From iatp@igc.apc.org Fri Jul 12 18:53:40 1996 Date: Fri, 12 Jul 1996 14:41:05 -0700 (PDT) From: IATP To: Recipients of conference Subject: NAFTA & Inter-Am Trade Monitor 7-12- NAFTA & Inter-American Trade Monitor Produced by the Institute for Agriculture and Trade Policy July 12, 1996 Volume 3, Number 13 __________________________________________ Headlines: - CHILE AND MERCOSUR SIGN PACT - CANADA-U.S. AG TRADE TENSIONS - FLORIDA GROWERS LOSE ROUND ONE - BIO-TECHNOLOGY AND FOOD LABELING - COMMITTEE SEEKS NAFTA AG MOVEMENT - MEXICAN TRUCKERS CLOSE BORDER __________________________________________ CHILE AND MERCOSUR SIGN PACT On June 25, Chile signed an agreement to become an associate member of Mercosur, the Southern Cone Common Market. With Bolivia's membership, expected to be finalized within 90 days, the size of the trade bloc will increase to 210 million people in six nations: Argentina, Bolivia, Brazil, Chile, Paraguay and Uruguay. With Chile's accession to Mercosur, the trading bloc gains access to the Asian Pacific region, a growing market for Latin America. Beginning October 1, Chile will lower tariffs on most Mercosur trade, beginning with a 40 percent tariff cut and eliminating all duties on intra-bloc trade within eight years, with some exceptions to protect Chile's agricultural sector. Environmentalists and some agriculture groups still oppose the accord, arguing that lack of labor and environmental provisions will lead to replacement of traditional crops by intensive lumbering and consequent displacement of rural workers. As an associate member of Mercosur, Chile will maintain its own uniform 11 percent external tariff, rather than harmonizing with Mercosur's varied external tariffs, which average 13 percent. Chilean exports rose 11.4 percent in 1995, to $16 billion of the gross domestic product of $66.7 billion. Chilean efforts to join the North American Free Trade Agreement have been put on hold because of the U.S. delay in negotiating new trade agreements, but Chile is expected to sign a separate trade agreement with Canada this year. Late last year, the European Union signed a framework agreement for a trade pact with Mercosur, scheduled to be finalized in 2005. With Mexico resisting the Clinton administration proposal for negotiations with Mercosur, Commerce Undersecretary for International Trade Stuart Eizenstat said Canada and the United States might begin talks on hemispheric integration with Mercosur "on a four-plus-two basis." Calvin Sims, "Chile Will Enter a Big South American Free Market," NEW YORK TIMES, June 26, 1996; David Pilling, "Bolivia to Sign Free Trade Pact With Mercosur," FINANCIAL TIMES, June 26, 1996; David Pilling and Imogen Mark, "Jilted Chile Hitches Up to Mercosur," FINANCIAL TIMES, June 25, 1996; Paula L. Green, "Tired of Waiting for US, Chile Seals Deal to Join Mercosur Bloc," JOURNAL OF COMMERCE, June 24, 1996; Richard Lawrence, "US Wants Nafta-Mercosur Talks," JOURNAL OF COMMERCE, June 24, 1996; Gustavo Gonzalez, "Agriculture's Cold Feet Will Not Hamper Approval," INTERPRESS SERVICE, June 26, 1996; Marcela Valente, "Looking Toward the Asia-Pacific Rim," INTERPRESS SERVICE, June 23, 1996; "U.S. Seeks NAFTA- Mercosur Talks Without Mexico, Eizenstat Says," INSIDE U.S. TRADE, June 28, 1996. CANADA-U.S. AG TRADE TENSIONS With bilateral trade of $262 billion in goods and $69 billion in services and investment income in 1995, the United States and Canada are the world's biggest trading partners. Despite the Canada-U.S. Free Trade Agreement (1989) and the North American Free Trade Agreement (1994) disputes in areas including wheat, dairy, poultry, cultural investments, softwood lumber, salmon, steel, potatoes, wool, and trade with Cuba persist. Canadian dairy, poultry and egg producers fear that a NAFTA dispute resolution panel may not vindicate Canada's conversion of import quotas on their products into supply management tariffs. Canadian officials may get a first look at a confidential preliminary panel report by mid-July, though the report will not be made public until August. Canada maintains that it may convert quotas to tariffs, as provided by the General Agreement on Tariffs & Trade, while the United States argues that Canada gave up this right by signing on to NAFTA. According to a Canadian economic impact study, the Canadian economy would lose 138,000 jobs in agriculture and food processing if the U.S. forces open its market for dairy, chicken, turkey and eggs. The panel can rule that the tariffs are legal or illegal, but is rumored to be considering a "third option:" finding that the tariffs are legal but not in the spirit of NAFTA, and recommending negotiation of a political settlement that would provide freer access to Canada for U.S. dairy, poultry and egg producers and to U.S. markets for Canadian peanut and sugar producers. Canadian farmers oppose the third option, since one of NAFTA's advantages was that trade disputes would be settled according to laws rather than according to the political power of the United States. That political power is evident in the dispute over wool suit exports by Canada, raised in U.S.-Canadian trade talks in June. U.S. Congressional members from districts where wool suit and fabric plants are located want legislation directing re-negotiation of the wool- products tariff preference level (TPL) under NAFTA. Canadian officials object to any reconsideration, pointing out that Canada's TPL for wool products actually shrank under NAFTA, and that the bilateral trade balance in textiles is in the United States' favor. The U.S. Trade Representative's office acknowledges that Canada's wool exports are legitimate, but have raised the issue several times because the imports are creating "a real political problem" and potentially undermining support for NAFTA within the United States. While the United States and Canada reached an agreement to limit Canadian softwood lumber exports, British Columbia lumber mills halted U.S. shipments altogether in June, fearing the imposition of penalties for exceeding the duty-free export quota. U.S. buyers have held off purchasing until the July 1 beginning of the next quarter, causing softwood lumber prices to plummet from $277 per thousand board feet on June 7 to $237 on June 20. Industry executives predict that the market turmoil will subside as Canada assigns company-by- company export quotas. In another agricultural trade development, Canada will begin allowing U.S. hog producers from 24 pseudorabies- free states to export hogs to Canada without a prohibitively expensive 30-day quarantine. United States barriers to Canadian hogs, a countervailing tariff calculated to offset Canadian subsidies, have fallen 1.34 to .45 cents per pound. Aviva Freudmann, "Free Trade May Take Time to Realize," JOURNAL OF COMMERCE, June 24, 1996; Aviva Freudmann, "Turmoil Hits Lumber Trade," JOURNAL OF COMMERCE, June 24, 1996; Barry Wilson, "Farmers Angered at Talk of NAFTA Compromise," THE WESTERN PACKER, June 20, 1996; "Canada Tells U.S. to Heed NAFTA Rules, Not Claims by U.S. Wool Group," INSIDE U.S. TRADE, June 21, 1996; Aviva Freudmann, "A Woolly Battle Along the Border," JOURNAL OF COMMERCE, July 3, 1996; Courtney Tower, "Canada to Lower U.S. Hog Barrier," WESTERN PRODUCER, June 6, 1996; Ian Elliott, "Canada's Resolve Toughened in Market Dispute With U.S.," FEEDSTUFFS, May 27, 1996. FLORIDA GROWERS LOSE ROUND ONE On July 2, the U.S. International Trade Commission (ITC) ruled in a 4-1 vote that a surge in Mexican tomato and bell pepper imports was not unduly harming Florida growers. Acting U.S. Trade Representative Charlene Barshefsky and Department of Commerce Secretary Mickey Kantor expressed disappointment with the July 2 ITC decision. Kantor has recently criticized the independence of the ITC, saying that its decisions "may not reflect the economic and social needs" of the United States. While the ITC vote ends the possibility of relief on the Section 201 grounds of damage to U.S. industry, a separate action involving allegations of "dumping" Mexican tomatoes at unfairly low prices remains to be decided by the Department of Commerce by September 9. Mexico has asked the World Trade Organization to review the dumping allegations, charging that the Department of Commerce artificially chose a period of investigation designed to find dumping in violation of the General Agreement on Tariffs and Trade. The time period from March 1, 1995 to February 29, 1996 is, according to Mexico, "the last two months of last year's growing season, and the first two months of this year's season. Not coincidentally, those are exactly the periods during the last two growing seasons when prices were lowest." Governors of 10 U.S. and Mexican border states opposed what they called the protectionism evidenced by Florida's petitions, as did the U.S.-based Fresh Produce Association of the Americas, which handles more than a billion dollars worth of Mexican produce imports yearly. Mexican growers argue that trade restrictions would harm the United States, pointing out that Mexico will import more than $2 billion in grain and oils alone from the United States this year, and that Florida exports $700 million in goods to Mexico annually. Some Mexican officials, point out that trade restrictions could have other consequences, as Mexican migrant workers lose jobs in northern and western Mexico: "Americans have got to realize," says Mexican opposition Congressman Victor Quintana, "Either they will import our tomatoes, or import our people." Mexican officials have drawn up "hit lists" of Mexican exports that could benefit by lower U.S. tariffs and of U.S. products that could be targeted for tariff increases if anti-dumping penalties are imposed on Mexican tomatoes. Either lowered U.S. tariffs on specified Mexican imports or increased Mexican tariffs on specified U.S. exports would be allowed as compensation to Mexico if sanctions are imposed on its produce growers. "Mexico Seeks WTO Consultations on U.S. Tomato Dumping Case," INSIDE U.S. TRADE, July 5, 1996; "House, Senate Trade Leaders Question Kantor's Criticism of ITC," INSIDE U.S. TRADE, July 5, 1996; Martin Crutzinger, "Panel: Mexico Imports Not Unduly Harmful," ASSOCIATED PRESS, July 3, 1996; John Maggs, "Mexico Drafts Hit List of Goods," JOURNAL OF COMMERCE, June 28, 1996; Larry Waterfield, "Governors Protest Protectionism," THE PACKER, July 1, 1996; Joel Millman, "Mexican Farmers are Wary of Sanctions," WALL STREET JOURNAL, July 2, 1996; John Maggs, "Mexicans Win Round in Tomato Trade Fight," JOURNAL OF COMMERCE, July 3, 1996. BIO-TECHNOLOGY AND FOOD LABELING Draft guidelines on labeling food to identify genetic engineering use will be considered by a United Nations standards-setting body, the Codex Alimentarius Commission in 1998, when delegates to the Commission meet in Ottawa. Some countries want genetically engineered foods labeled as such, while others, including the United States, oppose any labeling on biotechnology grounds and wants a ban on even voluntary labeling that would say a food has been produced without genetic engineering. The World Trade Organization's Committee on Trade and Environment, which met in late June in Geneva, was unable to agree on any trade measures to implement the Multilateral Environmental Agreements. European Union Environment Commissioner Ritt Bjerregaard called for rules on ecolabeling, as did Canada. The U.S. Clinton Administration is considering adopting an industry proposal on ecolabeling from the Grocery Manufacturers of America. The proposal would require that ecolabels be transparent, non-discriminatory, and based on "sound science," which would open many ecolabels to challenge. For example, this requirement could be used to prevent dairies from labeling milk as "produced without BST" because there is no scientific basis for distinguishing between milk produced by cows treated with the hormone and those not so treated. Greenseal, a U.S. non- governmental organization that advocates ecolabeling, opposes the Grocery Manufacturers' proposal. Canadian officials studying biotechnology labeling have recommended to Parliament flexible guidelines that can be changed to take account of changing circumstances and science. Under Canadian law, foods derived from genetic transfers between the same or different species are classified as "novel" foods and must receive health safety approval before marketing. Biotech boosters, including agricultural interests, favor guidelines rather than specific, enforceable regulations. Canadian farm leaders insist that food labeling should be required only for health or safety reasons, and that biotech labeling would just scare consumers. Courtney Tower, "Genetic Food Label Rules Not Coming for Several Years," WESTERN PRODUCER, May 23, 1996; Barry Wilson, "Officials Favor Relaxed Labeling Guidelines," WESTERN PRODUCER, June 20, 1996; Barry Wilson, "Farm Leaders Want to Limit Labeling of Biotech Food," WESTERN PRODUCER, June 6, 1996; "U.S. Seen as Opposing Progress on Key Environment Issue for WTO," INSIDE U.S. TRADE, June 28, 1996. COMMITTEE SEEKS NAFTA AG MOVEMENT A confidential draft report from the President's Advisory Committee for Trade Policy and Negotiations (ACTPN) recommends that the Clinton Administration move to accelerate the elimination of Mexican and Canadian tariffs on farm products, and carefully monitor sanitary and phytosanitary measures adopted by other countries to ensure that all are based on scientific grounds and do not unduly restrict agricultural trade. The report also recommends a cautious approach to any unilateral actions that would reduce U.S. imports of agricultural products from a NAFTA member. Part of the reason for the report is that some parts of the U.S. agribusiness sector feel that agricultural interests have taken a back seat to trade issues such as autos and intellectual property rights. The report notes that U.S. agriculture accounted for $54 billion in exports in 1995, and that 30 percent of U.S. farm income in 1995 was derived from trade. The ACTPN also urges that the United States work to eliminate special treatment for agriculture in the Asia-Pacific Economic Cooperation forum (APEC) and in the European Union. The ACTPN is made up of about 45 members, mostly manufacturing and service industry executives and officials from U.S. labor and environmental groups. Janice Hughes, "ACTPN Draft Seeks Full Implementation of NAFTA Farm Provisions," INSIDE U.S. TRADE, June 12, 1996. MEXICAN TRUCKERS CLOSE BORDER Angered by U.S. Department of Transportation (DOT) actions, an estimated 1,500 Mexican truckers blocked all transport of fruits and vegetables at several international bridges during the last week of June, before agreeing to return to work for two weeks under a 10-point plan to address their grievances. The DOT stepped up inspections of motor vehicles along the border last year and truckers charge that DOT inspectors are illegally sending Mexican drivers back into Mexico, taking trucks out of service for minor violations, and illegally seizing truck drivers' passports and border crossing identification cards. "If it is happening, it shouldn't be," said U.S. vice consul Douglas Koneff in Matamoros, across from the Texas border city of Brownsville. Koneff asked truckers to be patient and focus on honest efforts being made by U.S. officials to respond to their concerns. Under U.S. law, immigration documents cannot be seized because of safety violations, and trucks stopped for safety violations must be issued citations that require fixing the problem within 10 days, but cannot be sent back to Mexico. The U.S. Federal Highway Administration denied that it was sending Mexican trucks back across the border. Truckers also complain that they are taken out of service for minor violations, at a cost of $300 to get vehicles back in service and $200 in towing costs. Problems began last year with Texan imposition of costly registration requirements for Mexican truckers. These regulations were later withdrawn, but then the Clinton administration refused to honor the December 18 opening of border states required by NAFTA, a matter still under formal dispute resolution processes. Kevin G. Hall, "Mexican Truckers Return to Work for Two Weeks," JOURNAL OF COMMERCE, July 3, 1996; Kevin G. Hall, "Mexican Truckers Protest at Border," JOURNAL OF COMMERCE, June 26, 1996; Lance Jungmeyer, "Strike Could Disrupt U.S. Imports," THE PACKER, July 1, 1996. ____________________________________________ NAFTA & Inter-American Trade Monitor is produced by the Institute for Agriculture and Trade Policy, Mark Ritchie, President. Edited by Mary C. Turck. 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