Small minority businesses weigh the advantages and the adjustment costs of global free trade.
Arturo Volpe supports global free trade – up to a point. The CEO of Pan American Express, a trucking company in Laredo, Texas, knows from experience how opportunities open up when nations lower their tariffs and trade restrictions. But when it comes to allowing Mexican trucks full access to U.S. roads, he thinks free trade has overextended itself.
Pan American Express faces a situation familiar to many Hispanic companies. With a location near the border and annual revenues of $23.68 million (ranking 172 on the HISPANIC BUSINESS 500), the company has strategic advantages to help it compete in a binational economy. In a global trade milieu dominated by large multinational corporations, however, such small firms often lack the capital or other resources to absorb sudden changes, such as the Mexican trucking regulations.
The upside of trade seems obvious since implementation of the North American Free Trade Agreement (NAFTA). According to congressional testimony by U.S. Trade Representative Robert Zoellick, U.S.-Mexico trade grew from $81 billion in 1993 (the year before NAFTA took effect) to $247 billion last year. During the same period, 2.2 million jobs were added in Mexico and 1.3 million new jobs were created in Canada, with 13 million more in the United States.
Now President George W. Bush wants to expand NAFTA – a project originally conceived by his father and brought to fruition by President Bill Clinton – by negotiating new bilateral, regional, and global trade pacts. He faces opposition from the Democratic Senate as well as Republicans in the House of Representatives, who have been spooked by protests from labor unions, environmental groups, and protectionist industries. At stake is whether Congress will give Mr. Bush “trade promotion authority” (TPA) this year. This power, formerly called “fast-track authority,” allows a president to negotiate trade agreements independently of Congress, which would only vote for or against the final document that was agreed to by a foreign leader. Without TPA, most countries won’t negotiate, since the agreement would be picked apart in Congress.
To date, free trade’s biggest supporters have consisted of large multinational corporations and a smattering of transport-related companies like Pan American Express. But Mustafa Mohatarem, chief economist at General Motors Corp., points out the potential benefits for a wide swath of the small and minority business community. NAFTA “forces firms to increase their efficiency and productivity to meet foreign consumer demand. Even at the micro-industrial level, companies must begin to act as if they do business in one large market. For example, under NAFTA, a small supplier that sold products to GM in the U.S. now has the opportunity to supply GM in Mexico as well,” Mr. Mohatarem contends.
Hispanic companies in particular “ought to play to their strength and go global,” advocates Congressman Silvestre Reyes, a Democrat who represents El Paso. “They are bilingual and should celebrate the fact that there is another market they can get into and do well there. … The figures for NAFTA have shown a net gain [of jobs and business]. As we talk about globalization of the economy, it opens new markets to our companies.”
The debate over Mexican trucks forms a microcosm of the larger issue of global trade. At present, U.S. trucks can enter Mexico, and NAFTA stipulates that Mexican trucks are to be allowed into the United States. But small trucking companies such as Pan American, together with the International Brotherhood of Teamsters, highway safety advocates, and the American Insurance Association, have questioned the safety and maintenance records of Mexican trucks and the skills and law enforcement record of their non-unionized, low-paid drivers.
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