Let me give you some help, and I know it is not my interest in
helping you pass NAFTA â€” and I am not going to go into all the de-
tails the chairman did â€” but I fervently believe this is a terrible
trade agreement; it ought to be defeated. But you feel differently
and the administration feels differently.
And I might also say to my friends on that side of the aisle who
think the President has not been diligent enough or tough enough
or strong enough, where have they been? This guy has been out far
more than he should have been, pushing a bad trade treaty, in my
But let me just say that you want to find money for it. I do not
want to help you pass it, but I have got an idea for money. I just
yesterday got an estimate from the joint tax committee, an esti-
mate that I asked for in writing â€” last year, the President cam-
paigned on a number of tax provisions, one of which was let us end
the little tax incentive called deferral for plants that close up in
America and move overseas. Let us end the tax incentive for plants
that leave this country.
Now, I have had a bill in, both when I was in the House and now
I have reintroduced it in the Senate, and I got the most recent esti-
mate from the Joint Tax Committee yesterday. It raised $1.6 bil-
lion in 5 years. The estimate they gave me last year was $1.3 bil-
lion. And there was supposed to be a little fix on this issue, or at
least some marginal improvement on this issue in the bill that we
passed, the budget bill. But the fact is the Joint Tax Committee
now says the incentive that exists under deferral for closing your
plant in America and moving it overseas has grown even larger â€”
I very much want to pass that. I want to pass my bill.
Do you want to put my bill in NAFTA? I still will not vote for
NAFTA, but at least my bill might pass. And it would solve your
Ambassador Kantor. I thought we had a negotiation going on.
I am truly disappointed.
Senator DoRGAN. No, no.
But why do you not look at this? Why do you not take a look at
that? It is something the President campaigned on, feels strongly
about I think, and it is something we ought to do.
Ambassador Kantor. I will.
Senator Dorgan. It is good public policy. And it also, coinciden-
tally, would raise you $1.6 billion. And at least from the discussion
I have heard here, I think you need it.
Ambassador Kantor. We will look closely at that, and I appre-
ciate your remarks. Thank you very much, Senator.
The Chairman. For the committee's information, we are going
live now with Mexico City and the witnesses on the second panel,
and I would just relate that for our distinguished panelists appear-
And for the free press, please take notes because you might be
asked by the press down in Mexico City. They are not allowed in
the studio. They have been trying all day long to try to get in and
follow the proceedings of this particular hearing, but the Televisa
studios are owned by Emilio Escara.
Emilio Escara is the one who in February â€” do you remember
when they had that wonderful fundraiser and they were all told to
come in with $25 million? That is better than Mickey ever put on
in California. I mean, they really beat you on that one. And when
asked about it, Escara said, $25 million â€” I would be glad to give
three times that amount with the fortune I have made with Mexi-
can TV. He is keeping them out.
In fact the reason we are doing this is the candidates by law â€”
if you are running for president under the law of Mexico you can-
not leave the country a year preceding thereto. Now, understand
the very justifiable pride of all Mexican citizenry. They are very
sensitive. When witnesses appear and talk about an issue it could
be misinterpreted as criticism of the country itself
It is not our intent in this committee to give any criticism of
Mexico. They are our best neighbor and we want to try to foster
the best of relations. And we think the common market approach
of a free trade agreement is better than the NAFTA approach.
But having said that, going live, they will be following the an-
swers of that panel down there, and we will try to follow promptly
along behind this panel. But the press is not allowed to hear it, or
hear the questions or the answers down there.
And I say that, Secretary Wirth, with respect to all this con-
demnation and the wonderful change. See, we have been through
this over the years. We have gone down under Echeverria, de la
Madrid, and Portillo, and every time we are sold that we have got
a new front. But we have got the record here and you will see it,
get it in the record before we leave. But let me yield to Senator
Senator Mathews. Thank you, Mr. Chairman. Mr. Ambassador,
you and I represent the same State, and I am sure you are hearing
from the same people I am with respect to this treaty. And I am
happy to say that, with the exception of one group in Tennessee,
I think we are almost unanimous in terms of supporting the
NAFTA treaty, that our industry has kind of stepped forward very
clearly, our financial institutions and others, the health organiza-
tions. I think we are pretty universal in support of it.
There are two areas that I would Hke to ask you to comment on,
and one of them has been touched on a good bit before and that
is the tax issue. As you know, we are a big tourism State also.
It appears to me that we do a lot of Mickey Mouse-type ap-
proaches to problems around here, and it appears to me that if we
really believe, and I do, that we are going to create jobs through
NAFTA we are also â€” your economic advisors tell us that in doing
so, for each 1 percent we decrease unemployment in this country
we put another $35 to $50 billion into the coffers of the U.S. Treas-
It seems to me that this type of approach to that tax problem
might be a little more salutary than trying to tax the people who
want to come to our States and who want to come to our country
to visit with us and spend their dollars here. And I would hope that
we might look at that.
The other question is that it appears that we have some Amer-
ican companies who are trying to jump start this treaty already.
We have some, and in my State we have had two or three, one or
two of them under the section 940, I guess, of the Internal Revenue
Code, and others moving to Mexico or to the border already. This
is having a depressing effect upon it.
Would you comment on these two?
Ambassador Kantor. First of all, thank you for your kind re-
marks, and you have always been a great friend of mine and my
family, and I appreciate the comments about my native State.
The fact is that for every $1 billion in exports, enhanced exports,
we create about 18,000 to 20,000 new jobs in this country. One-half
of our gross national product growth in the last 5 years has been
due to exports. Clearly, we have to grow our markets overseas if
we are going to be successful in growing this economy and building
jobs here at home, for if we do not do that as we become more pro-
ductive, if markets do not increase you lose jobs not gain jobs. But
as you are more productive and more competitive in a world mar-
ket, what happens to you? As you open those up you become more
successful and you grow jobs. That is answer number one.
No. 2, as far as the concerns about companies moving or the pain
of that, it is much more likely companies will move under the cur-
rent situation, high tariffs, high tariff barriers, a maquiladora pro-
gram, and nonenforcement of environmental and labor laws than
under a NAFTA situation which ends those practices, because you
can stay in the United States under NAFTA and be more competi-
tive and ship your goods south, whether you are a small business
or the biggest one here, or a medium or large business than under
the present circumstances.
Frankly, we see much more exports going south than jobs. The
automobile industry, with all due respect to the chairman, is a
clear winner and will grow iobs not only in building cars in this
country but in auto parts and. in trucks and in busses.
So, therefore, in both cases we become a winner under NAFTA.
This is an agreement that levels the playing field, and it is good
for U.S. workers.
Senator Mathews. Mr. Chairman, in interest of time I would
The Chairman. Very good. Senator Danforth.
Senator Danforth. Mr. Chairman, thank you very much. Am-
bassador Kantor, I apologize for not being here earher. There is an-
other committee which also has jurisdiction over this matter, the
Finance Committee, and in fact we were having our markup just
Do you believe that international trade is a zero-sum game? That
is, if one country wins out does another country necessarily lose,
or do you believe that when we open markets and it is to the ad-
vantage of one country such as in Mexico, that could also be to the
advantage of the United States?
Ambassador Kantor. In fact I believe that fervently. Senator,
and I do not believe it is a zero-sum game. In fact, the facts are
clear that it is not.
Where there are open markets and expanding trades, whether in
the European Community before they have had the economic prob-
lems unrelated to trade and other areas of the world, in fact both
The most obvious example today is in Latin America. As we have
a growing trade surplus with the growing market economies of
Latin America^^hile, Argentina, Venezuela, Argentina, Mexico â€”
their economies have grown as well. They have increased jobs. We
have increased jobs.
So, opening markets and expanding trade has been good for all
parties right here in this hemisphere.
Senator Danforth. And do you think that a growing economy in
Mexico is in the best economic interests of the United States?
Ambassador Kantor. It is in the best economic as well as our so-
cial and political interests, frankly, Senator. Even our opponents
agree that NAFTA will stem the flow of illegal immigration by 1.4
to 1.6 million people by the turn of the century which will have an
enormous effect on raising income for our lowest paid workers. It
will raise it, it is estimated by our opponents, raise their income
by 4 to 6 percent, and I cite a study done by the Economic Policy
Institute to that effect.
Senator Danforth. Now, there is now a tariff disparity between
the United States and Mexico; is there not?
Ambassador Kantor. Yes, sir.
Senator Danforth. What is that tariff disparity?
Ambassador Kantor. Mexico's tariffs average about 2V2 times
higher than U.S. tariffs. In agriculture it is more than that. Tariffs
average about 16 percent and ours are only 6 percent.
Senator Danforth. And what would NAFTA do to that tariff dis-
Ambassador Kantor. Well, it would tear down the barriers in
terms of tariffs between the two countries, and of course their tar-
iffs as a percentage would come down much faster and much great-
er than ours simplv because they are higher and we would remove
that barrier or wall.
Senator Danforth. How about the maquiladora program? How
does that operate to the detriment of the United States now, and
what would be done about it under NAFTA?
Ambassador Kantor. To work backward, when it is phased out
and the trade preferences are eliminated by virtue of the NAFTA,
the way it operates now is any company moving into that region
is able to import tariff free component parts as long as they are as-
sembled into finished goods and shipped back to the United States
of America where we only charge tariffs on the value added, not
on the whole product. Ana so it gives a huge competitive advantage
to any company moving to that region.
In addition, those companies are prohibited from shipping those
finished goods into the interior of Mexico, so they must ship them
back into the United States. It is the only market for them. They
do it virtually tariff free. They get the component parts tariff free,
and it gives them a competitive advantage over our companies op-
Senator Danforth. We are halfway into a vote now.
The Chairman. Yes. The committee is indebted to both of you
gentlemen and I will note in the record the fact of the record on
human rights. Secretary Wirth, and you can stay if you will or you
can be excused. What we have is, unfortunately, three votes. So, we
are going to be gone for about a half-hour, and it is now 11:50 a.m.,
and you nave got other important engagements.
We do appreciate your appearance here before this committee.
Thank you very much.
The committee will be in recess.
[A brief recess was taken.]
The Chairman. Well, I would like to say good afternoon to our
friends in Mexico. I am Chairman Rollings, chairman of the Com-
mittee on Commerce, Science, and Transportation. We have been
holding a series of oversight hearings on the North American Free
Trade Agreement with the great country of Mexico.
We have not been able to get quite the balance that we would
have wished on both sides of the aisle here with Senators, and un-
fortunately this morning we are all wrapped up in some votes.
Now, I voted early. The other members will be coming back.
But I think what we should do in welcoming our witnesses from
Mexico City, that we identify them in the order in which they are
asked to make their statements. And if they can try to limit their
statements verbally here to about 5 minutes that will take up a
good half hour. We only have the remaining hour on this satellite.
We want to leave at least the remaining half hour for questions
from the colleagues.
If you have, as some do, a prepared statement, those statements
will be entered into the record in their entirety, but we do ask that
you highlight them.
So, as the chairman of the committee, here is the order that I
have been instructed as to the desire to be heard. Dr. Miguel
Basanez, the president of Market and Opinion Research Inter-
national, MORI de Mexico, World Association for Public Opinion.
Then second. Dr. Jorge Castaneda of the National Autonomous
University. Then Ms. Amalia Garcia, the secretary for inter-
national affairs, the Party of the Democratic Revolution.
Fourth, Mr. Zeferino Torre Blanco, president of Super Super, Inc.
And five, Mr. Alfredo Corella, an attorney at law.
I see you folks down there clearly, and I was just told by the
leadership on the floor of the U.S. Senate that this sort of sets a
precedent for appearances here which probably will take root. We
have a tremendous expense bringing in witnesses all the way from
California and the Northwest on other occasions, and if we can
have these satellite hearings in Mexico, we ought to be able to have
them in our own country. And we will have some other coming
along asking the question.
But Dr. Basanez, let me first recognize you, sir, and proceed
STATEMENT OF DR. MIGUEL BASANEZ, PRESmENT, MARKET
AND OPINION RESEARCH INTERNATIONAI^[MORIl DE MEX-
ICO, WORLD ASSOCIATION FOR PUBLIC OPINION RESEARCH
Dr. Basanez. Yes, sir, Mr. Chairman. I would like to highlight
some aspects of public opinion in Mexico about the United States
and free trade.
In a survey that we took in the United States, Canada, and Mex-
ico in 1990 with the University of Michigan as it appears, and I
think you have a copy of that graph but it can be shown on the
screen also, you could notice that on three different commissions
the opinions in the three different countries are different, particu-
larly the United States.
On a freer trade, on conditional commissions, the United States
was very much against, Canada was in the middle range, though
Mexico was 70 points agreeing.
If no jobs are lost, then both Canada and the United States are
higher, agreeing, and Mexico remains the same. And the three
countries are on around 75 percent agreeing on May 1990, when
this survey was taken.
Do you have a copy of this graph?
The Chairman. I do have it. We will show it also on the screen,
because we will make it a public record. We have it. It will be part
of the record. You can proceed, please.
Agree with Freer Trade ..
- _ G
r 75 -
c 70 '
t 80 â–
Mexico . â– ""^
â– ' â– Â»
r~ '^ â€” '
. . _ IB' 1^
Ur.coiidllionally It no jobs are
cs Suivcy. Ihc Uiiiversily of Muliiti.in. 1 'I'Xl / i.^ USAIOIO.
r:m3ila:172y & M
Dr. Basanez. The second graph I wanted to present is how the
opinion on NAFTA has changed from 1990 up to today. In 1990 the
Mexican public was nearly 80 points in favor of NAFTA and 15
points against. In 1991 the favorable opinion dropped to 60 points,
to 50 points in 1992, and to 45 points today.
Are yon in favor or against NAFTA?
~~" â€” -m^
' " â– -
n favor â–
n- " â€”
I J 92
\\>il.l Valiir, Siirvry. Thr Uriivctsw "( Mnli.R.m. May '>"". Â» I â€¢> > 1 / Scplrnil'T lO")!. I A 1 irnc^. n-l"i-15 /
AiiEiisl ^992. WcrkI R.itlin Nrvv< Smv-y. n-IK./ I 'I' I'i' '.^. f-xrrlsiof, n^H ?!
Dr. Basanez. The sun'eys were taken for the University of
Michigan in 1990, for the L.A. Times in 1991, for a radio news pro-
gram in 1992, and for Excelsior, a Mexican newspaper, in 1993.
What is your opinion about the US?
June l'>8h Naiion.il ijiirvey iwUII / Aiif. u^ l \')'t\ . I A I iii.cyn- 1 52 V Tcli [')')}. lixcHsio
Dr. Basanez. When we ask who benefits from NAFTA what we
got â€” and that is under graph No. 3. What we got is exactly the re-
verse opinion than what you got in the U.S. In 1991, 45 percent
of the Mexican public thought that the United States benefited
from NAFTA, and 21 percent thought that Mexicans benefited from
it. In 1993, the people, the Mexicans feeling that NAFTA benefits
the United States increased to 51. On the people feeling that Mex-
ico would benefit from it decreased to 14.
Now, if we go to the fourth graph, what is your opinion about the
United States, we could notice that Mexicans have now a more fa-
vorable opinion about your country. In 1988, 35 percent had a good
opinion. In 1991 that increased to nearly 60. On this year the de-
crease will be to 45, whereas the bad opinion in 1988 was 20 per-
cent, in 1991 it was 14, and in 1993 it is 16. And so you may see
that there is, I would say, a stable opinion. The decrease that we
have the last year may be for some problems that have arisen at
the beginning of this year on the relations between the two coun-
tries, at least as perceived by the public.
Who benefits from NAFTA?
1 99 t
Scpirml'Ct I'in i I, A limes, ii^l'^'l'^/ Prh . l^tccKi m . n-M7l
Dr. Basanez. The last graph that I wanted to emphasize for you
is that of opinions of Mexicans about the United States came from
almost one-half of the population having relatives in the United
States. Forty-three percent of Mexicans have relatives in the Unit-
ed States, as well as one-third of the Mexican public has visited
your country. So, most of the opinions that Mexicans hold about
the United States on what is forming on NAFTA is not just from
what they read, but a lot of that from what they have personally
Do ynij have relatives in the US?
4 3 %
Njijoii.tI Survey / I.A linie<i / Aur. I'JS^ / n=18Ti
Dr. Basanez. I thought it would be of mterest to present for you
these data, and I would be very glad to expand on your questions
The Chairman. Well, very good. We will come back to those
questions. We will next hear from Mr. Castaneda.
STATEMENT OF JORGE G. CASTANEDA, NATIONAL
Mr. Castaneda. Thank you. It is a pleasure to be with you, Sen-
ator Hollings, through the satellite hookup.
I think this is a particularly interesting experience for people in
Mexico. As you know, it has not always been simple for Mexicans
to deal with the U.S. Congress. I think this new experience will
make it a lot easier, and hopefully this will sort of open up the pos-
sibilities of a greater exchange between our two countries.
I must mention
The Chairman. Let me ask a question. It was earlier reported
that the press of Mexico was trying to cover this particular hear-
ing. They were trying to, of course, get in the studio, as I under-
stand it, with you to hear the questions and hear the answers. Is
the Mexican press present?
Mr. Castaneda. No, Senator. Unfortunately, the company here,
Televisa, has refused to allow the Mexican press in, which is why
we are all here. We decided to continue to be here and carry on
with this exercise, but nonetheless under protest.
We think it is totally inadmissible that Televisa, the Mexican
company that you hired to do the technical linkup, has decided on
its own accord and without your agreement or our agreement in
any case to not let the Mexican press attend this hearing, which
takes this to the extreme, the absurd.
The same Mexican media who are not being allowed into the stu-
dio here have correspondents in your chamber right now in Wash-
ington and are able to see and hear all of this in Washington, but
they cannot hear it and they cannot see it here. This is an example
of the type of difficulties we face in having free debate on NAFTA
in Mexico, which was the main point I wanted to try and make,
The Chairman. Well, please proceed with your statement.
Mr. Castaneda. Thank you. I wanted to open very quickly by
saying. Senator, that I, as so many of my compatriots, are not op-
posed to the idea of a free trade agreement between Mexico and the
United States and Canada, or even to many of the features, I
would say to most of the features that the current agreement has,
but we believe, or I certainly believe that the type of debate that
has been taking place and is taking place in the United States and
that has taken place in Canada before, were it to take place in
Mexico, would have enriched the agreement and would improve the
agreement and would also make it much more attractive and palat-
able to the Mexican population.
One of the reasons that Miguel Basanez' polls and so many other
polls show a significant drop in support for NAFTA in Mexico is be-
cause first there were excessive expectations aroused by the hype
the government put into this, and then now a great deal of dis-
appointment and disenchantment with it, but not because any of
this is based on real information, but simply because what is going
on is that there is no debate.
I think the important point is to realize that in Mexico it is ex-
tremely difficult to have the type of discussion and debate on tele-
vision or on the radio about NAFTA that has taken place in the
United States and in Canada. This is not true of much of the writ-
ten press. The written press has been quite open and has encour-
aged debate. Opinions, pro and con, appear often.
But the written press in Mexico, for all sorts of historical rea-
sons, has very small circulation. The largest newspaper in Mexico
maybe sells 100,000, 120,000 copies, whereas television and radio.
which truly has mass audiences, are completely closed off to debate
on these matters.
I know the U.S. press has reported in recent days on a clamping
down on freedom of expression on the radio in Mexico in recent
times, the firing of a very â€” or the resignation-come-firing of a very
distinguished commentator, the difficulties of having a debate on
the radio, and television, of course, is totally out of the question,
as once again illustrated by the problems we are having right here
So, my first point would be. Senator, that it is important for you
in the United States to realize that when you hear someone say
that Mexicans believe, Mexicans think, Mexicans support, or Mexi-
cans oppose NAFTA, we do not really know what anybody in Mex-
ico thinks, but the important point, of course, is that there has
been no debate allowing Mexicans to have an informed opinion
Second, this means, of course, as I said initially, that the process
of enrichment, of improvement of NAFTA that has occurred in the
United States and partly in Canada, is not occurring in Mexico.