TRADE NEWS BULLETIN Volume 2 Number 95 Week In Review May 24-28 ________________________________________________________ NAFTA News Summary ________________________________________________________ CANADIAN HOUSE APPROVES NAFTA Canada's lower house of Parliament approved the North American Free Trade Agreement Thursday by a 140 to 124 vote. Conservatives used their 10-seat majority to push the trade pact through the House of Commons despite strong disapproval from opposition parties and the majority of Canadians. Opposition leaders argue that NAFTA ratification should be put on hold until supplemental accords on labor and environmental standards are worked out. The trade accord will now move to the Senate, also controlled by the Conservatives, where it is expected to pass easily. Prime Minister Brian Mulroney said he will not administer royal assent, the final step in the ratification process, until after NAFTA is approved by the United States and Mexico. Sources: Bernard Simon, "Canada Set to Ratify Agreement," FINANCIAL TIMES, May 28, 1993; "Canada-Free Trade," AP, May 27, 1993; "Canada's House of Commons Ratifies NAFTA," REUTER, May 27, 1993. ________________________________________________________ U.S. REPORTS SAY NAFTA MAY INCREASE DRUG TRAFFIC Two U.S. intelligence reports released Monday indicate that drug traffic will surge under NAFTA. Colombian drug cartels, preparing for increased access to the United States, are investing in legitimate factories, warehouses and trucking firms in Mexico. "Once in place, these operations can be used as fronts for drug trafficking activities to the U.S.," said the army intelligence reports. The traffickers have also started buying maquiladora manufacturing and assembly plants for the same purpose. Between 50 and 70 percent of U.S.-bound cocaine is currently shipped through Mexico. Sources: Damian Fraser, "Mexico Forced to Face its Drugs War," FINANCIAL TIMES, May 26, 1993; "NAFTA Can be Vehicle for Drugs- U.S. Intelligence," REUTER, May 24, 1993; Tim Weiner, Tim Golden, "Free-Trade Treaty May Widen Traffic in Drugs, U.S. Says," NEW YORK TIMES, May 24, 1993. ________________________________________________________ EC SAYS NAFTA IMPACT MAY CONFLICT WITH GATT The European Community released a report two weeks ago detailing the impact of NAFTA on European trade. The report finds that NAFTA would hurt a number of EC industries, including financial services and insurance and farm products. The Community is particularly concerned about losing its share of Mexico's sugar, dairy and meat markets. NAFTA would raise Mexican agricultural barriers to the U.S. level after the first six years. The report also found that NAFTA dispute settlement rules could conflict with GATT procedures. The 20 page document said the "interests of GATT Contracting Parties could be affected" by NAFTA. Overall, the report concludes that NAFTA will boost EC trade as the Community forms a closer political relationship with Mexico. "As the NAFTA draws Mexico more closely into the North American orbit, Mexico's relationship with the EC may gain importance as a counterweight," it states. Sources: "EC Outlines Potential Problems in NAFTA," AGRA EUROPE, May 14, 1993; Lionel Barber, "EC Positive About NAFTA Agreement," FINANCIAL TIMES, May 13, 1993. ________________________________________________________ GATT News Summary ________________________________________________________ SUTHERLAND EXPECTED AS NEW GATT CHIEF BY JUNE Peter Sutherland, chairman of Allied Irish Banks, is slated to become GATT'S next director-general when members gather June 9 to elect a new trade chief. During a closed-door vote, GATT contracting parties are expected to follow the United States and European Community by backing Sutherland to replace current director-general Arthur Dunkel. Sutherland, who is one of three candidates, served as EC Competition Commissioner from 1985 to 1989. Latin American countries have nominated the other two candidates: Luis Fernando Jaramillo, Colombia's ambassador to the United Nations and Julio Lacarte-Muro of Uruguay, a senior trade ambassador to GATT. Sources: Tim Dickson, Martin Wolf, "Sutherland Faces Toughest Brief," FINANCIAL TIMES, May 28, 1993; "GATT Session in June to Name Dunkel Successor," REUTER, May 25, 1993. ________________________________________________________ CLINTON TO RENEW CHINA MFN UNCONDITIONALLY U.S. President Bill Clinton announced Thursday that he will unconditionally renew Most Favored Nation (MFN) trade status for China this year. But he said China will need to make serious efforts to modernize and to respect human rights before he will consider renewing MFN next year. "I want to support modernization in China, and it's a great opportunity for America there," said Clinton during a televised White House meeting. "But I want to make it clear to them that there has to be some progress on human rights and the use of prison labor." A White House official said Clinton would issue a formal executive order today, specifying conditions for renewal beyond June 1994. Without renewal China's exports to the United States would face a tariff rate of approximately 40 percent, compared to the current eight percent. U.S. businesses worried that failure to renew MFN would result in retaliation from the Chinese government. Sources: Steven Greenhouse, "Clinton to Grant China Renewal of Favored-Nation Trade Status," NEW YORK TIMES, May 28, 1993. ________________________________________________________ FRANCE CLOSER TO OILSEED SETTLEMENT After four days of discussions, EC agriculture ministers negotiated a successful agriculture price and production package for European farmers. French ministers agreed to a 20 percent permanent land set-a-side for its cereal producers in exchange for increased aid of 12 Ecus ($14.4) per ton for cereal grains. "We have reached a compromise which appears really positive for France and Europe," said French Farm Minister Jean Pueche. "We will have a more open attitude in international talks." France has contributed to the slow progress in GATT farm dispute resolutions, and is now expected to ease its stance in light of aid granted to its farmers. European ministers are scheduled to vote on the oilseeds deal June 8. Sources: "France Moves Closer to Accepting Oilseed Pact," REUTER, May 27, 1993. ________________________________________________________ Event: "Keeping Your Job in the USA." Texas billionaire, Ross Perot, will appear on NBC television, 8 p.m. EDT on Sunday, May 30 to present his views on the NAFTA. ________________________________________________________ Resources: For copies of the following resources, contact the authors or organizations listed below. 1. Andrew Reding, "Unrequited Toil: Denial of Labor Rights in Mexico and Implications for NAFTA," WORLD POLICY INSTITUTE, April 1993. 29 pages. World Policy Institute at the New School for Social Research, 65 Fifth Ave. Suite 413, New York, NY 10003. Tel: (212) 229-5808. US$5.00. Reding makes the argument for the creation of enforceable international standards to guarantee that "free trade" will not be used to evade -- and thus undermine -- U.S. and Canadian labor laws or to bid wages downward in the U.S. and Canada. Furthermore, he states that the crucial failure of U.S. NAFTA negotiators was their unwillingness to address Mexico's determination to subordinate worker rights for the overall goal of attracting foreign capital. 2. Aparna Viswanathan, "Subsidizing the Rich While Starving the Poor," PUBLIC INTEREST LEGAL SUPPORT AND RESEARCH CENTRE (PILSARC), August 1992. 54 pages. PILSARC, A-131 New Friends Colony, New Dehli 110065. Fax: 91-11- 684-1884. US$25.00. (please fax requests to PILSARC for more information regarding method of payment) The authors' arguments reveal that the agriculture provisions in the Dunkel Draft of the GATT operate so as to permit the U.S. to continue to intervene in commodity markets and manipulate agriculture trade to its advantage. Also, specific market access commitments will only enable the highly oligopolistic and integrated transnational food corporations to further dominate world markets. Finally, food aid programs under the Dunkel Draft will adversely affect the recipient's domestic foodgrain economy and threaten its diplomatic independence. 3. Robert Schaeffer, "FREE TRADE AGREEMENTS: THEIR IMPACT ON AGRICULTURE AND THE ENVIRONMENT," April, 1993. 48 pages. San Jose State University, 770 San Carlos Ave., Albany, CA 94706. Tel: (510) 527-4566. US$4.00. This study concludes that provisions of the NAFTA and GATT are designed to improve the market shares and to facilitate the construction of flexible global commodity chains for the benefit of large agricultural traders and agro-industries. Moreover, free trade agreements exist essentially to guarantee steady supplies of food that make it easier for transnational corporations to transfer the cost of shortages to producers and workers and the environment. 4. Consumer Unity and Trust Society, "ALL ABOUT GATT -- A CONSUMERS' PERSPECTIVE," February, 1993. 50 pages. Consumer Unity and Trust Society (CUTS), 3B, Camac Street, Calcutta 700 016, India. US$20.00. This publication serves as a primer on GATT. The topics discussed include agriculture trade, labor welfare, intellectual property rights, the multi-fibre arrangement, environmental security, and the Multilateral Trade Organization (MTO). This primer is articulate and serves well as a tool for introducing the GATT to interested citizens. ______________________________________________________ Published by: Mark Ritchie Produced by: Gigi Boivin, Kai Mander and Chirag Mehta The Institute for Agriculture and Trade Policy (IATP) 1313 Fifth Street SE, Suite #303, Minneapolis, MN 55414-1546 USA Tel: (612) 379-5980 Fax: (612) 39-5982 E-Mail: kmander@igc.apc.org ______________________________________________________