
Key Tronic is a healthier company, better able to stand up to Japanese 
competition. Key Tronic employees in the United States have a better 
future in a healthier company. Key Tronic suppliers are healthier with 
better future prospects for them. Their employees are better off.
  In the long run it is indefensible to promote trade barriers that 
intentionally reduce economic efficiency when competitors elsewhere in 
the world continue to strive for efficient means of production. That is 
why we need to recognize that free trade is obviously the wave of the 
future.
  Yes, I want to make sure we do not lose U.S. jobs. But I realize as 
we compete internationally, it is essential for us to continue moving 
ahead with these partnerships. Trade is a win-win situation and, on 
balance, will create more opportunity here in the United States.
  NAFTA has provided United States firms with a tangible advantage over 
our competitors from both Europe and Asia. As Robert Paltrow, president 
of N.A. Communications, an Armonk, NY marketing firm, recently said: 
``The great sucking sound is not the sucking of our jobs to Mexico. It 
is the sucking of jobs from the Orient.''
  The remarkable level of United States exports to Mexico even during 
enduring a major Mexican recession, is clear evidence that NAFTA 
provides United States firms significant advantages over their 
competitors from Europe and Asia. Even during bad economic times United 
States firms account for a majority of the increase in Mexican imports. 
They are coming from this country.
  As Mexico recovers from their slump, Mr. Speaker, United States 
exporters are a major beneficiary. At least 70 percent of all Mexican 
imports come from the United States. This gives us another major stake 
in Mexican economic stability. Not that everyone in southern California 
does not already recognize that long-term economic health in Mexico is 
critical to finding a solution to the problem of illegal immigration, 
giving the United States a clear stake in economic development in 
Mexico is very, very important.
  Many people have argued that we should not have engaged in this 
agreement. But, quite frankly, there is no benefit for the United 
States having a poor southern neighbor. Trade is not a zero sum game.
  I recognize that there are tremendous losses of jobs in many of the 
districts, including yours, Mr. Speaker, as the gentleman has just 
informed me. But the fact of the matter is, I argue that many of those 
jobs that have gone to Mexico would have gone with or without NAFTA, 
and what has happened is the opportunity for partnership, deregulation, 
decentralization, and privatization. The things we all herald in Mexico 
were locked in because of the North American Free-Trade Agreement.
  So I believe that while we listen to those critics out there who talk 
about that giant sucking sound, who talk about the fact that we have 
somehow given up our sovereignty, we have to recognize that maintaining 
our sovereignty is a top priority, and I am as committed to that as 
anyone. But recognizing that we live in a global economy is just as 
important. It is just as important because if we do not recognize that, 
the United States of America will be at a tremendous disadvantage to 
other countries throughout the world.
  So this has been a positive agreement. It is a long-term agreement. 
It is one that is going to be phased in over a 15-year period. But I 
believe very sincerely that the arguments that we made 2 years ago on 
behalf of the North American Free-Trade Agreement stand today.
  Mr. Speaker, I again thank my friend from Texas. I have consumed a 
grand total of 12 minutes, having gone just slightly beyond the 10, but 
in between the 10 and 15 that I said I would use.

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