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April 29, 1992 PRESIDENT BUSH ON THE NORTH AMERICAN FREE TRADE AGREEMENT "The United States will continue to lead the world toward a system of free trade and open markets... Trade means economic growth. Trade means jobs for all Americans." President George Bush May 1, 1991 "We have before us the opportunity to expand growth and prosperity for all Americans... [the] agreement with Mexico is in our fundamental interest." President George Bush March 5, 1991 Summary o President Bush is committed to obtaining a North American Free Trade Agreement (NAFTA) that will increase trade and create jobs in the U.S., lower prices for American consumers, and stimulate the economies of the United States, Canada and Mexico. o A NAFTA will mean greater access to the dynamic and growing Mexican market through the removal of tariffs and import permits, a more open services and investment regime, and the protection of intellectual property rights. A NAFTA will place the United States in the middle of a North American market of over 360 million consumers and an annual output of $6 trillion. A NAFTA Will Increase U.S. Exports and Create U.S. Jobs The U.S.-Canada Free Trade Agreement Serves as a Model for NAFTA Negotiations: o President Bush has overseen the successful implementation of the U.S.-Canada Free Trade Agreement (CFTA). The free trade agreement between the United States and Canada has substantially increased exports for U.S. industries, attracted investment and jobs to the United States and Canada, and facilitated business between the two countries. o Trade has grown dramatically since the inception of the agreement. Merchandise exports to Canada totalled $85.1 billion in 1991, a gain of 42 percent over 1987. American workers who can attribute their jobs directly to trade with Canada are over two million strong. 28,000 jobs were created by trade growth with Canada in 1991 alone. o The CFTA has facilitated all manner of business exchange between the two countries. For example, as a result of the CFTA, more American companies are eligible for, and winning, Canadian government contracts; businesses have better access to customers north of the border; and American service providers have a guaranteed access to the Canadian market. o The advantages of the CFTA will be reinforced and expanded under the NAFTA. A NAFTA Will Increase U.S. Exports: o A NAFTA will ensure U.S. access to the growing Mexican and Canadian markets. The citizens of Mexico today import more American goods per capita than the citizens of the European Community. With its population of 88 million (almost three times larger than Canada's) expected to grow to 100 million by the year 2000, an economically surging Mexico could become an increasingly important market for the United States. o U.S. exports to Mexico are growing more than twice as fast as U.S. merchandise imports from Mexico. Since 1987, exports have grown at an average annual rate of 23 percent; merchandise imports have grown at 11 percent. In 1991, the U.S. ran a trade surplus with Mexico for the first time in a decade. o Since Mexico started to liberalize trade in 1986, U.S. merchandise exports to Mexico have increased more than 169 percent -- from $12.4 billion in 1986 to $33.3 billion in 1991. o Mexico purchases two-thirds of all its imports from the U.S., and for each dollar of Mexican GNP growth, fifteen cents is spent on U.S. goods. Increased production in Mexico and Canada will enable these countries to earn U.S. dollars with which they can buy U.S. exports. A NAFTA Will Increase U.S. Jobs: o A NAFTA will strengthen the Mexican economy, which in turn will increase Mexico's demand for U.S. goods. This increased demand for U.S. products and services will create American jobs. o Merchandise exports to Mexico have increased by more than 169 percent, generating over 300,000 new American jobs. The Commerce Department estimates that 650,000 American jobs are related to U.S. exports to Mexico. o Nearly 20 formal economic studies have concluded that a NAFTA will be favorable to overall U.S. employment. Many American manufacturers have already noted that joint production arrangements with Mexico have saved U.S. jobs and created new ones. A NAFTA Will Increase U.S. Competitiveness o A NAFTA will benefit U.S. producers and workers through increased sales opportunities, improved operating efficiencies, and strengthened competitiveness in the world economy. o The U.S.-Mexican joint ventures and cooperative production efforts promoted by a NAFTA will give these producers a comparative advantage by combining the U.S. advantage in technology, research and innovative development with Mexican production operations. These U.S. producers thus become more competitive in the world economy. A NAFTA Will Include Transition and Safeguard Provisions Transition Measures: o In order to avoid dislocations to industries and workers producing goods that are import-sensitive, a NAFTA will provide a gradual schedule for the elimination of tariffs and non-tariff barriers on such products. In isolated cases where the lengthy phaseout period fails to prevent injurious increases in imports, the Administration will retain the ability to reimpose duties and other restrictions. o In determining import sensitivity, the Administration will rely heavily on the advice of the U.S. International Trade Commission, the Congress, and the private sector. Strict Rules of Origin: o The Bush Administration will negotiate effective rules of origin to ensure that the benefits of a NAFTA do not flow to third countries that establish "screw-driver" operations exporting their products to the U.S. with only minimal assembly in Mexico or Canada. Increased U.S.-Mexico Cooperation on Labor o The U.S. Secretary of Labor and her counterpart from Mexico signed a Memorandum of Understanding in May, 1991 which provides for cooperation and joint action on a number of labor issues which are being implemented in parallel with the NAFTA negotiations. o These issues include health and safety measures; work conditions, including labor standards and enforcement; labor conflicts; labor statistics; and other areas of concern to the United States and Mexico. A NAFTA Will Improve Environmental Standards in Mexico o A NAFTA will assist Mexico in meeting environmental standards closer to those adhered to by the U.S. and Canada. As President Salinas has made clear, Mexico has no interest in becoming a pollution haven for U.S. companies. o In parallel with the NAFTA negotiations, President Bush is pursuing an ambitious program of cooperation on a wide range of environmental matters, including the design and implementation of an integrated border environmental plan. o The Bush Administration has committed $143 million in the current fiscal year for implementation of the border environmental plan, and a further $241 million is in the President's proposed budget for Fiscal Year 1993. The Mexican government has budgeted $460 million for the 1992- 1994 phase of the plan. o Mexico's comprehensive environmental law of 1988, which is based on U.S. law and experience, is a solid foundation for tackling its environmental problems. All new investments are being held to these higher legal standards, and an environmental impact assessment is required. o Standards for imported food items will not be lowered. A NAFTA Will Enhance Competitiveness of Import-Sensitive Sectors Steel: o Mexico's demand for steel products is expected to increase dramatically in the coming decades as the Mexican economy grows. Mexican steel producers, however, are not expected to have sufficient capacity to meet domestic demand for a number of products. A NAFTA will enable U.S. steelmakers to take advantage of this surging market by lowering Mexican tariffs on U.S. steel products, which previously have been cited by U.S. steelmakers as the greatest impediment to increasing exports to Mexico. U.S. steel exports to Mexico totaled nearly $800 million in 1991 and will expand further as the Mexican economy grows and tariff rates are reduced. o The American Iron and Steel Institute and the Steel Manufacturers Association have endorsed negotiation of a NAFTA. o The United States has maintained a large trade surplus with Mexico in steel products. U.S. exports of steel products to Mexico increased 64% in 1991 -- the U.S. exported three times as much steel to Mexico as it imported in 1991. Textiles and Apparel: o Since Mexico began to liberalize trade in 1986, U.S. textile and apparel exports to Mexico have increased at an average annual rate of 25 percent, climbing to approximately $1 billion in 1990. A NAFTA will further reduce trade barriers and enable U.S. exports to Mexico to expand as the Mexican population grows and their standard of living increases. o For two of the last three years, the United States has maintained a surplus with Mexico in textile and apparel products. This trend is expected to improve further as trade barriers come down. o The Bush Administration will seek to negotiate a NAFTA that eliminates Mexican and Canadian tariffs and non-tariff barriers; phases out U.S. barriers gradually over a sufficient transition period so that U.S. companies and workers will have time to adjust; establishes strict rules of origin and appropriate safeguards; and contains measures to prevent illegal transshipment and fraud. Autos and Auto Parts: o A NAFTA will increase exports of U.S. motor vehicles to Mexico by removing restrictive Mexican trade and investment barriers. o A strong rule of origin will ensure that Mexico and Canada are not used as export platforms to the United States by third-country producers. o A NAFTA would not drain U.S. jobs and investment because lower labor costs in Mexico are offset by costs associated with Mexico's underdeveloped infrastructure and lower productivity. Labor costs are a decreasing component of automotive manufacturing cost. Other Advantages o A NAFTA will reduce incentives for illegal immigration into the United States by increasing Mexican wages and production and growth. o A NAFTA will send a strong and encouraging signal to other countries in Latin and South America, resulting in new trade relationships that will open new markets for U.S. goods.


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