August 17, 1992 THE BENEFITS OF FREE TRADE IN NORTH AMERICA +quot;By building together the

 
August 17, 1992

           THE BENEFITS OF FREE TRADE IN NORTH AMERICA

     "By building together the largest free trading region in the
     world, Mexico, the United States and Canada are working to
     ensure that the future will bring increased prosperity,
     trade, and new jobs for the citizens of each of our
     countries."
                              President George Bush
                              July 15, 1992

Summary

o    President Bush had the vision to conceive and complete
     negotiations on a job-creating North American Free Trade
     Agreement (NAFTA) -- creating a market that will extend from
     the Yukon to the Yucatan.  The United States will become the
     centerpiece of a $6 trillion market with 360 million
     consumers.

o    By tearing down Mexico's remaining trade barriers, NAFTA
     will increase U.S. exports and jobs.  Increased trade will
     help Canadians and Mexicans spend more on American goods
     while American consumers will enjoy cheaper Canadian and
     Mexican goods.

     --   As Mexico's economy grows, it will import more: 70
          cents of each Mexican import dollar -- and 15 cents of
          each additional dollar of Mexican income -- is spent on
          U.S. goods.

o    The jobs of over 600,000 Americans are currently tied to
     exports to Mexico -- this is expected to increase to one
     million jobs by 1995 as a result of the NAFTA.

o    NAFTA will also ease immigration pressures in the Southwest
     United States, provide measures to ensure a smooth
     transition for American workers and industry, and will
     enhance environmental protection.

o    Integrating the three economies will improve the
     competitiveness of the U.S. economy, raise productivity, and
     increase real incomes in the U.S.

Creating Jobs by Expanding Exports

o    Creating Jobs:  Exports to Mexico already support over
     600,000 U.S. jobs.  The Institute for International
     Economics projects that with a NAFTA, by 1995 over one
     million U.S. jobs could be tied to exports to Mexico.

     --   Merchandise exports to Mexico have grown by more than
          169 percent over the past five years, creating more
          than 300,000 new U.S. jobs.

     --   Even states like Missouri, where NAFTA's leading critic
          in Congress -- Richard Gephardt -- comes from, would
          gain:  In 1991, 170,000 jobs in Missouri were tied to
          exports, 78,000 of which depend on exports to Canada
          and Mexico. 

o    Since Mexico began reducing its trade barriers in 1986, U.S.
     exports to Mexico have almost tripled, and are expected to
     reach $44 billion in 1992.  In 1991, the U.S. ran a trade
     surplus with Mexico for the first time in a decade.

     --   Mexico is now the United States' second-largest market
          for manufactured goods, having recently surpassed
          Japan.

o    Nonetheless, Mexico's tariffs are still two-and-a-half times
     the average U.S. tariff -- by leveling the playing field,
     U.S. exporters stand to reap substantial gains.

o    More trade means a higher standard of living for Americans;
     export-related jobs pay 17% more than the average U.S. job.
 
Examples of NAFTA'S Market-Opening Provisions

o    Approximately 65 percent of U.S. industrial and agricultural
     exports to Mexico will be legible for duty-free treatment
     either immediately or within five years.  Mexico's tariffs
     currently average 10 percent, which is two-and-a-half times
     the average U.S. tariff.

o    Services:  NAFTA will open Mexico's $146 billion services
     market for U.S. providers, including banks, insurance,
     telecommunications, accounting, and trucking firms.  It will
     also improve our access to Canada's $285 billion services
     market.

o    Motor Vehicles and Auto Parts:  U.S. autos and light trucks
     will enjoy greater access to Mexico, which has the fastest-
     growing market in the world.  With NAFTA, Mexican tariffs on
     vehicles and light trucks will be cut in half immediately. 
     Within five years, duties on three-quarters of U.S. parts
     exports to Mexico will be eliminated and Mexican "trade
     balancing" and "local content requirements"  will be phased
     out over ten years.

o    Auto Rule of Origin:  Only vehicles with substantial North
     American parts and labor content will benefit from tariff
     cuts under NAFTA's strict rule of origin.  NAFTA will
     require that autos contain 62.5 percent North American
     content, considerably more than the 50 percent content
     requirement of the U.S.-Canada Free Trade Agreement.  NAFTA
     contains tracing requirements so that individual parts can
     be identified to determine the content of major components
     and sub-assemblies, e.g. engines.

o    Textiles and Apparel:  Barriers to trade on $250 million of
     U.S. exports of textiles and apparel to Mexico will be
     eliminated immediately and another $700 million will be
     freed from restriction within 6 years under NAFTA.  Tough
     rules of origin will ensure that the benefits of trade
     liberalization accrue to North American producers.

o    Agriculture:  Mexico imported $3 billion in U.S.
     agricultural goods last year, making it our third-largest
     market.  NAFTA will immediately eliminate import licenses,
     which were required on 25 percent on U.S. agricultural
     exports last year, and will phase out Mexican tariffs.

o    Energy:  NAFTA provides increased access for U.S. firms to
     Mexico's electricity, petrochemical, gas, and energy
     services and equipment markets. 

o    Intellectual Property Rights:  NAFTA provides a higher level
     of protection than that in any other bilateral or
     multilateral agreement.  U.S. high technology,
     entertainment, and consumer goods producers that rely on
     protection for their patents, copyrights, and trademarks
     will all realize substantial gains under NAFTA.

NAFTA Ensures a Smooth Transition for American Workers

o    NAFTA will give sensitive sectors time to adjust to full
     competition by gradually phasing out tariffs and by
     providing a safeguard mechanism against import surges that
     injure U.S. firms.

o    Tough rules of origin will prevent non-NAFTA products coming
     through Canada or Mexico to take advantage of a NAFTA.

o    The Bush Administration will ensure a worker adjustment
     program that is adequately funded and that provides
     effective services to workers who may lose their jobs as a
     result of an agreement with Mexico.

o    Pursuant to a 1991 Memorandum of Understanding, the U.S. and
     Mexican governments have been cooperating on key labor
     issues, such as worker safety and health, child labor and
     worker rights.

o    NAFTA has focused attention on critical infrastructure needs
     at the border; the U.S. and Mexico are building bridges,
     improving crossing points, and upgrading border facilities.

o    Removing restrictive Mexican trade and investment barriers
     under a NAFTA will reduce the incentive of illegal
     immigration into the United States.

A NAFTA Will Enhance Environmental Protection

o    The NAFTA will sustain our right to enforce existing
     environmental standards and encourage all NAFTA parties to
     strengthen standards. NAFTA specifically allows the U.S. to
     maintain its stringent health, safety, and environmental
     standards, including the right to prohibit imports that do
     not meet our standards.  The NAFTA also:

     --   Allows states and cities in NAFTA countries to enact
          even tougher standards.

     --   Preserves our right to restrict trade in endangered
          species and to take other steps pursuant to
          international environmental accords. 

o    New Resources for Environmental Protection:  By generating
     new income, NAFTA will permit Mexico to devote even more
     resources to protecting and enhancing the environment. 
     Academic studies show that as economic growth increases,
     pollution decreases.

o    Border Plan:  The United States and Mexico have developed an
     "Integrated Environmental Plan for the U.S.-Mexico Border,"
     announced by President's Bush and Salinas in February 1992. 
     Mexico has committed $460 million over three years for
     border environmental initiatives.  President Bush's FY93
     budget includes $241 million, double the 1992 amount, to
     clean up the border area's rivers, hazardous waste, and air
     pollution.

o    FINANCIAL SERVICES: Mexico's closed financial services
     markets will be opened and U.S. banks and securities firms
     will be allowed to establish wholly owned subsidiaries. 
     Existing restrictions, including limits on foreign market
     share, will be eliminated by January 1, 2000, giving U.S.
     banks and securities firms the opportunity to compete with
     local firms.  

o    INSURANCE: U.S. insurance firms will gain major new
     opportunities in the Mexican market: firms with existing
     joint ventures will be permitted to obtain 100-percent
     ownership by 1996 and new entrants to the market can obtain
     a majority stake in Mexican firms by 1998.  By the year
     2000, all equity and market share restrictions will be
     eliminated, opening up completely what is now a $3.5 billion
     market.

o    TELECOMMUNICATIONS: NAFTA opens Mexico's $6 billion
     telecommunications services and equipment market.  It gives
     U.S. providers of voice mail or packet-switched services
     nondiscriminatory access to the Mexican public telephone
     network and eliminates all investment restrictions by July
     1995.

o    TRUCKING: More than 90 percent of U.S. trade with Mexico is
     shipped by land, yet U.S. truckers have been denied the
     right to carry cargo in Mexico or to own warehouses.  With
     NAFTA, U.S. truckers will no longer be forced to "hand off"
     trailers to Mexican drivers and return home empty.  NAFTA
     will permit U.S. trucking companies to carry international
     cargo the Mexican states contiguous to the U.S. by 1995, and
     gives them cross-border access to all of Mexico by the end
     of 1999.

o    INVESTMENT: Mexican "domestic content" rules will
     eliminated, permitting additional sourcing of U.S. inputs
     and, for the first time, U.S. companies operating in Mexico
     will receive the same treatment as Mexican-owned firms. 
     Mexico has agreed to drop is export performance
     requirements, which presently force firms to export as a
     condition of being allowed to invest.

o    Textile and apparel exports to Mexico have increased at an
     average annual rate of 25 percent since 1986, reaching
     almost $1 billion in 1990.

o    A NAFTA will increase exports of U.S. motor vehicles to
     Mexico by removing restrictive Mexican trade and investment
     barriers.  NAFTA will slash Mexican tariffs by half
     immediately and phase out restriction that have kept U.S.
     parts and vehicles out of Mexico's auto market.

o    In 1991, agricultural products to Mexico rose to a record
     $2.9 billion, double the amount in 1986 when Mexico began 
     cutting trade barriers.  Under a NAFTA agricultural markets
     will grow even more.

o    Steel:  U.S. exports of steel products to Mexico increased
     64% in 1991.  The American Iron and Steel Institute and the
     Steel Manufacturers Association, recognizing that NAFTA will
     lead to even more exports to Mexico, have endorsed
     negotiation of a NAFTA.

o    On August 12, President Bush announced completion of
     negotiations for a job-creating North American Free Trade
     Agreement (NAFTA).