Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: WEDNESDAY, December 29, 1993 TAG: 9312290142
SECTION: BUSINESS PAGE: A-7 EDITION: METRO
SOURCE: Associated Press
DATELINE: MEXICO CITY LENGTH: Medium
Under the terms of the North American Free Trade Agreement, tariffs will disappear on about half of American exports to Mexico and 75 percent of U.S. imports from Mexico.
By 2004, less than 1 percent of the trade between the countries will be subject to tariffs.
With an economy just one-twentieth as big as the U.S. economy, Mexico will be much more affected.
"Most of the things you would find in Wal-Mart, for example, will come into Mexico duty-free," said Carlos Poza, an economics officer at the U.S. Embassy.
But on both sides of the border, the impact should be gradual rather than immediate.
"There will still be inventories on which those duties have been paid," Poza said. That will keep prices from dropping until store stocks run down and are refilled with duty-free goods.
American computers, helicopters, X-ray equipment, telecommunications gear and many agricultural goods are among the estimated 4,500 items to be stripped of tariffs immediately.
Tariffs on American automobiles will be halved to 10 percent Jan. 1 and are to vanish in five years. American automakers sold about 5,000 cars in Mexico in 1993 and hope to sell at least 10 times that many next year.
Tariffs on most American industrial equipment going to Mexico will vanish within five years.
About half of Mexico's imports to the United States already enter duty-free. Those most likely to challenge American products, including glassware, orange juice, peanuts and some other agricultural products, will have to wait 15 years for duty-free access to American markets.
The agreement is just part of a process that already has liberalized Mexico's economy, bringing in a flood of imports and forcing many Mexican companies to shape up or shut down.
"Stores are coming in that draw attention by giving special offers," Poza said. "That hasn't been done here, where the problem has been keeping the shelves stocked."
Traditionally, Mexican stores worked on a high margin of profit and a relatively low volume of sales. Most U.S. franchises work the other way around.
Economists here say small- and medium-sized distributors and retailers could be hurt in Mexico. In the United States, damage may fall on low-technology and labor-intensive businesses, as well as growers of some farm products such as tomatoes, onions and melons.
by CNB