TRADE NEWS BULLETIN Volume 2 Number 211 Wednesday, November 24, 1993 Headlines U.S. WANTS OUT OF GATT SERVICES TAX PROPOSAL U.S., EU FAIL TO ACHIEVE BREAKTHROUGH, FARMERS TO PROTEST MEXICAN SENATE APPROVES NAFTA ________________________________________________________ GATT News Summary ________________________________________________________ U.S. WANTS OUT OF GATT SERVICES TAX PROPOSAL U.S. Treasury officials Monday requested that the United States remain exempt from a services tax proposal outlined in the General Agreement on Tariffs and Trade. The current services text, which includes key sectors of the banking and insurance industries, requires all 116 GATT members to offer national tax treatment to foreign firms and employees. U.S. negotiators argue that direct taxation -- an income tax for individuals and companies -- should be governed through bilateral treaties. They are requesting the freedom to treat foreign service companies differently than local companies for tax purposes. The European Union and other GATT members worry that the United States could craft bilateral tax laws that would prevent foreign firms from enjoying access to U.S. markets. "In theory, unless direct tax is covered in the accord the U.S. could tax foreign service providers and individuals they employ in such a way as to prevent them from being able to compete with American firms," said one European trade diplomat. Other GATT members threatened to demand similar provisions if the U.S. was granted its request. Negotiators speculate the tax dispute could evolve into a larger debate preventing conclusion of the current GATT Round by the December 15 target date. "We have already gone a long way to accommodate U.S. concerns in the draft agreement," said one negotiator. "To be told at the eleventh hour that even this is not acceptable has caused a major and violent reaction." GATT Director- General Peter Sutherland told U.S. Treasury Assistant Les Samuels that the U.S. tax proposal was unacceptable and warned that the U.S. demand could "unravel" progress already made in the services sector. Sources: Robert Evans, "U.S. Pushes Tax 'Carve-Out' Bid at GATT Talks," REUTER, November 22, 1993; David Dodwell, "GATT Negotiators Balk at U.S. Tax Demands," FINANCIAL TIMES, November 23, 1993; Frances Williams, "U.S. Tax Stance Threatens Trade Talks, Says GATT," FINANCIAL TIMES, November 24, 1993; Stephanie Nebehay, " U.S. Rebuked Over Stance on Taxation at GATT Talks," REUTER, November 23, 1993; David Dodwell, "U.S. Fights Its Corner Over Tax Demands," FINANCIAL TIMES, November 23, 1993. ________________________________________________________ U.S., EU FAIL TO ACHIEVE BREAKTHROUGH, FARMERS TO PROTEST U.S. Trade Representative Mickey Kantor and EU Trade Commissioner Leon Brittan failed in talks this week to resolve long-standing differences in a number of sectors outlined in GATT. "It was more covering old ground than fresh negotiations," said an EU official describing the meetings. Uruguay Round negotiators are still working on issues involving steel tariffs, the EC-U.S. Blair House accord, tariff reduction for textiles and clarifying audiovisual trade and subsidy rules. The European Union was apparently upset by a weak U.S. market access offer and by Kantor's adamant refusal to reopen farm talks. French farmers' unions, led by the Federation of French Farmers (FNSEA), are planning to protest the U.S.-EU farm deal on December 1. "The FNSEA plans a genuine attack against a GATT compromise," said an FNSEA source. "It means to hit hard." Sources: Lyndsay Griffiths, "U.S., EC Strive for Trade Compromise," REUTER, November 23, 1993; Frances Williams, "Sparks Fly in Steel Clash," FINANCIAL TIMES, November 23, 1993; "French Farmers to Protest Against GATT on December 1," REUTER, November 22, 1993; "France: No Progress on GATT," UPI, November 24, 1993; "Global Trade Talk Focus Shifts to France," REUTER, November 24, 1993; Martin Crutsinger, "Global Trade," AP, November 22, 1993; Peter Madden, "Fibre Losers in Uruguay Round," FINANCIAL TIMES, November 23, 1993. ________________________________________________________ NAFTA News Summary ________________________________________________________ MEXICAN SENATE APPROVES NAFTA The Mexican Senate passed the North American Free Trade Agreement Monday by a vote of 56 to two. Senator Porfirio Munoz Ledo of the Democratic Revolution Party, which cast the only two votes in opposition to NAFTA, called the agreement a "colonial-type pact" and told other Senators during the pre-vote debate that NAFTA would "turn our country over to the foreigners." Senator Carlos Sales Gutierrez, of the Institutional Revolutionary Party (PRI), accused Munoz Ledo of making "false statements," and told him: "The country you see and the country I see are very different, sir." The governing PRI party controls 61 of the 64 Senate seats. Six PRI Senators were absent for the vote. Sources: "Mexican Senate Begins NAFTA Approval Debate," REUTER, November 22, 1993; Anita Snow, "Mexico-NAFTA," AP, November 22, 1993; "Mexican Senate Approves NAFTA," UPI, November 23, 1993. ________________________________________________________ Other Trade News ________________________________________________________ ASIA, LATIN AMERICA TIES CONTINUE TO GROW Trade and investment ties between Asia and Latin America are expected to continue growing as Mexico and Chile prepare to join the Asia-Pacific Economic Cooperation (APEC) forum and Japan searches for new opportunities and access to the North American Free Trade zone. Japanese business leaders, who have enjoyed increased trade with Latin America over the past few years, expect NAFTA to boost sales of Japanese motorcycles, television sets, videotapes and other goods. In 1991, 11 Latin American countries bought $11.7 billion worth of goods and sold $17.9 billion worth of goods to 12 Asian countries. Japan accounted for 50 percent of the South American trade and displaced the United States in 1991 as Chile's number one trade partner. A Colombian sociologist, Armando Rodriguez, said Latin America is aggressively seeking Asian investment and trade in an attempt to diversify its economic growth. "The U.S. investments in Latin America continue to occupy the first place, which means an economic dominance in our own territory." Sources: Janet Duncan, "Japanese See Trade Benefits in Mexico With NAFTA," REUTER, November 22, 1993; Eduardo Gallardo, "LatAm- Pacific Trade," AP, November 9, 1993. ________________________________________________________ Note: The next edition of trade news will be produced Tuesday, November 30. ________________________________________________ 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 ________________________________________________