NAFTA Monitor
Tuesday, March 1, 1994
Volume 1, Number 10
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Headlines:
NAFTA PANEL TO HEAR CUSTOMS COMPLAINT
TAX TREATY COINCIDES WITH NAFTA
MEXICO RELUCTANT TO EXPAND NAFTA
CANADA, MEXICO SEEK ANTIDUMPING LAW
EZLN INSISTS ON POLITICAL REFORMS
RESOURCES
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NAFTA PANEL TO HEAR CUSTOMS COMPLAINT
A newly formed NAFTA panel on customs issues will hear an anti-
trust complaint by U.S. customs brokers against their Mexican
counterparts. U.S. brokers argue that differing customs rules along
the U.S.-Mexico border allow Mexicans a near monopoly on frontier
trade.
At issue is the Mexican law requiring that all goods entering Mexico
be processed by a Mexican broker. The U.S. does not impose a
comparable requirement.
John Simpson, assistant deputy director of the U.S. Treasury
Department, said customs regulations in Canada, the U.S. and Mexico
need to be harmonized in the immediate future. He said the anti-
trust complaint would be addressed by the NAFTA panel during
meetings this week in Mexico City.
Susan K. Ross, a Los Angeles trade attorney who is on the NAFTA
customs advisory committee, says NAFTA negotiators failed to work
out the detailed regulations necessary to ease border transactions. "I
think what happened is you've got three independent countries and
each operates differently, and I'm not sure it was possible, under the
time constraints that applied, to get them to agree on all the
particulars," Ross said.
Sources: "NAFTA Panel to Address Issue of Mexican Brokers' Fees,"
JOURNAL OF COMMERCE, February 23, 1994; Kevin G. Hall, "U.S.
Official Criticizes Snarls in Customs Under NAFTA," JOURNAL OF
COMMERCE, February 23, 1994.
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TAX TREATY COINCIDES WITH NAFTA
The U.S. and Mexico recently finalized the details of a tax treaty that
lowers or eliminates taxes on cross-border earnings, including taxes
on net income, dividends, interest and royalties. It also allows the
two countries to exchange information on suspected tax evaders.
The treaty, which went into effect January 1, allows U.S. companies
to operate in Mexico for short periods without having to pay Mexican
income taxes. Companies are permitted to perform market studies,
promote their products, set up or apply for a bank loan or prepare
for the opening of a Mexican subsidiary without incurring any new
tax obligations, providing they leave the country within six months.
Business officials who frequently cross the border have the one-time
option of deciding under which country's tax laws they would like to
be covered. The final phase of the treaty takes effect next January.
Sources: Alva Senzek, "Taxing Matters," EL FINANCIERO
INTERNATIONAL, February 21-27, 1994; John Robert Cohn, "New
Treaty Favors Investors," NATIONAL LAW JOURNAL, February 21,
1994.
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MEXICO RELUCTANT TO EXPAND NAFTA
Media reports indicate that Mexico may be unwilling to admit new
members to NAFTA. According to a leaked 30-page internal U.S.
Trade Representative Office document: "Mexico reportedly is not
interested in allowing other countries in the region into an
arrangement that offers considerable benefits."
The Clinton administration immediately said the document did not
reflect the opinions of the White House. "In conversations (U.S. Trade
Representative Mickey) Kantor and I have had with senior Mexican
officials, they have always voiced positive interest in expanding free
trade in the hemisphere, and have never stated or implied
opposition," said U.S. Deputy Trade Representative Rufus Yerxa.
The document warns that abandoning wider regional trade
integration could seriously jeopardize U.S. credibility in the area and
undermine free-market policies by countries attempting to qualify
for NAFTA accession.
Sources: "U.S. Says Own Report Critical of NAFTA Inaccurate," REUTER,
February 25, 1994; Keith Bradsher, "U.S. Memo Says Mexico May Bar
NAFTA Growth," NEW YORK TIMES, March 1, 1994.
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CANADA, MEXICO SEEK ANTIDUMPING LAW
Business and government leaders from Canada and Mexico agreed
last month that new, more sweeping regulations are needed under
NAFTA to resolve dumping and subsidization disputes.
Presently, the NAFTA text creates binational panels of independent
trade experts to arbitrate conflicts and decide whether each
government's agencies followed their own dumping rules.
The Canadian Business Council on National Issues, Canadian
Ambassador David Winfield, Mexican President Carlos Salinas de
Gortari and Mexican Commerce Secretary Jaime Serra Puche say
these NAFTA provisions allow the U.S. to continue unfair
antidumping practices.
The leaders discussed the idea of replacing dumping investigations
and countervailing duties with "a law that would apply to all the
three countries when there are anti-dumping practices," Canadian
Business Council President Thomas d'Aquino said.
The U.S. and Canada are currently tangled in a number of disputes,
including one over Canadian lumber exports, which the U.S. claims
are subsidized unfairly by the Canadian government. Mexico's steel
industry recently bolstered complaints that subsidies to U.S. steel
producers allow them to ship steel to Mexico at unreasonably low
prices.
Sources: Kevin G. Hall, "Canada, Mexico Seek New Pact on Dumping,"
JOURNAL OF COMMERCE, February 23, 1994; John Maggs, "U.S.
Charges Splinter Lumber Talks," JOURNAL OF COMMERCE, February
23, 1994.
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EZLN INSISTS ON POLITICAL REFORMS
The Zapatista National Liberation Army (EZLN) reached a broad
agreement with the Mexican government last week during peace
talks in San Cristobal de las Casas, Mexico. Government and rebel
leaders outlined reforms aimed at improving health, education,
housing and other services in poor, indigenous Chiapan communities.
But, because they failed to achieve progress on EZLN demands for
national political reforms, rebel leaders say they have not "thought of
handing in our guns."
"We are not ready to sign peace," said one EZLN subcommander
calling himself Marcos. "The government's answers are just a
mountain of papers and that paper does not cure you, teach you, feed
you or give you democracy ... We demand credible elections with real
freedom and democracy."
Mexico's voters and opposition party members have complained for
years that Salinas's PRI party has rigged and controlled elections
since its uninterrupted rule began in 1929.
Prior to the Chiapas uprising, the Salinas government vowed to
reform the political system once it had completed economic
restructuring plans and concluded NAFTA negotiations. However,
because of the length of NAFTA negotiations, the government said
electoral reforms would have to wait until December 1994. The
Presidential election will be held in August.
But John Bailey, a Georgetown University political scientist and
Mexico specialist, says "Chiapas was a wake up call for the
government."
Government sources say Salinas may now present a political reform
package to the Mexican legislature. The package will reportedly
include: placing international election observers at polling stations,
allowing equal media access time for all political parties and placing
the Federal Electoral Institute under non-partisan direction. The
Institute, which sets election rules and verifies all voting results, is
directed by the PRI party.
Sources: K. Murray, "Mexico Rebels Say Peace Still a Long Way Off,"
REUTER, February 28, 1994; T. Nauman, "Peace Talks to Begin," EL
FINANCIERO INTERNATIONAL, February 21-27, 1994; J. Rice,
"Mexico-Rebellion," AP, February 28, 1994; T. Robberson, "Rebellion
Spurs Mexico to Plan Major Reforms," WASHINGTON POST, February
28, 1994; S. Hughes, "Strategic Thinking," EL FINANCIERO
INTERNATIONAL, February 21-27, 1994.
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RESOURCES
"The Environmental Implications of the NAFTA Environmental Side
Agreement," Zen Makuch and Scott Sinclair, October 1993. 53 pages.
CANADIAN ENVIRONMENTAL LAW ASSOCIATION, 517 College Street,
Suite 401, Toronto, Ontario M6G 4A2. (416) 960-2284. Fax: (416)
960-9392. $7.50.
"NAFTA and Water Exports," Wendy Holm and Jamie Linton, October
1993. 134 pages. CANADIAN ENVIRONMENTAL LAW ASSOCIATION,
517 College Street, Suite 401, Toronto, Ontario M6G 4A2. (416) 960-
2284. Fax: (416) 960-9392. $7.50.
"Estimating the Effects of North American Free Trade: A Three-
Country General Equilibrium Model with TReal-WorldU Assumptions,"
Jim Stanford, September 1993. 49 pages. CANADIAN CENTRE FOR
POLICY ALTERNATIVES, 251 Laurier West, Suite 804, Ottawa, Ontario
K1P 5J6. (613) 563-1341. Fax: (613) 233-1458. $6 for members, $9
for individual non-members, $15 for institutions.
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