From iatp@igc.apc.org Sat May 18 08:22:09 1996 Date: Fri, 17 May 1996 10:33:09 -0700 (PDT) From: IATP To: Recipients of conference Subject: NAFTA & Inter-Am Trade Monitor 5-3-9 NAFTA & Inter-American Trade Monitor Produced by the Institute for Agriculture and Trade Policy May 3, 1996 Volume 3, Number 9 __________________________________________ Headlines: - U.S. VEGETABLE FARMERS FIGHT IMPORTS - WHEAT FUNGUS SPARKS DISPUTE - NAFTA DISPUTE PANELS HEAR CASES - TRUCKS STILL ON TABLE - CHILEAN FARMERS OPPOSE NAFTA - BANANA DISPUTE TO WTO - MEXICO RESTRICTS SOME FOREIGN INVESTMENT - ZEDILLO ANNOUNCES NEW FARM CREDIT PROGRAM __________________________________________ U.S. VEGETABLE FARMERS FIGHT IMPORTS Joining tomato growers in Florida and the California avocado industry, California sugar pea growers are complaining that imports are hurting their industry. Guatemalan growers have lower labor costs and a climate that allows year-round sugar pea production. Two California growers, Johna Dykstra-Ruz and her husband, Danyel Ruz, partners in Go West Distributing, estimate that Guatemala produces 70 percent of the world's snow peas and snap peas and seek quotas to limit the quantity of sugar peas and snap peas that can be imported during the California growing season. Ken Gilliland, manager of international trade for the Western Growers Association, said that U.S. growers would have to prove that the peas are coming in below cost before anti-dumping action would be taken. The California Avocado Commission recently turned over to the U.S. Department of Agriculture new evidence showing that pest infestation in Mexican avocado groves is higher than previously known. The commission's new evidence is based on Mexican government documents from 1995-96, which it obtained through a source kept secret because of personal safety issues. Data previously furnished to the USDA by the Mexican government dated back to 1993-94. The 1995-96 samplings showed weevils present in 46 percent of the registered groves in Uruapan, Mexico, and substantially higher numbers of fruit flies than previously reported. While Florida agreed to lift its $70 per truck inspection fee, imposed on January 22 in a 90-day emergency rule, Florida tomato growers continue to push for restrictions on Mexican competition. Senate Majority Leader Bob Dole (R-KS) backs legislation that would allow seasonality to be included in the definition of "domestic industry" and "like product" by the International Trade Commission, allowing easier application of Section 201 of the Trade Act of 1974 to winter tomato production. The Clinton administration also supports the measure. Florida is also pursuing an anti-dumping lawsuit and a Section 201 filing on behalf of tomato growers. And growers are pressing Congress to require Mexican tomatoes to be packed in the same kind of boxes that U.S. growers use. Florida tomatoes, picked green and ripened by exposure to gas, are shipped in plain cartons. Softer, vine-ripened Mexican tomatoes are hand- packed in cushiony cartons resembling egg cartons, and would be bruised in Florida-style boxes. While one U.S. official says that Mexican tomatoes taste better, Florida tomato magnate Paul J. DiMare scoffs that taste "doesn't really matter," because tomatoes are usually eaten as condiments, not alone. Despite claims by DiMare that Mexican competition is killing his industry, Florida production has grown. In 1980-81, growers produced nearly 1.2 billion pounds on 46,300 acres, according to a University of Florida study. In 1994-95, they produced 1.6 billion pounds on 50,600 acres. The industry is dominated by big producers -- 88 growers in 1996, down from 98 last year. Among the largest producers are those owned by the DiMare, Gargiulo, Heller and Esformes families. Humberto Monteverde, president of the Fresh Produce Association of the Americas in Nogales, Arizona, thinks taxpayers are being taken for a ride, paying for baseless challenges to Mexican imports. "Eight to 10 growers are costing taxpayers millions of dollars," says Monteverde. Tom Burfield, "Growers Seek Import Relief," THE PACKER, April 15, 1996; Anne Gonzales, "Pest Issue Causes Alarm," THE PACKER, April 8, 1996; "Exigen a Clinton Mantener la Restriccio'n al Aguacate Mexicano," LA JORNADA, March 12, 1996; "Dole Reveals Backing for Bill on Perishable Agricultural Products," INSIDE U.S. TRADE, April 26, 1996; Helene Cooper and Bruce Ingersoll, "With Little Evidence, Florida Growers Blame Tomato Woes on Nafta," WALL STREET JOURNAL, April 3, 1996; Tracy Rosselle, "Florida Set to Ax Its $70 Fee," THE PACKER, April 1, 1996; Larry Waterfield, "Country of Origin Bill Introduced in Congress," THE PACKER, April 1, 1996. WHEAT FUNGUS SPARKS DISPUTE After the U.S. placed a hold on exports to 21 nations because of detection of the Karnal bunt grain fungus in Texas, Arizona, California and New Mexico in early March, Canada blocked shipments of U.S. durum wheat through its ports. The fungus had been detected in several varieties of durum, but not in the Northern Plains states that produce most of the U.S. durum crop, where cold climates prevent the fungal spores from surviving. Mexico also closed its border to wheat grown in Arizona, California, New Mexico and Texas, despite the presence of Karnal bunt in Mexico. North Dakota Senators Kent Conrad and Byron Dorgan accused the Canadians of using the fungus as an excuse to gain a trade advantage over U.S. producers. "It's as unreasonable to ban durum from North Dakota because of Karnal bunt in Arizona as it is to ban Canadian beef because of mad cow disease in Britain," declared Conrad. Although Arizona seed was planted in North Dakota, North Dakotans believe that the cold will kill any Karnal bunt spores. Under U.S. pressure, Canadian officials relaxed the new rules to allow U.S. durum wheat to stop in Canadian ports so long as it is not off-loaded into Canadian elevators. Canada will still require special U.S. certificates for other non-durum wheat and barley. The U.S. Department of Agriculture is not equipped to test and certify each shipment, and testing takes two weeks, which is a lengthy delay for grain trade. U.S. grain traders say the new Canadian requirements effectively close the St. Lawrence River/Great Lakes system to 5 million tons a year of U.S. wheat and barley exports. The USDA ordered farmers in Texas, New Mexico and Oklahoma with Karnal bunt infection to plow under about 4,000 acres of crop land to prevent fungus spreading. Arizona wheat was beyond the stage at which plowing would help to stop the spread, and USDA officials ere looking for mills that would accept the wheat since it poses no health risk to humans or animals. Maggie McNeill, "Hold on U.S. Wheat Exports Begins to Loosen," REUTERS, March 15, 1996; John Maggs & Aviva Freudmann, "Canadian Curbs on Wheat Anger US Exporters, Ports," JOURNAL OF COMMERCE, April 1, 1996; Aviva Freudmann, "Canada Eases Wheat Import Rules A Little," JOURNAL OF COMMERCE, April 4, 1996; John MacDonald, "North Dakota Still Bunt Free;" Jeremiah Gardner, "Forging Ahead," AGWEEK, April 15, 1996; "U.S.D.A.'s Campaign Against Karnal Bunt Disease Expands to California," MILLING & BAKING NEWS, April 9, 1996; "Mexico Bans Wheat From Border States to Curb Crop Fungus," KNIGHT RIDDER, April 22, 1996. NAFTA DISPUTE PANELS HEAR CASES Muehlstein International, a U.S. chemical company charged with unfair trade in Mexico, took its case to a NAFTA Chapter 19 dispute resolution panel in April. Secofi, the Mexican commerce agency, imposed compensatory penalties ranging from 11 to 45 percent on U.S. exporters of crystal polystyrene. Muehlstein, socked with penalties of 44.32 percent, claims that Secofi wasn't legally empowered to impose the penalty in 1994. Muehlstein cannot challenge the Mexican law in the NAFTA proceedings, but instead claims that Secofi did not follow its own rules. In another NAFTA dispute, Mexican drug maker Signa SA de CV challenged the Canadian government's system for approving generic drugs, saying that it unfairly excludes new manufacturers. Signa claims that Canada's regulations for introduction of generic drugs go beyond international standards. The specific provision at issue allows the patent holder to challenge introduction of a generic equivalent, and begins a 30-month review process at the request of the patent holder, thus delaying introduction of the generic drug. Signa is seeking $37 million for expected lost revenue on an antibiotic, using a NAFTA provision that allows an investor to sue a member government. Signa's challenge is now in a three- month consultation process. "U.S. Chemical Firm Takes Its Complain in Front of the Nafta Dispute Panel," JOURNAL OF COMMERCE, April 18, 1996; Kevin G. Hall, "Nafta Resolution Panel Weighs Fate of U.S. Company," JOURNAL OF COMMERCE, April 22, 1996; Aviva Freudmann, "Mexican Firm Sues Canada in First Use of NAFTA Rule," JOURNAL OF COMMERCE, March 18, 1996. TRUCK ISSUES STILL ON TABLE Mexican and U.S. government officials continue to negotiate on opening U.S. border states to Mexican trucking, as agreed to under NAFTA. Since the U.S. acted unilaterally to block the scheduled opening on December 18, 1995, Mexico has sought consultation and has looked for a way to block U.S. truckers in reciprocal fashion. Mexico wants the United States to acknowledge that it violated NAFTA. The United States is concerned about verifying Mexican truck safety and about November's U.S. presidential and congressional elections. Industry sources say they have been told that the new safety review process will be in place by December 18, one year after the scheduled opening and more than a month after U.S. elections. Inside the United States, the Teamsters Union is working to win non-union truckers to their side in an attempt to permanently stop the expansion of NAFTA into the U.S. trucking industry. Warning that Mexican truckers are paid as little as $7 per day, Teamsters insist: "We're not against the Mexican driver -- we're against companies making conditions worse for all of us." NAFTA's first border opening allows Mexican truckers in only the four border states, but then opens all U.S. highways to Mexican trucks by the year 2000. Truck drivers' associations from all three NAFTA countries met in Chicago in March in an international "Truckers Summit." Kevin G. Hall, "U.S., Mexico Move Closer to Agreement on Trucking," JOURNAL OF COMMERCE, April 10, 1996; "Teamster Members Reach Out to Nonunion Truckers on NAFTA," THE TEAMSTER, April/May 1996. CHILEAN FARMERS OPPOSE NAFTA A Chilean farmers' organization "El Surco" warns that Chilean farmers "can't compete with products from abroad as it is, and half of our members already live below the poverty line!" El Surco represents rural workers and small farmers, who are part of the country's increasingly polarized rural economy. Small farmers and workers remain poor and lack access to technology and capital. Modernized, large-scale, often foreign farmers are concentrating more land and capital and often produce fruit and forestry products for export. El Surco fears that membership in NAFTA will cost the traditional, small-farm sector 4,000 jobs and $70 million per year. Lucien Peppelenboz, "Chile in NAFTA? No Thanks!" LANDMARK, January/February 1996. BANANA DISPUTE TO WTO The United States, joined by Guatemala, Honduras, Mexico and Ecuador, requested that the World Trade Organization's Dispute Settlement Body (DSB) establish a dispute settlement panel for challenges to the European Union banana regime. The April 24 request was blocked by the European Union, exercising its right to claim that consultations on the issue are continuing. The request will be renewed at the May 8 DSB meeting, and the EU will not be able to block a second request. An informal meeting of Caribbean and Latin American producers and the United States, held in Miami on April 9, ended acrimoniously with charges from Caribbean nations that the United States reneged on promises to seek a negotiated settlement before going to the WTO. The U.S. Trade Representative agreed to pursue changes in the EU banana regime after complaints by Hawaiian producers and U.S.-based Chiquita Brands International, which produces bananas in Latin America. "European Union Blocks U.S.-Latin Request for WTO Panel on Bananas," INSIDE U.S. TRADE, April 26, 1996; "U.S., Latins to Seek WTO Panel on EU Banana Regime This Month," INSIDE U.S. Trade, April 12, 1996; Canute James, "Caribbean Banana Growers Upset," JOURNAL OF COMMERCE, April 26, 1996. MEXICO RESTRICTS SOME FOREIGN INVESTMENT Backed by Mexican labor unions, the Mexican congress barred foreign companies, except those from the United States, Canada, and Chile, from managing new, private pension funds that will be set up as part of the privatization of large sectors of the Mexican social security system. Foreign firms, except those from the United States, Canada, and Chile, may own no more than 49 percent of any pension fund and no single corporation may control more than 17 percent of the pension fund market during the first five years. In March, the Mexican government had restricted the sale of 60 of the 61 government-owned petrochemical plants to Mexican companies or to joint ventures in which Mexicans have a majority interest. The Mexican government had originally said petrochemical plants would be open to 100 percent foreign investment, but intense domestic pressure forced a change in policy. The country's petrochemical assets are considered part of the national heritage and the constitution reserves oil to the state, but the government has said the constitution does not protect secondary petrochemical assets, such as the plants. NAFTA allows the government to restrict sale of state assets to majority-Mexican firms, and to limit resale to majority-Mexican firms only for three years after privatization. In another major investment sector, Mexican regulators set fees that will be paid by U.S. investors to Telmex for interconnection of calls on Telmex lines. The rate announcement gave only an average cost per minute of 5.32 cents, leaving Telmex competitors such as AT&T, GTE, MCI, and Bell Atlantic concerned that local call costs would be set very low and long-distance charges would be as much as 25 cents per minute. U.S.-Mexico phone traffic is the second highest volume between any two countries. Chris Aspin, "Mexico Moves Closer to Overhaul of Pension System," REUTERS, April 20, 1996; Anthony DePalma, "Mexico Tries to Restrict Some Foreign Investments," NEW YORK TIMES, April 5, 1996; Martin Langfield, "Mexico to Favor Domestic Firms in Petrochem Sale," REUTERS, March 14, 1996; "Mexican Commission OKs Petrochemical Sell-off by Pemex," JOURNAL OF COMMERCE, March 6, 1996; Anthony DePalma, "Two Decisions in Mexico May Aid U.S. Companies," NEW YORK TIMES, April 27, 1996; Kevin G. Hall, "Telecom Officials Upbeat on Mexican Linkage Rates," JOURNAL OF COMMERCE, April 24, 1996; Kevin G. Hall, "Telmex Competitors Get a Wrong Number," JOURNAL OF COMMERCE, April 29, 1996. ZEDILLO ANNOUNCES NEW FARM CREDIT PROGRAM Mexican President Ernesto Zedillo announced new technical and credit assistance programs for production of basic grains, including eight billion pesos (approximately one billion U.S. dollars) to support credit to 590,000 producers and the addition of 4.6 million hectares in basic grain production. Ten thousand agricultural engineers will be employed to provide technical assistance in production of basic grains. Ricardo Aleman, "Anuncia Zedillo $8 Mil Millones en Cre'ditos Para Granos Ba'sicos," LA JORNADA, April 24, 1996. __________________________________________ RESOURCES/EVENTS __________________________________________ NAFTA and Agriculture: Is the Experiment Working? Tri- National Research Symposium on November 1-2, 1996 in San Antonio, Texas. Two-page proposals describing the research objectives, procedures, and likely contribution of the research proposed, focusing on any facet of NAFTA and griculture or agribusiness for presentation should be submitted by June 1, 1996. American and Canadian researchers contact Dr. Gary Williams, Texas Agricultural Market Research Center, Room 321 Blocker Building, Texas A&M University, College Station, Texas 77843-2124. Mexican researchers contact Dr. Manuel A. Gomez Cruz, Director, CIESTAAM, Autonomous University of Chapingo, Km. 38.5 Carretera Mexico Texcoco, C.P. 56230 Chapingo, Mexico, MEXICO. ____________________________________________ 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. 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