From iatp@igc.apc.orgTue Dec 6 10:04:34 1994 Date: Tue, 06 Dec 1994 04:11:03 -0800 (PST) From: IATP To: Recipients of conference Subject: NAFTA & Inter-Am Monitor 12/5/94 Produced by the Institute for Agriculture and Trade Policy - - - - - - - - - - - - - - - - - - NAFTA and Inter-American Trade Monitor, vol. 1, #28 December 5, 1994 - - - - - - - - - - - - - - - - - - HEADLINES NAFTA IMPACT FELT BEYOND ITS BORDERS MOVES TOWARD INTEGRATING REGIONAL TRADE AGREEMENTS ECOLOGICAL CONCERNS RAISED ON GLOBAL TRADE FOOD PRODUCTION, POVERTY INCREASE IN LATIN AMERICA LATIN AMERICAN TRADE NOTES - - - - - - - - - - - - - - - - - - NAFTA IMPACT FELT BEYOND ITS BORDERS After almost a year, NAFTA's impact on the economies of its three member countries remains a matter of debate. While trade between Mexico and the United States has continued the upward trend begun prior to NAFTA, many regulations governing trade and investment have become even more complex. No improvement in enforcement of Mexican labor or environmental laws has been seen. Unions cite the dismissal of claims against General Electric and Honeywell as clear indications that NAFTA's labor side agreement is toothless and that the National Administrative Office (NAO) set up to hear claims will do nothing to protect workers. While the NAO Secretary Irezema Garza says her office's function is to gather and publicly report information about labor practices in the three countries, she barred electronic media from recording the first hearings and limited witnesses to about 15 minutes of testimony each. Caribbean countries report negative effects from NAFTA, with the region's garment exporters claiming that they are losing ground to Mexico. The rate of growth of Caribbean Basin imports slowed from 28 percent from January to June 1993 to 9.9 percent for the same months in 1994. Mexican garment exports to the United States grew by 19.4 percent during the first half of 1993, and by 39.2 percent in the first half of 1994. The garment industry employs 450,000 workers, mostly women, in the Caribbean Basin, and last year earned $3.9 billion. Source: Damian Fraser, "Trade Balance Still Largely Unchanged," FINANCIAL TIMES, 11/23/94; Peter White, "False Teeth," IN THESE TIMES, 11/14/94; Scott West, "Garments Lose Ground to Mexico," IPS, 11/24/94. - - - - - - - - - - - - - - - - - - MOVES TOWARD INTEGRATING REGIONAL TRADE AGREEMENTS Canadian Trade Minister Roy MacLaren recently criticized the United States for backtracking on promises to integrate Latin America into a free trade zone stretching from Alaska to Tierra del Fuego, calling Chilean accession to NAFTA "the key to opening the emerging South American market as a whole." According to MacLaren, Latin American frustration over delays in NAFTA expansion have led countries to create a "confusing myriad" of regional groupings. Regional groupings include the Andean Pact (Colombia, Ecuador, Venezuela, Peru, and Bolivia as an observer), with zero internal tariffs and significant agreement on common external tariffs; Mercosur (Brazil, Argentina, Uruguay, and Paraguay), which is moving toward a customs union and a common external tariff; the Group of Three (G-3, composed of Mexico, Colombia, and Venezuela), which has liberalized trade provisions among its members. Chile, still eager to begin negotiations for entry to NAFTA, is also pressing for an association with Mercosur. Chile's proposal to Mercosur would lead to creation of a free trade zone within six years. Bolivia and Ecuador have also expressed interest in association with Mercosur. The European Union (EU) has approached Mercosur for a cooperation agreement in 1995, though it is unlikely to give easy access to its markets for Mercosur's agricultural products. The EU is Mercosur's primary trading partner, with a balance of trade in Mercosur's favor of $46 billion from 1985-1992. The Andean Pact nations are also interested in a trade agreement with Mercosur, though the Pact is still working toward agreement on its own common external tariffs. . Source: "Canada Says NAFTA Will Lose Steam Without Chile," REUTER, 11/25/94; "Chile Reaffirms Intention to Join Mercosur," REUTER, 11/25/94; Elaine Flaherty, "Canada Backs Chile's Inclusion in Trade Pact," OTTAWA CITIZEN, 11/26/94; "Las Prioridades de Chile Son el NAFTA y el Mercosur," SUCESOS,11/24/94; "O Mercosul E Apenas O Come o," IBASE, 11/18/94; Debra Percival, "EU Wants Mercosur Accord Signed in 1995," IPS, 11/16/94; "Europeus Se Aproximam do Mercosul," IBASE, 11/17/94; "Ministers to Discuss Common Foreign Tariff," IPS, 11/22/94; "Ecuadorean, Colombian Businessmen Analyse Trade," IPS, 11/16/94. - - - - - - - - - - - - - - - - - - ECOLOGICAL CONCERNS RAISED ON GLOBAL TRADE Brazil's government and logging industry successfully opposed plans to clamp down on trade in Amazonian mahogany trees at the November meeting of the intergovernmental Convention on International Trade in Endangered Species (CITES). Environmentalists, led by delegates from the Netherlands, criticized lumbering for its impact on both the mahogany trees and the Amazonian eco-system. Meanwhile, petroleum companies operating in Latin American countries, meeting in Ecuador in mid-November, agreed to create an environmental policy center in 1995 "in order to efficiently deal with environmental issues in the petroleum industry's different activities." Latin America produces seven million barrels of petroleum each day and consumes about four million barrels a day. Source: William Schomberg, "Brazil, Logging Industry Resist Calls for Tighter Controls on Mahogany," JOURNAL OF COMMERCE, 11/11/94; John H. Cushman, Jr., "Tigers, Elephants and Sharks Gain at Conference," NEW YORK TIMES, 11/20/94; "Petroleum Companies to Create Environmental Centre," IPS, 11/16/94. - - - - - - - - - - - - - - - - - - LATIN AMERICAN TRADE NOTES % Jamaica is studying the feasibility of increased bauxite exploration, mining, and processing. Bauxite/alumina is Jamaica's second-largest export earner, and world demand is expected to grow as plants in the former Soviet Union become idle. % Chile was showing a $394.3 million trade surplus by October, due to rising international copper prices. Copper makes up more than 40 percent of Chile's exports. Total 1994 trade may show a surplus, though industrial exports show a serious decline. % In Ecuador, exports increased more than ten percent over 1993 during the January-August time period. Banana, coffee, seafood, flower, and manufactured goods exports rose, offsetting a decline in sales of crude oil, the country's main export product. % Venezuela's automotive exports rose to more than $500 million in 1994, with $150 million in auto parts and 20,000 assembled vehicles, nearly double last year's 11,000 exported vehicles. The United States imports 58 percent of Venezuelan auto parts, but 88 percent of the vehicles go to Colombia, with 10 percent going to Ecuador and the remainder to various Caribbean nations. Colombia, Ecuador, and Venezuela signed a tariff agreement on auto parts and vehicles in 1993. % Italy looks to increasing business deals in Mexico, along with increased investment there, according to the president of the Italian Chamber of Commerce. Italian sales to Mexico increased from $240,000 to one billion dollars over the past five years. Mexican exports to Italy, and to the rest of the European Union, are minimal. % A Brazilian company, the Andrade Gutierrez company, will invest $400 million in Chile to build two hydroelectric plants. The plants, on the Chachapoal River, will be used by the state-run Chilean Copper Corporation, Codelco, and will have a capacity equal to ten percent of Chile's current electric capacity. % Mexican businesses will invest $300 million in a geothermal plant in Nicaragua, part of the renegotiation of Nicaragua's one billion dollar plus debt to Mexico. Half of the debt is scheduled to be paid over 40 years, while the other half will be made up by purchase of shares and investments by Mexican businesses. Another deal involves the Mexican purchase of Nicaragua's only cement company for $60 million. Source: "Bauxite Industry Looking Up," IPS, 11/8/94; "Trade Balance Shows Surplus Thanks to Copper," IPS, 11/8/94; "Exports Up More Than 10 Percent," IPS, 11/11/94; "Automotive Exports Hit 500 Million Dollars," IPS, 11/10/94; Eduardo Molina y Vedia, "Italy/Mexico Trade: Good Prospects for Business and Investment," IPS, 11/12/94; "Brazilian Company to Build Chilean Hydroelectrics," IPS, 11/17/94; "Mexico Invests $300 Million in Geothermal Plant," IPS, 11/18/94. - - - - - - - - - - - - - - - - - - FOOD PRODUCTION, POVERTY INCREASE IN LATIN AMERICA South American grain production rose in 1994, but will still not meet 1994-95 demand, according to the UN Food and Agriculture Organization (FAO). The already-complete rice harvest produced higher yields in Peru and Brazil, with slightly lower yields in Argentina and Uruguay. In Brazil, less wheat was planted in 1994 than in 1993, due to lower prices and competition from imported wheat. Chilean farmers have also been affected by competition from imported grain. According to Jacques Chonchol, ex-Minister of Agriculture in Chile (1970-73), who has been at the Institute of Advanced Studies of Latin America at the University of Paris since 1974, free trade is increasing rural poverty. Chonchol argues that, while agricultural exports from Latin America have grown from $7 billion in the 1970's to $30 billion at present, the rate of rural poverty or misery has increased from 56 percent to 61 percent. While larger landowners benefit, tenants and non-owners have become poorer. Worldwide agricultural production will rise by 2.2 percent in 1994, according to the FAO. Citing "enormous contrasts and unequalities" in world food and agricultural production, FAO General Director Jacques Diouf said that many people will continue to suffer from chronic malnutrition. Diouf cited Haiti, El Salvador, Honduras and Nicaragua as Latin American countries with problems of food scarcity or emergency. Causes of malnutrition include increased food prices in some areas. In Jamaica, the rising cost of basic foods has hit the elderly particularly hard. According to a 1992 UN Development Program (UNDP) report, 80 percent of the rural elderly live below the poverty line of $15 weekly, the amount of the weekly minimum wage. Food stamp program recipients, including 320,000 elderly, pregnant women, disabled persons, children between one and five years of age, and low income families, receive less than three dollars per person per month for food. Source: "Latin America: 1994 Rise in Grain Production Insufficient," IPS, 11/17/94; Jorge Pina, "FAO Director Outlines Growth Trends," IPS, 11/15/94; Misha Lobban, "Increasing Food Costs Wiping Out Effect of Food Subsidy," IPS, 11/7/94; "Zonas de Livre Comercio Desprezam Mao-de-Obra Rural," IBASE, 11/17/94. - - - - - - - - - - - - - - - - - - RESOURCES/EVENTS "Economic Restructuring and Rural Subsistence in Mexico: Corn and the Crisis of the 1980s," edited by Cynthia Hewitt de Alcntara. Published by the United Nations Research Institute for Social Development and the Center for U.S.-Mexican Studies of the University of California at San Diego. Publications Office of Center for U.S.-Mexican Studies, University of California, San Diego, La Jolla, CA 92093-0510. Telephone 619/534-4503; fax 619/534-6447. $18. Expanded version of Spanish-language UNRISD Discussion Paper of the same name, including eight case studies of how different kinds of farmers, in different regions of Mexico, are coping with free trade and the reorganization of the public sector, and final chapter on policy changes to the end of 1993. - - - - - - - - - - - - - - - - - - The NAFTA and Inter-American Trade Monitor is available in both English and Spanish on Association for Progressive Communications (APC) computer networks on the conference eai.news. It can also be faxed or sent via mail on request. We welcome your comments and contributions. - - - - - - - - - - - - - - - - - - For more information about the Institute for Agriculture and Trade Policy, send email to iatp-info@igc.apc.org. - - - - - - - - - - - - - - - - - - Produced by: Mary C. Turck, Institute for Agriculture & Trade Policy, 1313 Fifth St. SE, Suite #303, Minneapolis, MN 55414- 1546 USA Tel: (612) 379-5980, Fax: (612) 379-5982, email: mturck@igc.apc.org