TRADE NEWS BULLETIN Volume 2 Number 145 Thursday, August 12, 1993 ________________________________________________________ HEADLINES: Supplementals Almost Complete But Canada Presents Stumbling Block, Mexico Cites "Breaking Point" Ontario Study Says NAFTA Will Create More Pollutants Economist Urges Creation of "Super GATT" ________________________________________________________ NAFTA News Summary ________________________________________________________ SUPPLEMENTALS ALMOST COMPLETE BUT CANADA PRESENTS STUMBLING BLOCK, MEXICO CITES 'BREAKING POINT' Mid-level negotiators from the United States, Canada and Mexico were expected to resume talks in Ottawa today and formally announce the completion of side accords to the North American Free Trade Agreement. But an announcement by Canadian Prime Minister Kim Campbell has put further talks and agreements on hold. President Bill Clinton and Campbell are expected to discuss the issue by phone tomorrow. Campbell interrupted closed-door negotiations yesterday saying she was not "satisfied" with the direction of talks and indicated to Canadian Trade Minister Tom Hockin that she is not ready to agree to side accords. Campbell's "last minute" announcement was reportedly made in response to private pressure from Canadian Chamber of Commerce and the Business Council on National Issues which threatened to revoke NAFTA support if sanctions are agreed to. "The business community has made it clear that their support would erode if sanctions are included," said a Canadian official. According to various news reports, U.S. and Mexican negotiators had agreed to a compromise over sanction rights and were awaiting final approval from Hockin when Campbell intervened. Under the proposed compromise, a panel would first issue fines against countries or companies that violated side agreements and then impose border tariffs or sanctions if fines were not paid. However, a U.S. trade analyst said the compromise, even if accepted by Canada, is not likely to secure NAFTA ratification. "It is an obvious compromise that does not really satisfy any of the countries," said the trade analyst. Negotiators will also need to resolve the issue of Mexican sovereignty once conflict over enforcement mechanisms is resolved. U.S. and Canadian negotiators pressed for an agreement earlier this week that would allow them to sue Mexico in its own courts for non-compliance with supplemental accords. Jaime Serra Puche, Mexico's trade minister, sent a memorandum to negotiators in Washington earlier this week, saying, "Based on ... the principles of sovereignty and non- intervention held by Mexico, any attempt by the United States and Canada to intervene in our courts must be rejected absolutely." Puche instructed negotiators to "reject any action that would be an attempt against national sovereignty." Notimex, a Mexican government news agency, predicted that continued pressure by the United States and Canada over the court mechanism could "constitute a breaking point" in NAFTA talks. Sources: "NAFTA Side Accords Stall on Canadian Opposition," UPI, August 12, 1993; Peter Morton, "Ottawa Rejects NAFTA Compromise," FINANCIAL POST, August 12, 1993; Drew Fagen, "NAFTA Hits Snag, Campbell Balks at Sanctions in Side Deals," TORONTO GLOBE AND MAIL, August 12, 1993; Keith Bradsher, "Most Talks Completed Over Trade Pact Issues," NEW YORK TIMES, August 12, 1993; "NAFTA Ministers May Meet Thursday," REUTER, August 11, 1993; "Mexico Rejects Intervention in Courts in NAFTA Dispute," UPI, August 11, 1993; Eduardo Kragelund, According to a new study commissioned by the Ontario Ministry of Environment and Energy, the ability of governments to create tighter pollution laws will be eroded under NAFTA. The study, "The Environmental Implications on Trade Agreements," predicts that NAFTA will force national governments and approximately 90 provincial and state governments throughout North America to lower environmental standards as each jurisdiction competes for investment. Michelle Swenarchuk, an official from the Canadian Environmental Law Association (CELA), which was commissioned to perform the study, said NAFTA will prompt "a capping and downward pressure on a wide range of environmental standards, from pollution levels to pesticides in food to workplace chemical exposure levels." Lawyers, economists and trade specialists who authored the study concluded that the amount of pollutants and energy consumption in Ontario will be significantly higher if the free trade accord is passed. Pollutants are expected to increase by more than 4.5% annually over the next three years without a trade pact, but analysts say the increase will be accelerated by NAFTA. Swenarchuk said only a "sweeping renegotiation" of the free trade deal would eliminate problems outlined in the study. Sources: Martin Mittelstaedt, "Higher Pollution, Energy Use Seen in NAFTA," TORONTO GLOBE AND MAIL, August 12, 1993; Ian Austen, "Trade Deal Poses Risk to Environment, Study Says," OTTAWA CITIZEN, August 11, 1993. ________________________________________________________ GATT News Summary ________________________________________________________ ECONOMIST URGES CREATION OF "SUPER GATT" An economist with the National Planning Association, a Washington- based think-tank, called for the creation of a "Super GATT" to replace the current system of the General Agreement on Tariffs and Trade. The proposed Super GATT would be a two-tiered multilateral trade system. The first level would function as the current GATT does, providing Most Favored Nation trade status and other current GATT provisions. At the second level, members could agree to provisions on services, subsidies, intellectual property and enforcement. "Currently GATT -- which is going nowhere -- is like a g pumps and sells different brands and quality levels of gasoline." Belous also explained that the Ses would be welcome." Source: "NPA Calls For The Creation of a Super GATT to Replace the Current Multilateral Trading Structure," NPA NEWS RELEASE. ________________________________________________________ Resource: "The GATT and NAFTA: Investing or Divesting in Our Future?' Looking Ahead, NATIONAL PLANNING ASSOCIATION, 1424 16th Street, NW, Suite 700, Washington, D.C. 20036. Tel: (202) 265-7685. Fax: (202) 797-5516. $10.00. ________________________________________________________ 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 ________________________________________________________