NAFTA MONITOR VOLUME I, NUMBER 7 Tuesday, February 8, 1994 Headlines: FIRST ROUND OF NAFTA UNEMPLOYMENT BENEFITS ISSUED CONSTITUTIONALITY OF NEW MEXICAN LAWS QUESTIONED WI COMPANY PLANS EXPANSION OF MEXICO PLANT TARIFF NEGOTIATIONS SET TO BEGIN THIS MONTH RESOURCES _________________________________________________ FIRST ROUND OF NAFTA UNEMPLOYMENT BENEFITS ISSUED The U.S. Department of Labor ruled Friday that 136 Nintendo workers, recently slated for layoffs following the videogame giant's decision to relocate operations to Mexico, will be the first to qualify for compensation benefits under the NAFTA worker adjustment program. Under the transitional program, any workers who lose their jobs between December 8, 1993 and September 30, 1994 because of company relocations to Mexico or Canada, qualify for federal job search, retraining services and extended unemployment benefits. Interim legislation calls for $90 million to fund the program -- $45 million for training and $45 million for income support. President Bill Clinton is expected to make money available to dislocated workers through September 30, 1998, pending enactment of the legislation. The bill also directs Clinton to deliver a comprehensive report to Congress by mid-1997 on the economic impact of NAFTA on wage levels and employment for key U.S. industries. Sources: "Videogame Workers First to Get NAFTA Benefits," SAINT PAUL PIONEER PRESS , February 6, 1994; "Worker Adjustment," NORTH AMERICAN FREE TRADE ASSOCIATION TRADE AND INVESTMENT REPORT, Volume 4, Number 1, January, 1994. _________________________________________________ CONSTITUTIONALITY OF NEW MEXICAN LAWS QUESTIONED Constitutional lawyers at Mexico City's Autonomous University are calling unconstitutional several provisions of Mexico's new foreign investment law, passed late last year by the Mexican government. The law, one of 16 bills designed to conform Mexican law to NAFTA, provides no restrictions on repatriation of profits, content requirements or export quotas for foreign investors. In addition, the law encourages foreigners to purchase property within 60 miles of Mexico's land borders with the United States and Guatemala, and within 30 miles of Mexico's coastline. Ruperto Patino, an investigator for the University's judicial department said the law is illegal because it violates Article 27 of Mexico's Constitution designating where foreigners can own land. The law will affect Mexico's tourism and maritime industries, which own land along the coastline. Several other new bills were passed, making it easier for foreigners to set up operations in Mexico. Changes in Mexico's Tax Code, for example, permit foreign auditors to perform services as long as they are registered with Mexico's Finance Ministry. Other legislation eliminated the sales tax for independent personal services directed at foreign markets. Sources: Kevin G. Hall, "Parts of New Mexican Law Criticized as Unconstitutional," JOURNAL OF COMMERCE, January 18, 1994; "Mexican Legislation," NORTH AMERICAN FREE TRADE ASSOCIATION TRADE AND INVESTMENT REPORT, Volume 4, Number 1, January, 1994. _________________________________________________ WI COMPANY PLANS EXPANSION OF MEXICO PLANT Briggs and Stratton, the largest private employer in the Milwaukee, Wisconsin area, announced it will expand operations at its Juarez, Mexico plant after July 31, 1994. The company said it would add 300 jobs in Juarez. The company also announced it will cut 46 jobs immediately at its Glendale, Wisconsin lock plant, and another 240 jobs over the next four years. Briggs and Stratton, which produces automotive locks and small air-cooled engines, employs more than 7,000 hourly and salaried workers. The Juarez lock plant currently employs 523 workers. Briggs executives insist that plans to create jobs in Juarez are not directly related to layoff plans at the Glendale plant. United Paperworkers International Union Local 7232, which represents more than 5,400 Briggs production and maintenance workers, filed a grievance against the company in late December challenging Briggs' expansion plans. The union contends that Briggs has already begun physical expansion of its Juarez plant, which violates the Local 7232 contract. Under terms of Briggs' contract with Local union members, the company is prohibited from expanding its Juarez plant before July 31, 1994. But union members say, citing Briggs' annual reports, that the Juarez plant has already been expanded by 2,000 square feet during the last year. "Briggs and Stratton is so anxious to flee Wisconsin, it can't even wait seven months," said Local 7232 President Dick Crofter. The Union is demanding that Briggs tear down the added 2,000 square feet and that the company compensate U.S. workers who lost their jobs as a result of the expansion. George M. Thompson, director of corporate communications for Briggs, said the addition consisted of a cafeteria and restrooms, not actual production space. The union is also concerned that Briggs' planned expansion of the Juarez plant will be used to influence members' decisions during bargaining discussions scheduled for later this year. Briggs requested preliminary talks to reopen the union's contract in October, but workers refused. "We believe that this job flight is what Briggs had in mind when it asked to reopen our contract in October," said Crofter. A study, conducted by the union, estimates that Briggs planned layoffs could cost the state and federal governments $143 million in lost tax revenue and $55 million in unemployment benefits. Sources: Larry Sandler, "Briggs Union Files Grievance Over Plant," MILWAUKEE SENTINEL, December 22, 1993; "Grievance Filed, Union Accuses Briggs of Violating Contract by Expanding Mexico Plant," LOCAL 7232 PRESS RELEASE, December 21, 1993; John Fauber, "Briggs Union Warns of a 'Ripple Effect'," THE MILWAUKEE JOURNAL, December 8, 1993; Ellen Bravo, "Stratton's Contribution to Welfare Rolls," BUSINESS JOURNAL, December 25, 1993. _________________________________________________ TARIFF NEGOTIATIONS SET TO BEGIN THIS MONTH Negotiations to accelerate the elimination of tariffs beyond schedules outlined under NAFTA will begin sometime this month, according to Raul Ramos Tercero, director general of Mexico's Commerce Secretariat. Industry consultations were scheduled to begin February 1 to decide which products Mexico will propose for accelerated tariff reduction. Ramos said tariff reductions would not be negotiated for entire sectors, but rather for specific products, such as belts, textiles and scissors. Source: "Acceleration of Tariff Elimination to Begin," EL FINANCIERO INTERNATIONAL , January 31-February 6, 1994. _________________________________________________ RESOURCES: "NAFTA: Myths vs. Facts," William A. Orme, Jr. FOREIGN AFFAIRS, November/ December, 1993. 10 pages. $7.95/ issue; $38/year. Reprints are available. "El Financiero International Edition." Weekly newspaper on the Mexican economy and society. Very useful for tracking NAFTA. 2300 So. Broadway, Los Angeles, CA 90007. (213) 747-7547. Fax: (213) 747-2489. Subscription is $140/year or $80/six months. The North American Free Trade Association provides members with information and assistance on commerce and investment between NAFTA partners through conferences and monthly periodicals. Membership rates range from $300.00 per year to $1,500.00 per year. Contact Brian Marshall, 1130 Connecticut Avenue, N.W., Suite 500, Washington, D.C. 20036. (202) 296-3019. Fax: (202) 296-3037. NAFTA tariff schedules are available from the Government Printing Office. $50.00 domestic; $62.50 non-U.S. Superintendent of Documents, P.O. Box 371954, Pittsburgh, PA 15250-7954. (202) 783- 3238. Fax: (202) 512-2250. Order number: 949-010-00002-3. _________________________________________________ Editors: Gigi DiGiacomo and Kai Mander The Institute for Agriculture and Trade Policy (IATP) 1313 Fifth Street SE, Suite #303, Minneapolis, MN 55414-1546 USA Telephone:(612)379-5980 Fax:(612)379-5982 E-Mail: kmander@igc.apc.org _________________________________________________