The benefits of free trade are not lost on executives of Illinois’ industrial machinery/computer industries, who have seen their products become Illinois’ leading export to Canada and second-leading to Mexico.
Overall, Canada ranked as Illinois’ top export market in 1995 at $6.9 billion, according to Illinois’ Department of Commerce and Community Affairs. Mexico was tied for fourth at $1.6 billion. And exports to the two North American Free Trade Agreement countries are on the rise–growing nearly 38 percent between 1993 and 1996, according to the Council of the Americas.
While the benefits of freer trade, may seem obvious, the discussion surrounding the creation of the Free Trade Area of the Americas, as well as the lack of “fast-track” authority to negotiate new trade agreements for the United States, is politically charged. In fact, it is reminiscent of the debate in the early 1990s when the United States, Canada and Mexico were haggling over NAFTA. Political opponents guaranteed we would hear the “sucking sound” of U.S. jobs being pulled into Mexico, where labor is cheaper.
Nothing could have been further from the truth. A recent survey of U.S. businesses, co-sponsored by Harris Bank, shows that 51 percent of the companies report gaining employees since NAFTA was enacted, and only one attributes job loss directly to NAFTA.
That job growth is driven by expansion into new markets, and the businesses are predicting even more aggressive growth ahead. For example, while 31 percent of the firms said they have increased sales to Mexico since NAFTA was established, 71 percent expect to do more business there over the next two years. Similarly, 14 percent of U.S. firms say their sales to Canada are up since NAFTA, but 70 percent expect to see that business jump over the next two years.
The importance of U.S. trade relations in the western hemisphere is even more critical now with the downturn in the Asian economies. According to DCCA, Japan and South Korea rank among the top 10 markets for Illinois exports, with Japan ranking No.2. As those economies regroup, the ability of U.S. companies to compete with our western hemisphere counterparts will become more critical.
One of the most important constituencies in the trade debate, the business community has been quiet on the issue, and as a result their views have been overlooked. But the survey found business executives are nearly unanimous in supporting FTAA.
With or without the U.S., nearly every country in the western hemisphere is working to forge economic ties with their neighbors. Canada already has established a trade agreement with Chile that automatically gives its products an 11 percent price advantage over the same products from the U.S. Mexico is exploring a role as the economic gateway between North and South America. And Brazil and its partners in Mercosur have made no secret of their ambitions to establish a free trade agreement that spans South America, and may even reach Europe or Asia.
The establishment of a Free Trade Area of the Americas is essential for the future of businesses in the U.S. A zone that extends from the Arctic reaches of Canada to the southern tip of Argentina is inevitable and those who are complacent about the integration of the Americas will be left as spectators on the sidelines.
