TRADE NEWS BULLETIN Volume 2 Number 109 Week in Review and New Publications June 12-18, 1993 Headlines: NAFTA FACES PROBLEMS IN CANADA, MEXICO PRESSES FORWARD G-7 SUMMIT MAY BE IN TROUBLE ________________________________________________________ NAFTA News Summary ________________________________________________________ NAFTA FACES PROBLEMS IN CANADA, MEXICO PRESSES FORWARD -Campbell Chosen As New Canadian Leader- Canadian Defense Minister Kim Campbell was chosen to replace Prime Minister Brian Mulroney as leader of the Progressive Conservative Party. Campbell, who will be Canada's first female prime minister, is a strong supporter of global and continental free trade. She has proposed expanding the North American Free Trade Agreement to include Pacific Rim countries. -Canadian Trade Minister Will Not Run in Fall, Senate Worries Over NAFTA- Campbell will begin announcing cabinet changes when she becomes prime minister June 25. Trade Minister Michael Wilson, who is considered crucial to ratifying NAFTA, said he will not run in the autumn election, leaving Campbell to decide whether or not to retain him as a cabinet member until then. Tory Senate leaders were surprised by Wilson's announcement and hinted that NAFTA could face opposition if the Senate votes on it next week as planned. "We thought he would hold off on that announcement until sometime next week, after the Senate vote," said one party member. -Salinas Launches Policy, Law Changes- Mexican President Carlos Salinas de Gortari launched a series of policy changes over the past two weeks in an attempt to secure business investment and stablize the economy should the United States reject NAFTA. Salinas was successful in winning independence for the Central Bank last week and proposed a number of other mechanisms aimed at attracting more foreign investment. Salinas then began a strict law enforcement campaign to crack down on the illegal drug industry, firing 67 members of Mexico's federal anti- drug squad suspected of collusion with drug traffickers. He also pledged to allocate $25 million towards environmental restoration. Apparently, Salinas expects the measures to increase U.S. support for NAFTA. If the pact is not ratified by the U.S. Congress, where it currently faces strong opposition, Salinas still hopes to create a stable enough business environment so that foreign investment will grow. "We don't think it's a disaster scenario for Mexico if NAFTA is put off until the first or second quarter of the year," said Carl Ross, an economist for Bankers Trust Securities Corporation. "We think investors in this market are relatively sophisticated and pay more attention to underlying economic fundamentals." Sources: Lucy Conger, "Mexico Fires Agents in Drugs Purge," FINANCIAL TIMES, June 17, 1993; Christine Tierney, "NAFTA Drives Mexican Law Enforcement Spree," REUTER, June 16, 1993; Drew Fagan, "Wilson Departure Clouds Trade Deal," GLOBE AND MAIL, June 16, 1993; Jonathan Ferguson, "Loss of Wilson a Blow to NAFTA, Tories Fear," TORONTO STAR, June 16, 1993; Matt Moffett, "NAFTA or Not, Salinas Pursues Free Market," WALL STREET JOURNAL, June 15, 1993; Kevin Hall, "With or Without NAFTA, Mexico to Ease Investment," JOURNAL OF COMMERCE, June 11, 1993. ________________________________________________________ GATT News Summary ________________________________________________________ G-7 SUMMIT MAY BE IN TROUBLE Leaders of the Group of Seven major industrialized nations will meet in Tokyo July 7-9 in an attempt to create a market access deal and push forward a conclusion of the Uruguay Round of the General Agreement on Tariffs and Trade. But a number of recent political developments have dampened the prospects for a GATT deal. -Miyazawa Given Vote of No-Confidence- Japan's parliament gave Prime Minister Kiichi Miyazawa a vote of no-confidence today, triggering a wave of concern from foreign officials who have been gearing up for the July G-7 summit. A vote of no-confidence dissolves the Diet and requires that general elections be held within 40 days. Members of the G-7 had been counting on preliminary market-access talks between Japan, the United States, Canada and the European Community to push forward the long-stalled Uruguay Round of GATT talks. But the no-confidence vote has created uncertainty as to whether enough progress will be made to conclude GATT. Miyazawa remains optimistic that talks will not be jeopardized by his political crisis. "Officials involved have been laying the groundwork for the three-day talks, so I don't think this will make a fundamental difference," Miyazawa said. U.S. and Japan Fail to Produce Working Agenda for Preliminary Talks Miyazawa and U.S. President Bill Clinton met in Washington earlier this week to discuss Japan's $50 billion trade surplus and to create a bilateral economic agenda to present at the July G-7 meeting. Although they failed to agree on a deficit-reducing framework, officials said they made progress. -Kantor and Brittan Meet, Briefly Discuss German Telecommunications Row- U.S. Trade Representative Mickey Kantor met with EC Trade Commissioner Sir Leon Brittan in London yesterday to "compare notes and positions" on a market access deal to present next week at the preliminary G-7 meeting in Tokyo. But they failed to resolve a dispute over a U.S.-German telecommunications agreement. Brittan said the U.S. - German telecommunications deal, which allows the two nations to bypass EC and U.S. sanctions, "complicates" negotiations. The European Commission claims the bilateral German-U.S. deal violates the EC's founding Treaty of Rome signed in 1957. -Balladur Calls For New GATT Focus, Seguin Says Abolish GATT Altogether- French Prime Minister Edouard Balladur suggested this week that the United States and European Community join together in pursuit of a new GATT agenda. He said the two should work together in an effort to protect their standards of living against challenges from Asia and Latin America. "The question now is how to organize and protect ourselves from countries whose different values enable them to undercut us," Balladur said Tuesday before meeting with U.S. President Bill Clinton in Washington. Meanwhile, French National Assembly speaker Philippe Seguin challenged Balladur to pursue an alternative economic policy aimed at halting the growing unemployment problem throughout Europe. Seguin suggested abolishing the GATT agenda altogether, and instead instituting more protectionist policies to create jobs. French newspaper editorials said Seguin's comments seriously undermined business confidence and Balladur's political credibility. Sources: Linda Sieg, "Japan Politics Seen Affecting Summit, Trade Talks," REUTER, June 18, 1993; David Dodwell, "Veil of Secrecy on U.S.-EC Trade Talks," FINANCIAL TIMES, June 18, 1993; Maggie Fox, "U.S., EC Fail to Resolve Telecom Row," REUTER, June 17, 1993; "France Says EC Must Preserve Grain Share in GATT," REUTER, June 17, 1993. ________________________________________________________ New Publications: ________________________________________________________ For copies of the following resources, contact the authors or organizations listed. All prices in U.S. dollars unless otherwise indicated. Diane E. Davis, "Mexico's New Politics: Changing Perspectives On Free Trade," WORLD POLICY JOURNAL Fall/Winter, Vol. 9, No. 4, 1992. World Policy Institute, New School for Social Research, 777 United Nations Plaza, New York, NY 10017. (212) 229-5808. $2.00. "GATT Focus: Newsletter of the GATT," Information and Media Relations Division, No. 98, April 1993. 8 pages. Centre William Rappard, 154 rue de Lausanne, 1211 Geneva 21, Switzerland. (739) 51 11. Free. "GATT Focus" is published ten times a year in English, French and Spanish. This issue includes an article regarding the EC's request for a GATT panel on U.S. car taxes. "Dislocated Workers: Improvements Needed in Trade Adjustment Assistance Certification Process," General Accounting Office, GAO/HRD-93-36, October, 1992. 13 pages. P.O. Box 6015, Gaithersburg, MD 20877. (202) 275-6241. First publication is free, $2.00 for each copy thereafter. Victor Navasky, ed., THE NATION, June 14, 1993. 72 Fifth Avenue, New York, NY 10011. (212) 242-8400. $4.00 prepaid. This issue of THE NATION features an article entitled, "The Big Buy: How Mexico is Waging the Most Expensive Foreign Lobbying Campaign in History for NAFTA." Jamie Linton, "NAFTA and Water: Ecological Insights Into Free Trade," CANADIAN WATER WATCH/EAUX AGUETS, Vol. 6, No. 5-6, May/June 1993. Rawson Academy of Aquatic Science, 1 Nicholas St., Ottawa, Ontario K1N 7B7, Canada. (613) 563-2636. $4.00. Naomi Roht-Arriaza, "Precaution, Participation, and the "Greening" of International Trade Law," JOURNAL OF ENVIRONMENTAL LAW AND LITIGATION, Vol. 7, 1992. 40 pages. Institute for Agriculture and Trade Policy, 1313 Fifth St. SE, Suite 303, Minneapolis, MN 55414- 1546. (612) 379-5980. $5.00. William E. Spriggs, Ph.D., "Worker Rights and U.S. Trade Policy," ECONOMIC POLICY INSTITUTE, May 1993. 19 pages. 1730 Rhode Island Ave., NW, Suite 200, Washington, DC 20036. (800) 537-9359. $6.00. Carol Alexander and Ken Stump, "The North American Free Trade Agreement and Energy Trade," GREENPEACE, 1992. 40 pages. 1436 U St., NW, Washington, DC 20009. (202) 462-1177. $5.00. Jerome Levinson, "The Mexican Peso," ECONOMIC POLICY INSTITUTE, May 1993. 1730 Rhode Island Ave., NW, Suite 200, Washington, DC 20036. (800) 537-9359. $6.00. In testimony presented by Levinson before the House Small Business Committee, he refutes the claims by NAFTA proponents that Mexico will face a financial crisis if the NAFTA is rejected. He argues that eventual collapse of the overvalued peso and artifically high interest rates are the reasons for Mexico's shaky financial state. ________________________________________________________ Published by: Mark Ritche Produced by:Gigi Boivin and Chirag Mehta 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 ________________________________________________________