From iatp@iatp.org Wed Nov 5 12:42:22 1997 Date: 05 Nov 1997 06:58:13 From: iatp@iatp.org To: Recipients of conference Subject: Re: NAFTA & Inter-American Trade Monitor [The following text is in the "iso-8859-1" character set] [Your display is set for the "US-ASCII" character set] [Some characters may be displayed incorrectly] ------------------------------------------------------------------------ NAFTA & Inter-American Trade Monitor - Vol. 4, Number 22 October 31, 1997 ------------------------------------------------------------------------ Table of Contents - Clinton's Visit To South America - Legislative Maneuvering On Fast Track - Trick, No Treat - Produce Trade Picture Mixed - Dutch Stall Banana Decision - Beef, Pork Trade Developments CLINTON'S VISIT TO SOUTH AMERICA Visiting Argentina, Brazil and Venezuela in October, U.S. President Clinton attempted to assure South American allies that the United States is firmly committed to the Free Trade Area of the Americas (FTAA) and to closer ties and increasing trade with all of Latin America. Despite his visit, Brazil and Argentina and their Mercosur allies (Brazil, Uruguay, Paraguay and Chile, an associate member of the trade group) remain skeptical of his ability to deliver, given internal U.S. opposition to fast-track trade legislation. Brazilian and Argentine leaders met in advance of Clinton's visit to coordinate their messages and ensure that both countries emphasized the importance of Mercosur. Clinton assured Brazilians that his advocacy of FTAA was not aimed at weakening Mercosur. Mercosur's total annual trade has increased from $5.1 billion in 1991 to more than $16 billion in 1997, and the European Union is its primary trading partner. Visiting Argentina in May, French President Jacques Chirac declared that "Latin America's future does not lie on a North-South axis, but in Europe." Mercosur's principal economic partner is the European Union, with which it is currently negotiating a trade accord. Brazilian business leaders endorse their government's go-slow attitude toward FTAA. The president of the Brazilian Association of Toy Makers, Synesio Batista, said during the Clinton visit that businesses "don't want a U.S. economic invasion, at least not until we are in a position to compete." "We're not ready for it yet, and we don't want it forced upon us," agreed Roberto Macedo, president of the Electronics Manufacturing Association of Brazil. While Clinton voiced support for Mercosur, skeptics noted that the "gifts" offered by the United States have increased conflict among Mercosur members. During his visit to Argentina, Clinton conferred "major non-NATO ally status" on Argentina, a move opposed by Chile as potentially upsetting the regional strategic balance. The status, which is already held by Egypt, Israel, and Japan, makes it easier for Argentina to get weapons from the United States. U.S. General Wesley Clark, chief of the U.S. army Southern Command, said in early October that Argentina is the United States' "top ally" in Latin America. The United States also has offered F-16 fighter planes to Chile, which has a long history of military tension with Argentina. In Brazil, Clinton signed agreements on cooperation in education, nuclear energy, space exploration, family health care, and the environment. In Venezuela, agreements on energy, the environment, and fighting the drug trade were signed. Venezuela is the largest oil supplier for the United States. Trade disputes, including U.S. drug manufacturers' demands that Argentina upgrade its patent protections, U.S. investors' dissatisfaction with their treatment in privatization of port facilities, and U.S. optical fiber and cable manufacturers' desire for an opening of Brazilian markets, may have been topics of discussion during Clinton's visit, but no breakthroughs in these areas were announced. While Clinton did not visit any Latin American country during his first term in office, he has visited Mexico, Central America and the Caribbean earlier this year, and will go to Chile in April 1998 for the FTAA summit. Marcela Valente, "Mercosur Bloc Resists 'Dissolving' into FTAA," INTERPRESS SERVICE, October 13, 1997; Marcela Valente, "Clinton Will Feel at Home," INTERPRESS SERVICE, October 14, 1997; Mario Osava, "Clinton Exercises His 'Power of Seduction,'" INTERPRESS SERVICE, October 15, 1997; Anthony Faiola, "Businesses Fear Dropped Barriers Could Damage Recovering Economy," THE WASHINGTON POST, October 16, 1997; "Clinton Tour Does Venezuela, Brazil, Argentina, Haiti," WEEKLY NEWS UPDATE ON THE AMERICAS, October 19, 1997; "U.S. President Bill Clinton Pushes Trade on Latin America Trip," NOTISUR, October 17, 1997; Kevin G. Hall, "Brazil, Argentina Want Single Policy for Trade With U.S.," JOURNAL OF COMMERCE, October 15, 1997; James Bennet, "Clintons Present Their Act to an Admiring Argentina," NEW YORK TIMES, October 17, 1997; Andrea Campbell, "U.S. Hails Argentina Role as Ally," FINANCIAL TIMES, October 17, 1997; "Free Trade Gets Boost in Brazil," THE GLOBE AND MAIL, October 15, 1997; "Clinton, on Latin Trip, Pledges Effort to Pass Fast Track This Year," INSIDE U.S. TRADE, October 17, 1997; John Maggs, "For U.S., Argentina, Smiles Hide the Conflict," JOURNAL OF COMMERCE, October 14, 1997; Mark Suzman, "Clinton Set on Fast-Track for Trade Deals," FINANCIAL TIMES, October 20, 1997. LEGISLATIVE MANEUVERING ON FAST TRACK Special Counselor to the President Jay Berman said that there will be a vote on renewal of fast-track negotiating authority in the House of Representatives, despite lack of Democratic support. Berman said that Republicans have traditionally provided about 75 percent of the support for trade legislation. After initially saying that a fast-track vote should be postponed until 1998, House Republican leaders promised in late October that they would schedule a fast-track vote by November 7. Under fast-track, trade agreements would be voted up or down by Congress, but could not be amended. While trade bills have traditionally been voted on first in the House of Representatives, Senate Minority Leader Trent Lott (R-MI) predicted that a Senate vote on fast-track could come sooner than the House vote. Minority Leader Tom Daschle (D-SD) continued efforts to block a vote until Republicans agree to debate campaign finance reform. President Clinton is expected to propose a $90 million-a-year program to aid those with trade-related job losses, in an appeal for more support for fast-track. The worker retraining measure had been promised prior to passage of NAFTA in 1994. Strong opposition to fast-track has been mounted by labor, including the United Steelworkers of America, the Teamsters, and the United Auto Workers. George Becker, United Steelworkers president, warned that, with current trade practices, "we're on the long haul to deindustrialize America." "Berman Predicts House Will Vote on Fast Track Despite Uncertainty," INSIDE U.S. TRADE, October 17, 1997; John Maggs, "GOP Mulls Postponing Fast-Track Vote to '98," JOURNAL OF COMMERCE, October 22, 1997; Peter Baker and Helen Dewar, "In Reversal, Clinton to Push 'Fast Track' in Senate Initially," WASHINGTON POST, October 22, 1997; John Maggs, "Trying to Save Fast Track, Clinton Offers Job Program," JOURNAL OF COMMERCE, October 27, 1997; Tim Shorrock, "Union's Rank and File Put Up Steely Opposition to Fast Track," JOURNAL OF COMMERCE, October 27, 1997; Greg Hitt and Bob Davis, WALL STREET JOURNAL, October 30, 1997. TRICK, NO TREAT U.S. vintners share the concerns of tomato growers in Florida and cattle ranchers in California: the government failed to keep the promises it made in 1993 to win their industries' support for NAFTA. According to Public Citizen's Global Trade Watch, more than 20 deals and promises made to industries and members of Congress in exchange for support of NAFTA were not kept. Lori Wallach, director of Global Trade Watch, noted that "many in Congress learned during NAFTA that Clinton serves up only phantom pork." Another study, released by the Institute for Policy Studies on October 23, shows that companies who are members of America Leads on Trade, a corporate lobby organization pushing for passage of fast-track, have laid off 13,000 workers as a result of NAFTA. "Many made specific promises not to cut jobs under NAFTA," according to Sara Anderson of the Institute for Policy Studies. The companies studied include General Electric, Allied Signal, AMO Group and Sara Lee Corporation, each of which laid off more than 1,000 workers due to imports or competition from Canada or Mexico. The numbers in the study are based on claims to the U.S. Labor Department for special retraining benefits available under a provision of NAFTA. Marc Greenberg, a spokesperson for Allied Signal, said the study distorts the number of layoffs caused by NAFTA. John Maggs, "Think Tank: Pro-Nafta Firms Cut 13,000 Jobs," JOURNAL OF COMMERCE, October 23, 1997; Greg Hitt, "To California Vintners, Promised a Rose Garden, Fast-Track Bill is Wreathed in Grapes of Wrath," WALL STREET JOURNAL, October 6, 1997; "Trick, No Treat Analyzes More Than 20 Deals for NAFTA Votes," PUBLIC CITIZEN, October, 1997; Ramon G. McLeod, "Fast Track Backers Derided, Study Finds Firms Laid Off Thousands Because of NAFTA," SAN FRANCISCO CHRONICLE, October 23, 1997. PRODUCE TRADE PICTURE MIXED As politicians and produce industry representatives line up behind various proposals for food safety guidelines, skirmishes between produce growers in Canada, Mexico and the United States continue. ^Õ Tomato growers in Mexico and Florida reached agreement on a floor price of $5.17 per 25-pound carton of Mexican tomatoes a year ago. Now Florida wants an increase in the floor price, and Mexico wants a decrease for the summer months. ^Õ The U.S. Department of Agriculture (USDA) imposed a new minimum diameter requirement for tomatoes in a proposed rule published October 6 in the Federal Register. The Mexican commerce agency promptly protested, saying that U.S. officials gave inadequate notice to Mexican officials and growers, and the USDA extended the comment period by 20 days. ^Õ Maine potato growers charge that Canadian potato imports are unfairly subsidized, and have asked the U.S. International Trade Commission to protect them against the imports. ^Õ California table grape growers are working for repeal of a Mexican labeling law that limits their access to Mexican markets. Other producers express concern that Mexican labeling standards for packaged foods are confusing. ^Õ Mexico imposed a 101 percent compensatory tariff on U.S. apples on September 1, doubling the price of U.S. apples in Mexico. Mexico charges unfair dumping practices, which U.S. producers deny. U.S. growers, some of whom were initially optimistic about expanded export markets under NAFTA, have seen mixed results, and have differing priorities. For example, Florida tomato growers have pushed for a seasonal designation of their winter tomato production, while Washington apple growers have resisted seasonal designation, fearing that it might be turned against their product by other countries. While California Table Grape Commission president Bruce Obbink says that "NAFTA has worked very well for us," California avocado growers vehemently oppose the allowance of Mexican avocado imports into the northeastern United States. Tracy Rosselle, "Floor Price Getting Favorable Reviews," THE PACKER, October 13, 1997; Paul Conley, "Dispute With Mexico Enters Its Sixth Week," THE PACKER, October 13, 1997; Larry Waterfield, "Industry Ready for Scrutiny," THE PACKER, October 13, 1997; Tracy Rosselle, "NAFTA Fails to Dissolve Disputes," THE PACKER, October 13, 1997; Mary Sutter, "Exporters Still Trying to Decipher Mexico's Rules for Labels on Food," October 23, 1997; Tracy Rosselle, "Export Opportunities Fail to Meet Expectations," THE PACKER, October 20, 1997; Kevin G. Hall, "Legal Action Sought in U.S.-Mexico Apple Spat," JOURNAL OF COMMERCE, September 29, 1997; Kevin G. Hall, "Mexico Slams Nafta Clause on Tomatoes," JOURNAL OF COMMERCE, October 23, 1997. DUTCH STALL BANANA DECISION On October 16, the European Union announced that it will comply with the September 25 World Trade Organization ruling that the EU system regulation banana imports violates international trade rules. But a Dutch national court ruling by judges in The Hague forbids the Dutch from cooperating in the EU compliance, overruling the Dutch government's position. The Dutch government is appealing its national court decision. Because the EU requires unanimity among member states, the Dutch court decision will delay implementation of any EU compliance measures. While the EU said it will comply, it also said that it will continue to respect its obligations to African, Caribbean and Pacific nations under the Lomé Convention. Ecuadorean president Fabian Alarcón warned in October that he would not accept compensation in lieu of changes to the EU banana import rules, and EU sources indicated that they did not see compensation as a "long- term solution" to compliance. Gordon Cramb, "Dutch to Appeal After Court Overrules EU Trade Accord," FINANCIAL TIMES, October 23, 1997; "EU Says It Intends to Comply With WTO Ruling on Banana Regime," INSIDE U.S. TRADE, October 17, 1997; Neil Buckley, "Bananas: 'EU Must Comply,'" FINANCIAL TIMES, October 20, 1997; Mario Gonzalez, "New Debate Over EU's Decision on Bananas," INTERPRESS SERVICE, September 29, 1997. BEEF, PORK TRADE DEVELOPMENTS Japan, the largest market for U.S. beef exports, expressed concern about reports of contaminated U.S. beef, and a South Korean meat purchasing agent recommended a ban on Nebraska beef after E. coli bacteria were found in an 18.18 metric ton shipment from an Iowa Beef Processors (IBP) plant in Nebraska. Taiwan also ordered bacteria checks on imported U.S. beef in early October. IBP reported a 28 percent drop in earning s during the third quarter. Beef generates about 80 percent of IBP's income, with pork representing the rest. IBP, Cargill, ConAgra, and National Beef controlled 87 percent of the U.S. beef slaughter market in 1996, up from 67 percent in 1987. Cargill and IBP control approximately 66 percent of the slaughter market in Canada. As packers' profits have reached record levels, U.S. cattle producers' share of the retail beef dollar has fallen from 64¢ in 1979 to 44¢ in 1997. A newly-formed cattle producers' cooperative, U.S. Premium Beef, agreed in September to buy half of Farmland National Beef Packing Co., which kills eight percent of U.S.-fed cattle. The beef producers' cooperative was formed in 1996, with producers representing 850,000 head of cattle. Argentina and Canada have dropped trade barriers to each other's pork and beef, with Canada following the lead of the United States in dropping the ban on Argentine beef because of the eradication of hoof and mouth disease in Argentina and Argentina allowing Canadian pork imports. Argentine beef will compete for the small portion of Canada's low-tariff import quota that is not already allocated to Australia and New Zealand. Or Argentina may pay an over-quota duty of 28 percent, which could still leave its beef competitively priced. Canadian pork processors note that millions of hogs are now exported to the United States, where larger U.S. processors operate more profitably because of lower costs. The Canadian Meat Council estimates that 3,400 Canadian meat processing jobs were lost in 1996, due to exports of 3 million head of hogs to the United States. Courtney Tower, "Argentina, Canada in Accord," JOURNAL OF COMMERCE, October 3, 1997; "Canada Hogs Moving South," AGWEEK, September 29, 1997; "Four Firms Control U.S. Meat Packing Industry," UNION FARMER, September, 1997; "Two Firms Control Canadian Meat Packing Industry," UNION FARMER, September, 1997; Barbara Duckworth, "American Beef Co-op Gains 50 Percent of Packing Company," WESTERN PRODUCER, October 2, 1997; Adrian Ewins, "Health Issues Erased in Argentine Trade," WESTERN PRODUCER, October 9, 1997; "Japan Traders Worried About Consumer Fears," WESTERN PRODUCER, October 9, 1997; Scott Kilman, "IBP's Quarterly Profit Dropped 28% Amid Safety Worries Involving Beef," WALL STREET JOURNAL, October 28, 1997. ------------------------------------------------------------------------ NAFTA & Inter-American Trade Monitor is produced by the Institute for Agriculture and Trade Policy, Mark Ritchie, President. Edited by Mary C. Turck. 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