From iatp@igc.apc.orgFri Feb 23 22:13:58 1996
Date: Fri, 23 Feb 1996 09:44:28 -0800 (PST)
From: IATP <iatp@igc.apc.org>
To: Recipients of conference <trade-news@igc.apc.org>
Subject: NAFTA & Inter-American Trade Monitor

NAFTA & Inter-American Trade Monitor
Produced by the Institute for Agriculture and Trade 
Policy
February 23, 1996
Volume 3, Number 4
_________________________________________
Headlines:
- U.S., CANADA SETTLE LUMBER DISPUTE
- TORTILLAS FOR FOOD AND FORTUNE
- FLORIDA, CALIFORNIA ARE FOCUSES OF AG TRADE DEBATE
- FOOD PROCESSING JOBS MOVE SOUTH
- CHILEAN FRUIT INDUSTRY EXPANDS
- CARIBBEAN SUGAR EXPORTS INCREASE; U.S. SUGAR SUBSIDY 
UNCERTAIN
- CULTURE WARS CONTINUE
_________________________________________
U.S., CANADA SETTLE LUMBER DISPUTE

In mid-February, Canada and the United States reached an 
agreement limiting Canadian lumber exports to the United 
States. The five-year agreement, which will take effect 
on April 1, ends a 13-year trade dispute. Under the 
agreement, British Columbia, Canada's largest lumber-
exporting province, will impose an export tax of $50 for 
each 1,000 board feet for the first 250 million board 
feet in excess of 9 billion yearly, and $100 for each 
1,000 board feet after that. Other provinces will 
increase fees paid by producers for cutting timber. 
According to the National Association of Home Builders, 
the agreement will increase U.S. lumber prices by about 
14 percent, raising the cost of a new home by $1,000. 

United States lumber mills have long charged that 
Canadian mills enjoy an unfair advantage because the 
Canadian government, which owns 97 percent of the 
country's timber, sells wood to Canadian mills below 
market value. Canada's share of the U.S. softwood lumber 
market increased from 27 percent in 1991 to 36 percent 
in 1995. U.S. Trade Representative Mickey Kantor cited a 
report showing that 5,838 U.S. jobs were lost due to 
mill closings in the Pacific Northwest between 1993 and 
1995, and said that more than 70 mills have closed 
permanently since 1993.  

Canadians agreed to settle under threat of filing of a 
countervailing duty petition by U.S. producers, which 
could have resulted in imposition of duties on all 
Canadian lumber imports. Both U.S. and Canadian 
governments seemed eager to avoid submitting their 
dispute to the World Trade Organization, despite their 
free trade rhetoric.

John Maggs and Aviva Freudmann, "U.S.-Canada Lumber Deal 
Flouts Global Trade Rules," JOURNAL OF COMMERCE, 
February 21, 1996; Robert D. Hershey, Jr., "U.S. and 
Canada in Deal That Ends Lumber Dispute," NEW YORK 
TIMES, February 17, 1996; "U.S. and Canada Reach 
Agreement on Softwood Lumber," OFFICE OF THE UNITED 
STATES TRADE REPRESENTATIVE, February 16, 1996; Kim 
Chipman, "Canada Tentatively Agrees to Slow Down 
Softwood Lumber Shipments Into U.S.," THE SUN HERALD 
(Biloxi, MS), February 17, 1996; "U.S., Canada Softwood 
Lumber Negotiators on the Verge of Agreement," INSIDE 
U.S. TRADE, February 16, 1996. 

TORTILLAS FOR FOOD AND FORTUNE

The Mexican government awarded Maseca, Mexico's largest 
producer of corn flour and tortillas, 200,000 tons of 
1996 direct corn import quotas, compared to 36,500 tons 
for Grupo Minsa, its nearest competitor. According to a 
Mexican Agriculture and Trade Ministries report in 
February, total quotas for corn flour producers were set 
at 276,500 tons. The import quota award further 
solidifies the dominance of Maseca in Mexico's corn 
flour and tortilla sector, which began with an agreement 
with the Mexican government in 1990 that froze the 
amount of corn allotted to traditional tortilla makers 
and awarded all growth in the market to corn flour 
manufacturers. Tortillerias that refused to switch from 
traditional nixtamal to Maseca's corn flour method of 
manufacturing tortillas were allotted the worst corn in 
strictly limited quantities. 

In addition to forcibly shifting the market to Maseca, 
the government subsidizes its operation, with subsidies 
totaling $300 million in 1994, approximately 43 percent 
of Maseca's net revenues. Through Conasupo (the 
government-operated National Basic Staples company), the 
Mexican government paid farmers above-market prices for 
corn, then sold the corn at lower prices to tortilla 
makers, theoretically subsidizing poor consumers of 
tortillas at a cost estimated at 8.5 billion pesos last 
year. The government is considering eliminating all 
tortilla subsidies in 1996, which would at least double 
the price of a kilo of tortillas. 

Mexico's rural poor, who usually do not buy ready-made 
tortillas, and the country's independent tortilla 
sector, do not receive much benefit under this system. 
Traditional tortillas are made by boiling corn kernels 
in water and lime and then grinding the pulp into dough 
(nixtamal) and making tortillas. Approximately 15,000 
nixtamal mills supply 40,000 independent tortillerias. 
These independent operations, averaging 2.6 employees 
each, typically operate at a bare subsistence level. 

Grupo Maseca does business in Latin America and the 
United States, where it is known as Mission Foods 
Corporation, and also bought Banorte (the Banco del 
Norte) in 1992, when bank privatization began, and is 
now taking over Banco del Centro and negotiating for 
parts of two other banks. Archer Daniels Midland 
reportedly wants to buy 30 percent of the company, which 
is traded on the New York Stock Exchange. 

While Maseca dominates the corn flour quota allotment, 
nearly half of the total  1996 direct corn import quota 
of  3,134,601 tons was assigned to the farming sector. A 
far smaller second round of quotas will be determined 
at a later time.  

"Tortilla Subsidy May Be Eliminated in 1996," MEXICO 
UPDATE, December 12, 1995; Chris Aspen, "Mexico Assigns 
1996 Direct Corn Import Quotas," REUTERS, February 9, 
1996; Anthony DePalma, "How a Tortilla Empire Was Built 
on Favoritism," New York Times, February 15, 1996; Raul 
Llanos Samaniego, "55 Mil Molinos y Tortillerias 
Independientes Apenas Logran Subsistir," LA JORNADA, 
February 16, 1996; Patricia Mun~oz, "Hasta 8.5 Mil 
Millones Podri'an Gastarse en el Subsidio a la Tortilla, 
LA JORNADA, February 13, 1996. 

FLORIDA, CALIFORNIA ARE FOCUSES OF AG TRADE DEBATE

Florida tomato growers are leaving tomatoes to rot in 
the fields, saying that they just can't compete with 
Mexican tomatoes selling for $4 and $5 for a 25-pound 
box. Florida growers say they need $8 a box just to 
break even. Consumers have seen no benefit from the 
tomato war, with grocery store prices remaining constant 
at about $1 per pound. 

Florida's Department of Agriculture has tried to slow 
Mexican imports by imposing roadside inspections of 
trucks bearing Mexican tomatoes and charging a $70 per 
truck fee for the inspection, over protests from Chile, 
Canada, and Mexico. On February 14, Florida exempted 
some, but not all, Canadian and Chilean imports from the 
inspection and fees, and the U.S. Department of 
Agriculture forestalled a proposed Florida inspection 
program covering air and seaports by agreeing to add 
inspectors and increase inspection activities. The U.S. 
Congress backed away from legislation that would have 
increased tariff protection by classifying winter 
tomatoes as a separate product, referring the 
legislation to committee for hearings. 

The December 1994 Mexican peso devaluation made Mexican 
tomatoes much cheaper, leading to what U.S. officials 
say is a 65 percent increase in Mexican tomato exports 
this year. Mexicans say that tomato exports have grown 
only 15 percent. University of Florida economics 
professor John Van Sickle says that the number of 
Florida tomato farmers has dropped from 200 two years 
ago to about 100 today, with their revenues falling from 
$700 million to $400 million during the same time 
period. Florida Agriculture Commissioner Bob Crawford 
claims that Florida's share of the U.S. winter vegetable 
market has fallen from 68 percent to 37 percent because 
of NAFTA and the 1995 import surge from Mexico. 

In contrast to the Department of Agriculture, Florida's 
Department of Commerce says that the state has actually 
benefited for NAFTA. While acknowledging that "it was 
always a given that there was going to be some losses to 
farmers over the short term," a spokeswoman for the 
Florida Department of Commerce said that in the long 
run, Florida will benefit from NAFTA, noting that 
Florida's 1994 exports to Mexico were $844.2 million, 
compared to imports from Mexico of about $174.5 million. 
During the first three quarters of 1995, Florida exports 
to Mexico dropped to $415.8 million, but Mexican imports 
rose to only $187.9 million. Most Florida exports to 
Mexico are high-value goods, such as industrial 
machinery and computer and electronic equipment. South 
American and Caribbean nations, however, are more 
important markets than Mexico, making up Florida's top 
seven markets, with China at number eight and Mexico not 
even in the top 15. 

As Florida farmers denounce NAFTA, California agri-
business firms say foreign trade is their future. 
According to Jim Pandol, vice president of marketing for 
California's Pandol Brothers Inc. farms, global 
marketing, particularly in Latin America and Asia, is 
the wave of the future. Because of California's tough 
environmental standards, its produce has an excellent 
international reputation. While domestic fruit sales are 
flat, foreign markets are booming for the Pandols, who 
farm 5,000 acres in California and more in Chile. Like 
Pandol, Pierre Tada, CEO of Limonaire Associates, 
predicts growing markets in Asia for his company's 6,000 
acres of citrus products. 

Despite Californian advocacy of global agricultural 
marketing, the state's avocado growers maintain their 
adamant opposition to allowing Mexican avocados to enter 
the northeastern United States, claiming fear of pests. 
Mexican officials maintain a ban on West Coast cherry 
imports, claiming fear of the plum curculio and apple 
maggot pests, a fear that some trade specialists call 
equally unfounded. According to Kraig Naasz, a trade 
specialist with the Northwest Horticultural Council in 
Yakima, Washington, representatives of the Mexican 
government said privately that "we would be permitted to 
export cherries on the day they were permitted to export 
avocados to this country, and not before." 

Jane Bussey, "Unable to Compete With Mexico, Florida 
Farmers Let Their Tomato Crops Rot," MIAMI HERALD, 
February 18, 1996; Jim Carnal, "California Agriculture 
Committee Highlights Foreign Markets," THE BAKERSFIELD 
CALIFORNIAN, February 6, 1996; Kevin G. Hall, "Florida 
Sees Good in NAFTA, Even as Tomato Farmers See Red," 
JOURNAL OF COMMERCE, February 12, 1996; "Peter M. 
Tirschwell and John Maggs, "Florida Slaps Fee on Foreign 
Produce Moving by Truck," JOURNAL OF COMMERCE, February 
9, 1996; Larry Waterfield, "Congress Delays Action," THE 
PACKER, February 5, 1996; Peter M. Tirschwell, "The 
Avocado as Political Football," JOURNAL OF COMMERCE, 
February 15, 1996; "Florida Limits Ag Inspections as 
Industry Talks Are Set With Mexico," INSIDE U.S. TRADE, 
February 16, 1996. 

FOOD PROCESSING JOBS MOVE SOUTH

Watsonville, California, long a center for food 
processing, has seen yet another food plant close, as 
the shutdown of the Norcal-Crosetti Frozen food plant 
leaves 700 mostly Mexican-American women unemployed this 
month. Watsonville City Councilman Oscar Rios sees the 
purchase of Norcal-Crosetti by Wisconsin-based Dean 
Foods, and the plant's subsequent closure, as part of a 
trend: "Workers are seeing their frozen food plants 
either merging or downsizing. Workers at one time felt 
some security coming out of field jobs. Now they don't." 

Norcal-Crosetti was the site of an 18-month strike in 
1985-86, as workers defied the all-white city government 
and police administration that sided with their 
employer. Workers were protesting food companies' 1985 
move to slash wages and benefits by as much as 40 
percent. Now one local factory after another has 
relocated to Mexico, drawn by lower wages and costs 
there. 

Reese Erlich, "Latina Workers Lose Out as Big Companies 
Move In," INTERPRESS SERVICE, February 8, 1996.

CHILEAN FRUIT INDUSTRY EXPANDS

The Chilean fruit industry is booming, with markets in 
Latin America, Asia, and the United States contributing 
to its grown. In December, Chile became the first Latin 
American country officially declared free of the medfly, 
opening new Asian markets. Table grapes and kiwi fruit 
lead Chilean exports to Asia, which grew from 5.5 
million cases in 1993-1994 to 8.9 million cases in 1994-
95. 

Total Chilean fresh fruit exports for the 1995-96 season 
are projected at 160 million boxes, up from 154 million 
boxes last year. Exports to North America were 58.8 
million boxes in 1994-95, with Chilean fruit making up 
nearly five percent of North American fruit consumption 
from January-April. Chilean fresh fruit exports to Latin 
America have grown rapidly, particularly in Brazil, 
which more than doubled its consumption over 1995-96. 
Cuba, Venezuela, and Colombia also increased consumption 
of Chilean fruit. 

Steve Anderson, "Country is Declared Free of Medfly," 
THE PACKER, December 18, 1995; Dave Swenson, "Record 
Year on the Way," THE PACKER, December 4, 1995; Steve 
Anderson, "More Product Latin America-bound," THE 
PACKER, January 29, 1996.

CARIBBEAN SUGAR EXPORTS INCREASE; U.S. SUGAR SUBSIDY 
UNCERTAIN

Caribbean sugar producers, recently granted preferred 
access to European Union markets, have also been buoyed 
by the announcement of a second increase in three months 
in the quota of raw cane sugar that they can sell in the 
United States. The U.S. market pays about 22 cents per 
pound, less than the protected European market, but 
significantly above the 12-14 cents paid on the world 
market. Officials of the Sugar Association of the 
Caribbean say that demand for cane sugar has increased 
greatly, while the demand for beet sugar and artificial 
sweeteners has leveled off. Sugar growers are trying to 
increase production and rehabilitate mills to take 
advantage of the growing market.

The U.S. sugar price support program guarantees U.S.-
based sugar mills a return of 18 cents per pound, which 
generally brings raw sugar prices to 22 or 23 cents per 
pound. Budget-cutters have targeted the sugar subsidy, 
saying that it costs U.S. consumers more than a billion 
dollars yearly in higher prices. Defenders of the 
program say that sugar is not subsidized, because 
interest payments on crop loans actually return money to 
the U.S. government. The Florida sugar cane industry, 
which employs about 33,000 people, is dominated by two 
producers, U.S. Sugar and the Flo-Sun Land Corp. While 
the sugar industry survived attacks on the sugar program 
in the Senate, bi-partisan opposition to the program 
remains in the House of Representatives. 

Bert Wilkinson, "A Whole Lot of Sweetness in Sugar 
Industry," INTERPRESS SERVICE, January 26, 1996; Canute 
James, "Caribbean Sugar Growers Hope for Brighter 
Future," FINANCIAL TIMES, December 29, 1995; James 
McNair, "Bitter Fight Rages Over Sugar Subsidy, 
Affecting Florida Growers," MIAMI HERALD, January 22, 
1996; Juan Miguel Pedraza, "Bi-Partisan Group of 
Lawmakers Targets U.S. Sugar Program," AGWEEK, February 
12, 1996. 

CULTURE WARS CONTINUE

U.S. Trade Representative Mickey Kantor, already 
involved in disputes over a Canadian tax on a local 
edition of "Sports Illustrated" and a ruling that kept 
Nashville-based Country Music Television off Canadian 
cable, will have new battles to fight in the on-going 
cultural war. Canada's foreign investment watchdog, 
Investments Canada, refused to allow Borders Group Inc. 
to form a local joint venture because the operation's 
buying would be controlled from Borders' Ann Arbor, 
Michigan headquarters. Barnes & Noble, another U.S. book 
retailer, and Britain's Virgin Retail Group are also 
trying to enter the Canadian retail book market. 

Canadian officials base their positions on a NAFTA 
exemption that requires federal approval for investors 
seeking to acquire or invest in cultural sectors. The 
Canadian Broadcasting Company has also banned U.S. 
programming from its prime-time lineup, beginning in 
September, and Canadian film distributors are fighting 
Hollywood efforts to sell pay-per-view movies directly 
to providers in Canada. 

"U.S. Booksellers' Rejection Threatens Trade Clash," 
REUTERS, February 11, 1996; "Kantor Charges Canadian 
Split Run Tax Violates NAFTA and WTO," INSIDE U.S. 
TRADE, February 2, 1996; Aviva Freudmann, "Canada Wins 
New Battle in Culture War With U.S.," JOURNAL OF 
COMMERCE, February 13, 1996.

_________________________________________
RESOURCES/EVENTS
_________________________________________

Small Grants for Graduate Student Field Research on the 
Transformation of Rural Mexico offered by the Center for 
U.S.-Mexican Studies at the University of California, 
San Diego in association with the Guadalajara unit of 
the Centro de Investigaciones y Estudios Superiores en 
Antropologma Social de Occidente (CIESAS-Occidente) to 
determine how rural producers in Mexico are adapting to 
1992 constitutional amendment affecting ejidos and 
internationalization of agricultural commodity markets. 
Five to eight grants ranging from $1,000-$1,500 will be 
made for fieldwork between May 1, 1996 and October 31, 
1996. Contact David Myhre, Center for U.S.-Mexican 
Studies, University of California-San Diego, La Jolla,CA 
92093-0510, fax 619/534-6447; email: 
ejido@weber.ucsd.edu. Applications due February 29, 
1996.
____________________________________________
NAFTA & Inter-American Trade Monitor is produced by 
the Institute for Agriculture and Trade Policy, Mark 
Ritchie, President. Edited by Mary C. Turck.  Electronic 
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