What NAFTA’s Debaters <i> Didn’t</i> Say : A Look at the Validity of Claims by Gore and Perot

Tuesday night’s debate between Vice President Al Gore and Texas billionaire Ross Perot threw off a lot of sparks that danced over the sensitive issues surrounding the proposed North American Free Trade Agreement.

But amid the rhetoric and name calling, questions remain about how much light Gore and Perot managed to shed on the facts about the treaty, which would remove most trade barriers among the United States, Mexico and Canada.

Here is an analysis of some of the key claims made in the debate:

Perot’s charge: U.S. exports to Mexico are inflated.

Analysis: From 1986 to 1992, American exports jumped to $40.6 billion from $12.4 billion, creating a trade surplus last year of $5.4 billion. So far this year, the surplus is running at about half that level. That much both sides agree on. What’s at issue is the composition of those trade flows.

Perot contends that as much as half of the American exports were actually semi-finished goods being shipped to Mexico for assembly and then shipped as finished goods back to the United States. The Clinton Administration says 80% to 90% of exports to Mexico remain there.

According to Perot, the problem with “revolving-door trade” is that it inflates the financial interaction between the two countries and its economic impact. Even economists who support NAFTA concede that such exports do not generate the same wealth as exports that are consumed overseas.

Perot also argues that “true” export figures should not include machinery sent to Mexico for use by American companies setting up shop there.

But supporters of NAFTA disagree. “These exports are creating jobs in the United States just like any other exports,” says Jeffrey J. Schott, senior fellow at the Institute for International Economics. “Someone here is making this equipment and someone there is buying it.”

Gore’s charge: If we don’t partner with Mexico, some other country will.

Analysis: The vice president warned that the Japanese will move into the gap if the United States rejects NAFTA. Similarly, Mexican President Carlos Salinas de Gortari has said Mexico will look elsewhere for economic allies if the pact is rejected.

But even economists who support NAFTA dismiss Gore’s claim and Salinas’ apparent threat.

UCLA trade economist Edward Leamer says Mexico is attractive to other countries only as a pathway into the United States. Goods made there by Japanese companies would be targeted primarily at American consumers. Without tariff-free access to those buyers, Mexico loses that draw.

“The fact is that if NAFTA loses, Mexico is a less desirable place for other countries to invest, because it won’t have the automatic entry into the United States,” says Schott.

Perot’s charge: Mexican workers can’t afford to buy American-made products.

Analysis: The former presidential candidate has argued that low-paid Mexican workers can’t afford to purchase consumer goods made in the United States. “People who don’t make anything can’t buy anything,” he said repeatedly Tuesday night.

It’s true that the average worker in Mexico makes substantially less than the average worker in the United States. According to statistics from the Mexican government, hourly manufacturing wages there were $2.35 in 1992, compared to $16.17 in the United States.

But wage discrepancies don’t eliminate consumer purchasing power, argues Leamer. “We sell products to countries with all sorts of hourly wage averages,” he says.

Perot’s charge: Even more U.S. firms will open plants in Mexico if NAFTA passes.

Analysis: That the trade agreement will make it easier for U.S. manufacturers and others to build operations in Mexico is undisputed. The impact on American jobs is what’s at issue.

In the debate, Gore cited estimates that 400,000 U.S. jobs have been added through increased trade with Mexico over the past five years--sidestepping the question of job losses that also have occurred. The Administration often touts studies showing that NAFTA could create as many as 170,000 U.S. jobs over the next five years.

However, experts are deeply divided over NAFTA’s potential impact on the U.S. labor force. Opponents of the pact say as many as 900,000 American jobs could be lost if the agreement is passed.

NAFTA supporters concede that the agreement would force some low-paid, undereducated U.S. laborers out of their jobs as work is moved to Mexico. But they argue that those losses would be more than offset by new--and higher-paying--jobs created by the increased trade and resulting prosperity.

Personal Possessions

Recent surveys have shown that urban Mexican consumers are not far behind Americans and Canadians in acquiring household goods. Percentage of households with each item, from in-person surveys:

TELEPHONE: Mexico: 50.3% United States: 92% Canada: 99.6%

WATER HEATER Mexico: 73.3% United States: 78% Canada: 84.8% AUTOMOBILE Mexico: 52.8% United States: 78% Canada: 89%

CD PLAYER Mexico: 24.1% United States: 30% Canada: 41.7%

COLOR TV: Mexico: 83% United States: 93% Canada: 97.9%

VCR: Mexico: 62.5% United States: 62% Canada: 76.9%

Note: Data for Mexico is from urban residents surveyed in 42 cities.

Source: Roper Reports Americas

Researched by ADAM S. BAUMAN / Los Angeles Times

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