From iatp@igc.apc.orgWed Feb 14 20:56:41 1996 Date: Wed, 14 Feb 1996 14:43:26 -0800 (PST) From: IATP To: Recipients of conference Subject: re-post of 2/9/96 NAFTA Monitor NAFTA & Inter-American Trade Monitor Produced by the Institute for Agriculture and Trade Policy February 9, 1996 Volume 3, Number 3 ________________________________________________ Headlines: - U.S.-CANADA AG DISPUTES - TOMATO BILL BACK TO COMMITTEE - AVOCADO, MEAT AND GRAIN DECISIONS NEARER - SECTION 936 ON THE WAY OUT - ZEDILLO SEEKS TRADE ALLIES ACROSS ATLANTIC - ONGOING TRUCKING DISPUTE - TEXTILES FOCUS OF DISPUTES WITH COSTA RICA, MEXICO - COFFEE PRICES FALL, PRODUCERS MEET - CARIBBEAN SUGAR EXPORTS INCREASE; U.S. SUGAR SUBSIDY UNCERTAIN - FINANCIER BUYS FARM LAND - HAITI RICE FARMERS HURT BY IMPORTS ________________________________________________ U.S.-CANADA AG DISPUTES A binational NAFTA panel will hear the U.S. challenge to Canadian dairy, egg and poultry products, though a decision is not expected until May. The U.S. maintains that high over-quota Canadian tariffs negotiated in the Uruguay Round of trade talks violate NAFTA tariff agreements, while Canada says Uruguay Round agreements are exempt from NAFTA's prohibition on raising tariffs beyond the level negotiated between the U.S. and Canada under NAFTA. The newly-formed Coalition for Fair Trade with Canada, which includes the (U.S.) National Milk Producers Federation, the National Broiler Council, and the United Egg Association among its 165 members, urged U.S. Trade Representative Mickey Kantor to continue pressure on Canada to open markets to U.S. dairy, egg and poultry products. A study by Informetrics, a Toronto economic forecasting firm, predict "Americanization of Canada's food supply" and loss of 27,000 Canadian jobs if tariffs on U.S. dairy, egg and poultry products are removed. The study also predicts dumping of excess U.S. dairy and poultry products on the Canadian market and infiltration by inferior U.S. products subject to lower testing standards, taking up about 20 percent of the Canadian market. After prolonged negotiations, the Canada-U.S. Joint Commission on Grains issued a final report recommending that the U.S. curtail export subsidies and the CanadianWheat Board (CWB) be placed at greater risk of profit or loss in the market and make its operations more transparent. The CWB buys wheat from Canadian farmers at 75 percent of its projected value, then sells it on the world market and distributes profits back to farmers. The final report weakened a recommendation, made in an earlier preliminary report, for establishment of a mechanism torecommend trade restraint penalties if Canadian wheat exports disrupt the U.S. market. U.S. Commissioner Alan Bergman, a grain farmer and president of the North Dakota Farmers Union, refused to sign the final report, citing his disappointment in the commission's failure to address protection of U.S. producers from surges in Canadian grain exports. The Canadian wheat industry has seen increasing concentration, with a decline in farms in Saskatchewan alone from 140,000 in 1941 to 57,000 today. Over the next three years, one in five prairie elevators run by the Wheat Pool, the largest Saskatchewan cooperative, will be eliminated, making way for 10 concrete inland terminals. The Wheat Pool itself is being "privatized" by creation of a two-tier membership system that will allow purchase of non-voting shares by non-farmer investors. Ontario's rural cooperative network - United Cooperatives of Ontario (UCO) - was taken over by the U.S. cooperative giant, Growmark of Chicago, in 1994. Growmark bought all of UCO's assets, with Canadian member cooperatives becoming members of Growmark. "U.S., Canada Name Panelists to Settle Dairy, Poultry Dispute," INSIDE U.S. TRADE, January 26, 1996; "Canadian Farmers Warn of Disaster If Tariffs Go," REUTERS, January 29, 1996; ""Canada Warns on Farm Jobs," FINANCIAL TIMES, January 31, 1996; U.S.-Canada Joint Grain Report Made Public After Four Month Delay," INSIDE U.S. TRADE, February 2, 1996; Mitch Diamantopoulos, "Market Forces Threaten Farm Co-ops," INTERPRESS SERVICE, December 18, 1995; Stephen Dale, "Cooperative Movement Moves Into the Cities," INTERPRESS SERVICE, October 19, 1996. TOMATO BILL BACK TO COMMITTEE As Mexican legislators threatened retaliation against U.S. meat, grain, and dairy imports, the leadership of the U.S. House of Representatives sent a tomato protection bill back to committee on January 30, delaying action until at least March. The bill, advocated by the Florida Fruit & Vegetable Association, has been passed by the Senate and initially reached the House floor without committee hearings. U.S. commodity groups, including meat, grain and egg producers, oppose the legislation, fearing that a protectionist move in regard to one commodity will lead to counter-measures that will limit exports of their products. The proposed legislation would redefine who can qualify for import protection under Section 301 of U.S. trade law, broadening the category to include producers of "seasonal" perishable commodities. The Clinton administration backs the bill, which opponents say would violate NAFTA and World Trade Organization rules. Meanwhile, U.S. tomato growers and fast food restaurants are pushing Japan to end a ban on U.S. tomato imports, which they say would be better in quality and 80 to 90 percent cheaper than Japanese-grown tomatoes. Richard Lawrence, "Tomato Import Proposal Derailed," JOURNAL OF COMMERCE, January 31, 1996; Larry Waterfield, "Groups Speak Out Against Tariff Quotas," THE PACKER, January 29, 1996; Peter M. Tirschwell, "A Slice of the Market," JOURNAL OF COMMERCE, January 251996. AVOCADO, MEAT AND GRAIN DECISIONS NEARER The U.S. Department of Agriculture (USDA) is reviewing a final rule that will lift an 81-year-old ban on imports of Mexican avocados, allowing them to enter 19 Northeastern states, according to Mark Affleck, president of the California Avocado Commission. USDA officials insisted that internal review was continuing and no decision has yet been made. The Avocado Commission plans to challenge any rule change in court. The USDA is also completing a regulatory framework for import of meat and livestock from regions of Mexico and other foreign countries. The new framework, agreed to under the Uruguay Round trade negotiations, will allow imports from regions deemed to be free of disease, even if other parts of a country are not disease-free. Even before the framework is complete, the USDA will probably approve pork imports from the Mexican state of Sonora, after extensive assessment of Sonora as a disease-free region. The United States is pushing Mexico not to implement proposed phytosanitary regulations that would set a zero tolerance for the ergot fungus in grain imports, a level the United States calls impossible to certify. Both sides agreed to refer the issue to the North American Plant Protection Organization, a standards-setting body for all three NAFTA members. Peter M. Tirschwell, "USDA Said to Soon Lift Ban on Mexican Avocados," JOURNAL OF COMMERCE, February 6, 1996; "USDA Close to Finishing Regulations to Allow Mexican Meat Exports," INSIDE U.S. TRADE, January 26, 1996. SECTION 936 ON THE WAY OUT Section 936 of the U.S. Internal Revenue Code, which has saved U.S. companies operating in Puerto Rico about $480 billion in taxes over the past two decades, is slated for repeal when some version of a budget bill finally passes the U.S. Congress. Both Democrats and Republicans agree that the provision, passed to boost the Puerto Rican economy, costs taxpayers too much and shows too little benefit to Puerto Rico. According to representatives Dan Burton (R-IN) and Peter Deutsch (D- FL), "Unemployment in Puerto Rico has remained chronically high, between 15 and 17 percent . . . [and] the manufacturing sector on the island provides approximately 101,000 jobs - the same as 20 years ago." U.S. and Caribbean businesses strenuously oppose repeal of Section 936. Caribbean countries have benefited by $1 billion in loans from a lesser-known part of the 936 program. Section 936 required U.S. companies in Puerto Rico to keep their profits on deposit in Puerto Rico, and some of these funds were designated for use as low-interest loans to Caribbean countries that signed Tax Information Exchange Agreements with the United States. Trinidad and Tobago and Jamaica were the major beneficiaries, receiving $775 million in loans. While Section 936 would be phased out over 10 years, the interest rates on already-disbursed 936-derived loans would immediately revert to market rate. Canute James, "Caribbean Decries Program's End," JOURNAL OF COMMERCE, January 11, 1996; Yvette Collymore, "More Cheers Than Tears as Credit Scheme Approaches the Axe," INTERPRESS SERVICE, January 18, 1996. ZEDILLO SEEKS TRADE ALLIES ACROSS ATLANTIC During his first state visit to Europe, Mexican President Ernesto Zedillo advocated a free trade agreement between Mexico and the European Union and insisted that free trade is the way to solve Mexico's economic problems. The Mexican president credited NAFTA with increasing bilateral trade with the United States and noted that Mexico already has free trade agreements with Chile, Costa Rica, Colombia, Venezuela and Bolivia, and is working on other agreements with Nicaragua, Honduras, and El Salvador. "Free trade works," Zedillo told the Royal Institute for International Affairs in London. "Mexico strongly believes that free trade has, and will continue to be, the true engine for growth." Zedillo visited Spain, the United Kingdom and Italy, as well as attending the World Economic Forum in Switzerland. Darius Bazargan, "Free Trade the Answer, Says Zedillo," INTERPRESS SERVICE, January 31, 1996; Leslie Crawford, "Zedillo to Seek Closer EU Ties," FINANCIAL TIMES, January 19, 1996. ONGOING TRUCKING DISPUTE The Teamsters union launched a radio ad campaign calling for continuing the ban on Mexican trucks in the United States. The ads say that Mexican trucks are older and heavier than U.S. trucks and that drivers earn only seven dollars a day and lack training to handle hazardous materials. Under NAFTA, border states were supposed to open to foreign trucking on December 18, but U.S. officials said that they would not act on applications by foreign truckers pending further talks on safety issues. The U.S. government has said it will not move on applications, at least 29 of which have been filed, and the Mexican government reportedly has 20 applications pending. Mexican Commerce Undersecretary for external trade Raul Ramos denied reports in the Wall Street Journal that Mexico would begin processing applications from U.S. and Canadian truckers, saying that discussions with the United States were continuing. "Mexican Officials Deny Rumors of Border Opening," KNIGHT RIDDER, February 5, 1996; "Union Seeks Permanent Ban on Mexican Trucking in US," JOURNAL OF COMMERCE, January 31, 1996; Kevin G. Hall, "US, Mexico Play Game of Tit for Tat in Nafta Row," JOURNAL OF COMMERCE, January 31, 1996. TEXTILES FOCUS OF DISPUTES WITH COSTA RICA, MEXICO The United States and Costa Rica will resolve their underwear trade dispute before the World Trade Organization, after Costa Rica sought "consultation" before the WTO Dispute Settlement Body. In March 1995, the United States unilaterally restricted underwear imports from Costa Rica, claiming damage to U.S. manufacturers. Costa Rica maintains that its exports are not a significant factor, particularly when more than half of U.S. underwear imports from all countries are products assembled abroad from U.S. components. Some Costa Rican workers have been laid off or work shorter weeks as the export quota fills up, and Costa Rican officials also fear that foreign investors will go elsewhere. Meanwhile, U.S. exporters object to new textile and apparel labeling rules published by Mexico on January 24. The rules require that goods assembled in a foreign country with fabric from a third country say that on the label. The U.S. Apparel Exporters Association termed the requirement "just another obstacle," while Mexican officials defended it as necessary to stop a flood of Asian exports that has hurt domestic manufacturers. Mexico's maquiladoras, which assemble textiles and other goods for export, make up 18 percent of the country's total manufacturing jobs and 34 percent of the total value of Mexican exports. During the first eleven months of 1995, 432 new plants were approved and 635 plants built additions, bringing the total number of maquiladora workers to 742,700 in more than 3,000 plants. Caribbean Basin apparel exporters also expanded sales to the United States by some 24 percent during the first three quarters of 1995, despite CBI arguments that their U.S. market is threatened by Mexico's open access under NAFTA. In the United States, plant closings continue. "If you own a business and you could get a product made for a bowl of rice a day, or you could pay someone $6 an hour, what would you choose?" asks Douglas Benad, whose Texas garment factory closed in December. Phillips-Van Heusen Corp. cited the "impact of NAFTA, GATT and other trade laws that are reducing tariffs and quotas" in closing three Alabama manufacturing facilities. In October, Fruit of the Loom, the largest underwear maker in the United States, announced closings of six U.S. plants and cutbacks at two others, with layoffs of 3,300 workers or about 12 percent of its U.S. work force. According to American Apparel Manufacturers Association president Larry Martin: "[O]ur attitude always has been that it's better to do this [apparel assembly] work in this hemisphere than in the Far East." "U.S., Costa Rica Clash Over Justification for Underwear Quota," INSIDE U.S. TRADE, January 26, 1996; Paula L. Green, "Costa Rica, US Seek to Avert Textile Showdown Before WTO," JOURNAL OF COMMERCE, January 31, 1996; Chakravarthi Raghavan, "Costa Rica Complains Over U.S. Textile Restrictions," INTERPRESS SERVICE, February 1, 1996; Kevin G. Hall, "Mexican Labeling Rules to Hit Asian Goods," JOURNAL OF COMMERCE, January 30, 1996; "Mexico's Maquiladoras Provide 742,700 Jobs," JOURNAL OF COMMERCE, January 11, 1996; "Free Trade: Clean Air, PCBs, Maquilas," WEEKLY NEWS UPDATE ON THE AMERICAS, January 21, 1996; Canute James, "Caribbean Apparel Exports to US Rise Despite Failure to Win Easier Access," January 16, 1996; "U.S. Plant Closings Continue," BOBBIN, January, 1996; Barnaby J. Feder, "Citing Trade Treaties, Fruit of the Loom Will Close," NEW YORK TIMES, October 31, 1995; Sam Howe Verhovek, "In Small-Town Texas, the Sewing Stops," NEW YORK TIMES, January 15, 1996. COFFEE PRICES FALL, PRODUCERS MEET After coffee prices peaked at more than two dollars a pound in July 1994, they fell steadily to less than a dollar a pound in December 1995, despite coffee producers' attempts to control supply and despite a worldwide coffee shortage. Brazilian National Coffee Council president Gilson Ximenes explains the combination of low prices and low production as market manipulation by the four giants of the staple goods market, including General Foods and Nestle. In a highly concentrated market, roasters counter producer retention plans by using up old stocks instead of buying fresh coffee. Last year the Association of Coffee Producing Countries (ACPC) agreed to restrict world coffee exports to 60.4 million 60 kilogram bags for the year. Meeting in London in January, the ACPC decided to continue supply restrictions past 1996. World production is expected to reach 83.4 million sacks on 1995-96, 10 percent lower than the preceding year, but production is expected to rebound in 1996-97. Coffee production supports 10 million people in Brazil, 350,000 families in Colombia, 62,000 in Venezuela and 82,000 in Honduras. The Costa Rican coffee sector employs 60,000 people, 22 percent of all agricultural workers. Guatemala's National Coffee Association claims that the sector employs 11 percent of the work force and affects half the population. Darsha Damavanthi and Mario Osava, "Coffee, Free Market Make Strange Brew," INTERPRESS SERVICE, January 21, 1996; Julia Meehan, "Coffee Nations to Extend Supply Curbs to Buoy Prices," REUTER, January 23, 1996. RESOURCES/EVENTS Special Issue Report by Washington Office on Haiti focuses on the Rice Corporation of Haiti, its ties to the former military regime, and its impact on rice farmers and consumers in Haiti. Washington Office on Haiti, P.O. Box 29218, Washington, DC 20017. Telephone 202/319-4464. Donation requested. ____________________________________________ NAFTA & Inter-American Trade Monitor is produced by the Institute for Agriculture and Trade Policy, Mark Ritchie, President. Edited by Mary C. Turck. Electronic mail versions are available free of charge for subscribers. For information about fax subscriptions contact: IATP, 1313 Fifth Street SE, Suite 303, Minneapolis, MN 55414. For information on subscribing to this and other IATP news bulletins, send e-mail to: iatp-info@iatp.org. IATP provides contract research services to a wide range of corporate and not-for-profit organizations. For more information, contact DalWiehoff at 612-379-5980, or send email to: dwiehoff@iatp.org.