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FREE TRADE WITH MEXICO SCARES CANADA

In a country already facing a renewed Quebec separatism and regional economic decline, Canada's hard-pressed Tory government is entering a new controversy. It comes because of the Mulroney government's announcement that Canada will join in the negotiations between the United States and Mexico for a North American free trade market.

For many Canadians, the inclusion of Mexico represents even greater menace to Canada's industries than has U.S.-Canada free trade. Canadians know about the dirt-cheap wages in the maquiladora industrial towns along the U.S. border and about Mexican President Carlos Salinas de Gortari's competitive market economy with its great export potential.

The Canadian auto parts industry, which would directly face the modernized and expanding Mexican auto industry, is already worried. Mexican vehicle exports to the U.S. have jumped from $374 million in 1982 to $3 billion in 1988. The Mexican maquiladora program also permits local firms to freely import industrial equipment into their manufacturing regions if their finished goods are exported.

Steven Van Houten, president of the Toronto-based Auto Parts Manufacturers' Association of Canada, which does support a Canadian role in trade talks with the United States and Mexico, emphasizes that his association must have strong guarantees from the Canadian government for "the same terms of trade entering the U.S. market as has Mexico."

According to Bolivian-born Keith Hillyer, president of the Redma Group of Toronto, one of the few Canadian management consulting firms active in Latin America, the current concern about Mexico reflects a historical reticence of Canadian firms about doing business in Latin America. Hillyer cites a recent Canadian Manufacturers' Association survey in which 323 companies perceived Mexico as a threat to its members though only 19 percent had ever done business with Mexico.

As they did during the heated U.S.-Canada free trade discussions, Canada's big chartered banks are eagerly singing the praises of the North American Free Trade Market.

Less certain is how the average Canadian feels about it. But there are clues. A clear but negative one was the sweeping and totally unexpected socialist victory in Ontario's provincial elections this year.

The unprecedented victory of the anti-free trade and minority socialist New Democratic Party was a reaction in part to the loss of about 20,000 jobs to date from plant closures.

Despite the many strong industry disclaimers, both the labor movement in Canada and many Canadian companies are convinced the 25 major U.S. branch plants closings in Canada since Jan. 1, 1989, were planned corporate re-allocations under the free trade pact -- with several moving to the United States.

Yet, based on overall figures, the inclusion of Mexico's 85 million people, along with 250 million in the United States and 26 million more in Canada, not only represents a combined consumer market of 360 million but a future gross domestic product of $3 trillion (U.S.).

The talks on including Mexico are re-opening the old wounds between labor and industry first felt here in the fight before passage of the U.S.-Canada Free Trade Agreement. Both organized labor and many small industries bitterly opposed the agreement because they insisted the comparative advantage for competitive industries would favor larger U.S. corporations and lead to plant closedowns in Canada.

One of the reasons for Tory Prime Minister Brian Mulroney's lowest ratings in the polls for any Canadian prime minister is his ideological proximity to Republican presidents Ronald Reagan and George Bush, who have pressed vigorously for the continental common market which, in the long run, the giant U.S. economy will dominate.

JOHN D. HARBRON is a free-lance writer from Etobicoke, Ont.

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