Have We Got a Deal for You

For the U.S., Canada and Mexico, the 14 months it took to complete the North American Free Trade Agreement may have been the easy part. Now comes the task of persuading lawmakers in all three countries to ratify the deal, which would phase out thousands of barriers over the next 15 years and unite more than 360 million consumers in a single trade bloc. Weary negotiators put the final touches on the plan by requiring that at least 62.5% of the parts for cars and light trucks sold duty free in the bloc should come from North America. The U.S. had pressed for a 65% local-content standard, while Canada and Mexico had initially wanted a 50% level.

Just hours after the agreement was reached, President Bush strode into the White House Rose Garden to applaud the pact as "the beginning of a new era." Mexican President Carlos Salinas de Gortari went on early-morning television to praise the deal, while Canadian Prime Minister Brian Mulroney called it "an important step forward." Elsewhere the reception was chillier. In Japan, angry trade and auto-industry officials charged that the local-content requirement would force Japanese manufacturers to redesign cars sold in North America and jack up prices.

The stiffest resistance could come from U.S. labor leaders and Democrats in Congress who fear that the trade pact would tempt companies to shift factories and jobs to low-wage Mexico. Declared Senator Donald Riegle, a Michigan Democrat: "To integrate our economy with a Third World economy will create massive unemployment here." Congressional critics seem certain to demand safeguards for U.S. jobs and the environment when the trade deal comes to a vote next year.