TRADE NEWS BULLETIN Volume 2 Number 186 Tuesday, October 19, 1993 Headlines: REPUBLICAN NAFTA SUPPORT WEAKENS OVER TAX HIKES DAIRY FARMERS SAY NAFTA RULES OF ORIGIN TOO WEAK GATT URGES MEMBERS TO PUSH AHEAD WITH CONCESSIONS TAIWAN PUSHED TO JOIN GATT AS DEVELOPED NATION ________________________________________________________ NAFTA News Summary ________________________________________________________ REPUBLICAN NAFTA SUPPORT WEAKENS OVER TAX HIKES In a letter to President Bill Clinton, 27 House Republicans threatened to withdraw support for the North American Free Trade Agreement if the administration raises international transportation taxes. The Clinton administration last week proposed raising taxes on international airline and cruise tickets for travelers entering the United States by air or sea, and increasing fees on trucks and trains entering the country. The plan, which has been strongly criticized by the airline and cruise industries, would raise $2.37 billion to offset lost revenue from tariffs eliminated by NAFTA. "It would be difficult for many of us to support a NAFTA which includes tax increases ... if an offset is needed we should cut spending rather than raise taxes," states the letter. All 27 Republicans signing the letter had either endorsed NAFTA or were leaning toward an endorsement. Congressional budget rules require that tax and tariff cuts be offset by higher taxes or cuts in mandatory programs, such as Medicare. Representative Thomas W. Ewing (R-Illinois) has suggested instead that cuts be made to automatic spending programs, like food stamps. Senator Max S. Baucus (D-Montana) said it would be difficult to change budget rules. Senate rules in effect since the 1990 budget agreement require that an exception win the support of at least 60 Senators. Sources: Keith Bradsher, "House Republicans Rebel Over Taxes in Free Trade Pact," NEW YORK TIMES, October 19, 1993; "NAFTA," AP, October 19, 1993. ________________________________________________________ DAIRY FARMERS SAY NAFTA RULES OF ORIGIN TOO WEAK The Farmers Union Milk Marketing Cooperative (FUMMC) claims weak rules of origin outlined in the NAFTA text will lead to the decline of America's dairy industry. "We are absolutely shocked to discover that NAFTA allows dairy imports camouflaged as ostensibly nondairy items such as sugar confectionery full access to our market from anywhere in the world," said FUMMC President Stewart G. Huber in testimony before the House Agriculture Committee. Items containing non-U.S./Mexican dairy inputs, such as chocolate crumb, mixtures of animal and vegetable fats and oils, and sugar confectionery, could be sold in the NAFTA market tariff-free 10 years after the agreement is ratified. Butter and powder from other countries would be allowed into Mexico, where they would then be mixed with other products to produce the items for sale in the U.S., Canada and Mexico. "This time bomb buried in NAFTA will explode in 10 years and devastate our dairy industry," Huber said. "We wonder what other surprises are hidden in this 2,000 page agreement." FUMMC also argued that inadequate harmonization of sanitary standards, the loss of Section 22 dairy quotas and other NAFTA provisions would force American dairy farmers out of business. "Instead of expanded export markets for American dairy producers, NAFTA will bring our market down to the world level. Instead of economic modernization for Mexican farmers, NAFTA will bring them a few low-wage jobs mixing foreign dairy ingredients. That's not the way it was supposed to be," Huber said. Source: "Huge Loophole in NAFTA Rules of Origin Will Devastate Dairy, FUMMC Warns," FUMMC NEWS RELEASE, October 19, 1993. ________________________________________________________ GATT News Summary ________________________________________________________ GATT URGES MEMBERS TO PUSH AHEAD WITH CONCESSIONS During another round of negotiations in Geneva, U.S. and EC officials failed to make significant progress in global trade talks. GATT Director-General Peter Sutherland told the United States and the European Community yesterday that a tariff-reducing deal is urgently needed to conclude a global trade package by December 15. "There is no further time for prevarication and evasion," Sutherland warned. The U.S. and EC offered some tariff cuts Friday, but wide gaps remain in the textile and natural resource products sectors. During negotiations by senior U.S., EC, Canadian and Japanese officials last week, Japan was said to have offered the most significant proposal, a 50 percent reduction on nonferrous metal duties and tariff cuts up to half of its current 15 percent tariffs on textiles. EC officials, who are expected to offer another market access package on industrial products today, criticized U.S. reluctance to liberalize its ocean shipping industry and textiles sector. Sources: Keith M. Rockwell, John Zarocostas, "Deep Rift at GATT Stirs Fears of Crisis," JOURNAL OF COMMERCE, October 18, 1993; Robert Evans, "GATT Urges U.S., EC to Save Trade Pact," REUTER, October 18, 1993. ________________________________________________________ TAIWAN PUSHED TO JOIN GATT AS DEVELOPED NATION Leading industrialized nations agreed to support Taiwan's GATT application providing it joined the global trade regime as a developed nation. As a "developed" nation, Taiwan would be expected to lock in tariff cuts negotiated for other industrial leaders under the Uruguay Round of GATT talks. Taiwan has also been pressured to sign aviation and procurement codes upon entering the global trade body. But Ke- Sheng Sheu, who headed the Taiwanese delegation during GATT membership negotiations last week, told delegates that Taiwan was not yet prepared to sign either code. Source: "Key Nations Back Taiwan GATT Bid If Taipei Accepts Established Codes," JOURNAL OF COMMERCE, October 14, 1993. ________________________________________________________ Event: "Striking a Green Deal," November 7-9, The European Parliament, Brussels. $140.00. To reserve space contact: Environment & Development Resource Center, BLD Brandwhitlock, 146, 1200 Brussels, Belgium. Tel: +32 (2) 736 80 50 Fax: +32 (2) 733 57 08. This international conference will focus on Europe's role in the environment and South-North trade relations, including talks on the environmental impact of commodity trade and the "greening" of GATT and regional trade agreements. ________________________________________________________ Editors: Gigi DiGiacomo 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 ________________________________________________________