The country has been dramatically altered by the North American Free Trade Agreement

 BY JANE BUSSEY

 In his meeting today at the family home of President Vicente Fox of Mexico, President
 Bush will encounter a country that has been dramatically altered by the North American
 Free Trade Agreement -- the groundbreaking treaty first negotiated by Bush's father.

 George W. Bush is making his first foreign trip as president to Mexico, spending seven
 hours visiting Fox's home, Rancho San Cristóbal, in the central state of Guanajuato.
 The visit is deliberately low-key to allow the two presidents, who are enjoying a political
 honeymoon with their electorates, to become reacquainted now that they have
 been inaugurated.

 With Mexico's economy at $500 billion a year and the U.S. economy at $10
 trillion, nowhere in the world have two such disparate countries launched such an
 ambitious experiment in erasing national borders in an era of globalization.

 The results of NAFTA have been much more complex than anyone expected,
 from trade and investment to politics and political participation. Fox's election --
 the first modern president of Mexico who is not a member of the once-dominant
 Institutional Revolutionary Party -- is attributed by many to the political opening
 produced by NAFTA, including greater press freedom and increased political
 activism.

 ``NAFTA has been good for Mexico,'' said Andrés Rozental, former deputy foreign
 minister.

 ``It has been the fundamental vehicle through which there has been change
 accomplished in Mexico.''

 But the trade agreement with Mexico and Canada has brought surprises. The
 number of U.S.-owned factories in Mexico has surged, bringing the amount of
 goods moving between the two countries to $225 billion annually, but the U.S.
 trade deficit with Mexico has soared, contributing to a sharp deterioration in
 America's trade balance. The loss of jobs in many manufacturing sectors has
 provoked U.S. public opposition to trade agreements and increased scrutiny of
 the nation.

 The emergence of a modern U.S.-oriented Mexico that leaves the traditional and
 impoverished Mexico far behind also threatens the stability of the country and its
 trade pact.

 Fox and Bush will focus on many of the traditional issues, trade, drugs and
 immigration. Bush is also expected to seek opportunities to buy energy for
 power-starved California from the country that is one of the largest crude oil
 exporters to the United States.

 Fox has called for a ``NAFTA plus'' a common market with Canada and the United
 States that would allow the free flow of workers across the borders to be
 negotiated over 20 years. For starters he is asking for an expanded guest worker
 program.

 In a goodwill gesture, Bush administration officials said the new U.S. president is
 open to ending the annual U.S. evaluation of Mexico's drug-fighting efforts, a
 review that has caused friction in the past.

 But no matter how much the two leaders are determined to avoid confrontation
 during the a visit, major problems exist between the two countries.

 NAFTA has made little dent in Mexico's poverty. Some studies show the country
 more unequal today than a decade ago. The flow of Mexican migration to the
 United States rose to an estimated 1.8 million from 1995 to 2000. The border
 region is one of the most polluted regions in the world, with cities like San Diego
 suffering from the sewage problems of neighboring Tijuana.

 Drug trafficking continues. Mexico is now experiencing the kind of violence seen
 in Colombia: Two former directors of top security prisons have been assassinated
 in recent months and a drug lord escaped from a high-security prison last month.

 ``George Bush is coming face to face with the flaws of a foreign policy that resists
 involvement outside of our borders in matters that don't rise to the height of
 national security threats,'' said David Rothkopf, a former Clinton administration
 commerce official and now an international business consultant in Washington.

 ``Mexico is the place to start,'' Rothkopf said.

 ``It's the petri dish of globalization.'

 Some experts insist that there has been too much attention paid to the trade
 numbers of NAFTA instead of looking at the real significance: that it was a
 watershed in U.S.-Mexican relations, forcing the United States to focus its
 attention on new dimensions in Mexico and the bilateral relations.

 ``Mixed in with the genuine benefits of increased attention are a set of often
 repeated ideas and numbers that are misleading or false,'' said Harley Shaiken, a
 professor at the University of California at Berkeley who studies labor in the global
 economy.

 ``High on that list is the fact that Mexico is the U.S.'s second-largest trading
 partner,'' Shaiken said. ``The numbers tell us that, but the underlying reality is
 that two-thirds of what we export to Mexico is ultimately sold in the U.S. market.
 One might say that much of our exports are industrial tourists; they stay in the
 country just long enough to be assembled.

 ``That is a very different relationship than a burgeoning consumer market to the
 south,'' he said.