From iatp@igc.apc.orgSat Nov 18 12:22:18 1995 Date: Fri, 17 Nov 1995 13:38:22 -0800 (PST) From: IATP To: Recipients of conference Subject: NAFTA & Inter-Am Trade Monitor 11-17 NAFTA & Inter-American Trade Monitor Produced by the Institute for Agriculture and Trade Policy November 17, 1995 Volume 2, Number 29 _______________________________________________________ Headlines: - U.S. AG EXPORTS AT RECORD HIGH - MEXICO: NEW FARM PLAN PROPOSED - PESO STILL FALTERING - COMMENTS ON TOMATO IMPORTS CONSIDERED - CANADIAN TRADE SURPLUS A CHIMERA - "CBI PARITY' BILL CHANGED - FAST TRACK SLOWED IN CONGRESS - NAFTA ENVIRONMENTAL CONCERNS CONTINUE _______________________________________________________ U.S. AG EXPORTS AT RECORD HIGH U.S. agricultural exports saw estimated growth of 22 percent in fiscal 1995 (October 1994-September 1995) to a record $53 billion, the biggest year-to-year increase since 1988. Agricultural exports are expected to grow by three percent in 1996 to set a new record high of $54.5 billion. U.S. agricultural imports are expected to remain at 1995's level of $29 billion for another year. U.S. coarse grain exports (corn, sorghum, barley, rye, oats, and mixed grains) fell in volume in 1995, but higher export prices kept their value steady at 1994 levels. U.S. corn export prices are expected to rise further in 1996. Exports of high-value product -- fruit, vegetable, and meat exports -- continue to rise, partly as a result of market-opening agreements and expanded international fast food sectors. In Colombia, for example, the government has agreed to allow imports of meat and poultry from the U.S., provided it comes from federally inspected U.S. plants. International market opening is a two-way street, as Argentina and Uruguay have finally met U.S. concerns about hoof-and-mouth disease and have gained permission to begin shipping fresh and frozen beef to the United States. Exports of animal products also continue to rise steadily. U.S. beef exports rose, driven by higher sales to Japan and South Korea. Citing "competitive priced pork products" and record U.S. pork production, the USDA Foreign Agricultural Service reported that the U.S. has reversed its traditional position as a large net importer of pork, and will probably be a net exporter of pork for the first time in 43 years. Live cattle imports from Mexico to the U.S. increased dramatically in 1995, as Mexican producers sold off drought- stricken herds. Meanwhile, Marvin Lehrer, director of the USDA's trade office in Mexico City, predicted increasing U.S. agricultural exports to Mexico in the future, despite 1995's sharp decline in agricultural exports due to the peso devaluation. Lehrer maintains that Mexico simply cannot produce enough to feed its growing population. With decreasing tariffs under NAFTA, U.S. products such as meat, fresh fruits and vegetables, and processed foods are more attractive to the Mexican middle class. Mexico will import a record ten million tons of grain in 1995, more than a quarter of total annual grain consumption. "U.S. Ag Exports to Set Record in FY96," AGRICULTURAL OUTLOOK, October, 1995; "U.S. Pork Exports Setting Record Pace," THUMB FARM NEWS, October 2, 1995; Robert H. Brown, "Colombia Opening Borders to U.S. Meat," FEEDSTUFFS, September 18, 1995; Paul F. Conley, "US Live Cattle Exports Plummet; Drought-Hit Mexico Sells Herds in US," JOURNAL OF COMMERCE, August 30, 1995; Calvin Sims, "South American Beef to Broaden Markets," NEW YORK TIMES, October 5, 1995; Bill Mongeluzzo, "US Sees Farm Sales to Mexico Sprouting," JOURNAL OF COMMERCE, September 14, 1995; Chris Aspin, "Mexico Corn Shortage Forces Farm Policy Shake-Up," REUTER, October 19, 1995. MEXICO: NEW FARM PLAN PROPOSED The Mexican government announced a new Alliance for Rural Areas (Alianza Para el Campo - APC) as a companion to the Alliance for Economic Recovery (APRE), and the "Alliance to Strengthen and Modernize Social Security." The broad objectives of the APC are increasing agricultural profitability, combating rural poverty, providing staples at low costs, and reducing reliance on imports of dairy and beef products. "Mexico cannot continue importing 40 percent of the milk it consumes nor continue importing meat," said Agriculture Secretary Francisco Labastida. Cooking oil production will also be supported, in order to reduce reliance on imports and to export to Asian markets. According to Labastida, consumer subsidies for the purchase of wheat, cornmeal and tortillas will take the place of direct subsidies to producers. Specific proposals include a 20 percent subsidy to farmers who purchase tractors (though this is offset by a 10 percent increase in the price of John Deere tractors), and subsidies to ranchers and dairy farmers for grass seeding, fertilization, irrigation, and storage plants for cold milk. Between 25 and 30 billion new pesos will fund the Programa de Apoyos a la Capitalizacion del Campo (PRODUCE) over the next five years. In addition, the APC will make land transfers easier. Mexican critics faulted the APC as a subsidy program for the sectors who need it least, the ranchers and large agricultural producers. The APC also calls for transferring 85 percent of the functions of the Secretariat of Agriculture, Ranching and Rural Development's 126 functions to state governments next year in a massive decentralization move. Foundations operated by producers in each state would be charged with encouraging technology transfer. David Myhre, an expert on Mexican Agriculture at the University of California-San Diego's Center for U.S.-Mexican Studies, warned that the states may not be ready to take on the federal functions and that the foundation structure may favor large, wealthy landholders. "There's no guarantee that transfer to state officials will make it more democratic, participatory and efficient," said Myhre. "Where are the checks and balances?" Kevin G. Hall, "Mexico's Farm Plan Carries Benefits, Risks," JOURNAL OF COMMERCE, November 3, 1995; "Alliances for Whom?" MEXPAZ, November 8, 1995; Matilde Perez U.," "Se Destinaran de N$25 Mil Hasta N$30 Mil Millones en 5 Anos: Labastida," LA JORNADA, November 2, 1995; Matilde Perez U. and Ricardo Aleman Aleman, "El FIRA Operara Ahora Como Medio de Financiamiento Rural," LA JORNADA, November 1, 1995. COMMENTS ON TOMATO IMPORTS CONSIDERED Although most members of U.S. President Clinton's cabinet oppose new restrictions on tomato imports from Mexico, the National Economic Council has recommended that the administration solicit comments on the import restriction proposal. The proposal, put forward by U.S. Trade Representative Mickey Kantor and supported by Florida tomato growers, would require calculation of the tomato import quota weekly instead of twice yearly. If, as expected, President Clinton agrees to request comments, the notice would appear in the Federal Register and the issue would remain alive into next year's electoral campaign season. John Maggs, "Clinton Team to Seek Comment on Tomato Import Restrictions," November 6, 1995. PESO STILL FALTERING The Mexican peso continued to show weakness in early November, fluctuating between 7.5 and 8 pesos to the U.S. dollar. The Bank of Mexico intervened on November 9, halting what seemed to some to be a new free fall for the peso by raising interest rates and buying pesos. This was the first intervention by the central bank since February. The peso devaluation increased Mexico's foreign debt from 853.3 billion new pesos to 908.9 billion new pesos on Friday, November 3. Mexican government officials angrily blamed the peso's continuing slide on rumors originating in New York and Chicago. The rumors, traced to the New York Stock Exchange and Dow Jones, alleged that a military coup was imminent and/or that Finance Minister Guillermo Ortiz had quit. Both rumors proved false, but some questioned whether the rumors were a strategy of speculators planning to take advantage of a peso sell-off. As money markets showed continuing weakness, the Mexican government introduced a bill in Congress to restructure the nation's Social Security Institute, privatizing much of the pension and health care systems and cutting back daycare and cultural centers. The Mexican Social Security Institute runs everything from hospitals in which one of every three Mexicans is born to a chain of 16 funeral parlors that offer $73 pine coffins and $52 wakes. Roberto Gonzalez Amador, "Ayer, 'Mas Estabilidad' Cambiara: BdeM; El Dolar Se Mantuvo a 8 Pesos," LA JORNADA, November 11, 1995; Michael Stott, "Wild Rumors from U.S. Hurt Mexico Markets," REUTER, November 3, 1995; "Rumors Lead to Market Instability," MEXPAZ, November 7, 1995; Julia Preston, "Intervening, Mexico Halts Slide in Peso," NEW YORK TIMES, November 10, 1995; Anthony DePalma, "Insecurity and Calls for Change Rock a Cradle-to-Coffin System in Mexico," NEW YORK TIMES, November 13, 1995; "Mexico Gets New Pact, Social Security Under Attack," WEEKLY NEWS UPDATE ON THE AMERICAS, November 5, 1995. CANADIAN TRADE SURPLUS A CHIMERA Although Canada typically runs a merchandise trade surplus with the United States, analysts say that much of the surplus is due to re-export of parts and components that had originally been imported for use in manufacture. Many high- value parts and components for manufactured goods are purchased from abroad, with the result that Canadian subsidiaries assemble products that have been researched and designed in the United States, using U.S.-produced component parts. If the value of these components is taken into account, Canada's trade surplus evaporates. In 1993, for example, taking imported parts and components into account would change Canada's $19.5 billion merchandise trade surplus with the United States into a $4 billion trade deficit. David Crane, "Canada Really Importing More Than It's Exporting," CCPA MONITOR, November, 1995. "CBI PARITY" BILL CHANGED Although the "CBI Parity" bill, which would grant duty-free status to apparel products from Central America and the Caribbean, seems to be dead in the 1995 session of Congress, trade and labor activists claimed a small victory when Senator Bob Graham (D-FL) agreed to include worker protections in the proposal. The original CBI Parity bill did not include worker protections, but Graham agreed to add a provision explicitly authorizing a petition process for worker rights, similar to the process in place under the Guaranteed System of Preferences (GSP) law. The CBI Parity legislation has the support of several U.S. textile and apparel industry groups, who agree with the Caribbean Basin nations that they have been disadvantaged by NAFTA. From January to August, 1995, Mexico's apparel exports to the United States grew by 71.6 percent, while the CBI apparel exports grew by 26.2 percent. While the 24 Caribbean Basin nations seek greater access through the CBI Parity legislation, they already enjoy a special-access textile program that allows them to negotiate more generous import quotas for goods sewn with U.S. fabric. This special-access program was extended in September to the four Andean nations of Colombia, Peru, Ecuador and Bolivia. The extension was predicated on the assumption that building Andean export industries will provide alternatives to coca production and export. U.S. Trade Representative Mickey Kantor will lead a delegation to Guatemala, Honduras, and El Salvador in mid- November. The delegation, which will include members of worker rights groups, will investigate progress on worker rights in relationship to duty-free treatment of some commodities. "New Trade Benefit," GUATEMALA WORKER RIGHTS UPDATE, November 3, 1995; Canute James, "U.S. Business Warns Against Denying Caribbean Parity," JOURNAL OF COMMERCE, October 31, 1995; Paula L. Green, "Andean Nations to Join US Special-Access Textile Program," JOURNAL OF COMMERCE, August 13, 1995; "USTR Moves to Increase GSP Pressure," GUATEMALA WORKER RIGHTS UPDATE, November 3, 1995. FAST TRACK SLOWED IN CONGRESS Republicans in the U.S. House of Representatives continued to block any consideration of labor or environmental issues in trade agreements, effectively ending the possibility of a "fast track" provision passing Congress this year. Although current U.S. law allows trade sanctions to be used in the case of unfair labor practices, Republicans demanded that such provisions be specifically excluded from any fast track authority. "Fast track" negotiating authority would allow the Clinton administration to negotiate the addition of Chile to NAFTA by guaranteeing that there would be no amendments to any agreement reached. While the three NAFTA partners and Chile continue negotiations and report progress in their talks, no deal will be reached unless the United States has fast track negotiating authority. John Maggs, "Agreement on Fast Track Trade Authority Proves Elusive," JOURNAL OF COMMERCE, October 17, 1995; "NAFTA Partners Make Progress in Talks With Chile," REUTERS, October 25, 1995. NAFTA ENVIRONMENTAL CONCERNS CONTINUE In a contentious meeting in Mexico in mid-October, environmental ministers from the United States, Canada and Mexico argued over wording of two reports, one focusing on bird deaths in Guanajuato and the other on a regional action plan to eliminate lead, cadmium, DDT and PCB pollution. Mexican Environment Secretary Julia Carabias was apparently concerned about language in the commission report attributing the deaths of 40,000 birds in the Silva Reservoir to raw sewage. Carabias wanted to ensure that the language did not appear to dictate what Mexico should do. Mexico also objected to naming all four pollutants in the regional action plan, and the final accord named only PCBs, with a provision to add the other chemicals at a later date. Mexico wants to expedite action on PCBs because it has 11-12 million tons of PCBs in need of destruction, while the United States has 380 million tons. Mexico would like to export PCBs to the United States for disposal, instead of continuing to send them to Finland for environmentally safe handling. In late October, environmental groups blasted Mexico's relaxation of requirements for environmental impact statements. Instead of conducting environmental impact studies, many businesses will be allowed to file prevention plans giving sketchy outlines of their plans to protect the environment. If the National Ecological Institute (INE) does not respond to a filed prevention plan within 30 days, the company can move ahead with plant construction. The INE has 2,000 files currently awaiting review, and environmentalists doubt that adequate review of new filings will be possible. "What we're seeing," says Dan Seligman, a senior fellow with the U.S. Sierra Club, "is a race to the bottom in environmental standards as countries compete for foreign investment." The Sierra Club and the Mexican Environmental Law Center say that the new rules may be appealed under Article 14 of NAFTA's environmental side agreement. Kevin G. Hall, "Disputes Mar Nafta Environmental Meeting," JOURNAL OF COMMERCE, October 16, 1995; Kevin G. Hall, "Nafta Countries Agree to Focus on PCB Elimination," JOURNAL OF COMMERCE, October 17, 1995; Kevin G. Hall, "Environment Rule Change Draws Fire in Mexico," JOURNAL OF COMMERCE, October 26, 1995 ESOURCES/EVENTS Planning the Border's Future: The Mexican-U.S. Integrated Border Environmental Plan, by Jan Gilbreath Rich. University of Texas at Austin: 1992. 48 pp. Order from U.S.-Mexican Policy Studies Program, Lyndon B. Johnson School of Public Affairs, University of Texas at Austin, P.O. Drawer Y, University Station, Austin, TX 78713-7450. Environmental policy analyst presents brief history of economic trends leading to Plan, responses to plan gathered from public hearings in 1991, and final version of plan developed after hearings. INTERCONNECT, a quarterly publication aimed at "grassroots movement-building and sharing of resources within the US- Latin America solidarity community." 10 pp. INTERCONNECT, 57 South Main Street., Pittsford, NY 14534; telephone 716/381- 5606; fax 716/381-3134. Profiles organizations and resources. ____________________________________________ NAFTA & Inter-American Trade Monitor is produced by the Institute for Agriculture and Trade Policy, Mark Ritchie, President. Editor: 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 Dale Wiehoff at 612-379-5980, or send email to: dwiehoff@iatp.org.