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Background Briefing by Senior Administration Official

September 14, 1993

The Briefing Room

1:35 P.M. EDT

MR. JONES: This briefing on NAFTA is a BACKGROUND BRIEFING. Copies of the side agreements will be available after this, as well as a summary that are on their way. So -- and I think there will be an opening statement by [the senior official].

SENIOR ADMINISTRATION OFFICIAL: Thank you very much. I'll just make a couple of brief opening remarks and then open it up. First of all, of course, you all heard today from the President as well as the three former Presidents all the compelling arguments for the NAFTA. So I'm not going to try to duplicate anything they said. The purpose of this briefing, obviously, in your coverage of the story to fill in anything you need to know about the NAFTA itself, about the supplemental agreements, about the legislative process for finalizing the agreements and for finalizing the implementing legislation.

I'd like to start first by very, very briefly describing for you what will happen from this point forward. The President, obviously, started off the administration's effort this morning. This was directly followed by testimony by Ambassador Kantor, Secretary Reich and Administrator Browner before the House Ways and Means Committee. They're probably still being grilled up there. And tomorrow, Secretary Bentsen, Secretary Christopher and Ambassador Kantor will be testifying before the Finance Committee.

The President, of course, is going to New Orleans to speak to this issue in the Port of New Orleans tomorrow. And in addition, we have a full schedule of Cabinet officers traveling to various points around the country to convey the administration's message, to explain the arguments in favor of this very important agreement.

The legislative process, just so you understand, is an extremely arduous and detailed process. Perhaps the greatest misnomer is fast track, because this is a process that takes quite a bit of time. We work very, very carefully with all of the relevant committees in the Congress to fashion appropriate legislation. The President will not introduce legislation in the Congress to implement the NAFTA until we have worked with all of the committees of relevant jurisdiction, both on the House and Senate side. And they actually have a process that duplicates the normal legislative process, except instead of markups and conferences, they call them "nonmarkups and nonconferences," because the bill hasn't been introduced yet.

Once the committees have finished that process, working with the administration to fashion the appropriate language, the President then takes the recommendations of the Congress, folds them into the implementing legislation. Of course, he has to ensure that what's being recommended is consistent with the spirit and the letter of the NAFTA itself, and then he introduces an implementing bill.

Our target for introduction of that legislation -- and we think it's a very reasonable target -- would be late October or no later than the first of November. At that point, that legislation, which is introduced, is considered by both Houses under the fast track procedure. It is not amendable. There is a period for committee votes and committee hearings, followed then by floor action and a final vote. And we fully expect that the Congress would be able to finalize and approve this legislation this year.

The date of entry into force of the NAFTA is January 1, 1994, which means, of course, the President is committed to introducing it and securing the necessary congressional approval this year.

With respect to the supplemental agreements, let me just say, first of all, they were fully described to you by the President. They are available to you and you can see in quite a bit of detail what the supplemental agreements addressed. They establish new commissions for both -- North American commissions for both the environment and labor. And they provide a mechanism for addressing our concerns about adequate enforcement in both the labor and environment field and also for addressing any possible risks of import surges under the agreement.

Now, I can, of course, answer for you any questions about exactly what the NAFTA itself does. The simplest way to describe it obviously: it is an agreement which reduces and eventually eliminates all tariffs among the three countries in North America. And it also eliminates nontariff barriers; that is investment restrictions and other forms of nontariff restriction that might exist on U.S. exports to Mexico.

Now I will just stop there and open it up for discussion.

Q: The way the House works, the President is going to open himself up to a lot of criticism if he goes -- he doesn't introduce a bill before they start hearings.


Q: If they don't have anything specific from him to work on, or he's going to get a lot of criticism from Congress, especially from the Republicans.

SENIOR ADMINISTRATION OFFICIAL: Yes, but let me explain. This is -- we will handle this the same way other trade agreement implementations have been handled in previous administrations including the 1979 Trade Agreements Act, the 1988 Canada Act. We will propose draft legislation to the committees which begins the committee process. We will then work with the committees to get their approval to those drafts before the President introduces the bill. If he introduces the bill before talking to the committees there will be even more criticism from the committees because he will not have taken into account their concerns.

We want to work with the Congress in fashioning the legislation and we've been asked by the committees not to introduce the legislation until after the committees have had the necessary period to work out with us the implementing language.

Q: I have a question on process.


Q: With the fast track, as I understand it, it's 90 legislative days from the date of introduction.

SENIOR ADMINISTRATION OFFICIAL: It's a little more confusing than that.

Q: And does it expire after that if it goes over to next year?


Q: What's the December 15th --

SENIOR ADMINISTRATION OFFICIAL: Let me try to answer one question at a time. The fast track does not expire for NAFTA because President Bush signed the NAFTA before the expiry of the original fast track period. So the NAFTA, if we follow the appropriate procedures, the NAFTA legislation is entitled to fast track treatment.

Now, you're going to the question of what happens once we actually introduce the final bill. Once we introduce the final bill --

Q: Which you're suggestion would be no later than November 1st?

SENIOR ADMINISTRATION OFFICIAL: That's right. Once we introduce the final bill, there is then a period of 45 legislative days for consideration in the House, and an additional 15 days on the committee -- in the Senate committees -- with, if necessary, an additional period for the Senate floor. Now, that may immediately raise the question of whether we are guaranteed under fast track procedures a vote before the Congress adjourns, and I understand that question. We are working with the congressional leadership to secure that action as rapidly as possible.

The important thing to emphasize here is that in no previous fast track bill has that full period ever been utilized, because once the bill is introduced it is unamendable and the committees normally report it and vote on it expeditiously. If you look at what happened with the '79 act or the '88 act, it was voted on within a month of being introduced.

Q: Isn't unrealistic to think that you could introduce legislation November 1st and have something before the end of the year?

SENIOR ADMINISTRATION OFFICIAL: But try to understand, fast track is different than other procedures because we actually introduce a draft bill in the next several days and work out the language of the legislation with the committees. So before it's ever been introduced, we go through an entire legislative process.

And I've been through two fast track bills in the Congress myself, and I know that you have a period of committee markups, you have a conference between the House and the Senate, and all that takes place before the date of introduction.

Q: Are you going to take it up first in the Senate or the House?

SENIOR ADMINISTRATION OFFICIAL: No, it will be taken up in the normal process. We will work out the draft legislation with both Houses, introduce it. Our expectation then would be, of course, that the House and the Senate will work out the timetable for action.

Q: Can you go back -- you said 45 days in the House, and then you said 15 days in the Senate Finance, and then maybe more time for the Senate?

SENIOR ADMINISTRATION OFFICIAL: Fifteen days in the committees, and an additional 15 days on the floor, yes.

Q: So there's 75 -- there's no such thing as 90 days, even though that's what everybody talks about?

SENIOR ADMINISTRATION OFFICIAL: There is a grand --this is complicated stuff. There is a grand total of 90 legislative days that could be used if all of the committees and if both House floors utilize their full time period.

Q: But they can't fudge each other's time?

SENIOR ADMINISTRATION OFFICIAL: Now, I want to point out these are legislative days, they're not calendar days. And legislative days is a very complicated formulation because it excludes days when the Congress isn't in session for a certain number of days.

Q: is what we're talking about.

SENIOR ADMINISTRATION OFFICIAL: My point here is that we're not going to need all of those days. We haven't, under prior trade agreements legislation. And once the bill is introduced, it is not amendable. The job for the committees at that point is to decide whether or not to approve the legislation.

Q: In terms of the specifics that you are going to be working on as this draft legislation moves through the committees, are there enough points that there is room for give and take on, that they're going to change anybody's votes, or isn't it just basically the whole concept of NAFTA that's upsetting a lot of the opponents to this legislation?

SENIOR ADMINISTRATION OFFICIAL: In implementing an agreement of this type, obviously, we have certain discretion with respect to how we implement our obligations. The legislation does have to be consistent with the agreement. We have to honor the terms of the agreement. But how Congress does that and how they wish to do it is a matter that allows certain flexibility in the implementation process.

If you look at prior trade agreements, that's why the Congress places such a heavy emphasis on what I've described to you -- this nonmarkup and nonconference process -- because we do work out legislative language. Under the agreement you have flexibility as to how you implement certain of these obligations.

Q: Can you give us an example of some of the places that you think that there is room for give and take, that you see --

SENIOR ADMINISTRATION OFFICIAL: I'm not going to prejudge the process. I'm certainly not going to offer anything before we've begun to talk to the committees. But I can give you all kinds of examples of what's been done in the past. With respect to the Canada Free Trade Agreement, for example, the administration and the Congress worked out certain language about subsidy practices and how they would be addressed under U.S. law, which was directly relevant to the agreement.

So there are a number of things that can be done. My point here is that the implementing legislation that the President will introduce ultimately will carry out our obligations under the agreement, but will do so in a way we work out with the congressional committees.

Q: Are you prepared in dealing with the congressional committees to make changes in the administration's position to try to get individual members or blocks of members' votes?

SENIOR ADMINISTRATION OFFICIAL: I don't know what you mean by changes in the administration position. The President has endorsed and is supporting and will submit to the Congress the NAFTA agreement. That has to be successfully implemented by this bill. As I said, we have flexibility in certain aspects of how we carry it out.

Q: Is the administration going to introduce some sort of jobs displacement package separate from stuff already out there as a way of answering and reassuring people about job loss?

SENIOR ADMINISTRATION OFFICIAL: Well, I think the President, Secretary Reich, others have described a comprehensive dislocated worker program that the administration is discussing with the Congress and would expect to introduce this fall. That would address the -- not only the dislocation caused by trade but the much greater dislocation caused by other changes in our economy.

I think what they will say to the committees today, and there's discussion of this in their testimony, is that the administration strongly supports a comprehensive, as the President said today, reemployment program, because many of the workers who have lost their job in our economy over the last several years had not gone back to their original job, they've gone to new jobs. And we need a program to deal with those adjustments. That will be something that the administration will be addressing this fall. And it would be obviously designed to take care of the very, very minimal dislocations that might occur under trade agreements. I might also point out that, as the President said, the NAFTA creates far more jobs than would be lost.

Q: Not for the same people, though, right?

SENIOR ADMINISTRATION OFFICIAL: Well, as he said, in any change, in any effort to create a new and larger and more expanding economic base and market, you obviously are going to have some transitions in the economy.

Q: What do you mean by minimal?


Q: We heard the million jobs over a five years.

SENIOR ADMINISTRATION OFFICIAL: If you look at the reputable estimates of the job impacts of NAFTA, the reputable estimates as to opposed to the estimates by those who maybe have some ulterior motive for putting them forward, you will find that the consensus among those reputable estimates is over the period of full entry into force of the NAFTA. Which, by the way, doesn't become fully effective until 15 years after it's first implemented. That is the tariffs phase down over 15 years.

The reputable estimates are total job losses to the U.S. job economy of no more than 200,000. That's the consensus of these groups -- more than outweighed by the job gains which in all most all of these studies are a much larger number. That's why we recently received a letter from 294 economists. You know, I've never seen 294 economists agree on anything, but what they all agreed on, including all 12 living Nobel Prize winners -- I tried to get some of the dead ones but I -- was the following comment --

Q: How could you tell the difference? (Laughter.)

Q: Oooh, Andrea. (Laughter.)

SENIOR ADMINISTRATION OFFICIAL: Well, I'm not an economist so I can tell the difference, but -- (laughter.)

Q: Are you blushing, Andrea? (Laughter.)

SENIOR ADMINISTRATION OFFICIAL: You knew a different economist than I did. (Laughter.)

Anyway, what they say is that they all agree that NAFTA -- well, there's disagreement among these economists on the precise numbers, and that's not surprising. They all agree that NAFTA will create far more jobs than it loses and that the estimates of massive job losses or massive increased imports are without foundation -- without basis. And that's in a letter to the President from these economists. I'm sure we can make that available to you.

Q: You give the job loss number. What's the job gain number? What is that?

SENIOR ADMINISTRATION OFFICIAL: What we have said, and I think all of the studies bear this out, whether you look at the Congressional Budget Office study or the private independent studies that have been done, is that net job creation over the next several years will be anywhere from the low figure in these studies of something like 35,000 net jobs to a high figure of I think it's a net job creation of a million. Now, that one study that showed a million net job creation I would be a little bit careful of because it --

Q: The President used it today in his speech.

SENIOR ADMINISTRATION OFFICIAL: No, no, no. That's not the figure.

Q: Yes, it is.

SENIOR ADMINISTRATION OFFICIAL: Let me explain what the President --

Q: Over five years.

SENIOR ADMINISTRATION OFFICIAL: What he said was --yes, what he said was a million jobs -- let me explain exactly what that means. By 1995, we will have nearly a million jobs in the U.S. economy directly dependant on exports to Mexico. There are about 700,000 today and over the next two years with NAFTA we will create 200,000 more jobs. So nearly a million jobs -- I think the figure is something like 940,000 -- directly dependent on exports to Mexico made secure by the NAFTA agreement.

Q: Excuse me, that's not what he said. He said, "I believe that NAFTA will create a million jobs in the first five years."

Q: NAFTA will create a million jobs.

SENIOR ADMINISTRATION OFFICIAL: And as I said, there are studies out there that show anywhere from 35,000 to 1.1 million --

Q: Be careful of the million.

Q: You don't agree with him.

SENIOR ADMINISTRATION OFFICIAL: What I'm trying to tell you is, there are all kinds of estimates out there of job gains. These 294 economists couldn't agree exactly among themselves because this process of estimating job loss and job gains -- and all of you know this -- is an art form. It's not an exact science. You can't precisely calculate exactly every job change that's going to occur. But the impressive thing is that the vast majority of these studies show net job creation and show significant net job gains.

The only people who seem to be disputing that are people who have created some pretty phony numbers. Let me give you an example. The study that Mr. Perot and Mr. Choate rely on says 5.9 million jobs at risk under NAFTA. Now, how do they get that 5.9 million job figure? They get it by taking every job in America in the manufacturing or production sector, which includes agriculture where more than 20 percent of the costs of that industry are direct labor costs.

They then take all of those jobs and move them to Mexico, which means, of course, the entire aircraft industry, the entire telecommunications industry, the entire automobile industry and many others. I've just named you three industries that are big winners under NAFTA because we increase exports. The Big Three auto producers have estimated that in the first year of NAFTA, we will have an increase of our exports to Mexico of 60,000 vehicles.

So for Mr. Perot to suggest that 5.9 million jobs go to Mexico is wildly outrageous. Let me just give you the numbers so you understand how outrageous it is. In order for 5.9 million jobs to go to Mexico, Mexico would have to increase its exports to us by $350 billion. That is the entire GNP of Mexico -- $350 billion -- that's the entire GNP of Mexico.

So my point to you here is, there are some people out there who have postulated for you big job loss numbers, and their studies are not based on any sound economic modeling, they're not based on any serious examination of the record, and the serious examination which has been done, the President cited it today by numerous private sector studies, by the Congressional Budget Office, by the International Trade Commission, all show net job creation.

Now, we can quibble about exactly how many jobs, and I can tell you that those are based -- all of those are based on certain assumptions and you have to decide which assumptions to accept.

We do know this: We know that since 1987, we've created 700,000 export-related jobs to Mexico because of liberalization. We know that there are numerous barriers that are still in place that the NAFTA wipes out. And if we look at the sectors where the NAFTA wipes out the barriers such as automobiles, we can predict significant growth in exports.

Q: Can we go back to timing for a minute? You are saying that -- you're saying that it's conceivable that those things can all be done with a cooperative Congress, and you're saying -- you're citing as examples of this the fact that it has happened before in past trade agreements. And the past trade agreements that you helped negotiate or were witness to --

SENIOR ADMINISTRATION OFFICIAL: No, I was working in Congress at the time.

Q: In Congress? Okay. Was the Congress as divided over those as they are over this, number one; and number two, is

there anything that happens if these things are not passed by January 1? And if it's not, why push it?

SENIOR ADMINISTRATION OFFICIAL: Well, look, you all are better at reading the tea leaves than I am. You know what the sentiment is about this agreement. All I can tell you is that the administration and the President believe that a lot of the arguments are wrong, that we are beginning to change the perception of this agreement, that we're beginning to convince the Congress that this is a good agreement.

Can I ensure that all of the congressional committees will act expeditiously on this matter? Of course, I can't give you that assurance. What I can tell you is, the administration is going to the Congress, we're presenting the draft legislation. We've already gotten indications of cooperation from the two principle committees, the Ways and Means and Finance Committees. We will begin the nonmarkup process. We expect to introduce the legislation, as I said, no later than late October or the first of November. And at that point, the President will push very hard for the Congress to approve this.

Q: Let me just try to get you to answer two pieces of that. Why January 1st? Why push for that date? And in your experience, was Congress as divided last time over the last agreements that you talked about as they are over this?

SENIOR ADMINISTRATION OFFICIAL: January 1st is the date of entry into force of the agreement. That is the date that the three countries negotiated. They negotiated a provision that says it enters into force on January 1st.

Q: What happens if it's not passed by then?

SENIOR ADMINISTRATION OFFICIAL: If it's not passed, obviously, we're in breach of the agreement.

Q: Then what does that mean? Is that the end of NAFTA or --

Q: Do you renegotiate a different date?

SENIOR ADMINISTRATION OFFICIAL: Listen, all I can tell you is that we would be in breach of the terms of the agreement, that means that Mexico and Canada would obviously not implement the agreement, either, and that at that point there would be uncertainty as to the future of the agreement.

Q: Vice President Gore suggested the other day that this fight for ratification of this treaty could go past January 1st. Do you anticipate that as a possibility?

SENIOR ADMINISTRATION OFFICIAL: Can I finish her question first? Then I'll answer it. The second part of it was whether previous legislative debates have been, in my opinion, have had as much opposition. I mean, I think we're going to let the Congress speak to what their position is on this over the next several days. We'll see what attitude members are taking towards the agreement. We've already seen indications of undecided members moving to support it. I think you saw several congressional leadership figures at today's event. And obviously, as we get the message out, we would expect greater support.

Is it a very controversial issue at this point? Of course, it is. But, you know, it's -- we have just begun to fight. And it's not over until the vote.

Q: Is it possible ratification will go past January 1st? I mean, is that something that -- Gore had suggested this might happen the other day. And is that something that you say is, well, if we can't get it before then, maybe it will go later?

SENIOR ADMINISTRATION OFFICIAL: The President is going to fight to have this legislation approved by the Congress this year.

Q: In your strategy, who is the point person who's going to respond to Ross Perot?

SENIOR ADMINISTRATION OFFICIAL: You're above my pay grade here. You're above my pay grade.

Q: In which industries will you see job loss as a result of NAFTA?

SENIOR ADMINISTRATION OFFICIAL: The studies that have been done obviously indicate that there will be changes in jobs in the industries that currently have high import protection. Now, the industries that have high import protection include such products as household glassware, corn brooms --

Q: What?


Q: What are corn brooms?

SENIOR ADMINISTRATION OFFICIAL: You know, you've been to a grocery store; you see those brooms that are made out of real broom corn.

Q: What about agriculture?

SENIOR ADMINISTRATION OFFICIAL: Well, but you've got to understand, the reason many, many textile companies are supporting this legislation is that we have very, very favorable rules under the NAFTA for joint production. And actually, the vast majority of production in Mexico is based on U.S. yarn and fabrics. And many of the major textile producers believe that this is a win-win situation and we do not estimate major job losses in that sector.

Q: If it's going to be such a boon to the automotive industry than why is the entire, I think all most the entire Michigan delegation against this?

SENIOR ADMINISTRATION OFFICIAL: Well, you answer that question for me. Let me tell you what the current situation is on automobiles. Many, many U.S. companies produce autos in Mexico today and ship them to the United States. The tariff that they pay coming into the U.S. is 2.5 percent, which is basically an insignificant tariff. That's what we're reducing under this agreement.

On the other hand, U.S. auto companies are essentially barred from exporting to Mexico unless they produce in Mexico. And the barriers we're wiping out in Mexico include their local content rules, their investment restrictions and their very high tariff on automobiles, which comes down almost immediately under this agreement. The consequence of which there are much, much greater incentives to move auto production from Mexico back to the United States and ship to Mexico. In fact, as the President said today, one auto company had recently moved jobs from Mexico back to the United States.

And we've had conversations with, as I say, the major auto producers. The major auto parts producers all support this agreement because they believe that it means a bigger market for

parts in the United States for inclusion in products shipped to Mexico. Why is there a --

Q: Why is every union opposing it, most of the Democrats opposing it? It's hard to believe that just because --

SENIOR ADMINISTRATION OFFICIAL: Don't say most of the Democrats.

Q: corn broom growers --

SENIOR ADMINISTRATION OFFICIAL: There are a number of Democrats who support this legislation. All I'm trying to do is --

Q: A majority of Democrats in Congress thus far, according to the White House count have said this.

SENIOR ADMINISTRATION OFFICIAL: I understand that. Well, you know, sometimes people need to hear the facts and hear exactly what the agreement is about and what it does. And I think you have to make your own judgments after you've listened to those arguments whether or not the concerns, the uncertainties that are out there about the future of our economy.

Q: What other industries besides auto will prosper from this?

SENIOR ADMINISTRATION OFFICIAL: Telecommunications, automobiles, the agriculture sector is a big winner under this agreement, a number of others as well.

THE PRESS: Thank you.

END2:05 P.M. EDT

William J. Clinton, Background Briefing by Senior Administration Official Online by Gerhard Peters and John T. Woolley, The American Presidency Project

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