NAFTA: growth opportunity for small business - North American Free Trade Agreement - Editorial

Nation's Business, May, 1993

President Clinton's commitment not to renegotiate the North American Free Trade Agreement (NAFTA) and to seek its implementation as scheduled next Jan. 1 is welcomed by everyone aware that U.S. economic health is increasingly dependent on foreign trade.

Congress should now pass the legislation needed to put the agreement into force.

The issue is of major importance to U.S. small businesses, and they should urge their members of Congress to support the agreement.

NAFTA is a tremendous opportunity for the United States. It will expand already booming exports to Mexico, thereby creating jobs at home. The side agreements on environmental and labor issues now being negotiated by representatives of the three countries should help the Clinton administration gain increased congressional support for the agreement.

The stakes are enormous. NAFTA would forge a U.S.Canada-Mexico unified market of 360 million people with a total annual output of $6.5 trillion in goods and services.

Commercial ties among the three nations are already strong--Canada and Mexico are this country's largest and third-largest trading partners, respectively.

Those trading relationships would expand significantly under NAFTA to the benefit of all three nations. U.S. trade officials note that last year 700,000 U.S. jobs depended on this country's merchandise exports to Mexico, and that number will exceed 1 million by the end of next year.

Every job directly supported by U.S. exports to Mexico is backed by two additional jobs in supporting industries. And every $1 billion increase in exports to Mexico will create 19,000 more jobs in the United States.

The U.S. Chamber of Commerce, which has been in the forefront of business efforts supporting the agreement, points out these advantages for smaller firms:

* Mexico's smaller economy--I/20th the size of the U.S. economy--and lack of a mature distribution system would make it easier for small U.S. firms to do business in Mexico.

* Removal of all Mexican tariffs on U.S. goods (50 percent immediately and 98 percent by 2004) and Mexican customs user fees by 1999 would enable U.S. small businesses to export to Mexico more cheaply than before.

* Mexico would open its 2,000-mile border and interior zones to U.S. trucks for the first time. This would lower shipping costs for small businesses and make the Mexican market an ideal venture for first-time exporters.

* A special working group would be created to give small businesses access to government procurement contracts. U.S. construction-services firms would gain access to the Canadian procurement market for the first time. Small-business "set-asides" in all three nations would be preserved.

* The elimination of trade barriers would enable U.S. companies based in Canada or Mexico to rely on their established U.S.-based suppliers, many of which are small firms that cannot afford to set up additional operations outside the U.S.

* Rules of origin would require inclusion of more North American-made components in automobiles, textiles, and other items. This could boost NAFTA-wide sales for smaller U.S. suppliers of parts.

NAFTA represents an historic achievement for the United States, Canada, and Mexico as we seek to stimulate economic growth through reduced trade barriers between our nations.

Nevertheless, opponents are using scare tactics that have no basis in fact to attempt to dissuade Congress from voting to put NAFTA into effect.

If the U.S. fails to implement the agreement, it will set in motion events that not only would slow economic recovery and job creation but also would undermine this country's ability to negotiate pro-U.S. trade agreements with other countries around the world.

The bottom-line result would be less economic growth and fewer opportunities for U.S. companies to do business.

Small-business owners should help make their members of Congress-aware of the tremendous opportunities that would be created with the implementation of this agreement.