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The free-trade area would also offer a chance for smaller guys to go international. WaveRider Communications, based in Toronto, a maker of wireless Web equipment, has just opened a South Florida office to prospect for new business in such places as rural Venezuela, where the government's peculiar radio-frequency allocations drive up costs fourfold for some components. "If we could get low-cost, 128K wireless connections into their schools, offices and homes, they'd go crazy for it," says Scott Winn, the firm's South America manager.
But for every potential winner, it seems, there's a loser. Saddled with high taxes and a decrepit transportation infrastructure, the Brazilian machinery industry would simply "collapse" if forced to compete with North American firms, a Brazilian industry official says. The country's chemical industry says it would have to invest an extra $5 billion a year to avoid a similar fate, while Gianni Coda, director of Fiat Latin America, frets that "the entire Brazilian automotive sector will lose out."
Latin America's shoe and apparel makers could be big winners, as could the major U.S. apparel firms, who rely on imports to supply two-thirds of the U.S. clothing market and who see a chance to find new suppliers after the end of worldwide quotas in 2005.
The loser would likely be Asia. Larry Martin, president of the American Apparel and Footwear Association, says that since 1994, when NAFTA went into effect, "the Mexican and Caribbean share of our imports has risen from 24% to 38%, while China's share has dropped from 11% to 6%." Brazil's footwear industry is overwhelmed in the U.S. by China, where costs are 10% lower, but foresees a boom if it can eliminate the current 8.5% U.S. tariff.
Gains in Latin American fruit, flowers and other agricultural exports are supposed to help offset losses in other areas, and North America's normally pro-trade farmers are worried. Says Shawn Stevenson, a citrus and pistachio farmer in California's San Joaquin Valley: "It's hard to compete against folks who don't have the regulatory burden we do, or a minimum wage, or high fuel prices." Brazilian producers of frozen, concentrated orange juice are thirstily eyeing the U.S. market, in which they once enjoyed a 45% share. That was before the U.S. industry got Washington to impose whopping 63% tariffs, slashing Brazil's slice of the $8 billion market to just 12%. Brazil, with its much lower costs, has threatened to scuttle the whole free-trade area unless it regains free access for its juice. But the citrus agency in Florida claims that without tariffs, it could not "keep our growers in business."
The free-trade area could turn some of NAFTA's winners into losers. The Mexican auto-parts industry, for instance, exports more than 60% of its production to the U.S. But Enrique Zambrano Benitez, CEO of Proeza, a partsmaker that employs 5,000 in Monterrey, Mexico, is anxious about Brazil's big parts indus-try, which currently faces U.S. barriers that would fall in the proposed free-trade area.
Many executives harbored similar fears about the NAFTA treaty, but it has delivered far more opportunities than disruptions. That's the strongest argument that proponents of freer trade will bring with them to Quebec City.