From iatp@igc.apc.org Date: 03 Oct 94 04:46 PDT From: IATP Reply to: "Conference trade.news" To: "Recipients of conference trade.news" Newsgroups: trade.news Subject: NAFTA & Inter-Am Monitor 10/3/94 Produced by the Institute for Agriculture and Trade Policy - - - - - - - - - - - - - - - - - - NAFTA and Inter-American Trade Monitor, vol. 1, #19 October 3, 1994 - - - - - - - - - - - - - - - - - - HEADLINES MEXICO'S ECONOMIC PACT RENEWED ALLEGATIONS OF DUMPING STEEL, CHEMICALS MAQUILA EXPORTS UP MAQUILA STRIKE ENDS US COMPANIES GEAR UP FOR CUBA TRADE NAFTA BOOSTS TRADE, NOT JOBS TRADING IN THE ENVIRONMENT RESOURCES/EVENTS - - - - - - - - - - - - - - - - - - MEXICO'S ECONOMIC PACT RENEWED Mexico's Pact for Stability, Competitiveness, and Employment (PECE) was renewed on September 24. The PECE is a voluntary but formal agreement between government, business, and labor, first introduced in 1987, which serves to reduce inflation and economic instability. Under the pact, Mexico's inflation rate has fallen from more than 150 percent to less than 5 percent. While the median wage for factory workers has risen, Mexican minimum-wage workers have lost almost 30 percent of their buying power. Agreement on PECE is made possible by the close ties between the Confederation of Mexican Workers and the governing PRI political party. This year's PECE set an inflation goal of 4 percent for 1995, holding wage and price increases to the same level and offering modest tax breaks and financial incentives to business. The PECE reinforces stability in the Mexican economy, bolstering the confidence of investors. Source: "Mexico's Economic Pact Is Likely to be Renewed," EL FINANCIERO, 9/5-11/94; Anthony DePalma, "Mexico's Pact for a Stable Economy," NEW YORK TIMES, 9/27/94 - - - - - - - - - - - - - - - - - - ALLEGATIONS OF DUMPING STEEL, CHEMICALS The Mexican Commerce Secretariat (Secofi) is convening two antidumping panels to review allegations of US dumping of rolled plate and sheet steel. The panels are the first established by Mexico under NAFTA, though anti-dumping complaints pre-dating NAFTA have been heard and decided. (See "Pork Disputes Settled," 9/19 NAFTA & INTER-AMERICAN TRADE MONITOR.) The panels will review Secofi's August 2 decision waiving some of the compensatory duties previously levied against US firms. German steelmakers, among others, have been critical of this decision. Mexican chemical manufacturers, who have received favorable Secofi rulings in several dumping cases this year, recently complained that the process takes too long and asked for an autonomous panel to address their concerns. The manufacturers say that businesses may fold during the year or more that is needed for a Secofi investigation to vindicate their claims of unfair competition by dumping. Source: "Mexico Forms NAFTA Dumping Panels to Review Steel Cases," INTER-AMERICAN TRADE AND INVESTMENT LAW, 9/16/94; Kevin G. Hall, "Mexican Chemical Industry Proposes Trade Probe Panel," JOURNAL OF COMMERCE, 9/16/94 - - - - - - - - - - - - - - - - - - MAQUILA EXPORTS UP Value added to products assembled at maquiladoras is up from $5.5 billion in 1993 to an estimated $7 billion, according to a Commerce Secretariat (Secofi) official. Export revenue from Mexico's 2,053 maquiladoras accounts for more than half of all exports, and the plants now employ 588,177 workers, 18 percent of all of Mexico's manufacturing industry workers. In anticipation of their phase-out under NAFTA, many maquiladoras are converting to vertically integrated, full-scale production, according to Secofi. Source: "Maquila Exports Boom," MEXICO BUSINESS MONTHLY, 10/94 - - - - - - - - - - - - - - - - - - MAQUILA STRIKE ENDS After two months on strike, workers at the Industrial Arcos maquiladora in Tijuana reached a settlement and returned to work on September 12. While workers were not completely satisfied with the agreement reached, the agreement did provide that they would receive pay for three of the five weeks that they worked without compensation prior to the strike, and it assured that there would be no retaliation against strike leaders. But in their first work back, Arcos fired all seven strike leaders and refused to pay for September 16, Mexican Independence Day, which was supposed to be a paid holiday. Workers continue to question whether plant operations are controlled by the nominal owners, the three Leyva Osorio sisters, or by US contractor Lowe Alpine. Lowe Alpine announced on September 16 that it had just severed ties with Arcos and workers believe that the Leyva Osorio family is preparing to sell the plant. Source: "Settlement Reached in Arcos Strike, Workers Fear Retaliation," "Arcos Workers Fired, Company Violates Settlement Terms," SUPPORT COMMITTEE FOR MAQUILA WORKERS, 9/13,18/94 - - - - - - - - - - - - - - - - - - US COMPANIES GEAR UP FOR CUBA TRADE Despite continuing US insistence on maintaining its 32-year trade embargo against Cuba, US businesses are preparing for an eventual opening of trade. While estimates of potential US trade and investment vary, all agree that the opening would be significant. Other foreign investors are moving in: European, Canadian, and Jamaican companies operate tourist resorts; French Total and other firms are exploring, producing, and marketing petroleum; several foreign companies are investing in mining; and Mexican Grupo Domos has a $1.4 billion deal for Cuba's domestic telephone company. Five U.S. telephone carriers have negotiated modified direct dialing contracts with the Cuban government, getting FCC approval for a surcharge that will generate millions for both the carriers and the Cuban domestic company. US executives, such as former Chrysler Corp. chair Lee Iacocca, have visited Cuba recently, as have representatives of Merck & Co. and Johnson & Johnson. Texaco has plans for oil development as soon as the law permits. Cuban Foreign Minister Roberto Robaina maintains that tightened US trade restrictions under the Toricelli law have seriously affected Cuban trade with subsidiaries of US companies in third countries, which dropped from a high of $718 million in 1991 to a mere $1.8 million in 1993. He says that the Toricelli law's sanctions on ships and airlines also cost Cuba more than $50 million last year and severely increased shipping costs to Cuba, including oil transport rates. Source: Gail DeGeorge and Ruth Pearson and Mark Lewyn, "Almost Tasting Trade," BUSINESS WEEK, 9/19/94; Sallie Hughes, "Mexican Firm Gets Boost from New U.S.-Cuba Phone Contacts," EL FINANCIERO, 9/19-25/94; "Toricelli Law Hit Economy Hard, Foreign Minister Says," IPS, 9/9/94 - - - - - - - - - - - - - - - - - - NAFTA BOOSTS TRADE, NOT JOBS According to reports from the Mexican Commerce Secretariat (Secofi) and the Organization of Economic Cooperation and Development (OECD), Mexican exports to the US and Canada increased by 20.5 percent and 36.1 percent, respectively, during the first six months of NAFTA. Significant job growth has not followed the increase in exports, with Mexican government figures showing a mere 0.7 percent increase during the first half of 1994. This level of increase would generate only 84,000 new jobs annually, but Mexico needs to generate a million new jobs annually to accommodate new entrants to the labor market. President-elect Ernesto Zedillo has promised to create a million new jobs yearly, but analysts doubt that he will be able to accomplish this goal. An analyst at Mexico City's BanNorte stock brokerage predicted difficulty in fostering job growth through Zedillo's planned route of increased exports and vigorous small to mid-sized businesses. "You can talk about the micro revolution, but the reality is that big companies are going to continue kicking the butt of small companies," said the analyst. "Under Nafta, a lot of these companies will continue to fold, and there's no stopping that." Source: "NAFTA Boosts Mexico Trade, Not Jobs," UPI, 9/22/94; Sallie Hughes, "A Delicate Balancing Act," EL FINANCIERO, 9/19- 25/94 - - - - - - - - - - - - - - - - - - TRADING IN THE ENVIRONMENT % Ecuador's Cofan ethnic group won a judgment against Texaco in a New York case, in a lawsuit brought by the Cofan based on ecological damage caused by Texaco. The Ecuadoran government and Texaco in August reached a separate verbal agreement for repair of damage done to the Amazon region between 1972 and 1992, including spills of 450,000 barrels of oil. Lawyers for the Cofanes say the government is trying to lower the judgment against Texaco, while government officials say that the judgment in a US court violates Ecuadoran national sovereignty. Indigenous people make up 30 percent of Ecuador's population of 11 million, with six of the 10 remaining aboriginal groups living in the Amazon where all of the oil is extracted. Oil revenues finance half of the national budget. % In Brazil, a 12-year, $2.1 billion clean-up of the Tiete River, which runs through Sao Paulo, has stalled because of lack of funding. The Sao Paulo government can receive matching funds from the Inter-American Development Bank, but the state government has been declared bankrupt by auditors. Water is now scarce in Sao Paulo, with neighborhoods suffering rationing and industrial production also affected. % A vote by the US Congress means that Venezuelan gasoline will be banned from the US, beginning in 1995, based on environmental considerations. The Venezuelan government will challenge EPA standards that bar its unleaded gasoline, charging that the regulations violate the General Agreement on Tariffs and Trade (GATT), amounting to protectionism. The US ban will affect 50-60,000 barrels a day and will cost Venezuela about $50 million annually. % According to the Mexican Attorney General's Office for Environmental Protection (PROFEPA), 70 percent of the complaints filed in the first half of 1994 were from the Federal District, with only eight complaints (1.5 percent) coming from five border states. PROFEPA attributed the relatively small number of border complaints to its delegation of authority to state environmental commissions, but the Arizona-based Border Ecology Project pointed to serious budget problems in state PROFEPA offices and lack of personnel to receive and process complaints. Source: "Indigenous People Defend Win Against Texaco," IPS, 9/9/94; "Venezuela Will Challenge U.S. Ban on its Gasoline," AP, 9/14/94; "Venezuela Challenges U.S. Restrictions on Gasoline," IPS, 9/13/94; Ron Mader, "PROFEPA Releases Midterm1994 Report," ENVIRO MEXICO, 9/94 - - - - - - - - - - - - - - - - - - RESOURCES/EVENTS "World Investment Directory, Vol. IV Latin America and the Caribbean." UNITED NATIONS, 1994. 476 pp. (UN Conference on Trade and Development, Division on Transnational Corporations and Investment) United Nations Publications, Room DC2-0853, Dept. 600, New York, New York 10017/ Fax 212/963-4116. $65 plus $3.50 postage and handling. "The purpose of the World Investment Directory is to assemble comprehensive data and information on FDI (foreign direct investment), basic financial data on the largest transnational corporations by sector, the legal framework within which such investment takes place, and selected bibliographic information pertaining to FDI and transnational corporations in individual countries." "NAFTA and Agriculture: Will the Experiment Work?" Gary W. Williams and Thomas Grennes, eds. CENTER FOR NORTH AMERICAN STUDIES, 1994. 139 pp. Center for North American Studies, Department of Agricultural Economics, Texas A & M University, College Station, TX 77843-2124. Tel: 409/845- 5911, Fax: 409/845-6378. $20. Collection of papers presented at the International Agricultural Trade Research Consortium in San Diego, California, Dec. 12-14, 1993 includes overviews of Mexico's economy in NAFTA and specific examination of pollution abatement, dairy trade, and beef trade. - - - - - - - - - - - - - - - - - - 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