From iatp@igc.apc.orgFri Apr 14 01:04:41 1995 Date: Thu, 13 Apr 1995 13:53:36 -0700 (PDT) From: IATP To: Recipients of conference Subject: NAFTA & Inter-Am Trade Monitor 4/14 NAFTA & Inter-American Trade Monitor Produced by the Institute for Agriculture and Trade Policy Voume 2, Number 11 Friday, April 14, 1995 _______________________________________________ Headlines: - AGRICULTURAL TRADE PICTURE MIXED - CANADA-US TRADE AND DISPUTES - TEXTILE TRADE SEES DIFFICULTIES - GOVERNMENT, ZAPATISTAS TO NEGOTIATE _______________________________________________ AGRICULTURAL TRADE PICTURE MIXED % Corn and Other Grain Mexican corn growers have been hit hard by government-set low prices for their corn, high prices for fertilizer and other inputs, and unavailable or high-priced financing for production. Some Mexican agricultural organizations predict that the lack of financing for agricultural production may lead to a food shortage in the country. Mexican corn production is expected to drop this year, as farmers switch to more profitable crops, such as sorghum, and as corn yields drop due to lower rates of fertilization. While corn tortillas remain heavily subsidized by the Mexican government, increasing their sales to low-income consumers, farmers protest that the government-set prices for domestically-produced grains are too low to allow them a reasonable profit, or even to cover increased costs of production. The US Embassy reported that 118 Mexican mills had a total of $114 million in dollar-denominated debt (repayment figured in dollar- equivalents, rather than in pesos) coming due in the next few months, and predicted a reduction in wheat imports in 1995. Some analysts predict that as much as 20 percent of the Mexican milling industry may be out of business by the end of 1996, with wheat mills going bankrupt due to dollar-denominated debt for previous purchases of US wheat. US grain exports to Mexico dropped during the first part of 1995, but that was due in part to massive Mexican purchases at the end of 1994, which left Mexico with a surplus. Mexican millers were working off their inventories during the first months of 1995, and a Mexican government agricultural agency, CONASUPO, was selling its stocks of Mexican corn at 95 percent of the price of imported corn. Further complicating the export picture are Mexican government conditions on imported grain. A few months ago, the Mexican government required that all corn imports from North America be sprayed with green dye, a regulation later withdrawn. In March, the Mexican government announced a rule requiring all US grain imports -- corn, wheat, sorghum, and oilseeds -- to be sprayed with methyl bromide fumigant, a move protested by industry officials in the US both because of the increased cost and because of stringent US restrictions on the use of the toxic chemical. Gordon S. Carlson, "Peso Devaluation Hit Mexican Grain Buyers Hard: Attach," FEEDSTUFFS, 3/20/95; Matilde Prez, "40% Aumento Costos de Produccin del Maz," LA JORNADA, 3/16/95; Laura Gmez Flores, "El Barzon - Plan Agrava El Campo," LA JORNADA, 3/11/95; Matilde Prez, "Precio de Maz," LA JORNADA, 3/28/95; "Mexican Grain Imports, Flour Mills Suffer Under Devaluation," MILLING & BAKING NEWS, 3/21/95; Mike Zellner, "A Tortillazos Limpios," AMERICAECONOMIA, 2/95; "Corn Imports," REUTER, 3/24/95. % Dairy As the peso devaluation suddenly and dramatically increased the price of US milk, cheese, and ice cream for Mexico imports in December and January, US dairy producers saw a slowdown in exports with little likelihood of a quick rebound. Not only are the imported milk products more expensive, but many Mexican consumers have to forego purchases of more expensive cheese and ice cream products entirely. Mexican dairy production has also fallen, as producers abandon the use of recombinant bovine somatotrophin (BST) and sell off parts of their herds to raise needed cash. U.S. dairy producers continued to prepare for greater integration of the market, with the board of Mid-America Dairymen approving a proposal to offer Mid-Am membership to dairy farmers in Mexico. In August 1994 fluid milk sales from Texas and New Mexico to Mexico were 11.4 million pounds. The number increased to 24.7 million pounds by November. Then in December sales fell to 16.2 million pounds. Total US sales to Mexico in 1994 were $26.5 million for cheese (up from $20 million in 1993); $34.5 million for fluid milk and cream (up from $28 million in 1993); and $14.1 million for ice cream (up from $10.1 million in 1993.) As the Mexican market dries up, southwestern milk will be sold in other parts of the U.S., affecting U.S. domestic dairy prices. US producers criticized a proposed Mexican Health Ministry rule that would have limited the shelf life of all fluid milk products to 48 hours, a significant advantage for Mexican producers. In March, the Health Ministry informed the U.S. Embassy in Mexico that the 48- hour shelf life rule for milk would not be imposed, but did not specify what rule would be made. Edward Clark, "Mexico Peso Troubles Spread to U.S. Dairy Industry," FEEDSTUFFS, 3/13/95; "Mexico: Miscellaneous Trade Tidbits," US EMBASSY CABLE, 3/30/95; "Association Board Report," MID-AM REPORTER, 2/95. % Beef U.S. National Cattlemen's Association vice-president Chuck Lambert predicted that beef exports to Mexico during 1995 would decline to at least 1993 levels. Poultry, egg, and pork exporters predict similar declines. US beef exports to Mexico grew by 72 percent in 1994 to a total of 115,000 tons and, before December's peso devaluation, had been expected to reach 170,000 tons in 1995. Total U.S. beef exports rose by 18.5 percent in 1994 to a total of 685,000 tons. Since the devaluation, increased feed prices in Mexico pushed ranchers to sell feeder cattle herds, while the lure of dollars pulled them north. Feeder cattle are year-old steers or heifers that are sent to feedlots for about 120 days to gain weight for market. The owner of the International Livestock Exchange in Laredo, TX reported an increase from an average of 500-750 cattle per day to more than 1,000 per day. The US Department of Agriculture reported that during the week of December 17, the last before devaluation, 2,389 head of cattle were sent north through Laredo as feeders, but the number rose to 7,788 by the week ending February 4 and stood at 6,042 in the week ending February 25. "Peso Plunge Hits U.S. Exports," MEAT & POULTRY, 2/95; John Zaracostas, "US Beef Exports Rose 18.5% in '94 on Greater Demand in Asia, Mexico," JOURNAL OF COMMERCE, 3/15/95; Kevin G. Hall, "Peso's Decline Driving Cattle Exports to US," JOURNAL OF COMMERCE, 3/21/95. CANADA-US TRADE AND DISPUTES Canadian-US trade grew by 22 percent in 1994. Total bilateral trade of $330.69 billion (Canadian) was the largest annual trade between any two countries. Exports to the U.S. grew by 21.3 percent during the first 11 months of 1994, and exports to Mexico grew by 22.7 percent during the same time. Along with the increasing trade has come increased national debt (71 percent of the GDP), with soaring interest rates, a large budget deficit, and a weakened Canadian dollar. Bitter disputes between the U.S. and Canada remain, including battles over agricultural trade. Canadian agriculture minister Ralph Goodale criticized US grain export subsidies during a three-day trip to Chile, Argentina, and Brazil in March. Goodale also expressed concern about attacks on the Canadian Wheat Board by U.S. industry associations, saying that a public relations campaign is "obviously designed to ratchet up the political pressure in the U.S., just at the time when the [joint U.S.-Canada] blue-ribbon commission is trying to do its work in a serious and conscientious way." The Canadian Wheat Board pays farmers a fixed initial price, sells the wheat on behalf of farmers, and pays a final price based on international prices. Goodale had earlier defended Canada's system of marketing boards for dairy and poultry products, which are also opposed by the U.S. Canadian tariffs on U.S. dairy and poultry imports range from 100 to 300 percent. John Urquhart, "Canada's Trade With U.S. Grew by 22% in 1994," WALL STREET JOURNAL, 2/21/95; Clyde H. Farnsworth, "In Canada, Doubts Fade Quickly About Trade Accord," NEW YORK TIMES, 2/12/95; Bernard Simon, "Canada Faces Tough Budget to Tackle Debt," FINANCIAL TIMES, 2/27/95; Ian Elliott, "Canada Minister Blasts U.S. in South America," FEEDSTUFFS, 4/3/95; "Canadian Ag Minister Defends Dairy Industry," "Canadian Ag Minister Defends Wheat Board," AGWEEK, 2/27/95. TEXTILE TRADE SEES DIFFICULTIES In a surprise move, the U.S. Committee for the Implementation of Textiles and Apparel (CITA) notified the Dominican Republic, Colombia, Costa Rica, El Salvador, Honduras, Thailand, and Turkey that their exports of underwear to the United States had been protested by U.S. manufacturers. The move is a prelude to negotiation for reduction of such imports, which increased nearly 90 percent during the period 1992-94. The U.S. also notified also notified Jamaica, Honduras, and El Salvador that it plans to limit their exports of nightwear. The primary producers in these countries are in fact U.S. companies operating under the offshore assembly "807 program," which allows garments to be assembled in a region from fabric made and cut in the United States and then re-exported to the United States, with duty paid only on the value added in assembly. These U.S. companies would be most affected by any restrictions on imports. CITA's notification is also puzzling, because the U.S. Congress is currently considering extension to Caribbean nations of the same preferential treatment as is now extended to Mexico under NAFTA. US textile and apparel importers have recently complained about US government delays in setting textile quota levels for the year. The US Department of Commerce usually announces the quota levels at the beginning of the calendar year, but delayed until April this year. Commerce Department officials from the Office of Textiles and Apparel (OTA) say the process was delayed by last year's replacement of the Multi-Fibre Arrangement with a new Agreement on Textiles and Clothing, negotiated in the Uruguay Round of GATT talks. While setting levels for 17 countries with which the US has bilateral trade agreements, the OTA waited to see what countries signed on to the World Trade Organization (WTO) before setting other quotas. Mexico is taking steps to restrict imports, imposing a 35 percent tariff on textiles, footwear, and leather goods. The restrictions are aimed at "triangulated merchandise" -- goods originating in countries with which Mexico has no preferential trade agreements. Much of the targeted merchandise comes from Asia and Brazil. Mexican Commerce Secretary Herminio Blanco said that the tariff will protect Mexican sectors with a high number of micro-, small-, and medium- sized businesses that are threatened by such imports. Some US footwear and apparel distributors and retailers have objected to the tariff, because much of the stock they ship to Mexico originates outside the US and is subject to the new tariff. During Mexico's current economic crisis, Mexican textile manufacturers have been split between those who export and those who produce for domestic consumption. Exporters are prospering, with sales abroad expected to rise as much as 30 percent due to the peso devaluation. Domestic producers are struggling with increased interest rates and reduced domestic consumption. The textile industry's split between exporters and domestic producers characterizes much of Mexico's post-devaluation economy. Mexico's textile industry has been volatile for a decade, with about 400 companies going out of business in the late 1980's, when the industry was first opened to foreign competition. "For a few Mexican companies, the NAFTA is all that has kept them afloat during this crisis," claims a US Embassy cable, which then gives specific examples. "A men's suit manufacturer who entered into a joint venture with a U.S. partner three years ago told a trade officer recently that he delivered zero/zero product to Mexican customers during January and February. Only his export operations kept him going. Another firm, a shoe manufacturer/exporter and apparel importer says it received just five orders from Mexican retailers in all of January. The company kept going on the strength of exports to the U.S. Unfortunately, the vast majority of manufacturers could or would not reorient their strategy toward exporting when they had a chance and today are focused exclusively on mere survival." US, Canadian, and Mexican textile associations recently formed the North American Textile Council to work together to facilitate trade among the NAFTA members. "We want to see the textile and apparel trade increase in North America and displace the trade from the Far East," said Carlos Moore, executive vice president of the American Textiles Manufacturers Institute. The council supports Chile's entrance into NAFTA, but urges stringent conditions on China's admission to the WTO. "U.S. Moves to Snip Underwear Imports," INTERPRESS SERVICE, 3/31/9; John M. Nagel, "Zedillo Vows to Protect Mexico's Manufacturers," JOURNAL OF COMMERCE, 3/16/95; John M. Nagel, "Mexico's Trade Stance Defended," JOURNAL OF COMMERCE, 3/20/95; Paula L. Green, "Textile Quota Levels Expected to be Issued by April 10," JOURNAL OF COMMERCE, 3/29/95; Paula L. Green, "Council Working to Ease N. American Textile Trade," JOURNAL OF COMMERCE, 3/29/95; Brendan M. Case, "The Great Divide," EL FINANCIERO, 3/20-26/95; "Mexico: NAFTA Effects," U.S. EMBASSY CABLE, 3/30/95. GOVERNMENT, ZAPATISTAS NEGOTIATE After twelve hours of talks, representatives of the government and the Zapatista Army of National Liberation (EZLN) and Bishop Samuel Ruz as head of CONAI, the National Mediation Commission, signed an accord at midnight on April 9, agreeing to begin formal negotiations on April 20 in San Andrs Larrinzar. The protocol for further talks committed both sides to negotiating in good faith toward a goal of peace with justice and dignity. The April 9 meeting, originally slated to be held in the church in the small town of Ocosingo, was moved to a nearby wooden house after government representatives refused to meet in the church. San Andrs Larrinzar is located in the highlands of Chiapas, about 25 kilometers from San Cristbal de las Casas, and its population is 100 percent indigenous. A representative of the legislative Commission of Concord and Pacification (COCOPA) insisted that meetings in San Andrs Larrinzar may not take place in a church or convent or any religious building, and suggested that they might take place in a government building or a school. Until last week, the EZLN had insisted that it would not negotiate in Chiapas because of military presence there. A military source said that the approximately 100 soldiers in San Andrs Larrinzar had not yet been ordered to withdraw. Elio Henrquez, Jos Gil Olmos, and Juan Antonio Ziga, LA JORNADA, 4/10/95; Elio Henrquez and Jos Gil Olmos, LA JORNADA, 4/12/95; RESOURCES/EVENTS Land and Liberty in Rural Mexico, Democracy Backgrounder, Vol. I, No. 1, April 1995. Published six times annually by the InterHemispheric Resource Center, P.O. Box 4506, Albuquerque, NM 87196, email resourcectr@igc.apc.org. Phone 505/842-8288; Fax 505/246-1601. Subscription $15/year within U.S., $20 outside. First issue contains approx. 8-page background article on campesino organization during the 20th century. Public Citizen information packets. Compilations of news clippings, fact sheets, and other information from Ralph Nader's Public Citizen organization, 215 Pennsylvania Avenue SE, Washington, D.C., 20003. Telephone 202/546-4996, fax 202/547-7392. The March 3 edition of approximately 30 pages includes a general update on NAFTA impact and political outlook for expansion, selected news clips, and a "Globalization Pop Quiz." The Evolving Protection of State Laws and the Environment: NAFTA from a Texas Perspective by Dan Morales, Texas Attorney General (prepared by Gregg A. Cooke, Chief, Environmental Protection Division and Amanda Atkinson, Assistant Attorney General). U.S.- Mexico Occasional Paper No. 5, U.S.-Mexican Policy Studies Program, Lyndon B. Johnson School of Public Affairs, The University of Texas at Austin. 1994, 54 pp. U.S.-Mexican Policy Studies Program, Lyndon B. Johnson School of Public Affairs, The University of Texas at Austin, P.O. Drawer Y, University Station, Austin, TX 78713-8925. Phone 512/471-8925. Overview of legal rights of states vis-a-vis federal government and international trade agreements, focusing on state's role in environmental disputes arising under NAFTA. _______________________________________________ Produced by the Institute for Agriculture and Trade Policy, Mark Ritchie, President. Edited by Mary C. Turck. The NAFTA & Inter- American Trade Monitor is available free of charge to Econet and IATPNet subscribers. For information about fax or mail subscriptions, or other IATP publications, contact: The Institute for Agriculture and Trade Policy, 1313 5th Street SE, Suite 303, Minneapolis, MN 55414. Phone: 612-379-5980; fax: 612-379-5982; e-mail: iatp@iatp.org. For information about IATP's contract research services, contact Dale Wiehoff at 612-379-5980, or e-mail: dwiehoff@iatp.org