From iatp@igc.apc.org Sat Oct 19 10:33:52 1996 Date: Fri, 18 Oct 1996 06:37:14 -0700 (PDT) From: IATP To: Recipients of conference Subject: NAFTA & Inter-Am Trade Monitor 10-18 NAFTA & Inter-American Trade Monitor Produced by the Institute for Agriculture and Trade Policy October 18, 1996 Volume 3, Number 20 ________________________________________ Headlines: - CANADIAN WHEAT BOARD MAINTAINED - TOMATO CASE SETTLED - MEXICAN OIL PRIVATIZATION HALTED - FOOD SUMMIT FACES CONFLICTS - AROUND THE AMERICAS - TEXTILE TRADE CHANGES ________________________________________ CANADIAN WHEAT BOARD MAINTAINED After months of debate, Canadian Agriculture Minister Ralph Goodale announced in early October that the 61- year-old Canadian Wheat Board (CWB) will continue to hold monopoly marketing power over western Canadian wheat production. Goodale also said that he will introduce legislation to modify the wheat board's governance so that farmers will elect a majority of the board's directors. At present, the board is made up of federally appointed commissioners. Goodale says the CWB needs continued monopoly trading authority "to go head to head with the world's biggest multinational private grain traders and win." The board pays "pooled" prices for wheat and barley, based on average sales over the Canadian crop year. Goodale said the government will schedule a vote by barley farmers on whether they want to continue selling through the board. Many western farmers think they could get higher prices on their own and oppose the CWB's monopoly. The United States also criticizes the CWB, saying its "non- transparent" pricing practices threaten U.S. markets and prices. The CWB lowered its Pool Return Outlook for the fourth consecutive month, dropping projected prices to approximately $4.87 a bushel for No. 1 CW wheat, reflecting projected increases in the world wheat crop. John Urquhart, "Canada Upholds Monopoly Powers of Wheat Board," WALL STREET JOURNAL, October 7, 1996; Barry Wilson, "U.S. Warns Canada Off Heavy Foray Into American Markets," WESTERN PRODUCER, September 26, 1996; "U.S. Says It Will Keep Watchful Eye on Wheat Imports From Canada," MILLING & BAKING NEWS, September 24, 1996; Adrian Ewins, "Wheat PRO Down But Analysts Still Bullish," WESTERN PRODUCER, October 3, 1996. TOMATO CASE SETTLED On October 11, the U.S. Clinton Administration announced an agreement with Mexico that will end the shipment of low-price winter tomatoes to the United States, thereby pacifying Florida growers who want protection from $800 million in annual Mexican winter tomato exports. The agreement calls for Mexican farmers to sell their tomatoes in the United States at no less than 20.68 cents a pound, the lowest average price of Mexican tomatoes during the period in which U.S. officials have charged dumping (sale below actual cost of production.) U.S. consumers will not be likely to notice the increase because only about 20 cents of the consumer dollar for tomato purchases goes to tomato farmers. Florida growers maintain that their workers receive an average $6.77 an hour, compared to 50 cents an hour for workers in Mexico, and say that one-third of the cost of producing tomatoes is in labor. Florida tomato growers seemed headed for victory in the anti-dumping case before the U.S. Commerce Department, although the U.S. International Trade Commission had ruled against Florida growers twice this year. But, as one Clinton Administration official observed, "The math was pretty simple. Florida has 25 electoral votes, and Mexico doesn't." U.S. grain growers and California produce farmers have criticized the Florida complaint as a transparent election-year attempt to help Florida growers. Many U.S. farm organizations opposed the Florida complaint, fearing Mexican retaliation against other U.S. agricultural exports. The Mexican government complained that the U.S. action was heavy-handed and that the United States acted "outside the disciplines" of NAFTA and the World Trade Organization (WTO). Mexico has already sought consultations with the United States at the WTO. "Mexico Reviews U.S. Response After Geneva Talks on Tomatoes," INSIDE NAFTA, October 2, 1996; Kevin G. Hall, "California Trade Official Raps Clinton on Mexico," JOURNAL OF COMMERCE, October 10, 1996; David E. Sanger, "President Gains Deal on Tomatoes to Help Florida," NEW YORK TIMES, October 12, 1996; Larry Waterfield, "Subcommittee Hears Florida's Side," PACKER, September 30, 1996; "Commerce, Mexican Growers Explore Suspension Deal on Tomatoes," INSIDE U.S. TRADE, October 4, 1996; "U.S./Mexico Tomato Fight Heats Up, Ruling Tuesday," REUTER, October 7, 1996; Robert Greene, "Tomato-Dumping Deal Proposed," ASSOCIATED PRESS, 10/11/96; Maggie McNeil, "U.S., Mexico Squash Messy Tomato Fight," REUTER, October 11, 1996. OIL PRIVATIZATION HALTED Two weeks after the governing Institutional Revolutionary Party (PRI) convention voted to oppose the sell-off of 61 state-owned petrochemical plants, President Ernesto Zedillo announced the cancellation of petrochemical privatization efforts. The announcement, made on a Sunday to minimize its impact on financial markets, reversed repeated pledges by the president to carry through with sale of the secondary petrochemical processing plants. The state has owned all petrochemical plants since former President Lazaro Ca'rdenas nationalized the oil industry in 1938. The Mexican Constitution makes petroleum stocks government property, but Mexican governments have distinguished between eight primary petrochemicals and other secondary petrochemicals, such as ammonia used in fertilizers and polyethylene used in plastic bags. Oil workers and other opponents of privatization said the secondary petrochemical plants are closely linked to primary plants. Petrsleos Mexicanos (Pemex), the state-owned oil monopoly, needs capital to invest in producing and refining crude oil. Privatization would have furnished capital. Now Pemex will form a series of subsidiaries to run the 61 plants, with as much as 49 percent of shares in the subsidiaries to be privately owned. Mexico will also invite investors to set up new, 100 percent privately-owned secondary petrochemical plants. "Mexican Ruling Party Dooms Petrochemical Sell-Off Plans," JOURNAL OF COMMERCE, September 29, 1996; Sam Dillon, "Mexico Drops Its Effort to Sell Some Oil Plants," NEW YORK TIMES, October 14, 1996; Nick Anderson, "Mexico Cancels Plant Auctions," ASSOCIATED PRESS, October 13, 1996; Henry Tricks, "Mexico Rows Back on Petrochemical Sell-0ff," REUTER, October 13, 1996. FOOD SUMMIT FACES CONFLICTS Developing and industrialized nations remained in disagreement on significant issues covered in the Political Declaration and Plan of Action for the November 13-17 World Food Summit. The World Food Security Subcommittee meeting in late October worked to prepare final documents for signature, but by the end of an extended meeting, 200 clauses remained bracketed, meaning that they are not agreed upon. The Group of 77 (G-77, which represents much of Africa, Asia and Latin America) insists that the Political Declaration, to be called the "Rome Declaration," affirm that "All human beings have the fundamental right not to suffer hunger and malnutrition and we consider it is intolerable that more than 800 million people worldwide, and in particular from the developing nations, do not have enough food to meet their basic nutritional needs." Industrialized nations have not agreed to declare food a basic human right. The United States refuses to agree to a clause proposed by G-77 that specifies that "food should not be used as an instrument to impose political and economic pressure." Industrialized nations agreed on a declaration in favor of reconversion of developing nations' foreign debt in order to finance rural and agricultural programs. Josi Lopez Portillo of Mexico, president of the United Nations Food and Agriculture Organization, stressed that hunger is a global problem and that cooperation is needed to address it. He said that enforcement and follow-up mechanisms should be adopted to ensure that pledges made at the Summit are kept. Jorge Pin~a, "Food: No Agreement Reached on Summit Documents," INTERPRESS SERVICE, October 1, 1996; Jorge Piqa, "Food: World Summit to Approve Reconversion of Foreign Debt," INTERPRESS SERVICE, October 2, 1996; Jorge Pin~a, "Outlining the World Map of Hunger," INTERPRESS SERVICE, October 3, 1996; Jorge Pin~a, "Hunger - Not Just a Question of Productivity," INTERPRESS SERVICE, October 4, 1996; AROUND THE AMERICAS * Empresas La Moderna, a Mexican company, has contracted to buy some plant genetics research products from Monsanto Company. Francisco Gonzalez-Sebastian, chief executive officer of ELM's Seminis Vegetable Seeds subsidiary, predicted that Monsanto technology "such as gene transfer and enabling technologies, will enhance our own bio-technology efforts and fresh produce operations." Seminis produces 22 percent of the world's vegetable seeds. Monsanto will buy the Asgrow Agronomics unit of Seminis, a major U.S. grain seed company. * Canada, which is pseudorabies-free, will begin later this year to allow Canadian packing houses to import slaughter hogs from the United States without the present 30-day quarantine period, so long as the hogs come from U.S. states believed to be pseudorabies-free and provided that strict sanitation procedures are followed by slaughterhouses. Some Canadian hog producers oppose the change, pointing out that Canada already produces more hogs than it consumes, and that potential costs of a pseudorabies outbreak are very high. * Panama's Drunken Chicken (El Pollo Borracho) restaurant, and other small local restaurants, are endangered by the invasion of 13 McDonald's and 15 Kentucky Fried Chicken restaurants. McDonald's plans three more restaurants this year, Kentucky Fried Chicken plans another four, Burger King plans to grow from nine to sixteen, and Dairy Queen and Pizza Pizza will also grow. Panamanian restaurant business has dropped by 17 percent during the last year. A typical Drunken Chicken lunch costs about $2.50, while McDonald's offers a hamburger and coke for 99 cents. Special meals, toys, and playgrounds influence children to "beg their parents to take them to McDonald's," according to Roosevelt Thayer, a McDonald franchisee. * Chilean grape exporters rejected the latest U.S. offer to resolve disputes stemming from the March 1989 embargo imposed on Chilean table grapes after the alleged discovery of two grapes containing cyanide. The embargo cost Chilean grape exporters an estimated $330 million, and the U.S. proposal offers no monetary compensation, only information on prices and volumes in the U.S. market, meteorological information, 10 to 20 professional scholarships annually, and help for Chilean fruit in the U.S. market. Now Chilean fruit growers have been hit by a U.S. Department of Agriculture requirement that Chilean kiwi exports be treated with methyl bromide before entering the U.S., potentially pricing 9 million cases of kiwi fruit out of the market. The USDA says that mites that infect grapes have also been discovered in kiwis. * Brazil will cut farm aid by 15 percent in 1997, slashing federal funding for farm loans by 60 percent from the 1996 total, and ending most federal guarantees on farm loans. The government will increase funding for export loans and disease control, and will phase out programs that buy grain and oilseeds from farmers and then sell the stocks during the inter-harvest period. * The Inter-American Development Bank will loan $15 million to Honduras to finance development and technology transfer for agriculture, and for training agricultural workers. The Inter-American Development Bank has approved a total of $244.8 million this year to finance global agriculture projects. * Cargill, Inc. will build a $50 million, export- oriented citric acid plant in Brazil and a $6 million peanut shelling plant in Argentina. Cargill already has a citric acid plant in Iowa, and the Brazil plant's opening in 1999 will make Cargill the world's third- largest producer of citric acid. The peanut plant, scheduled to open in April, will produce about 17,000 tons for export and 7,000 tons for the domestic market. Tom Zind, "Genetic Engineering to be Focus," PACKER, September 30, 1996; "Monsanto to Acquire Asgrow Corn, Soybean Seed Business from ELM," MILLING & BAKING NEWS, October 1, 1996; "Canadian Hog Producers Fear Pseudorabies May be Next U.S. Export," UNION FARMER, August, 1996; Silvio Hernandez, "'The Drunken Chicken' Reeling From Fast-Food Competition," INTERPRESS SERVICE, 9/24/96; Steve Anderson, "Exporters Reject Proposal in Case," PACKER, September 9, 1996; El Diario, "1989 Embargo's Legacy Still Stings Chileans," PACKER, September 30, 1996; Patricia Saldanha, "Brazil to Cut Total Aid to Farmers by 15%," JOURNAL OF COMMERCE, September 5, 1996; "IDB Loans $15 Million to Honduras for Agriculture," XINHUA, October 3, 1996; "Cargill Plans Citric Acid Plant in Brazil, Peanut Plant in Argentina," MILLING & BAKING NEWS, October 8, 1996. TEXTILE TRADE CHANGES Caribbean and Central American apparel manufacturers reported a loss of 88,000 jobs from 1994 to 1995, with regional employment in the industry down to 472,000. Both manufacturers and government officials in the region blame the North American Free Trade Agreement for the job loss. The Dominican Republic reports a loss of 21,000 jobs due to movement of orders to Mexico, according to the Caribbean Textile and Apparel Institute, a lobby for the industry in Central America and the Caribbean. Guatemala lost 50,000 jobs, but the Institute said this loss was due to charges of human rights abuses. On the other hand, Honduras, El Salvador and Nicaragua all gained textile jobs through marketing and promotion. Despite the overall job losses, the volume of Caribbean apparel exports to the United States in the first half of 1996 was up six percent over the same period in 1995, with earnings increasing by three percent to $2.56 billion. During the same time period, Mexican apparel exports to the United States grew by 38 percent in volume and by 32 percent in value to $1.52 billion. Mexican industry spokespersons say that their growth is not at the expense of Caribbean nations, but rather is due to reduced U.S. imports from the Far East. The Caribbean Basin countries want Canada, Mexico and the United States to grant them "NAFTA parity," giving them the same free access for apparel exports that the NAFTA members extend to one another. Workers in the United States apparel industry oppose extension of NAFTA parity, pointing out that NAFTA has already cost them jobs as U.S. apparel plants move to Mexico. Pendleton Mills closed two of its six U.S. apparel plants in September, eliminating 163 U.S. jobs and moving production to Mexico. According to Gary Benson, Pendleton's manager for corporate human resources: "It has been traumatic for everyone here. We held out long after most American companies had gone offshore." Sixty-five percent of U.S. apparel sales are imports. Benson says that the company does not blame its employees or their union. "Primarily we feel this is the result of our government's trade policy, mainly the NAFTA and GATT. Somebody has decided that this is a disposable industry." In a move forcing U.S. apparel markets further open, a World Trade Organization dispute panel ruled in September that the United States must withdraw import restraints imposed in 1995 on Costa Rican-made underwear. The ruling is still officially classified, but will be sent to the two parties in late October. The WTO panel said that the United States had not demonstrated that imports from Costa Rica and Honduras caused serious injury to U.S. industry. Scott West, "Apparel Manufacturers Feeling the Pinch," INTERPRESS SERVICE, September 24, 1996; John Zarocostas, "WTO Panel Rules Against US on Costa Rica Underwear," JOURNAL OF COMMERCE, October 4, 1996; Canute James, "Caribbean, Top Source of US Imports of Apparel, Wary of Mexican Threat," JOURNAL OF COMMERCE, September 26, 1996; Robin Bulman, "Apparel Workers Stranded as Plant Moves to Mexico," JOURNAL OF COMMERCE, September 24, 1996. RESOURCES/EVENTS Mexico: Free Market Failure. Catholic Institute for International Relations, London: 1996. 43 pp. Order from CIIR, Unit 3, Canonbury Yard, 190a New North Road, London N1 7BJ UK. Telephone 44 171 354 0883; fax 44 171 359 0017. Email ciirlon@gn.apc.org. #2.50. Examines Mexico's political, economic and social history, and explains how Mexico's system of government and economic policies exclude poor, rural and indigenous people. ____________________________________________ 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 Dale Wiehoff at 612-379-5980, or send email to: dwiehoff@iatp.org.