From iatp@igc.apc.orgFri Feb 23 22:13:58 1996 Date: Fri, 23 Feb 1996 09:44:28 -0800 (PST) From: IATP To: Recipients of conference Subject: NAFTA & Inter-American Trade Monitor NAFTA & Inter-American Trade Monitor Produced by the Institute for Agriculture and Trade Policy February 23, 1996 Volume 3, Number 4 _________________________________________ Headlines: - U.S., CANADA SETTLE LUMBER DISPUTE - TORTILLAS FOR FOOD AND FORTUNE - FLORIDA, CALIFORNIA ARE FOCUSES OF AG TRADE DEBATE - FOOD PROCESSING JOBS MOVE SOUTH - CHILEAN FRUIT INDUSTRY EXPANDS - CARIBBEAN SUGAR EXPORTS INCREASE; U.S. SUGAR SUBSIDY UNCERTAIN - CULTURE WARS CONTINUE _________________________________________ U.S., CANADA SETTLE LUMBER DISPUTE In mid-February, Canada and the United States reached an agreement limiting Canadian lumber exports to the United States. The five-year agreement, which will take effect on April 1, ends a 13-year trade dispute. Under the agreement, British Columbia, Canada's largest lumber- exporting province, will impose an export tax of $50 for each 1,000 board feet for the first 250 million board feet in excess of 9 billion yearly, and $100 for each 1,000 board feet after that. Other provinces will increase fees paid by producers for cutting timber. According to the National Association of Home Builders, the agreement will increase U.S. lumber prices by about 14 percent, raising the cost of a new home by $1,000. United States lumber mills have long charged that Canadian mills enjoy an unfair advantage because the Canadian government, which owns 97 percent of the country's timber, sells wood to Canadian mills below market value. Canada's share of the U.S. softwood lumber market increased from 27 percent in 1991 to 36 percent in 1995. U.S. Trade Representative Mickey Kantor cited a report showing that 5,838 U.S. jobs were lost due to mill closings in the Pacific Northwest between 1993 and 1995, and said that more than 70 mills have closed permanently since 1993. Canadians agreed to settle under threat of filing of a countervailing duty petition by U.S. producers, which could have resulted in imposition of duties on all Canadian lumber imports. Both U.S. and Canadian governments seemed eager to avoid submitting their dispute to the World Trade Organization, despite their free trade rhetoric. John Maggs and Aviva Freudmann, "U.S.-Canada Lumber Deal Flouts Global Trade Rules," JOURNAL OF COMMERCE, February 21, 1996; Robert D. Hershey, Jr., "U.S. and Canada in Deal That Ends Lumber Dispute," NEW YORK TIMES, February 17, 1996; "U.S. and Canada Reach Agreement on Softwood Lumber," OFFICE OF THE UNITED STATES TRADE REPRESENTATIVE, February 16, 1996; Kim Chipman, "Canada Tentatively Agrees to Slow Down Softwood Lumber Shipments Into U.S.," THE SUN HERALD (Biloxi, MS), February 17, 1996; "U.S., Canada Softwood Lumber Negotiators on the Verge of Agreement," INSIDE U.S. TRADE, February 16, 1996. TORTILLAS FOR FOOD AND FORTUNE The Mexican government awarded Maseca, Mexico's largest producer of corn flour and tortillas, 200,000 tons of 1996 direct corn import quotas, compared to 36,500 tons for Grupo Minsa, its nearest competitor. According to a Mexican Agriculture and Trade Ministries report in February, total quotas for corn flour producers were set at 276,500 tons. The import quota award further solidifies the dominance of Maseca in Mexico's corn flour and tortilla sector, which began with an agreement with the Mexican government in 1990 that froze the amount of corn allotted to traditional tortilla makers and awarded all growth in the market to corn flour manufacturers. Tortillerias that refused to switch from traditional nixtamal to Maseca's corn flour method of manufacturing tortillas were allotted the worst corn in strictly limited quantities. In addition to forcibly shifting the market to Maseca, the government subsidizes its operation, with subsidies totaling $300 million in 1994, approximately 43 percent of Maseca's net revenues. Through Conasupo (the government-operated National Basic Staples company), the Mexican government paid farmers above-market prices for corn, then sold the corn at lower prices to tortilla makers, theoretically subsidizing poor consumers of tortillas at a cost estimated at 8.5 billion pesos last year. The government is considering eliminating all tortilla subsidies in 1996, which would at least double the price of a kilo of tortillas. Mexico's rural poor, who usually do not buy ready-made tortillas, and the country's independent tortilla sector, do not receive much benefit under this system. Traditional tortillas are made by boiling corn kernels in water and lime and then grinding the pulp into dough (nixtamal) and making tortillas. Approximately 15,000 nixtamal mills supply 40,000 independent tortillerias. These independent operations, averaging 2.6 employees each, typically operate at a bare subsistence level. Grupo Maseca does business in Latin America and the United States, where it is known as Mission Foods Corporation, and also bought Banorte (the Banco del Norte) in 1992, when bank privatization began, and is now taking over Banco del Centro and negotiating for parts of two other banks. Archer Daniels Midland reportedly wants to buy 30 percent of the company, which is traded on the New York Stock Exchange. While Maseca dominates the corn flour quota allotment, nearly half of the total 1996 direct corn import quota of 3,134,601 tons was assigned to the farming sector. A far smaller second round of quotas will be determined at a later time. "Tortilla Subsidy May Be Eliminated in 1996," MEXICO UPDATE, December 12, 1995; Chris Aspen, "Mexico Assigns 1996 Direct Corn Import Quotas," REUTERS, February 9, 1996; Anthony DePalma, "How a Tortilla Empire Was Built on Favoritism," New York Times, February 15, 1996; Raul Llanos Samaniego, "55 Mil Molinos y Tortillerias Independientes Apenas Logran Subsistir," LA JORNADA, February 16, 1996; Patricia Mun~oz, "Hasta 8.5 Mil Millones Podri'an Gastarse en el Subsidio a la Tortilla, LA JORNADA, February 13, 1996. FLORIDA, CALIFORNIA ARE FOCUSES OF AG TRADE DEBATE Florida tomato growers are leaving tomatoes to rot in the fields, saying that they just can't compete with Mexican tomatoes selling for $4 and $5 for a 25-pound box. Florida growers say they need $8 a box just to break even. Consumers have seen no benefit from the tomato war, with grocery store prices remaining constant at about $1 per pound. Florida's Department of Agriculture has tried to slow Mexican imports by imposing roadside inspections of trucks bearing Mexican tomatoes and charging a $70 per truck fee for the inspection, over protests from Chile, Canada, and Mexico. On February 14, Florida exempted some, but not all, Canadian and Chilean imports from the inspection and fees, and the U.S. Department of Agriculture forestalled a proposed Florida inspection program covering air and seaports by agreeing to add inspectors and increase inspection activities. The U.S. Congress backed away from legislation that would have increased tariff protection by classifying winter tomatoes as a separate product, referring the legislation to committee for hearings. The December 1994 Mexican peso devaluation made Mexican tomatoes much cheaper, leading to what U.S. officials say is a 65 percent increase in Mexican tomato exports this year. Mexicans say that tomato exports have grown only 15 percent. University of Florida economics professor John Van Sickle says that the number of Florida tomato farmers has dropped from 200 two years ago to about 100 today, with their revenues falling from $700 million to $400 million during the same time period. Florida Agriculture Commissioner Bob Crawford claims that Florida's share of the U.S. winter vegetable market has fallen from 68 percent to 37 percent because of NAFTA and the 1995 import surge from Mexico. In contrast to the Department of Agriculture, Florida's Department of Commerce says that the state has actually benefited for NAFTA. While acknowledging that "it was always a given that there was going to be some losses to farmers over the short term," a spokeswoman for the Florida Department of Commerce said that in the long run, Florida will benefit from NAFTA, noting that Florida's 1994 exports to Mexico were $844.2 million, compared to imports from Mexico of about $174.5 million. During the first three quarters of 1995, Florida exports to Mexico dropped to $415.8 million, but Mexican imports rose to only $187.9 million. Most Florida exports to Mexico are high-value goods, such as industrial machinery and computer and electronic equipment. South American and Caribbean nations, however, are more important markets than Mexico, making up Florida's top seven markets, with China at number eight and Mexico not even in the top 15. As Florida farmers denounce NAFTA, California agri- business firms say foreign trade is their future. According to Jim Pandol, vice president of marketing for California's Pandol Brothers Inc. farms, global marketing, particularly in Latin America and Asia, is the wave of the future. Because of California's tough environmental standards, its produce has an excellent international reputation. While domestic fruit sales are flat, foreign markets are booming for the Pandols, who farm 5,000 acres in California and more in Chile. Like Pandol, Pierre Tada, CEO of Limonaire Associates, predicts growing markets in Asia for his company's 6,000 acres of citrus products. Despite Californian advocacy of global agricultural marketing, the state's avocado growers maintain their adamant opposition to allowing Mexican avocados to enter the northeastern United States, claiming fear of pests. Mexican officials maintain a ban on West Coast cherry imports, claiming fear of the plum curculio and apple maggot pests, a fear that some trade specialists call equally unfounded. According to Kraig Naasz, a trade specialist with the Northwest Horticultural Council in Yakima, Washington, representatives of the Mexican government said privately that "we would be permitted to export cherries on the day they were permitted to export avocados to this country, and not before." Jane Bussey, "Unable to Compete With Mexico, Florida Farmers Let Their Tomato Crops Rot," MIAMI HERALD, February 18, 1996; Jim Carnal, "California Agriculture Committee Highlights Foreign Markets," THE BAKERSFIELD CALIFORNIAN, February 6, 1996; Kevin G. Hall, "Florida Sees Good in NAFTA, Even as Tomato Farmers See Red," JOURNAL OF COMMERCE, February 12, 1996; "Peter M. Tirschwell and John Maggs, "Florida Slaps Fee on Foreign Produce Moving by Truck," JOURNAL OF COMMERCE, February 9, 1996; Larry Waterfield, "Congress Delays Action," THE PACKER, February 5, 1996; Peter M. Tirschwell, "The Avocado as Political Football," JOURNAL OF COMMERCE, February 15, 1996; "Florida Limits Ag Inspections as Industry Talks Are Set With Mexico," INSIDE U.S. TRADE, February 16, 1996. FOOD PROCESSING JOBS MOVE SOUTH Watsonville, California, long a center for food processing, has seen yet another food plant close, as the shutdown of the Norcal-Crosetti Frozen food plant leaves 700 mostly Mexican-American women unemployed this month. Watsonville City Councilman Oscar Rios sees the purchase of Norcal-Crosetti by Wisconsin-based Dean Foods, and the plant's subsequent closure, as part of a trend: "Workers are seeing their frozen food plants either merging or downsizing. Workers at one time felt some security coming out of field jobs. Now they don't." Norcal-Crosetti was the site of an 18-month strike in 1985-86, as workers defied the all-white city government and police administration that sided with their employer. Workers were protesting food companies' 1985 move to slash wages and benefits by as much as 40 percent. Now one local factory after another has relocated to Mexico, drawn by lower wages and costs there. Reese Erlich, "Latina Workers Lose Out as Big Companies Move In," INTERPRESS SERVICE, February 8, 1996. CHILEAN FRUIT INDUSTRY EXPANDS The Chilean fruit industry is booming, with markets in Latin America, Asia, and the United States contributing to its grown. In December, Chile became the first Latin American country officially declared free of the medfly, opening new Asian markets. Table grapes and kiwi fruit lead Chilean exports to Asia, which grew from 5.5 million cases in 1993-1994 to 8.9 million cases in 1994- 95. Total Chilean fresh fruit exports for the 1995-96 season are projected at 160 million boxes, up from 154 million boxes last year. Exports to North America were 58.8 million boxes in 1994-95, with Chilean fruit making up nearly five percent of North American fruit consumption from January-April. Chilean fresh fruit exports to Latin America have grown rapidly, particularly in Brazil, which more than doubled its consumption over 1995-96. Cuba, Venezuela, and Colombia also increased consumption of Chilean fruit. Steve Anderson, "Country is Declared Free of Medfly," THE PACKER, December 18, 1995; Dave Swenson, "Record Year on the Way," THE PACKER, December 4, 1995; Steve Anderson, "More Product Latin America-bound," THE PACKER, January 29, 1996. CARIBBEAN SUGAR EXPORTS INCREASE; U.S. SUGAR SUBSIDY UNCERTAIN Caribbean sugar producers, recently granted preferred access to European Union markets, have also been buoyed by the announcement of a second increase in three months in the quota of raw cane sugar that they can sell in the United States. The U.S. market pays about 22 cents per pound, less than the protected European market, but significantly above the 12-14 cents paid on the world market. Officials of the Sugar Association of the Caribbean say that demand for cane sugar has increased greatly, while the demand for beet sugar and artificial sweeteners has leveled off. Sugar growers are trying to increase production and rehabilitate mills to take advantage of the growing market. The U.S. sugar price support program guarantees U.S.- based sugar mills a return of 18 cents per pound, which generally brings raw sugar prices to 22 or 23 cents per pound. Budget-cutters have targeted the sugar subsidy, saying that it costs U.S. consumers more than a billion dollars yearly in higher prices. Defenders of the program say that sugar is not subsidized, because interest payments on crop loans actually return money to the U.S. government. The Florida sugar cane industry, which employs about 33,000 people, is dominated by two producers, U.S. Sugar and the Flo-Sun Land Corp. While the sugar industry survived attacks on the sugar program in the Senate, bi-partisan opposition to the program remains in the House of Representatives. Bert Wilkinson, "A Whole Lot of Sweetness in Sugar Industry," INTERPRESS SERVICE, January 26, 1996; Canute James, "Caribbean Sugar Growers Hope for Brighter Future," FINANCIAL TIMES, December 29, 1995; James McNair, "Bitter Fight Rages Over Sugar Subsidy, Affecting Florida Growers," MIAMI HERALD, January 22, 1996; Juan Miguel Pedraza, "Bi-Partisan Group of Lawmakers Targets U.S. Sugar Program," AGWEEK, February 12, 1996. CULTURE WARS CONTINUE U.S. Trade Representative Mickey Kantor, already involved in disputes over a Canadian tax on a local edition of "Sports Illustrated" and a ruling that kept Nashville-based Country Music Television off Canadian cable, will have new battles to fight in the on-going cultural war. Canada's foreign investment watchdog, Investments Canada, refused to allow Borders Group Inc. to form a local joint venture because the operation's buying would be controlled from Borders' Ann Arbor, Michigan headquarters. Barnes & Noble, another U.S. book retailer, and Britain's Virgin Retail Group are also trying to enter the Canadian retail book market. Canadian officials base their positions on a NAFTA exemption that requires federal approval for investors seeking to acquire or invest in cultural sectors. The Canadian Broadcasting Company has also banned U.S. programming from its prime-time lineup, beginning in September, and Canadian film distributors are fighting Hollywood efforts to sell pay-per-view movies directly to providers in Canada. "U.S. Booksellers' Rejection Threatens Trade Clash," REUTERS, February 11, 1996; "Kantor Charges Canadian Split Run Tax Violates NAFTA and WTO," INSIDE U.S. TRADE, February 2, 1996; Aviva Freudmann, "Canada Wins New Battle in Culture War With U.S.," JOURNAL OF COMMERCE, February 13, 1996. _________________________________________ RESOURCES/EVENTS _________________________________________ Small Grants for Graduate Student Field Research on the Transformation of Rural Mexico offered by the Center for U.S.-Mexican Studies at the University of California, San Diego in association with the Guadalajara unit of the Centro de Investigaciones y Estudios Superiores en Antropologma Social de Occidente (CIESAS-Occidente) to determine how rural producers in Mexico are adapting to 1992 constitutional amendment affecting ejidos and internationalization of agricultural commodity markets. Five to eight grants ranging from $1,000-$1,500 will be made for fieldwork between May 1, 1996 and October 31, 1996. Contact David Myhre, Center for U.S.-Mexican Studies, University of California-San Diego, La Jolla,CA 92093-0510, fax 619/534-6447; email: ejido@weber.ucsd.edu. Applications due February 29, 1996. ____________________________________________ NAFTA & Inter-American Trade Monitor is produced by the Institute for Agriculture and Trade Policy, Mark Ritchie, President. 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 DalWiehoff at 612-379-5980, or send email to: dwiehoff@iatp.org.