THE OPPENHEIMER REPORT

NAFTA rhetoric may harm ties

By ANDRES OPPENHEIMER

Democratic hopefuls Barack Obama and Hillary Clinton's latest claims that they would ''opt-out'' of the U.S. free trade deal with Mexico may be just primary season political theater, but many Latin Americans see it as irresponsible rhetoric that could badly hurt U.S. ties with the region.

Words matter. Even if Clinton's and Obama's escalating criticism of the 1994 North American Free Trade Agreement (NAFTA) may be overheated campaign rhetoric aimed at winning blue-collar votes in Tuesday's primary election in Ohio -- one of the most protectionist U.S. states -- the candidates' anti-NAFTA speeches are helping create a public opinion mood that may hurt pending U.S. free trade deals and investments in Latin America, officials say.

''They are using a rhetoric that is immensely harmful for the U.S. political standing in Latin America,'' Colombia's Vice President Francisco Santos, whose country is fighting for U.S. congressional approval of a U.S.-Colombia free trade agreement, told me in a telephone interview Friday. ``It's a political and economic bomb that can have a huge impact.''

Many investors set up plants in Latin America to export their goods under preferential duties to the U.S. market. The idea that the United States may back off from existing free trade agreements ''generates fear among investors, and discourages investments in the region,'' Santos said.

Panama's Foreign Minister Samuel Lewis, whose country is also awaiting U.S. congressional ratification of a bilateral free trade deal, told me that the anti-NAFTA rhetoric in the U.S. presidential race is causing ''surprise'' and ''concern'' in Panama.

''There is a big concern that it could translate into changes in U.S. commercial relations that have been very positive,'' Lewis said.

Most Latin American economists agree that -- except for a few industries -- NAFTA has been largely good for Mexico, Canada and the United States. Trade between the three countries has grown by more than 200 percent since NAFTA's start, according to U.S. figures.

NAFTA has allowed Mexico to increase its exports to the U.S. market by 400 percent, and to receive $120 billion in U.S. investments over the past 14 years -- five times the average annual amount it was receiving before the deal.

If it weren't for NAFTA, Mexico's economy would be growing at a slower pace, if at all, and the threat of a social explosion would become a major U.S. immigration, trade, energy and security nightmare, they say.

And Obama and Clinton's claims that free trade with Mexico has hurt the U.S. economy is at best deceiving.

• First, the U.S. trade deficit with Mexico is small compared to that with China: while the United States runs a $256 billion trade deficit with China, it has a $74 billion trade deficit with Mexico, and much of it is because of rising prices of U.S.-imports of Mexican oil.

• Second, Mexico is the second-largest U.S. export market in the world, after Canada, and a major source of U.S. export-related jobs. The United States exports $134 billion a year in goods to Mexico, compared with only $55 billion to China.

• Third, a U.S. renegotiation of NAFTA would open a Pandora's box, since Mexico would seek advantages for its own NAFTA-affected products, and Mexican politicians would demand major U.S. concessions on the free movement of labor across the border.

• Fourth, a disruption in U.S. free trade with Mexico would make Mexican goods more expensive in the U.S. market, hurting both U.S. consumers and export-related industries. America would lose competitiveness in the global economy, and would contribute to creating an anti-globalization climate that would badly hurt U.S. exports and foreign investments.

''Be careful with what you wish for,'' Mexican ambassador to Washington Arturo Sarukhan told me. ``The way free trade is being portrayed, especially in a context of an economic slowdown, could not only hurt U.S. competitiveness but also hinder efforts of those of us who believe that open markets can deliver sustainable growth.''

My opinion: When it comes to Latin America, Clinton and Obama's statements on trade with Mexico are just as irresponsible as most Republican presidential hopefuls' statements on immigration from Mexico.

That's too bad. Although the primaries will come and go, the candidates' reckless speeches will leave their mark on U.S. public opinion. That will end up hurting the United States, Mexico and the rest of Latin America.