TRADE NEWS BULLETIN Volume II Number 70 Wednesday, April 21, 1993 ________________________________________________________ NAFTA News Summary ________________________________________________________ TAX PROPOSED FOR CLEAN-UP AND INFRASTRUCTURE ALONG BORDER U.S. President Bill Clinton has asked the Treasury Department and the Labor Department to conduct reviews on a proposed cross-border tax to cover NAFTA's implementation costs. Officials have already begun to receive requests for federal funds to pay for new highways, water and treatment plants, and other infrastructure demands. Texas alone is asking for $8 billion over the next ten years. Reportedly, the proposed tax would be less than one percent, replacing import tariffs of up to 25 percent. House Majority Leader Richard Gephardt and Senator Max Baucus (D- Montana) support the tax, saying it would allocate the costs of a free trade agreement to those who benefit from it. However, Canada and Mexico are strongly opposed to the idea, arguing it would erode the benefits of reduced tariffs. Some border-state legislators are also against the tax, and instead support a proposal to use general federal revenues to pay for any projects. According to a government official, other proposals to finance development and implementation of NAFTA include a federally financed development bank or federal guarantees for municipal bonds. Administration officials have already identified three major costs of the free trade agreement which would require extra funds: the loss of existing tariff revenues ($1 billion per year), worker retraining programs promised by the government (estimated at $335 million per year), and environmental border and highway cleanup ($8 billion over 10 years). Source: Keith Bradsher, "Tax Being Considered to Help Border Areas Cope With Free Trade," NEW YORK TIMES, April 20, 1993. ________________________________________________________ CONGRESS CALLS FOR GLASS MODIFICATIONS IN NAFTA Last month, U.S. Congress members requested more modifications to NAFTA on U.S.-Mexican trade in glass, adding one more provision to a list of similar demands. If passed by legislatures of the U.S., Mexico and Canada, glass duties on imports from Mexico would be eliminated immediately. Mexico will be given eight to ten years to kill its 20 percent tariff on U.S. glass imports. "Already, Mexican- made flat glass is displacing Texas-made products at an alarming rate throughout the south and west," argued Democratic Congressman Michael Andrews. USTR Mickey Kantor agreed that the glass provisions were unexplainable, but repeated President Clinton's earlier vow not to reopen the draft. He said changes could be made only after NAFTA is ratified, saying "many industries could find reasons to request protection." Source: "United States: NAFTA Provisions on Glass Come Under Fire," SUNS, March 15, 1993. ________________________________________________________ GATT PRAISES MEXICO FOR OPEN ECONOMY, WILL REVIEW NAFTA In a report issued by GATT economists, Mexico's trade regime was praised as one of the most open in the world. GATT members agreed during meetings, which ended yesterday, that Mexico has taken great strides to open its economy by cutting its tariff rates in half since 1982. But the report also pointed to Mexico's higher than average tariff protection on automobile, computer, iron and steel imports. "Such continued import protection seems incompatible with Mexico's overall policy of trade liberalization," the report stated. In discussing NAFTA's impact, members seemed to agree the trade pact may, at least initially, lead to some trade diversion by intensifying preferential trade. Members discussed setting up a working party to examine NAFTA's possible impact on world trade. Source: "GATT Praises Mexico Except for Auto Restrictions," REUTER, April 20, 1993. ________________________________________________________ GATT News Summary ________________________________________________________ PROCUREMENT DISPUTE REMAINS UNRESOLVED After two days of talks, U.S. Trade Representative Mickey Kantor and EC trade negotiator Sir Leon Brittan failed to agree on a solution to the public procurement dispute. The U.S. has consistently threatened sanctions worth $50 million against EC companies bidding for U.S. public procurement contracts. The U.S. says the EC's Utilities Directive favors European companies over American competitors. Kantor postponed sanctions, originally scheduled to take effect March 30, until after yesterday's meeting. Negotiators had hoped for a resolution in effort to move forward on the Uruguay Round of GATT talks. They are expected to talk by phone today, after Brittan returns home, in one last attempt to iron out the dispute before Kantor initiates sanctions. "There are outstanding issues not resolved," said Brittan. "It would be wrong to assume it's just a case of (adding) finishing touches." Despite what happens this week, the U.S. and EC are scheduled to meet at least three more times before the G-7 Tokyo Summit in July. The two sides hope to reach agreements on other issues so they can jointly pressure Japan to help with conclusion of GATT negotiations. "I believe that we have in these last two days added real momentum to the GATT process," said Brittan. Sources: Bob Davis, "U.S. and EC Trade Negotiators Fail to Settle Procurement-Rule Dispute," WALL STREET JOURNAL, April 21, 1993; Martin Crutsinger, "U.S.-Europe Trade," AP, April 21, 1993; Nancy Dunne, "U.S. and EC Start New Trade Talks," FINANCIAL TIMES, April 20, 1993; John Maggs, "Brittan-Kantor Talks May Be Last Chance For EC to Skirt Curbs," JOURNAL OF COMMERCE, April 19, 1993. ________________________________________________________ Produced by: Kai Mander and Gigi Boivin The Institute for Agriculture and Trade Policy (IATP) 1313 Fifth Street SE, Suite #303, Minneapolis, MN 55414-1546 USA Telephone:(612)379-5980 Fax:(612)379-5982 E-Mail:kmander@igc.apc.org ________________________________________________________