From iatp@igc.apc.orgFri Dec 1 17:12:21 1995 Date: Fri, 01 Dec 1995 06:35:53 -0800 (PST) From: IATP To: Recipients of conference Subject: NAFTA & Inter-Am Trade Monitor 12-1- NAFTA & Inter-American Trade Monitor Produced by the Institute for Agriculture and Trade Policy December 1, 1995 Volume 2, Number 30 _________________________________________________ Headlines: - U.S. WHEAT, DAIRY EXPORTS TO MEXICO - CHILEAN CROPS AND PESTICIDES - COFFEE UP, COFFEE DOWN - CHIAPAS TALKS CONTINUE - MEXICO AND LATIN AMERICA: POVERTY AND INTEGRATION - TRUCKING CHANGES AHEAD - CONTINUING OPPOSITION TO NAFTA WITHIN UNITED STATES _________________________________________________ U.S. WHEAT, DAIRY EXPORTS TO MEXICO Mexican authorities held up 45 rail cars of U.S. wheat at the border for nearly three weeks in November, alleging that inspectors had found small amounts of ergot, a wheat-related fungus. Kansas Republican Congressional Representative Pat Roberts protested that the Mexican action violated NAFTA, by setting standards more stringent than the uniform grain quality standards set by NAFTA. The grain had already passed USDA inspection, and re-inspection by U.S. and Mexican inspectors found that the ergot levels were well below the U.S. tolerance level, so Mexico allowed the rail cars to enter the country. Both countries agreed to discuss Mexico's grain regulations in order to avoid future problems. A new USDA dairy export initiative under the Export Credit Guarantee Program for fiscal year 1996 has been announced by the USDA. The Foreign Agriculture Service of the USDA said $700 million of the $1.25 billion in new Credit Guarantee Program sales to Mexico will be designated for dairy products, including butter, butter oil, milk powder, and various cheeses. Mexico also contracted for 12,000 tons of nonfat dry milk at the end of the July-September interim Dairy Export Incentive Program, for delivery in October- November. Robert H. Brown, "Roberts Says Situation Threatens Trade," FEEDSTUFFS, November 27, 1995; "Mexico Allows U.S. Wheat to Enter," STAR TRIBUNE, November 21, 1995; "Dairy Included in $1.25 Billion in New Export Credits to Mexico," FUMMC MILK MATTERS, November 16, 1995. CHILEAN CROPS AND PESTICIDES As the winter fruit season began in late November, the volume of Chilean fruit exports to North America was expected to be close to last year's record 58.5 million cases. Chile provides nearly 5 percent of the fruit consumed in North America, up to 15 percent of all fruit sales in pounds from January through April. According to Fedefruta president Ricardo Arztia, volume of all exports will increase from 154 million cases in 1994-5 to 160 million cases this season. Leading imports include table grapes, kiwi fruit, raspberries, plums, pears, nectarines, peaches, and cherries. In Chile's fruit-growing Central Valley, Dr. Victoria Mella studied birth defects in 1988-90 and found that three times as many babies were born without brains or with exposed spines and water retention in the brain, compared to periods before the fruit industry began heavy use of pesticides. Most of the parents of children with brain and spinal defects worked in the export fruit industry, which uses about 60 percent of the $38 million in pesticides imported annually. Since Mella's study was released in 1990, little has changed. The billion dollar fruit industry employs about 250,000 of Chile's 600,000 farm workers in the fields, with another 100,000 working in packing plants. Most of the industry is controlled by six large companies, including Dole, Standard Trading, and Unifrutti. Although health officials have resigned in protest over massive sprayings of Malathion in Santiago in 1994 to eliminate fruit flies, agriculture ministry officials argue that the pesticides are safe. Chile also uses pesticides banned in the United States, such as Lindano and Paraquat, and Parathion, which may be used in the United States only by specially trained handlers. Methyl bromide, which is banned in the United States, is required for fumigation of grapes to be exported there. While it dissipates before the end consumer receives the fruit, workers and even children in nearby schools have been intoxicated or killed by the gas. Tom Karst, "Volumes Up Slightly," THE PACKER, November, 13, 1995; Lake Sagaris, "The Killing Fields," CHICAGO TRIBUNE, November 5, 1995. COFFEE UP, COFFEE DOWN Coffee exporters earned $8.2 billion last year, up from $5.3 billion in 1992, leading to increased investment in plantations. Production is expected to increase by 18 percent by the end of the century. Coffee prices may remain high until then compared to the historically low prices during the 1980s, because of damage to Brazil in last year9s frost and drought and the retention agreements of the Association of Coffee Producing Countries. The retention agreement limits the amount of coffee that each producer country will export, in order to maintain coffee prices. Demand for coffee is expected to grow more slowly, with declining U.S. consumption being replaced gradually by increased coffee drinking in Japan. Colombia and Indonesia have agreed to abide by the retention agreement, joining Brazil, Ecuador, Costa Rica, El Salvador, Angola, Ivory Coast, and Uganda. According to Brazil's foreign ministry, exporting countries will not have more than 65 million bags of coffee to sell in 1995-96, though consumer countries will want 72 million. The shortfall is due to the continuing effects of last year's frost and drought in Brazil, which cut the Brazilian harvest in half. Brazil's share of world production is expected to fall from 25 percent to 20 percent by the end of the century, with Vietnam and Colombia increasing their shares. Brazilian coffee production has fallen so low that, for the first time in 200 years, Brazil expects to import less expensive Mexican and Guatemalan coffee this year to meet domestic demand, since its own crop is entirely contracted for export. Meanwhile, a campaign by a coalition of labor activists including the U.S./Guatemala Labor Education Project (U.S./GLEP) and the International Labor Rights Education and Research Fund (ILRERF) won an agreement from Starbucks, the largest U.S. retailer of specialty coffees to put in place a "Framework Code of Conduct" encouraging good labor and environmental practices by its producers. The framework affirms the right of farm workers to unionize and to earn wages and benefits that provide for "the basic needs of workers and their families." While U.S./GLEP points to significant shortcomings in the framework, including lack of enforcement mechanisms, it said Starbucks' response "is a statement that the company considers itself publicly accountable for abuses and worker rights violations on plantations from which it buys." In addition, says U.S./GLEP, the media coverage of the Starbucks statement "means that concerned groups and individuals have new leverage to press for significant changes from the growers from whom Starbucks buys and to make Starbucks accountable for conditions on those plantations." Alison Maitland, "Coffee Production 'to rise 18 percent by 2000,'" FINANCIAL TIMES, September 19, 1995; George Meek, "World Coffee," VOICE OF AMERICA, September 21, 1995; George Meek, "Brazil Coffee," VOICE OF AMERICA, November 22, 1995; "U.S. Coffee Firm Adopts Labour Guidelines," INTERPRESS SERVICE, October 24, 1995; "Starbucks Releases Code of Conduct," GUATEMALA WORKER RIGHTS UPDATE, NOVEMBER 3, 1995. CHIAPAS TALKS CONTINUE After six days of talks, the second round of discussions on Indigenous Rights and Culture in San Andres Larrainzar concluded on November 19 with some points of agreement, notably on the rights of indigenous people in the judicial system, and with disagreements on issues of autonomy and changes to land tenure provisions of Article 27 of the constitution. The government wants to restrict autonomy to the community level, while the EZLN proposes autonomous regions or Indian nations. The next round of discussions, beginning on January 10, will analyze concrete proposals on the theme of indigenous rights and culture. "Negotiations," MEXPAZ, November 21, 1995; Rosa Rojas and Elio Henriquez, "Se perdieron los Consensos en Larrainzar; Nueva Cita, 10 de Enero," LA JORNADA, November 21, 1995. MEXICO AND LATIN AMERICA: POVERTY AND INTEGRATION As Mexico's economy continues to slide, other Latin American markets follow the peso's ups and downs. The so-called Tequila Effect drove ING Barings Latin America index down nearly 20 percent from August's post-devaluation peak, as the peso's renewed slide shook Argentine, Brazilian, Peruvian and Chilean markets. Regional economic connections have been fostered by subregional trade agreements of Mercosur, the Andean Group, the Group of Three, the Central American Common Market, and the Association of Caribbean States. Trade within Latin America doubled to $32.3 billion in 1994 from $16 billion in 1990. Trade within the Mercosur group nearly tripled in the same time period, and is expected to increase further when Bolivia and Chile join Mercosur in the near future. Mercosur is also negotiating a preferential trade agreement with the European Union. Although Mexico has insisted repeatedly that it is and will continue to be "profoundly Latin American," Latin American economic and political integration have taken a back seat to economic integration with the United States. Mexico's membership in NAFTA and Chile's pursuit of NAFTA membership show the continued economic dominance of the United States in the region. International trade has not alleviated problems of poverty that plague the region. According to the United Nations Economic Commission for Latin America and the Caribbean (ECLAC), the region's Gross Domestic Product will grow less than two percent in 1995, with real wages falling and unemployment rising. Nearly half of all Latin Americans live in poverty with monthly incomes of $60 or less. According to a study by the Institute for Economic Research at the National Autonomous University of Mexico (UNAM), the percentage of Latin Americans who could be classified as poor (lacking sufficient caloric intake) grew from 43 to 46 percent (200 million people) from 1986 to 1990 and those in extreme poverty grew from 19 to 22 percent (98 million people). UNAM's research showed that the percentage of income received by the poorest 50 percent declined between 1980 and 1990, while the percentage of income received by the richest 10 percent of the population increased. UNAM socio-economic researcher Osorio Paz blames the development model imposed on the region by international lending institutions for the increasing inequality of income in the region. Foreign debt doubled since 1982 to $530 billion, with debt and interest payments from Latin America to creditor nations and multinational lenders exceeding loans and aid received by $35 billion in 1994, according to Salvador Arriola, permanent secretary of the Latin American Economic System (Sela). The U.N. Conference on Trade and Development predicts falling economic growth throughout the region, from 3.7 percent in 1994 to less than two percent in 1995. "Mexico and Latin America," EL FINANCIERO, September 25-October 1, 1995, October 2-8, 1995; October 9-15, 1995, October 16-22, 1995; Matt Moffett and Jonathan Friedland, "South American Markets Yanked by Peso," WALL STREET JOURNAL, November 17, 1995; "1995 A Year of Low Growth and High Unemployment," INTERPRESS SERVICE, November 9, 1995; Charles W. Thurston, "Latin America's Regional Commerce Outpacing Trade With Rest of World," JOURNAL OF COMMERCE, November 21, 1995. TRUCKING CHANGES AHEAD The U.S.-Mexico border is set to open to foreign trucking on December 18, as required by NAFTA, but some issues remain unresolved. Texas insurance regulators worry that Mexican carriers may not be able to obtain adequate insurance coverage. According to Gloria Leal, international legal counsel for the Texas Department of Insurance, U.S. insurance companies have no history of working with Mexican truckers and no information on which to base underwriting assumptions. Frustrated Mexican truckers feel that insurance issues amount to non-tariff barriers. In addition to paying $800 per truck registration requirements, they will have to meet minimum insurance requirements costing about $3,000 annually and provide workers compensation coverage for drivers while they are in Texas. Mexican truckers are pushing for a repeal of last year's permission for 53-foot trailers and longer-combination vehicles, worrying that the longer trailers will give U.S. truckers an advantage when border states are opened to international trucking. The Mexican government is considering a return to the previous 48-foot limit on trailer length, but is not expected to act until early 1996. U.S. truckers and transport officials also complain that Mexican rules and regulations are vague and that Mexico has not provided sufficient details on application for permits. Texas Attorney General Dan Morales complains that federal regulators have not provided sufficient safeguards to prevent damage to Texas roads from overweight Mexican vehicles. Morales has also expressed concern about lack of control over Mexican truckers carrying hazardous wastes. Kevin G. Hall, "Insurance Worries Mexican Truckers," JOURNAL OF COMMERCE, November 17, 1995; Kevin G. Hall, "US Truckers: Mexico Fails to Supply Operating Rules," JOURNAL OF COMMERCE, November 16, 1995; "Texas Official Seeks Way to Control Mexican Haulers," KNIGHT-RIDDER/TRIBUNE, November 13, 1995; Kevin G. Hall, "Mexico Thinking of Rescinding Rule Allowing 53-Foot Trailers," JOURNAL OF COMMERCE, November 17, 1995. CONTINUING OPPOSITION TO NAFTA WITHIN UNITED STATES On the second anniversary of NAFTA's ratification in mid- November, debate showed continuing opposition to NAFTA. Opponents, such as Lori Wallach of Ralph Nader's Public Citizen's Global Trade Watch, characterized NAFTA as "a disaster" in a recent multi-national forum in St. Paul, Minnesota. Canadian Tony Clarke, former chair of the Action Canada Network public interest group, said Canada's six years of liberalized trade with the United States, both before and during NAFTA, have cost Canada more than 23 percent of its manufacturing jobs. Mario Monroy, of the Mexico Action Network, pointed to a decline in Mexican wages since NAFTA took effect in January 1994, and to the increase in billionaires in Mexico from one in 1990 to 24 in 1994, according to a FORTUNE magazine report. Sara Larrain, of the Chilean National Environmental Coalition, warned that the extension of NAFTA to Chile would endanger the environment by increasing exports of natural resources at an unsustainable rate. In a press release, William H. Bywater, president of the electrical workers' union, contrasted NAFTA's promises of a $12 billion trade surplus and 200,000 jobs with its delivery of a $15 billion trade deficit and 300,000 jobs lost. Congressional opponents introduced a bill to set conditions for the United States to stay in NAFTA, with the support of both Democrats and some conservative Republicans. The NAFTA Accountability Act would set the stage for a repeal of NAFTA in 1997, unless some of its terms are renegotiated. NAFTA supporters said that 21 months of experience is not enough to judge its effects, and that Mexico's recession and currency crisis have more to do with Mexican governmental policies than with NAFTA. They also dispute the number of jobs lost, pointing out that only about 40,000 U.S. workers have been given special aid for displacement due to NAFTA. "U.S. Lawmakers Propose Conditions to Stay in NAFTA," REUTERS, November 20, 1995; Mike Meyers, "NAFTA Under Fire," STAR TRIBUNE, November 20, 1995; Nick Delle Donne, "IUE Labor Leader William Bywater Hails NAFTA Accountability Act," IUE NEWS RELEASE, November 16, 1995. RESOURCES/EVENTS The North-South Agenda Papers, "Odd Couples: Joint Ventures Between Foreign Capitalists and Cuban Socialists" by Jorge F. Pirez-Lspez. No. 16 in an occasional series of papers of the North-South Center, 1995. 38 pp. University of Miami North- South Center Press, 1500 Monza Avenue, Coral Gables, FL 33146-3027. Economist discusses recent history of foreign investment in Cuba, changes to foreign investment law passed in September 1995, benefits to Cuba of foreign investment, and remaining risks to investors. ____________________________________________ NAFTA & Inter-American Trade Monitor is produced by the Institute for Agriculture and Trade Policy and edited by 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.