TRADE NEWS BULLETIN Volume 2 Number 127 Thursday, July 15, 1993 Headlines: MEXICO MAY OPEN FINANCIAL MARKETS TO JAPAN, EUROPE STUDY: U.S.-MEXICO WAGE GAP LARGER THAN EUROPE, ASIA GROUPS URGE OPENING OILSEED SECTOR U.S. ECONOMIC GROWTH INCREASES TRADE DEFICIT ________________________________________________________ NAFTA News Summary ________________________________________________________ MEXICO MAY OPEN FINANCIAL MARKETS TO JAPAN, EUROPE Mexico hopes to open its financial markets to Japanese and European banks once the North American Free Trade Agreement is ratified. "We will certainly consider the possibility of Japanese or European banks being able to directly establish a commercial presence, not only through New York subsidiaries, but directly," said Guillermo Ortiz, undersecretary of Mexico's Ministry of Finance and Public Credit. Under current regulations, foreign financial institutions are not allowed to enter Mexico's financial market. But NAFTA would permit U.S. and Canadian institutions to set up subsidiaries in Mexico, and Japan and Europe will be able to operate in Mexico through offices already established in the United States and Canada. Source: "Mexico Hopes to Open Market to Japanese Banks," REUTER, July 15, 1993. ________________________________________________________ STUDY: U.S.-MEXICO WAGE GAP LARGER THAN EUROPE, ASIA A new study by the National Planning Association (NPA) concludes that NAFTA would create a larger wage gap between the United States and Mexico than those existing in Europe and East Asia. "NAFTA is an experiment in largely unchartered territory," say Richard Belous and Jonathan Lemco, editors of NAFTA As a Model of Development: The Benefits and Costs of Merging High and Low Wage Areas. "Never before has there been such a discrepancy in levels of economic development between the partners of such an agreement." Mexican compensation rates are approximately 15% of average rates in the United States, compared to Portuguese compensation rates at 19% of Germany's. Korea and Japan also have a smaller wage gap than the United States and Mexico. The European Community is creating a written social charter to address these differences. North American and East Asia have thus far not addressed the issue. The study concludes that low-skilled workers in the United States will be NAFTA's "losers." Source: "NAFTA Would Create Larger Wage Gap Than the Wage Differentials That Exist in Europe and East Asia, a New NPA Study Concludes," NATIONAL PLANNING ASSOCIATION PRESS RELEASE, July 6, 1993. For more information contact: NPA, 1424 16th Street, N.W. , Suite 700, Washington, D.C. 20036 Tel: (202) 265-7685. Fax: (202) 797-5516. ________________________________________________________ GATT News Summary ________________________________________________________ GROUPS URGE OPENING OILSEED SECTOR The EC Seed Crushers' and Oil Processors' Federation (FEDIOL) urged the European Commission to seek, through GATT, the global elimination of all duties and other trade barriers in the oilseed sector. In a letter to the Commission, FEDIOL cited a recent U.S. Department of Agriculture study concluding that the elimination of present trade barriers in the oilseed sector would have a significant impact on global trade. FEDIOL said other groups, including the International Association of Seed Crushers, the National Oilseed Processors Association and the American Soybean Association, support the proposal. UK Agriculture Minister Gillian Shepherd told a group of cereal producers that the U.S.-EC farm deal (Blair House accord) negotiated last November is compatible with the European Commission's agriculture reform policies. "Clearly, much depends on the assumptions you make about trends in yields and other factors when considering this question," she told the Home-Grown Cereals Authority (HGCA). "But we believe the Commission's assumptions are reasonable and that their conclusions are sound." The Blair House accord would cut budgetary agriculture subsidies 36% and reduce the volume of subsidized farm exports by 21%. France opposes the deal, arguing that it would restrict farm exports to a greater extent than planned under EC farm reforms. Representatives from 22 farm organizations attending the Family Farmers' Tokyo Summit last week urged GATT negotiators to consider the social and environmental consequences of liberalizing trade in agriculture. "Trade liberalization must not be pursued to the detriment of the numerous elements necessary for food production, for the environment and for the preservation of viable rural life," the groups said in a declaration. The groups also charged GATT negotiators with failing to take "into account the multi-functions of farming or the legitimate aspirations of farmers as regards income, living and working conditions." In addition to requesting greater stability in international trade of farm products, the farm organizations called on GATT to allow every nation the "right to retain the authority to shape food policy for the security and health of its citizens." Sources: "EC Oilseed Processors Seek End to Trade Curbs," REUTER, July 15, 1993; "UK Farm Minister Backs EC Commission on U.S. Accord," REUTER, July 14, 1993; "EC Wheat Production to Grow Despite Reform," JOURNAL OF COMMERCE, July 12, 1993; "Declaration of the Family Farmers' Tokyo Summit on the Uruguay Round Negotiations of GATT," July 5, 1993; Bruce Stokes, "Tokyo Talks Won't Resolve Crops Dispute," NATIONAL JOURNAL, July 3, 1993. ________________________________________________________ Other Trade News: ________________________________________________________ U.S. ECONOMIC GROWTH INCREASES TRADE DEFICIT The U.S. trade deficit increased substantially in April because the U.S. economy is outpacing growth rates of major U.S. trade partners. The U.S. trade deficit rose $10.5 billion in April, the highest monthly trade gap since December 1988. Analysts expect the current trend to continue as Japan and Germany remain mired in recession and Mexico continues to raise interest rates to combat a growing balance of payments deficit. "The trend is grim," said David Hale, chief economist for Kemper Financial. "Trade isn't going to be a source of growth for the U.S. for some time to come." Analysts expect the U.S. trade deficit to exceed $100 billion this year, compared to $84.5 billion in 1992. Source: Bill Montague, "Trade Proves No Source of Growth," USA TODAY, June 18, 1993. ________________________________________________________ Event: "The Florida Perspective on NAFTA," a Grassroots Education and Strategy Conference. July 31, Tampa, FL. Hosted by the Florida Consumer Action Network, with speaker Representative Sam Gibbons (D-FL). For more information contact: Monte Belote, tel: (813) 286- 1226. ________________________________________________________ Editors: Gigi Boivin and Kai Mander 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 ________________________________________________________