From iatp@igc.apc.org Date: 21 Aug 94 20:13 PDT From: IATP Reply to: "Conference trade.news" To: "Recipients of conference trade.news" Newsgroups: trade.news Subject: NAFTA & Inter-Am Monitor 8/22/9 Produced by the Institute for Agriculture and Trade Policy - - - - - - - - - - - - - - - - - - NAFTA and Inter-American Trade Monitor, vol. 1, #13 August 22, 1994 - - - - - - - - - - - - - - - - - - HEADLINES STEEL, TUNA, CEMENT STILL ISSUES FOR US, MEXICO FREE TRADE COSTING JOBS IN US, CANADA NAFTA OPENS MEXICAN BANKING MARKET GE, SONY FACE MEXICAN LABOR PROBLEMS VENEZUELA UPDATE RESOURCES/EVENTS - - - - - - - - - - - - - - - - - - STEEL, TUNA, CEMENT STILL ISSUES FOR US, MEXICO Despite NAFTA and GATT, long-standing trade issues between the US and Mexico remain unresolved. According to Mexican attorney Adrian Vazquez Benitez, speaking at the annual meeting of the American Bar Association, Mexico frequently uses anti-dumping and countervailing duty laws, but revised those laws last year to provide greater protection to "interested parties." In early August, Mexico's Trade Secretariat (Secofi) decided to uphold countervailing duties on imports of US steel. The duties were preliminarily imposed in 1993, and are now set at 78.46 percent for sheet plate and 38.21 percent for galvanized laminated steel. Two separate Secofi rulings affect different categories of steel imports, and stem from two sets of complaints of dumping brought by Mexican steelmakers in 1992 and 1993. Still before Secofi is a complaint from Mexican steelmakers that US steelmakers enjoy subsidized prices, due to incentives offered by federal and state Buy America statutes, state and local economic development programs, and incentives from the federal Pension Benefits Guaranty Corporation. Three exemptions from the tariffs were made for steel used by automakers. The exemptions benefit Chrysler, Ford, and General Motors manufacturing operations in Mexico, all of whom rely on US steel. Germany, also hit with the punitive tariffs, threatened a protest if it does not receive a similar exemption for Volkswagen and BMW imports of German steel. GATT has already ruled against the US in a dispute over alleged dumping of Mexican cement imports, but the US has not complied with the ruling and is instead considering heavier anti-dumping penalties. The Mexican government also renewed a complaint before the GATT executive council seeking to force the US to end an embargo against Mexican tuna imports. The US embargo is based on allegations of environmental damage by Mexican fishing boats, specifically in regard to the number of dolphins captured. Source: Kevin G. Hall, "Dumping Disputes Fail to Quash Mexico's Hopes for US Trade," JOURNAL OF COMMERCE, 8/11/94; "Mexico Is Relying Increasingly on Antidumping Laws, Attorney Says," BNA INTERNATIONAL TRADE DAILY, 8/17/94; "U.S.-Mexico Trade Disputes Over Steel Products, Cement, & Tuna Gain Prominence in Late July & Early August," SOURCEMEX, 8/10/94; Kevin G. Hall, "German Steelmakers Protest Mexican Exemption for US," JOURNAL OF COMMERCE, 8/5/94; Kevin G. Hall, "Mexico Slaps US Steel with Huge Trade Penalties," JOURNAL OF COMMERCE, 8/3/94 - - - - - - - - - - - - - - - - - - FREE TRADE COSTING JOBS IN US, CANADA Matsushita Television Co. announced that it will close a 330- employee television production plant in Franklin Park, Illinois and move production operations to Tijuana, Mexico at the beginning of 1995. All production jobs will be lost, but the company said it would offer 100 positions at a new Southern California facility to current design and engineering staff members. Company officials would not discuss wage levels in Illinois and Mexico. Two recent reports identify job losses in Canada since the US- Canada Free Trade agreement and in the US since NAFTA's effective date in January. In a sample of 44 members of Canada's Business Council on National Issues, 30 corporations had cut employment by 171,559 workers since 1988. Fourteen companies in the survey added more employees or kept their payroll at 1988 levels, but their total increase in employment was less than 25,000 workers, showing an overall downward trend in employment. In the US, the Labor Department reported that 4,487 workers who lost their jobs between January 1 and mid-May of this year have been certified for trade adjustment assistance because their job losses were due to NAFTA. The Office of Trade Adjustment Assistance received petitions from 150 companies in 33 states from January 1 to June 20, and determined that 53 of the petitions were eligible for aid -- 36 due to job shifts from the US to Mexico or Canada and 17 because of increased imports. AFL-CIO economist Sheldon Friedman called the report the "tip of the iceberg." Source: Stephen Franklin, "Franklin Park Quasar Output Mexico-bound," CHICAGO TRIBUNE, 7/30/94; "30 Big Canadian Companies Employing 171,559 Fewer Workers Than in 1988," CCPA MONITOR, July/August, 1994; "Over 4,000 Workers Have Lost Jobs to NAFTA," SOLIDARITY, 8/94 - - - - - - - - - - - - - - - - - - NAFTA OPENS MEXICAN BANKING MARKET During the first weeks after Mexico's banking industry opened to foreign firms through NAFTA, more than a hundred foreign financial institutions filed applications to open bank operations. A top Mexican finance ministry official said that at least 15-20 applications are likely to be approved. NAFTA allows foreign banks as a group to hold up to eight percent of the capital in the Mexican banking system, with no individual foreign bank holding more than 1.5 percent of the country's capital. Foreign banks are expected to increase competition in the corporate banking sector, provide a fast infusion of capital in the financial sector, and dominate the non-bank banking sector by the end of the year. Limits on foreign holdings will end at the end of the decade. First Chicago Corp. is the eighth US bank to ask permission to enter the Mexican market under NAFTA next year. First Chicago, the 10th-largest bank in the US, has acquired 10 smaller banks over the past several years, and is currently cutting 600 workers in a reorganization of its US operations. Citibank is the only foreign bank that currently has retail and corporate operations in Mexico, due to a concession it received 65 years ago. Citibank has now applied for status as a financial group complete with a brokerage firm and for a full 1.5 percent share of capital. Citicorp chair John Reed is not optimistic about the short-term outlook with the expected influx of foreign banks in the next two to three years. "It will get a hell of a lot worse before it gets better," said Reed. "The place is clearly going to get overbanked in the short-term and there will be some very stupid deals done." Source: Jeff Franks, "Mexico Banking Facing Lean Years," REUTER, 8/10/94; Damian Fraser, "Foreign Finance Lines Up at Mexico's Doors," FINANCIAL TIMES, 8/10/94; William Smith, "First Chicago to Cut 600 Bank Workers," CHICAGO TRIBUNE, 8/17/94; "First Chicago Eyes Mexico," CHICAGO TRIBUNE, 8/17/94 - - - - - - - - - - - - - - - - - - GE, SONY FACE MEXICAN LABOR PROBLEMS The metalworkers' union, STIMAHCS, filed a demand that General Electric negotiate a contract with the Mexican Labor Arbitration and Conciliation Board on August 8. The demand covers workers employed in GE's Compania Armadora (CASA) motor plant in Juarez, the subject of the first labor complaint filed under NAFTA. A US union, the United Electrical, radio and Machine Workers of America (UE), working together with STIMAHCS, filed that complaint on behalf of CASA workers fired by the company, allegedly for their union organizing activity. Under Mexican law, unions can negotiate with the company for a collective bargaining agreement, or they can file a collective bargaining agreement with the Mexican labor board and set a strike date. According to a STIMAHCS spokesperson, the latter route was made necessary by the company's threats to close the plant if workers insist on the union and a contract. In other labor news, US and Mexican labor organizations filed a complaint against Sony in mid-August, alleging violations of worker rights at its Nuevo Laredo, Mexico plant. The complaint was filed with the US National Administrative Office. The International Labor Rights Education and Research Fund and two Mexican organizations charge that Sony maintained surveillance on unionists, fired striking workers, pressured employees to work on national holidays, and violated Mexican labor laws. The groups say that the Mexican government has failed to enforce labor laws calling for freedom of association and limiting hours of work. Source: "Mexican Union Demands General Electric Contract," UE LABOR NEWS, 8/8/94; James Harding, "Unions Accuse Sony Under Nafta Accord," FINANCIAL TIMES, 8/17/94 - - - - - - - - - - - - - - - - - - VENEZUELA UPDATE Venezuela's economic state of emergency has not succeeded in stopping inflation, reported at nine percent during the month of June. Fluctuations in interest rates, caused in large part by government measures to control the economy, bear part of the blame for price increases. The country's banking crisis continues as well, with the government taking steps in early August to salvage eight more troubled banks, including the Banco de Venezuela, now the country's second-largest bank. The government outlined a stabilization plan that would require action by banks that consistently fail to meet clearing house and reserve requirements. Such banks will be taken over by government-appointed executives, and owners or major stockholders will be asked to increase capital and to pledge personal assets to cover government financial assistance. Some owners may be directed to carry out mergers, sell assets, reduce expenses, and otherwise cut financial losses. The government rescue package for Banco de Venezuela will cost $265-294 million, mostly in loans to cover losses. The banking crisis only indirectly affects most Venezuelans, just 20 percent of whom are able to adequately satisfy their basic needs, according to a recent study by the Foundation Centre of Studies for Growth and Development of the Venezuelan Population (FUNDACREDESA). FUNDACRESA also reported that 36 percent of the population live in poverty and can satisfy basic needs only with difficulty, and that 44 percent live in absolute poverty and cannot meet basic needs. Children from the latter sector are, on the average, seven centimeters shorter than their wealthier counterparts. Source: Joseph Mann, "Sticks and Carrots for Venezuela's Banks," FINANCIAL TIMES, 8/11/94; "Venezuela Takes Over No. 2 Bank and Plans Steps to Add Capital," WALL STREET JOURNAL, 8/10/94; Joseph Mann, "Venezuela Moves to Prop Up Eight Troubled Banks," FINANCIAL TIMES, 8/10/94; Pilar Pascual, "Gap Between Rich and Poor Can Be Measured in Height," IPS, 8/94 - - - - - - - - - - - - - - - - - - RESOURCES/EVENTS "Understanding the North American Free Trade Agreement," Leslie Alan Glick. KLUWER LAW & TAXATION PUBLISHERS, 1994. 147 pages. Kluwer Law & Taxation Publishers, 6 Bigelow Street, Cambridge, MA 02139. Tel: (617) 354-0140; Fax: (617) 354-8595. $45.00. Summary and analysis of major provisions and side agreements, projecting changes in laws and practices in the US, Mexico and Canada. Background for business and legal planners. "The Mexico-U.S. Free Trade Agreement," ed. Peter M. Garner. MASSACHUSETTS INSTITUTE OF TECHNOLOGY, 1993. 317 pages. MIT Press, Massachusetts Institute of Technology, Cambridge, MA 02142. Collection of seven economists' essays addressing issues such as environmental and wage impacts of NAFTA, water use, automobiles, financial services market in Mexico, and regional and local production and employment effects. "Free Trade or Fair Trade?" Monthly newsletter produced by the Latin American Institute for Alternative Legal Services (ILSA) and the Regional Coordinator of Economic and Social Investigation (CRIES), with the collaboration of CUSO. 6 pages. ILSA, Calle 38 No. 16-45, A.A.: 07844, Bogot, Colombia. Email: ax!ilsabog or ILSABOG@ax.apc.org. Monthly newsletter, subtitled Latin American and Caribbean trade alert, focuses on free trade and the new world order as they accentuate inequalities and social exclusions. - - - - - - - - - - - - - - - - - - The NAFTA and Inter-American Trade Monitor is available in both English and Spanish on Association for Progressive Communications (APC) computer networks on the conference eai.news. It can also be faxed or sent via mail on request. We welcome your comments and contributions. - - - - - - - - - - - - - - - - - - For more information about the Institute for Agriculture and Trade Policy, send email to iatp-info@igc.apc.org. - - - - - - - - - - - - - - - - - - Produced by: Mary C. Turck, Institute for Agriculture & Trade Policy, 1313 Fifth St. SE, Suite #303, Minneapolis, MN 55414-1546 USA Tel: (612) 379-5980, Fax: (612) 379-5982, email: mturck@igc.apc.org