Mexico Takes Important Step to Liberalize Trade
Jul. 19, 1986
MEXICO CITY (AP) _ Mexico's entry into the world's premier trading group should mean more and better products for its consumers and offer a rich market for U.S. businesses, analysts say.
It also should boost Mexican exports, bringing in badly needed money to help pay the enormous $97.6 billion foreign debt, the second largest in the developing world after Brazil's.
Mexico, with 70 million people one of the world's largest free-market economies, was approved last week for membership in the General Agreement on Tariffs and Trade, known by its initials as GATT.
''It's a major step,'' said Javier Murcio, an economist with the private consulting firm of Data Resources Inc. in Lexington, Mass.
When the formalities are completed in the coming weeks, Mexico will become the 92nd member of the organization, which sets trade rules and negotiates trade-expanding arrangements.
GATT membership will be an economic watershed.
''It's going to force a competitive mentality in Mexican industries,'' said Murcio.
Jorge Barbara Zetina, president of the Mexican Association of Importers and Exporters, told local reporters that industry will become more efficient and production will rise.
Mexican consumers, he said, will have access to better products at lower prices.
Over the years, the government has erected trade barriers to protect some of its industries from foreign competition. As a result, consumers' choices are limited. Store shelves often lack variety.
Prices of locally made appliances are usually higher than across the border. A small, Mexican-made, black-and-white TV set costs twice its $75 price at U.S. stores. Prices for color TVs also are double what they are in the United States.
Cars made in Mexico frequently cost the same as, or more than comparable models in the United States - though labor costs here are substantially lower.
In joining GATT, Mexico will gain most-favored-nation status with member- nation trading partners, which entitles its products to lower tariff rates than non-member countries.
Mexico already had that status with the United States and other key trading partners.
It also will become part of the organization's mechanism for settling trade disputes.
In exchange, Mexico agreed to reduce some of its trade barriers. That should permit U.S. and other foreign firms to take a bigger share of the local market.
Specifically, Mexico agreed to grant tariff concessions on 373 products, ranging from livestock and medical equipment to chain saws, agricultural hardware and electronic components.
The concessions represent 15.9 percent of the value of the country's imports, according to the Commerce Department.
Mexico exported $21.9 billion dollars worth of goods last year; imports were $13.5 billion.
For other products, Mexico agreed to maximum duties of 50 percent of product value, though higher values may be imposed to promote development of priority industries for up to eight years.
The Commerce Department said Mexico will be considered in GATT as a developing country, which the department described as beneficial.
Mexico's incorporation into GATT was worked out in an unusually short period because the nation wants to take part in what will probably be the last world trade talks of this century. Those discussions are to begin with a ministerial-level meeting of member countries Sept. 15 in Punta del Este, Uruguay.
President Miguel de la Madrid's decision last November to procure GATT membership was a surprise.
In 1979-80, Mexico nearly joined the trade group but backed out after political pressure from those who contended the country would lose some of its independence, business interests would be hurt, and unemployment would rise.
Some groups voiced similar concerns this time around. Fidel Velazquez, head of the 4 million-member Confederation of Mexican Workers, warned that GATT membership would force about 700,000 small- and medium-sized industries into bankruptcy.
But most businessmen and consumers felt Mexico had no choice but to join GATT as part of the push to modernize an underdeveloped economy.