TRADE NEWS BULLETIN Volume 2 Number 122 Thursday, July 8, 1993 ________________________________________________________ Headlines: U.S. Trade Surplus With Mexico Falls as NAFTA Doubts Mount Environmental Groups Propose Solutions For NAFTA Side Accords France Rejects Perceived GATT Progress, Calls for New Farm Deal Event: Labor and Latin America-Impact of NAFTA ________________________________________________________ NAFTA News Summary ________________________________________________________ U.S. TRADE SURPLUS WITH MEXICO FALLS AS NAFTA DOUBTS MOUNT Economists say the U.S. trade surplus with Mexico is shrinking due to uncertainty surrounding the North American Free Trade Agreement. According to the latest trade figures, the U.S. trade balance fell from $299 million in March to $264 million in April. U.S. exports to Mexico dropped by $1 billion during the same period and will continue to fall if NAFTA is not ratified concludes an analysis by First Chicago Bank. "In the case that NAFTA does not progress, pessimism will be prolonged, which will force the government to make painful economic policy decisions," said Vladimiro Brailovsky, director of Economia Aplicada. The Mexican government is considering peso devaluation as a policy option to further reduce the U.S. trade surplus and fight off a financial panic should NAFTA fail. Source: Nancy Dunne, "NAFTA Jitters Aid U.S.-Mexican Trade Balance," FINANCIAL TIMES, July 7, 1993; "Without the NAFTA, Mexico Will Face Even Deeper Adjustment," RMALC MEXICAN NEWS SUMMARY, July 7, 1993; Jerome I. Levinson, "The Mexican Peso," ECONOMIC POLICY INSTITUTE, May 20, 1993. ________________________________________________________ ENVIRONMENTAL GROUPS PROPOSE SOLUTIONS FOR NAFTA SIDE ACCORDS Seven U.S. and Mexican environmental groups along the border region proposed a compromise side accord to NAFTA which Mexican and Canadian officials say could break the impasse over environmental enforcement mechanisms. The border groups advocate fining individual polluters based on costs of cleanup rather than imposing wide-spread sanctions. "We would like fines rather than sanctions so that the entire country of Mexico isn't being held accountable for the actions of one polluter," said Geof Land, project coordinator for the Border Ecology Project in Arizona. Negotiations over environmental and labor side accords have been stalled for the past few months over enforcement mechanisms. The United States, prompted by environmental groups and congressional members, has pushed for sanction rights in the side accords. Canadian and Mexican negotiators have rejected U.S. proposals, but analysts suggest that fines may be an acceptable alternative to all three trade teams. Meanwhile, Michael McCloskey, chairman of the Sierra Club, urged President Clinton to swiftly address environmental concerns of the American public. McCloskey, representing one of three groups who won last week's court ruling requiring the Clinton administration to produce an environmental impact statement before submitting NAFTA to congress, said he supports free trade, but only if it does not compromise environmental standards. "The countries of this continent can enjoy the benefits of freer trade without compromising bona fide environmental laws that each party wants to have," McCloskey said in a letter to the WALL STREET JOURNAL. "It is not just about trade," McCloskey said. "It is about how the parties set standards for pollution control, about how strict they can be, and about what states and localities can do." Estimating that it will cost $20 billion to clean up existing border pollution, McCloskey argues that a cleanup funding mechanism is needed under NAFTA to prevent further destruction. "Concrete plans with funding and cleanup schedules are needed, as are commitments to action," McCloskey said. Sources: Michael McCloskey, "Rescue NAFTA -- Safeguard the Environment," WALL STREET JOURNAL, July 8, 1993; Dianne Solis, "Mexican, U.S. Environmental Groups Propose Compromise in NAFTA Logjam," WALL STREET JOURNAL, July 8, 1993; Robert Kozak, "Canada Says Firmly Against Sanctions in NAFTA Deal," REUTER, July 7, 1993. ________________________________________________________ GATT News Summary ________________________________________________________ FRANCE REJECTS PERCEIVED GATT PROGRESS, CALLS FOR NEW FARM DEAL French Foreign Minister Alain Juppe said the market access package negotiated yesterday by representatives from the United States, Canada, Japan and the European Community will not lead directly to a General Agreement on Tariffs and Trade pact. Juppe told reporters at a news conference in Tokyo that France was prepared to prolong negotiations beyond the December 15 deadline set by major trading nations. Juppe said an agriculture package would need to reached before France could consider the Quad text. "It says in black and white in the text that there has been no agreement on the problem of agricultural market access so we will have to continue discussions in Geneva," Juppe warned. "We, the French, will take advantage of that to add that the continuation of this discussion on agriculture will let us reopen the matter of the alleged Blair House accord, which remains unacceptable to us." France, the world's second largest agricultural exporter, has consistently opposed the U.S.-EC farm deal reached last November, thereby stalling global trade talks. Juppe was surprised by the general euphoria surrounding the Quad market-access package, saying, "One mustn't read into the text more than is in it." Juppe strongly disagreed with U.S. Trade Representative Mickey Kantor who called the package an "historic" agreement. "It's true there was progress ... But from there to speak about ... an historic accord on market access, there is a big difference." The market access package, which proposes reducing or eliminating tariffs in 18 trade sectors, requires the approval of all 111 GATT members before it can take effect. In addition to France, envoys from developing countries have hinted that they would not agree to the tariff reduction proposals. Sources: Alastair Macdonald, "France Tempers GATT Joy With New Farm Trade Call," REUTER, July 8, 1993; Jeff Stearns, "Tough Road Ahead Despite Major Nation Trade Pact," REUTER, July 7, 1993. ________________________________________________________ Event: "Labor and Latin-America -- Discussion of the Impact of the North American Free Trade Agreement," Monday, July 26, 7:30 pm. Hosted by the St. Paul Speakers Club, St. Paul Labor Center, 411 Main , St. Paul, MN. Contact: Dick or Lola Mitchell for more information: (612) 690-5079. ________________________________________________________ Editor: 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 ________________________________________________________