From dwiehoff@iatp.org Fri Sep 13 14:40:01 1996 From: Dale Wiehoff Subject: NAFTA & Inter-Am Trade Monitor 3-8-96 NAFTA & Inter-American Trade Monitor Produced by the Institute for Agriculture and Trade Policy March 8, 1996 Volume 3, Number 5 ________________________________________ - U.S. POLITICS AND INTERAMERICAN TRADE - BANANA WAR UPDATE - NAFTA ENVIRONMENTAL PANEL ACTS - SLOWLY - CARICOM MEETS, TALKS NAFTA - U.S. COTTON AND TEXTILE INDUSTRIES WEAKENED - GRAIN TRADE ISSUES U.S. POLITICS AND INTERAMERICAN TRADE As the U.S. presidential election race heats up, international trade figures prominently in campaign rhetoric and Latin Americans worry that the U.S. commitment to free trade in the region is wavering or gone. Pat Buchanan's attacks on NAFTA and the World Trade Organization increase the visibility of trade issues, and leading Republican contender Senator Bob Dole has pledged increased use of anti-dumping and Section 301 trade provisions, criticizing the Clinton administration for a "less than aggerssive trade policy." Even though only six percent of voters in an exit poll in New Hampshire cited trade as their primary reason for voting for Buchanan,and despite renewed Clinton administration promises to continue to push for the Free Trade Area of the Americas, anti-free-trade rhetoric is likely to remain part of the campaign. Canadian trade spokesperson Charles Larabie said it would be "a very serious blow for the Nafta pact were (Mr. Buchanan's) rhetoric to become reality." Electoral concerns also affect sectoral trade issues. The U.S. Department of Agriculture (USDA), for example, strongly denies reports that it has made a decision to end a ban on Mexican avocados - a ban fiercely defended by avocado growers in the key electoral state of California. The USDA has also bent over backwards to pacify tomato growers in Florida, another important electoral state, agreeing to increased federal pest inspections of fruits and vegetables at Florida airports and ports. The stepped-up inspections are a response to concerns about increased tomato imports, as is the February 16 imposition by Mexican growers of a stricter quality standard on exported tomatoes, effectively cutting shipments from 160-170,000 boxes daily to about 150,000 boxes daily. In California, the Border Trade Alliance, representing trade and transport interests along the U.S.-Mexican border, asked to meet with Senator Dianne Feinstein (D- CA) to counter her assertions that transporters have become a conduit for the drug trade. BTA officials said Sen. Feinstein did not understand that the line-release program, which she specifically criticized, streamlines paperwork but does not reduce the number of inspections of commercial cargo from Mexico. Feinstein, apparently jockeying for position as a potential gubernatorial candidate, has sounded anti-immigrant and anti-drug themes and called for the removal of Customs Commissioner George Weise. Stephen Fiedler, "Latin America Worries About U.S. Reversal on Trade," FINANCIAL TIMES, February 28, 1996; John Maggs, "Trade May Not Be Key to Buchanan Victory," JOURNAL OF COMMERCE, February 22, 1996; Peter M. Tirschwell, "USDA: No Ruling Made to Lift Avocado Ban," JOURNAL OF COMMERCE, February 27, 1996; Larry Waterfield, "Florida, USDA Enter Agreement," THE PACKER, February 26, 1996; Peter M. Tirschwell, "Mexican Growers Impose Stricter Tomato Standard," JOURNAL OF COMMERCE, February 28, 1996; Kevin G. Hall, "Border Groups Seeks to Discuss Drugs, Customs Issues With Sen. Feinstein," JOURNAL OF COMMERCE, February 22, 1996; Bill Mongelluzzo, "Critics Say Senator Playing Border Games," JOURNAL OF COMMERCE, February 8, 1996. BANANA WAR UPDATE With Chiquita Brand's current attempt to enter the Windward Islands banana market, the already-complicated banana wars involving the European Union (EU), the United States, Caribbean producers and Latin American producers became even more complex. The United States, acting at the behest of Chiquita and other U.S. companies, and with the support of Mexico, Guatemala, Honduras, Panama and Ecuador, the world's largest banana producer, has filed a World Trade Organization challenge to the EU banana regime, which grants preferred import status to bananas from African, Caribbean and Pacific (ACP) producers. ACP producers met in February to urge the EU to "remain resolute in its defense of the rights of its own and of ACP producers." Chiquita has now moved to buy bananas directly from producers in the Windward Islands. This move undercuts the new Windward Islands Banana Development Company (Wibdeco), a joint venture formed by the governments of St. Lucia, Dominica, St. Vincent and the Grenadines and Grenada with the Irish fruit company Fyffes to take control of the shipping and marketing of their bananas from the British and European Geest companies. Governments and marketing boards in the four countries have told farmers not to sell to Chiquita. Some farmers, including a newly organized St. Lucian producers' union, the Banana Salvation Committee, insist that they will defy legislation that gives Wibdeco sole authority over the sale of exportable quality bananas and take Chiquita's higher prices, farm-to-port transportation and other favorable conditions. St. Lucia is the biggest banana producer among the Windward Islands. Wibdeco spokesperson Arnhim Eustace warns that Chiquita just wants to get control of the island industry, destroying Wibdeco. "If we start splitting this up again into sales to different countries it means that our shipping, if we can get it at all, would become more expensive and the other services which we have combined will also become more expensive. We are already high- cost producers." Recent over-supply in bananas with increased EU tariff quotas for Central American bananas has brought EU banana prices to an all-time low. Flooding and heavy rains in Costa Rica in mid-February may increase prices, however. "Ecuador to Join U.S., Latins in Fight Against EU Banana Regime," INSIDE U.S. TRADE, February 2, 1996; Canute James, "Windward Islands Officials Oppose Chiquita's Banana Purchase Overtures," JOURNAL OF COMMERCE, January 23, 1996; Maricel Sequiera, "Bananas - Bitter Fruit of Globalization," INTERPRESS SERVICE, January 25, 1996; Patrick Smikle, "The Pros and Cons of Owning Your Own Banana Industry," INTERPRESS SERVICE, January 25, 1996; Canute James, "U.S. Offer Threatens Windwards Banana Split," FINANCIAL TIMES, February 23, 1996; Shada Islam, "ACP Banana Producers Urge EU to Defy U.S.," INTERPRESS SERVICE, February 23, 1996; Tom Karst, "Floods Slash Supplies," THE PACKER, February 19, 1996. NAFTA ENVIRONMENTAL PANELS ACT - SLOWLY The Border Environment Cooperation Commission (BECC), created by NAFTA to address border pollution and health problems, in January certified three projects for financing by the NAFTA-created North American Development Bank (NADBank). BECC approved a $39 million water supply and distribution project for Nogales, Sonora, across the border from Nogales, Arizona; a $42 million upgrade of water and wastewater systems in the Arizona border city of Douglas; and a $1 million wastewater treatment plant for the Finsa Industrial Park in Matamoros, Tamaulipas, across the border from Brownsville, Texas. This brings to six the total number of projects certified by BECC, but NADBank has not yet approved financing or loan guarantees for any projects. Non-governmental organizations objected to lack of public scrutiny and input on decisions, and to looseness of requirements for equitable fee structures for Nogales water users, including balance between industrial and residential users. The Finsa project also drew criticism, due to Finsa's perceived lack of commitment to community participation and to the lack of planning for sanitary sewers for surrounding colonias. The NAFTA Commission for Environmental Cooperation (NACEC) investigated Mexican approval of a new pier near a fragile coral reef on the resort island of Cozumel, after complaints by three Mexican environmental groups, and in mid-February ordered the Mexican government to respond to the commission within 60 days. NACEC does not have any power to block the pier, but could find that Mexico has violated its own law, thus opening the door for the United States or Canada to file a trade complaint that might someday result in sanctions against Mexico. Construction on the pier, which will provide a dock for large cruise ships, has already begun. "BECC Certifies Two Controversial Projects," BORDERLINES, February, 1996; "Nafta Border Panel Certifies Three Projects," JOURNAL OF COMMERCE, January 23, 1996; Harry Browne, "Activists Pressure for BECC/NADBANK Openness," OUR AMERICAS, February, 1996; "NAFTA Commission to Review Mexican Pier," ENVIRONMENTAL NEWS NETWORK, February 28, 1996; "Nafta Panel on Environment Raises Questions on Mexican Pier," JOURNAL OF COMMERCE, February 16, 1996. CARICOM, CANADA, CUBA Both Canada and the 14-member Caribbean Community (Caricom) expressed concern over the apparently imminent signing of the Cuban Liberty and Democratic Solidarity Act, better known as the Helms-Burton bill, by President Clinton in retaliation for Cuba's shooting down of two planes flown by Cuban-American protesters. The legislation targets trade with Cuba and would punish both Canada and the Caribbean nations. Canada's annual trade with Cuba totals about $515 million, while the Caricom nations trade with Cuba is about $30 million. The United States is Caricom's main trading partner. Canada has previously stated that the Helms-Burton legislation would violate NAFTA provisions. The legislation would allow Cuban-Americans and others to file suit in U.S. courts against individuals or companies who buy or lease any property confiscated by the Cuban government since the revolution 36 years ago, and would bar entry to the United States by officials of firms expanding their investments in confiscated property in Cuba after the passage of the legislation, and would bar their family members as well. "I think this is a dangerous precedent for one country to say if you trade with someone else you can't trade with us," said Canadian Trade Minister Art Eggleston. During its late February-early March summit meeting, Caricom approved a draft free trade agreement for negotiation with Latin American countries and welcomed U.S. Secretary of State Warren Christopher's assurance that the Clinton administration will soon renew efforts to gain equal access or parity with Mexican imports for Caribbean products. Caricom already has free trade agreements with Venezuela and Colombia, but wants new and broader regional accords to be more advantageous than the earlier agreements. Caricom also asked Canadian Prime Minister Jean Chretien, in attendance at the summit, for improvements in the 10-year-old Carib-Can trade agreement to grant parity with Mexico to Caricom members. More than 95 percent of Caricom products already enter Canada duty- free under Carib-Can. Caricom also requested Canadian support in the continuing banana dispute between the European Union (EU) and the United States over favorable terms given to Caribbean banana producers by the EU. In a mid-February meeting in Costa Rica, Mexico and seven Central American nations discussed regional political and economic development and prospects for a regional free trade agreement. Mexico and Costa Rica already have a free trade agreement, and Mexico is negotiating with Nicaragua and with the Guatemala, Honduras and El Salvador jointly. Michael Becker, "Caricom, Canada to Discuss Cuba Trade Sanctions," REUTER, March 3, 1996; Donna Smith, "Canada Says U.S. Overreacting on Cuba," REUTER, March 4, 1996; "Region Welcomes New Talk of NAFTA Parity," INTERPRESS SERVICE, February 28, 1996; Michael Becker, "Caribbean Nations Seek Free Trade With Latin America," REUTER, February 29, 1996; Aviva Freudmann, "U.S. Legislation Against Cuba Alarms Canadian Officials," JOURNAL OF COMMERCE, March 1, 1996; Kevin G. Hall, "Mexico, Central America Talks Set," JOURNAL OF COMMERCE, February 15, 1996. U.S. COTTON AND TEXTILE INDUSTRIES WEAKENED Despite a predicted decline in U.S. cotton plantings from 16.9 million acres in 1995 to 15.5 million acres in 1996, the National Cotton Council predicts a rise in production from 18 million bales in 1995 to 19.6 million bales in 1996, due to yield improvements. Predictions of decreased plantings were based on improved prices for competing crops, such as corn and soybeans, and increased risk to cotton from insects. California and New Mexico show the largest estimated increases. In contrast to the increased production of raw cotton, textile mills show decreased production and closing plants, due largely to foreign competition. The National Cotton Council also reported increased cotton textile imports of 53 percent over the past five years to a total of half of retail cotton consumption. In early February, three South Carolina textile mils closed, affecting about 700 workers. South Carolina textile industries employed 162,000 workers a decade ago, but now offer only 116,000 jobs. Nationally, apparel industry employment fell from 945,000 at the end of 1994 to 846,000 by the end of 1995. An additional 42,000 jobs were lost in the fabrics industry, where increased automation accounts for more of the job losses. Taken together, the fabrics and apparel industries accounting for 40 percent of all manufacturing jobs lost in the United States during 1995. Factories that moved from the more unionized Northeast to the Southeast and South are now picking up and moving to Latin America, where labor costs are still lower. While apparel manufacturing moves out of the United States, the far more heavily automated fabric production industry remains healthy, with increasing sales of U.S.-made fabric to Latin American and Caribbean apparel manufacturers. "U.S. Cotton Textile Imports Up; Mexico Share Up," KNIGHT-RIDDER, February 11, 1996; "'96 U.S. Cotton Plantings Seen Down, Output Up," KNIGHT-RIDDER, February 11, 1996; "Three South Carolina Textile Mills Closing," THE STATE, February 11, 1996; John Holusha, "Squeezing the Textile Workers," NEW YORK TIMES, February 21, 1996. GRAIN TRADE ISSUES Canada and the U.S. have vied for the Mexican wheat market since 1986, with the U.S. garnering an estimated 64 percent of the Mexican wheat import market in 1995, up from 40 percent in 1991 as Canadian wheat filled Chinese demand. The U.S. ships one-third of all world wheat exports. U.S. corn exports to Mexico were also strong in 1995, due in part to a drought in the Yucatan. Cargill's Mexican subsidiary, Cargill de Mexico, is also planning for increased U.S. soybean exports to Mexico, and has begun construction of a $30 million soybean processing plant in Tula, north of Mexico City. The plant will be next to Cargill's recently-completed Atitalaquia Corn Syrup Distribution Center, and will market soybean meal to the feed industry. The Canadian Wheat Board (CWB) forecast an increase in world wheat trade to a yearly average of 108 million tons during 1999 to 2000 and to 125 million tons in 2004-05, both substantial increases over the current five-year average of 104 million metric tons. The CWB forecasts particularly large increases in the Chinese market, which currently excludes U.S. wheat on alleged phytosanitary grounds of contamination with spores of TCK smut. The CWB also predicted increased Latin American imports from the current five-year average of 12 million metric tons to 18 million in 1999-2000 and to 22 million in 2004-05. The United Nations Food and Agriculture Organization (FAO) reports decreasing world cereal supply, saying that to meet the demand for the current year, global cereal stocks must be drawn down by almost 50 million tons, to well below the 17-18 percent of annual production that FAO considers necessary for world food security. Heather Eurich, "The Grain Trade Games," FARM JOURNAL, December 1995; "CWB Predicts Increases in World Wheat Trade," AG WEEK, February 5, 1996; Gordon S. Carlson, "China Threatened Over Trade Barrier Against U.S. Wheat," FEEDSTUFFS, December 18, 1995; "Cargill Building Soybean Plant in Mexico," FEEDSTUFFS, February 5, 1996; "World Cereal Supply Tight, Stores Situation Dangerous - FAO," INTERPRESS SERVICE, February 21, 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, URL:http://www.iatp.org/iatp. 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. Dale Wiehoff Communications Director Institute for Agriculture and Trade Policy (IATP) 1313 5th Street SE, Suite 303 Minneapolis, MN 55414-1546 USA Tel: (612) 379-5980 Fax: (612) 379-5982 Email: dwiehoff@iatp.org URL: http://www.iatp.org/iatp