One of the strongest arguments for NAFTA is that it will
continue the growth of U.S. exports to the dynamic Mexican market. In
the past five years, the U.S. has gone from a $5.7 billion trade deficit
with Mexico to a $5.6 billion surplus. NAFTA critics, however, point
out that much of that surplus is made up of capital goods -- and claim
that this is nothing more than taking apart American factories and
sending them south to Mexico. But this claim misses the real story
behind U.S. capital goods exports.
In percentage terms, capital goods have been the slowest
growing major export category to Mexico in the last five years. While
capital goods are still the largest component of U.S. exports to
Mexico, they have decreased from 40 percent of total exports to Mexico
in 1987 to 33 percent in 1992. In comparison, capital goods make up 40
percent of our exports to developing countries, and 39 percent of our
exports to the world.
The flawed logic that assumes that capital goods are merely a
one-time export which will produce a flood of cheap imported goods
flowing back into the U.S. misses the point. Capital plant equipment
exported to factories in Mexico should not be seen in negative terms for
the American economy. Production of cutting-edge technology such as
robotics, generators, and production machinery supports the
highest-paying U.S. manufacturing jobs; just as importantly, a healthy,
expanding Mexican economy will continue to need such high-tech U.S.
products. Even the U.S., the world's most productive economy, must
replace a part of its capital equipment each year.
Additionally, capital goods are some of our most competitive
exports and cover many things other than capital plant equipment: Boeing
jets, IBM computers, AT&T telephone systems, John Deere tractors. The
manufacture of all of these U.S. products support high-paying U.S.
jobs, and cannot be construed as a drag on the U.S. economy.
Finally, and perhaps most importantly, without NAFTA Mexico
has no incentive not to fill its growing capital goods needs from
Japanese and European -- rather than U.S. -- exports.
83 percent of the growth in U.S. exports to Mexico in the last
five years was for Mexican consumption -- not re-export. Additionally,
in those five years exports to maquiladoras in relation to total U.S.
exports to Mexico have fallen. In 1992, U.S. exports to maquiladoras
comprised 22 percent of U.S. exports to Mexico, compared to 32 percent