From iatp@igc.apc.orgSat Dec 16 10:43:31 1995 Date: Fri, 21 Apr 1995 12:58:08 -0700 (PDT) From: IATP To: Recipients of conference Subject: NAFTA & Inter-Am Monitor 4/21/95 NAFTA & Inter-American Trade Monitor Produced by the Institute for Agriculture and Trade Policy April 21, 1995 Volume 2, Number 12 __________________________________________ Headlines: - IMMIGRATION AND FREE TRADE - IADB CHANGES RULES FOR LOANS - DISTRIBUTION OF WEALTH -- U.S., CANADA, MEXICO - AUTO MANUFACTURING IN LATIN AMERICA - ARGENTINE PATENT LAW VETOED - FISHING WAR ENDS IN TRUCE FOR NOW IMMIGRATION AND FREE TRADE Reports in April that the U.S. government is preparing contingency plans, including use of the U.S. military along the Mexican border, renewed concerns over immigration and sovereignty. The secret plan for a worst-case scenario of mass emigration from Mexico to the U.S. has been made available to the Mexican government, which has chosen not to comment at this time. In January and February, U.S. immigration commissioner Doris Meissner had claimed that there was no change in immigration from Mexico due to that country's economic crisis. By March, Meissner reported that the crisis had led in fact to an immediate increase in emigration from Mexico. Remittances from Mexican immigrants living in the U.S. are estimated at $3 billion per year, making them one of Mexico's largest sources of foreign exchange. Border industrialization, including maquiladoras, has drawn Mexican workers to both sides of the U.S.- Mexico border area during the last decade. Changes in agricultural policy have forced other workers off the farms, adding pressure to urban and border areas. Among foreign legal residents of the U.S., applications for citizenship have soared in recent months. Punitive congressional proposals to bar legal permanent residents from eligibility for a range of programs from lead testing for children to food stamps and Medicare, as well as a rising tide of anti-immigrant feeling in the U.S., have moved many permanent residents to apply for U.S. citizenship. At least a million undocumented Latin American immigrants seek to cross into the U.S. each year. The total number of immigrants from all parts of the world is estimated at three million annually. Undocumented immigrants make up only 13 percent of all immigrants living in the U.S., and only one percent of the U.S. population. According to a 1994 American Civil Liberties Union Immigrants' Rights Project report, and numerous other studies, immigrants create more jobs than they fill and generate significantly more in taxes than they cost in services received. U.S. President Bill Clinton proposed a billion-dollar anti-immigration plan this year, including increased border patrols and deportations and crackdowns on sweatshops that employ undocumented workers. Shortly after the U.S. authorized billions of dollars in loans to Mexico, the Mexican government announced a new bi-lateral cooperation plan to deal with undocumented immigrants and drug smugglers. Under the plan, Mexico agreed to facilitate repatriation of undocumented immigrants, increase surveillance, and keep closer tabs on the movement of people throughout the country. Some in northern industrialized countries argue in favor of adding labor standards to free trade agreements, saying the lower wages and poorer working conditions of the South constitute unfair competition. According to Luis Marius, assistant general secretary of the Latin American Workers Central (CLAT), the cost to employers of a work-hour varies from $52 in Germany to $36 in the U.S. and $32 in Japan. In Latin America, the cost is $50 per month. Marius criticizes the Northern nations for insisting on neoliberal and free trade policies for the South. According to Marius, the industrialized North fails to comply with the neoliberal policies that it imposes on the South. Kevin G. Hall, "Mexico Mum on US Plan to Thwart Mass Exodus," JOURNAL OF COMMERCE, 4/11/95; "Applications for Citizenship Soar Among Legal Immigrants," NEW YORK TIMES, 4/3/95; Estrella Gutierrez, "Labour and Immigration, the New North-South Debate," INTERPRESS SERVICE, 3/16/95; "Federal Fingers Aim to Stretch Far and Wide," INTERPRESS SERVICE, 2/7/95; Diego Cevallos, "Joint Immigration Plan With United States Announced," INTERPRESS SERVICE, 2/2/95; Peter Andreas, "Border Troubles: Free Trade, Immigration and Cheap Labor," THE ECOLOGIST, November/ December/94; David Cole, "Five Myths About Immigration," THE NATION, 10/17/94. DISTRIBUTION OF WEALTH -- U.S., CANADA, MEXICO According to a just-released study based on Federal Reserve figures, the United States has the widest gap between rich and poor of all industrialized nations. Economic inequality within the U.S. has risen dramatically since the 1970s. The richest one percent of U.S. households owns nearly 40 percent of the country's wealth, with each household in the group worth at least $2.3 million. The top 20 percent of U.S. households (each worth $180,000 or more) owns 80 percent of the country's wealth. Income figures are similar, with the top 20 percent of U.S. households (those earning $55,000 per year or more) taking home 55 percent of all after-tax income. In contrast, the lowest-earning 20 percent of U.S. households earn only 5.7 percent of the country's income. Between 1970 and 1992, the richest 20 percent enjoyed inflation-adjusted income growth of $13,000, while the poorest 40 percent saw no growth. In Canada, the wealthiest 20 percent earn 40 percent of total family income, with the poorest 20 percent receiving only six percent. Canada has the third-highest poverty rate among the top seven industrialized countries, and the second-highest for single-parent families -- 45 percent. Canada's poverty rate for single-parent families is second to that of the U.S. -- 53 percent. In Canada, too, the gap between rich and poor has widened significantly since 1973. The current U.S. income distribution figures are close to those of Mexico. The richest 20 percent of the Mexican population earns 54 percent of the national income, while the poorest 20 percent earns less than 5 percent of the national income. In 1994, nearly 30 percent of Mexican workers earned the minimum wage of approximately $4.60 per day. Keith Bradsher, "Gap in Wealth in U.S. Called Widest in West," NEW YORK TIMES, 4/17/95; "Index: The Plight of Canada's Poor," "Gap Widens Between Haves and Have-nots," CCPA MONITOR, 3/95; Sarah Anderson, John Cavanagh, David Ranney, Paul Schwalb, NAFTA'S FIRST YEAR, 12/6/94. FISHING WAR ENDS IN TRUCE FOR NOW After vehement protests by Spain, including Spanish imposition of visa requirements on Canadians for the first time in recent history, Canada and the European Union reached an agreement on fishing rights in the Grand Banks area. The current crisis, with its roots in the worldwide exhaustion of fishing stocks, included sea chases, machine-gun fire, and confrontations between Canadian Coast Guard and Spanish military vessels. (See NAFTA & Inter-American Trade Monitor, 3/31/95.) Canada continued to maintain that the Spanish fishing vessel that it seized, as well as other Spanish trawlers, violated limits on both size and quantity of fish taken, further endangering the turbot stock of the Grand Banks Area. According to Greenpeace International, 69 percent of the world's fish stocks are overfished or depleted. About 50,000 Canadian fishers and fish plant workers are unemployed as a result of a three-year-old moratorium on cod fishing. Spain rejected Canada's claims and the proffered photographs and physical evidence, and accused Canada of piracy because the vessel was fishing in international waters when seized. The agreement reached in mid-April provides for verification of gear and catch records, minimum sizes for fish caught, and stiff penalties for violations. Enforcement will include satellite surveillance and placement of an independent monitor on every vessel fishing in the disputed waters off Newfoundland. Canada also agreed to a revision in quota division, with reduction of its share of the turbot catch to 37 percent of the total 27,000 tons and an increase to 37 percent of the European Union share, with the remainder going to other countries in the 15-member Northwest Atlantic Fisheries Organization, including Russia and Japan. Canada will also drop charges against the Spanish boat and captain, release the boat, and refund the bond previously posted. The Spanish fishing industry denounced the agreement, with one opposition leader promising to "fight in Parliament and in the streets if necessary." "El Gobierno Espaol Impone la Necesidad de Visado Para los Canadienses," "Canad Endurece Su Posicin Para el Pacto con la EU," EL PAIS, 4/3/95; Patrick Chalmers, "EU, Canada Make Another Effort to Solve N. Atlantic Fish Dispute," JOURNAL OF COMMERCE, 4/12/95; Clyde H. Farnsworth, "North Atlantic Fishing Pact Could Become World Model," NEW YORK TIMES, 4/17/95; Leo Ryan, "Spanish Fishermen Protest Deal to End EU-Canada Disagreement," JOURNAL OF COMMERCE, 4/18/95. AUTO MANUFACTURING IN LATIN AMERICA Brazil raised import tariffs on cars to 70 percent in March. Automobile tariffs had been reduced from 35 percent to 20 percent last October, but were brought back to 32 percent in February, after several months of trade deficits. Auto imports increased by 90 percent in 1994, with Brazilians spending $1.4 billion on 193,516 cars. Imported car sales continued to rise in early 1995, with 40,089 imported vehicles setting a new monthly record in January. The Brazilian tariff increase, in addition to cutting trade deficits, reinforces decisions of auto-makers to locate plants there. In March, Ford announced plans to invest more than $2 billion over the next five years to modernize existing plants and begin production of the Fiesta, its so-called world car. General Motors also announced a $2 billion expansion recently, and Germany's Volkswagen plans new investments of $3 billion. Fiat, a major auto manufacturer in both Brazil and Argentina, plans to invest $1 billion in Brazil and $600 million in Argentina. Chrysler, General Motors, Toyota Motors, and Renault also plan new investment in Argentina in the near future. With Mercosur's creation of a common market among Brazil, Argentina, Uruguay, and Paraguay, other manufacturers are also planning to locate in the region. The Mercosur market includes 200 million people. Brazil itself is the world's ninth-largest auto market, and produced 1.5 million vehicles last year, one-quarter of which were exported. Brazil plans to double production by the year 2000, part of a world- wide shift in car manufacturing to countries with cheap labor costs. During the past decade, auto production doubled in India, tripled in Mexico, quadrupled in China, and grew by a factor of eight in South Korea. The Mexican automotive industry, heavily protected since 1925, was opened up under NAFTA. U.S. auto exports to Mexico boomed, rising 685 percent to $437 million in 1994. Sales of Mexican-made cars and light trucks also increased dramatically. Auto-makers had looked to Mexico as a major and rapidly-expanding market, until the country was hit by the current economic crisis. Chrysler, Ford, General Motors, Nissan, Mercedes-Benz, and Volkswagen already have production facilities in Mexico. Prior to the economic crisis, Daewoo of South Korea and Fiat of Italy were also negotiating joint ventures with Mexican companies. On March 31, Ford Motor Company agreed to give its 8,000 workers in Mexico a 25 percent raise, narrowly averting a strike. Nissan agreed to an increase of 13 percent. Given an inflation rate expected to reach at least 50 percent this year, the pay increases are considered far less significant to the industry than the overall decline in car sales. Now that Mexican consumer demand has dropped, production is likely to be scaled back rather than increased. General Motors, for example, said it will cut its second-quarter vehicle production by 8.2 percent in Mexico and by 1.4 percent each in Canada and the U.S. The only significant increase in automotive manufacturing in Mexico is expected to be the relocation of U.S. auto parts factories to lower- wage Mexican facilities. John Manzella, "NAFTA & the Auto Industry," TWIN PLANT NEWS, 4/95; Nichole M. Christian, "GM Reduces Plans for Output in U.S., Canada, Mexico," WALL STREET JOURNAL, 4/6/95; Angus Foster, "Brazil Doubles Tariffs on Imported Cars," FINANCIAL TIMES, 3/31/95; Roger Wilkinson, "Brazil Auto Industry," VOICE OF AMERICA, 3/28/95; James Brooke, "Car Makers Shift to High Gear in Brazil," NEW YORK TIMES, 3/28/95; "Auto Imports Increased 90%," BRASILINFORM EXECUTIVE FAX BRIEFS, 2/20/95; Jonathan Friedland, "Foreign Investors Bet on a Bright Future for Argentina Despite Recent Woes," WALL STREET JOURNAL, 3/21/95; Daniel Dombey, "Ford Grants 25% Pay Hikes," EL FINANCIERO, 4/10-16/95. ARGENTINE PATENT LAW VETOED Argentine President Carlos Menem vetoed parts of a pharmaceutical patent law sent to him by Congress last week. (See NAFTA & Inter- American Trade Monitor, 4/7/95.) The legislation, passed in response to U.S. pressure for protection for patents of U.S. pharmaceutical companies, was denounced by Washington as insufficiently stringent. Washington warned that it would impose trade sanctions if an acceptable law is not in place by April 29, claiming that the new law did not comply with GATT rules. More than a dozen drug patent proposals have been blocked in the Argentine Congress over the past few years, as Argentine drug makers claim that patent protection would cause a rise in drug prices while forcing them out of the market. Drug sales in Argentina total $4.5 billion yearly, and U.S. drug companies say they lose as much as $300 million yearly as a result of patent piracy. The parts of the law vetoed by Menem include a requirement that patent holders manufacture their products in Argentina in order to be protected and an eight-year moratorium on payment of royalties by Argentine companies to foreign patent-holders. Defending his veto, President Menem asked, "If the United States takes this position and Europe as well, what can we do?" Argentine drug manufacturers are pushing for a veto override by Congress. Calvin Sims, "Argentine President Vetoes Patent Measure," NEW YORK TIMES, 4/19/95; "Argentine Patent Measure Heads for Veto by Menem," JOURNAL OF COMMERCE, 4/18/95. IADB CHANGES RULES FOR LOANS At their 36th annual meeting, held in Jerusalem in early April, the 46 members of the Inter-American Development Bank (IADB) and the affiliated Inter-American Investment Corporation (IIC) made significant policy changes. The IADB will begin making loans to the private sector, particularly for infrastructure projects such as oil pipelines or power generation. The IADB will also consider guaranteeing commercial bank and other private sector loans. The IIC increased its lending ration from 1:1 to 3:1, meaning it will be able to loan three times as much money without increasing its capitalization. The IIC staff has been cut in half in the past 15 months, and it is now required to act as a profit-making entity. Government membership in the IIC will also be opened to countries which are not members of either the IADB or the International Monetary Fund (IMF). This move clears the way for an application by Taiwan, which has significant interests in Central and South America. Last year, the IADB loaned $5.3 billion for projects in the region, more than the total World Bank lending in the region. This year, loans are estimated at $6-7 billion. According to Shahid Burki, vice president of the World Bank, Latin America will need $60 billion annual investment in infrastructure over the next decade, including $14 billion annually in telecommunications and $12 billion annually in water and sewage projects. Social sector lending by the IADB in 1994 accounted for 61 percent or the total, including $1.16 billion for urban projects, $969 million for education, $748 million for health and water sanitation, and $266 for social investment funds. Other loans included $547 million for transport and communication, $472 million for export financing, $441 million for industry, mining, and tourism, $230 million for energy projects, and $125 million for agriculture. Stephen Fidler, "Guarantees Likely for Private Sector Loans," FINANCIAL TIMES, 4/4/95; Richard Lawrence and Dov Hoch, "Development Bank Plans Record Loans for Latins," JOURNAL OF COMMERCE, 4/4/95; Stephen Fidler, "IADB Arm Will Not Limit Its Members," FINANCIAL TIMES, 4/5/95; Pratap Chatterjee, "IDB Lent 5.3 Billion Dollars in 1994," INTERPRESS SERVICE, 4/4/95. _______________________________________________ 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. 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