Surprise! Nafta's Already Here

By John Greenwald

Bill Clinton and H. Ross Perot may be reluctant to acknowledge it, but the U.S.-Mexican border is already wide open to trade and likely to remain so whether the North American Free Trade Agreement passes Congress or not. In Laredo, Texas, last week 18-wheelers thundered back and forth on I-35, hauling American-made computers, machine tools and other goods to Mexico and bringing back Mexican-produced TVs, beer and foodstuffs. At the same time, Mexican shoppers streamed across the Rio Grande to splurge at Laredo's glittering Mall Del Norte, where retailers such as Sears and B. Dalton books are often packed. " NAFTA or no NAFTA, free trade is here," says Kiko Zuniga, a Laredo businessman who has built three warehouses to handle the flow of merchandise. "All NAFTA can do is increase our sale of goods."

This booming two-way commerce reflects a recent transformation that has brought free markets to Mexico. The impact extends far beyond border towns and deep into the American heartland, which sends Mexican buyers everything from soybeans to Chevrolets. Since Mexico began lowering its trade barriers, annual U.S. exports to the Latin American country have more than tripled, to nearly $41 billion. That has turned a U.S. trade deficit with Mexico of $5.2 billion in 1986 into a $4.7 billion surplus last year. "Almost all the real effects of NAFTA have already happened," says Paul Krugman, an M.I.T. economist. "Mexico has already had the big liberalization. We're talking not about an investment boom that's going to happen, but one that's under way now." Many American companies with a foothold in Mexico's market of 88 million people have ambitious expansion plans there regardless of NAFTA's fate. Dallas-based Southland Corp. operates 180 7-Eleven stores with joint-venture partners in Mexico and will open 20 more by the end of the year. Wal-Mart opened a block- long supercenter in Mexico City in September, along with five Sam's Clubs warehouse stores. The Arkansas-based company is completing a second supercenter in Monterey, Mexico, this month, plus two more warehouse clubs. Rival K Mart will open its first Mexican store in 1994, and plans to build more than 50 outlets over the next five years.

Almost all the things Perot and other NAFTA critics say are going to happen if the agreement is signed have already happened. The largest -- and most controversial -- migrants to Mexico have been the automakers and other big manufacturing firms that have built assembly plants, or maquiladoras, along the border and employ low-wage Mexican labor. This process has been going on for more than 20 years. The factories export the vast bulk of their output, basically duty-free, back to the U.S. Some 2,200 maquiladoras, most of them American-owned, employ more than 500,000 Mexican workers. Not only has the shifting of the facilities to Mexico cost some Americans their jobs, but lax environmental standards and poorly enforced regulations have turned large stretches of the 2,000-mile border into toxic cesspools. Maquiladoras are blamed for the noxious brown cloud that often overhangs El Paso, Juarez and other cities, as well as for the foul wastes that flow into the Rio Grande.

Pollution-free service industries have also begun flocking into the expanding Mexican marketplace. The Principal Financial Group, a concern based in Des Moines, Iowa, last month won the first new insurance license Mexican authorities have issued to a foreign firm in more than 50 years. Principal has a 30% stake in a Mexican venture that markets insurance and pension plans. "The Mexican insurance industry needs a dose of marketing expertise," says Camilo Salazar, vice president of international operations for Principal.

Many of these market openings could prove to be irreversible as Mexicans develop a growing taste for American goods. Procter & Gamble first exported Pringles potato crisps to Mexico in 1991 and expects to sell more than $5 million worth of the snacks there next year. When Dell Computer began assembling personal computers in Mexico 18 months ago, its new plant promptly shattered the company's record for sales growth. Dell expects annual sales of the Mexican unit to continue to grow by at least 50% over the next few years. "The Mexican economy is becoming more robust and information-focused," says Brian Wood, Dell's vice president for global operations. "The automation of business is still 18 months behind the U.S., so there is a big demand to upgrade technology. You will not see the personal-computer market dry up if NAFTA does not pass." For Mexico's consumers and companies, as well as America's, there looks to be no turning back.

With reporting by Tresa Chambers/New York, Deborah Fowler/Houston and Richard Woodbury/Laredo