From iatp@igc.apc.orgTue Apr 4 10:43:10 1995 Date: Mon, 03 Apr 1995 15:02:12 -0700 (PDT) From: IATP To: Recipients of conference Subject: Nafta & Inter-American Trade Monito NAFTA & Inter-American Trade Monitor Produced by the Institute for Agriculture and Trade Policy Volume 2, Number 9 Friday, March 31, 1995 _______________________________________________ Headlines: - UN SOCIAL SUMMIT HIGHLIGHTS DIVISIONS BETWEEN RICH, POOR COUNTRIES - MERCOSUR REJECTS ARGENTINE REQUEST TO RAISE EXTERNAL TARIFFS - CONGRESS CONSIDERS CARIBBEAN PARITY - CUBA TRADE UPDATE - RMALC PROPOSES ALTERNATIVE PLAN FOR ECONOMIC RECOVERY AND SUSTAINABLE DEVELOPMENT - CANADA-EU FISHING DISPUTE - VENEZUELA IN ECONOMIC CRISIS _______________________________________________ UN SOCIAL SUMMIT HIGHLIGHTS DIVISIONS BETWEEN RICH, POOR COUNTRIES With 182 of the United Nations' 185 member-states represented, the UN Social Summit that was held in Copenhagen in early March came to no concrete agreement about narrowing the gap between those whom Mexico's Minister of Foreign Relations, Jose Angel Gurria, characterized as "one billion persons [who] concentrate 70 percent of the resources and income of the planet" and "one in every four human beings [who] live in extreme poverty." Delegates approved a 90-page plan that commits governments to eradicating poverty and reducing the billions of dollars in debt owed by poor countries. However, the plan contains no binding promises or specific programs. Non-governmental organizations (NGOs) meeting at an "alternative summit" in Copenhagen said the plan did not go far enough. The Latin American caucus declared itself in agreement with the NGO consensus that "the world is living in a profound global social crisis." The Latin American caucus went on to declare that "our continent, more than poor, is an unjust continent. The caucus said that contributing factors to the social crisis included debt, uncontrolled action of transnational corporations, over-exploitation of natural resources, expanded consumption by the North at the expense of the resources of the South, financial speculation, and capital flight as contributing factors. The Latin American caucus denounced neo-liberal economic models for providing no solutions to poverty, unemployment, and social disintegration, and even failing to stabilize economies. A February 2 letter to the U.N. Secretary General in regard to the Social Summit, which was signed by NGOs comprising the Civil Initiative for Central American Integration (ICIC), insisted that programs of structural adjustment aimed at increasing exports do not support productive development, equitable distribution of wealth, or ecological sustainability. ICIC called on the Social Summit to negotiate with the International Monetary Fund and World Bank in order to change their policy of privileging short-term investments and commerce to a policy of supporting social development, including access for poor groups to credit, technology, education, and land for small farmers and rural workers. While expressing disappointment that no rural organizations had been consulted in drawing up preparatory documents for the Social Summit, the Comisin Coordinadora de la Va Campesina called on the Summit to give priority to ethics over technology and to put human beings at the center of the development process. The World Bank, under attack from poorer nations at the Summit, claimed that it now gives priority to social spending, but opposed writing off the debt of the developing world. Jose Angel Gurria, "Palabras del Secretario de Relaciones Exteriores de Mexico," 3/12/95; "Caucus Latinoamericano: Cumbre Mundial Sobre Desarollo Social," 3/10/95; Nicholas Doughty, "U.N. Poverty Summit Plods Towards Final Resolution," REUTERS, 3/12/95; "America Central: Carta a Cumbre Social," ALAI, 3/8/95; "Campesinos Contra Cumbre Social," ALAI, 3/7/95; Mahesh Unyal, "Social Summit-World Bank: Invest In People," INTERPRESS SERVICE, 3/10/95. MERCOSUR REJECTS ARGENTINE REQUEST TO RAISE EXTERNAL TARIFFS Argentina withdrew a proposal to its Mercosur partners to raise Mercosur's common external tariff after Brazil, Uruguay, and Paraguay all indicated opposition. Both Brazil and Argentina stood to benefit from the proposed increase. Brazil's imports have doubled in recent months, creating a trade deficit. Argentina's economy has suffered a crisis of confidence since the December 20 Mexican peso devaluation, with $5 billion transferred out of Argentine banks since December. Paraguay and Uruguay opposed the tariff increase from the beginning. When Brazil withdrew its support and joined them in opposition, Argentina withdrew its proposal. Instead, Argentina will impose a different three percent tax that affects imports, as an emergency measure to slow imports and raise revenues. The Argentine House of Representatives has approved a three percent Value-Added Tax (VAT) hike requested by the International Monetary Fund, raising the VAT from 18 to 21 percent. If the measure is also passed by the Senate, experts predict an increase in inflation and in unemployment, officially at 12.2 percent. Most wages have been frozen for four years. "Argentina Desiste de Negociar Tarifa Externa Comum," FOLHA DE SAO PAULO, 3/24/95; Oscar Florman, "Gobierno Propondra Aumentar Arancel Comun de Mercosur," INTERPRESS SERVICE, 3/15/95; Carlos Castillo, "Holdups on the Road to Integration," INTERPRESS SERVICE, 3/95; Angus Foster, "Brazil Will Support Import Tariff Increase in Mercosur," FINANCIAL TIMES, 3/17/95. CONGRESS CONSIDERS CARIBBEAN PARITY The United States Congress is currently considering Caribbean Basin Parity legislation to reduce the disadvantage suffered by Caribbean textile manufacturers relative to Mexican textile manufacturers, now that NAFTA has slashed duties and quotas for Mexico. While Caribbean apparel imports to the U.S. grew by nine percent last year, the volume of imports from Mexico increased by 43 percent. In 1993, before NAFTA, each region had increased imports by 20 percent. Many manufacturers have shifted production to Mexico as a result of NAFTA. U.S. apparel manufacturers and importers are pushing for the Caribbean Basin Parity legislation, and for the tariff preference levels (TPLs) that would let Caribbean manufacturers use fabric imported from the Far East. The TPLs, which can be implemented by executive authorization, are needed because, unlike Mexico, the Caribbean nations do not have the mills to produce their own fabric. The Clinton administration says it does not object to the TPL provisions, and supports the parity legislation. Senate approval of the legislation may be difficult to obtain. Last year the Clinton administration withdrew similar legislation because of fear that it would impair the chances of GATT passage, and because of opposition by U.S. garment workers unions. Caribbean apparel sales to the U.S. totaled $3.9 billion in 1993, with the industry employing 450,000 workers, mostly in the Dominican Republic, Costa Rica, Guatemala, Honduras, and Jamaica. Paula L. Green and John Maggs, "House Panel Set to Vote on Parity for Caribbean and Mexican Apparel," JOURNAL OF COMMERCE, 3/27/95; Scott West, "Region Sees Hope in New 'Parity' Legislation," INTERPRESS SERVICE, 3/17/95; Canute James, "Peso Devaluation Adds to Caribbean Woes," FINANCIAL TIMES, 2/21/95. CUBA TRADE UPDATE Foreign investment in Cuba is growing, despite the 33-year-old U.S. trade embargo. Some conservative politicians and many business leaders in the United States advocate replacing the embargo with free trade, and letting U.S. firms have a chance at the Cuban market. Johns Hopkins University recently completed a study that shows the U.S. embargo costs U.S. businesses $750 million annually. Official Cuban sources say that 180 associations with capital from 38 countries now have more than $1.5 billion invested in 26 economic sectors. Canada, China, France, Mexico, and Spain lead the list of investors. Signs in Havana advertise the "United Colors of Bennetton" and Mitsubishi. While this year's sugar crop suffers from delayed cultivation, foreign financing will boost production next year, and Cuban sugar deals with China and Russia will generate cash and oil. Cuba's nickel production, hurt by the collapse of the Soviet Union, may be buoyed by $100 million in investment by Canada's Sherrit, Inc. over the next five years. According to Cuban government figures, Cuba showed economic growth of 0.7 percent in 1994, and a budget deficit reduction of 72 percent. Changes adopted by the government last year include price and tariff increases, a new tax law, and elimination of many subsidies. The fourth Congress of the National Economists Association in Cuba, meeting in March, called for decentralized management of businesses, granting traditional sectors levels of autonomy close to those of the mixed venture companies that now account for 13 percent of all Cuban industry. Restructuring and reorganization of state enterprises has begun, despite fears of displacement of workers. Also on the Cuban economic horizon is a revaluation of the peso, still officially pegged at one peso to the dollar despite a black market trade at a 35:1 ratio. Although no specific plans have been announced, government officials say that a new exchange rate will have to be set soon. As United States legislators, ranging from Senator Jesse Helms (R-N.C.) to Representative Robert Torricelli (D-N.J.) sign on to ever more punitive proposals to strengthen the U.S. trade embargo, the United States finds itself more and more isolated internationally. In November, more than 100 countries in the U.N. General Assembly condemned the embargo. The General Agreement on Tariffs and Trade forbids such trade restrictions between members of the World Trade Organization (WTO), and both Cuba and the United States are full members of the WTO. French President Mitterand called the embargo "stupid," and British Conservative Baroness Young warned that it "cannot but cause serious problems" between the U.S. and the United Kingdom. The Helms proposal would force foreign-based U.S. subsidiaries to stop grade with Cuba and would punish foreign firms that trade with or invest in Cuba. Torricelli claims that "the Castro regime is clearly on its last leg," and that tightening sanctions will hasten his departure. U.S. President Bill Clinton denied rumors that it was considering easing the sanctions imposed on Cuba last summer, including travel restrictions and a ban on cash remittances from Cuban exiles to their families still in Cuba. Some administration officials are pushing for a "roadmap" to tell Cuban President Fidel Castro exactly what steps could be taken to receive concessions or open the way for negotiations between the two nations. "Cultivation of Sugar Cane Plantations Lags in Cuba," JOURNAL OF COMMERCE, 3/17/95; Pascal Fletcher, "Cuba Secures Chinese Sugar Deal But Loses Out on Nickel," FINANCIAL TIMES, 3/23/95; "Analysts Call for Realistic Exchange Rate," INTERPRESS SERVICE, 3/21/95; Dalia Costa, "Economists Call for Reversal in Business Policy," INTERPRESS SERVICE, 3/23/95; Wayne S. Smith, "Washington Ignores Reality, Law in Undying Obsession with Castro," LOS ANGELES TIMES (reprinted in STAR TRIBUNE, 3/27/95); Daniel Williams and Ann Devroy, "Clinton May Ease Sanctions on Cuba," WASHINGTON POST, 3/7/95; "Clinton Rejects Any Softening of Sanctions," INTERPRESS SERVICE, 3/7/95; Dalia Costa, "No Shortage of Foreign Investors," INTERPRESS SERVICE, 3/20/95; Dan Burton, Robert Torricelli, "Burton and Torricelli Blast Idea of Easing Cuban Embargo," CONGRESSIONAL RECORD, 3/7/95; Carla Anne Robbins, "Odd Allies Await Clinton If U.S. Shifts Cuba Policy," WALL STREET JOURNAL, 3/16/95; RMALC PROPOSES ALTERNATIVE PLAN FOR ECONOMIC RECOVERY AND SUSTAINABLE DEVELOPMENT Attributing the Mexican economic crisis to the free trade economic model followed during the past 12 years, the Mexican Action Network on Free Trade (RMALC) proposed an alternative to "Zedishock" economic austerity. RMALC's plan emphasizes the necessity of sustainable development that places priority on raising the economic level of the majority of the population and preserving the environment. Generating more jobs and slashing interest rates are among the key elements of the RMALC plan, which includes tax reforms that will alleviate the burden on individuals and small businesses and will tax financial speculators. Increased wages for workers and increased economic development to generate jobs are key to the RMALC plan. RMALC Grupo Tecnico de Analisis Economico, "Plan de Recuperacion Economica y Desarrollo Sustentable," 3/17/95. CANADA-EU FISHING DISPUTE A three-hour sea chase, machine-gun fire across the bow of the ship, and the final seizure of a Spanish fishing vessel by the Canadian Coast Guard were called "gunboat diplomacy" by admiring Canadians and "piracy" by incensed Europeans. The dispute has its roots in declining fish stocks in the Northwest Atlantic, part of a worldwide problem. According to the United Nations Food andAgricultural Organization, 70 percent of the world's fish stocks are overfished and their viability is threatened. The Northwest Atlantic Fisheries Organization (NAFO) decided unanimously last September to restrict the total allowable catch of turbot to 27,000 tons in 1995. National quotas within the 27,000 ton limit were contested, but the vote finally assigned Canada 60 percent of the total and restricted European Union (EU) fishermen to 3,400 tons, compared to the 37,000 tons annually that they took between 1991 and 1993. On March 1, the EU rejected the quota assignment and unilaterally assigned themselves a quota of 18,630 tons -- 70 percent of the allowable catch for all NAFO members. On March 3, Canada adopted protection laws extending its authority beyond its internationally-recognized 200-mile "exclusive economic zone" to the "nose and tail" area of the Grand Banks. On March 8, the Canadian frigate Halifax arrived in the "nose and tail" of the Grand Banks after 45 Spanish fishing boats were reported there. On March 10, Canadian navy gunboats pursued and captured the Estai. Canadians charged that the Estai was using illegally-sized nets to capture small fish and contained a hidden hold with an excess catch of turbot. The ship was released on $250,000 bond on March 15, with Canada and the EU agreeing to talks at the next NAFO meeting. On March 28, renewed clashes between Spanish fishing trawlers, Spanish naval vessels, and Canadian patrol boats were reported. While more than 75 percent of the turbot is within Canada's 200-mile zone, catches in the area have fallen from 30,000 tons in 1987 to just over 5,000 tons in 1993, as catches on the edges of the zone have risen from 2,000 tons to 45,000 tons during the same time. The overall catch in the NAFO area has dropped 42 percent since 1973, with disastrous consequences for the Canadian fishing industry. The EU and Japan have resisted a binding international fishing treaty. When Spain and Portugal joined the EU in 1986, the previous EU members required them to agree not to fish in other European waters for 16 years, thus putting further pressure on Canadian waters. "FAO: Fishery Ministers Call for Protection of Resources," INTERPRESS SERVICE, 3/19/95; Clyde H. Farnsworth, "Canada and Spain Face Off Over Atlantic Fishing Zone," NEW YORK TIMES, 3/12/95; James Harding and Deborah Hargreaves," Fish Knives Out in Defence of Canada's Turbot," FINANCIAL TIMES, 3/11-12/95; Bernard Simon, "Spanish Go Home Smiling Despite Empty Nets;" Caroline Southey and David White, "EU and Canada Talk in Effort to End Fishing Row," FINANCIAL TIMES, 3/17/95; "Just for the Halibut," JOURNAL OF COMMERCE, 3/17/95; "Ottawa May Seek to 'Delay' NAFO Talks," INTERPRESS SERVICE, 3/17/95; Alicia Fraerman, "Conflict With Canada Symptom of Broader Issue," INTERPRESS SERVICE, 3/15/95; Robert Hart, "Spanish Fishermen Return to Disputed Fishing Grounds," REUTERS, 3/28/95. VENEZUELA IN ECONOMIC CRISIS Venezuelan finance minister Julio Sosa Rodrguez resigned in early February, and was replaced by Luis Raul Matos Azocar, who is rumored to share President Caldera's skepticism of the free-market orientation of the previous administration. During Caldera's first year in office, he declared a state of economic emergency, took over several troubled banks, and imposed price and wage controls. Official economic figures for 1994 show 71 percent inflation, 9 percent "open" (i.e. officially reported) unemployment, and 80 percent currency devaluation. While some analysts advocate creation of a new currency known as the gold bolivar and replacing the Central Bank with an Argentine-style "exchange house," most cabinet-level officials oppose such economic shock therapy as destructive and ultimately ineffective. Humberto Marquez, "Caldera's First Year Marked by Economic Crisis," INTERPRESS SERVICE, 2/1/95; "Venezuelan Finance Minister Resigns Amid Banking Crisis," WEEKLY NEWS UPDATE ON THE AMERICAS, 2/12/95; Humberto Marquez, "Currency Adjustment Proposed to Control Inflation," INTERPRESS SERVICE, 3/95. _______________________________________________ Produced by the Institute for Agriculture and Trade Policy, Mark Ritchie, President. Edited by Mary C. Turck. The NAFTA & Inter-American Trade Monitor is available free of charge to Econet and IATPNet subscribers. For information about fax or mail subscriptions, or other IATP publications, contact: The Institute for Agriculture and Trade Policy, 1313 5th Street SE, Suite 303, Minneapolis, MN 55414. Phone: 612-379-5980; fax: 612-379-5982; e-mail: iatp@iatp.org. For information about IATP's contract research services, contact Dale Wiehoff at 612- 379-5980, or e-mail: dwiehoff@iatp.org