Nafta

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• TRADE: Sugar deal

  05 May 2011 Hits: 138

  The US and Mexico appear to have agreed a deal, on 27 July, that will eliminate duties on trade in sweeteners between the two countries. Ever since Nafta was implemented in 1994, Mexico has chaffed at the restrictions the US has imposed on exports of Mexican sugar to the US. The US, for its part, has become increasingly irritated with Mexican measures to prevent high-fructose corn syrup, produced in the US, being exported to Mexico.

  The deal is a compromise. For the next sugar year, which starts on 1 October 2006, Mexico will be able to ship 250,000t of sugar to the US free of any tariffs. It will be able to do the same for the following sugar year. In return Mexico will allow the tariff-free importation of high-fructose corn syrup from the US. The Secretarí­a de Economí­a, which handles international trade negotiations, pointed out that Mexico would be able to export more sugar to the US by paying a tariff. Currently, under Nafta, the US can levy a tariff of US$0.032 per pound on Mexican sugar exports. From 1 January 2007 this tariff falls to US$0.016 and to zero from 1 January 2008. The Secretarí­a de Economí­a pointed out that Mexico's tariffs are considerably lower than the standard US tariff for sugar. This stands at US$0.15 per pound. Given that the international price of sugar is around US$0.15 per pound, the US tariff is prohibitive. So far this sugar year Mexico has exported 500,000t of sugar to the US. It expects to export at least 600,000t by the end of September.  

  The Secretarí­a de Economí­a has played what was a weak hand pretty well. The Mexican government has known that it would have to end the 20% tax on soft drinks sweetened with anything other than sugar. This followed a final ruling, in March this year, from a World Trade Organization disputes settlement panel. The panel ruled that the tax, introduced in 2002, was designed to distort trade and protect Mexico's domestic sugar industry. Mexico said that it only introduced the 20% tax because the US refused to abide by the terms of the Nafta treaty and to allow Mexico to increase its exports of sugar to the US.  

  Under the terms of the 1994 Nafta treaty, Mexico was allowed to export surplus sugar to the US. The US claimed that Nafta was talking about a "net surplus" (i.e. after imports of high-fructose corn syrup and other sweeteners had been included). Mexico argued that the Nafta agreement only referred to sugar and therefore any sugar that was not used domestically could be exported to the US. The US refused to accept this argument and set (tariff-free) quotas for Mexican sugar exports. Coincidentally, these have been 250,000t in recent years.

  What the Secretarí­a de Economí­a has done well is play on US fears that it would come up with some new way of preventing US companies exporting high-fructose corn syrup to Mexico. In late June the US Department of Agriculture (USDA) had become concerned that Mexico would slap an import tariff on high-fructose corn syrup even though Mexico agreed that it would drop the tax on non-sugar sweetened soft drinks from 1 January 2007. Mexico spooked US corn syrup producers by hinting that it was considering a 210% duty on corn syrup. The corn syrup lobby is powerful in Washington and appears to have overridden the equally-vocal sugar lobby to ensure that Mexico was offered an acceptable deal. The sugar lobby's position was also weakened by the damage caused by Hurricane Katrina to southern (cane) sugar production.  

  US cane sugar production in the current sugar year (2005 - 2006) is likely to be 2.8m t, down from 3m t in the previous season. In 2006 - 2007, the USDA is forecasting that cane sugar production will increase to 3.2m t as production recovers in Louisiana and Florida, two states which were badly affected by Hurricane Katrina. Beet sugar, grown in more northerly states of the US, accounts for the bulk of US sugar production. This year the USDA is forecasting 4.3m t of beet sugar production and next year (2006 - 2007) it is forecasting 4.7m t. Charles Grassley, (Rep, Iowa), the president of the US Senate Finance Committee, said that the deal reached on 28 July was a good one for both countries and would help the corn syrup industry. Iowa has four corn syrup plants and is responsible for a quarter of the US's output of high-fructose corn syrup.  

  WTO: The decision by Pascal Lamy, the director general of the World Trade Organization, to suspend the Doha round of trade talks means that industrialised countries, especially the European Union and the US, but also Japan, are likely to maintain their discriminatory and protectionist agricultural policies for at least the next five years. Even pro-US economic commentators in Mexico claim that the decision by the US Trade Representative Susan Schwab to dismiss the concessions Asian and European trade representatives had made in an effort to restart the talks after the G8 summit in St Petersburg at the end of July, was short-sighted. These commentators claim that the US now has no defence when it is accused of being mercantilist: they say that the US is prepared to push for free trade when other countries have to open up their markets, but when the US itself has to confront strong protectionist lobbies its enthusiasm for the principles and virtues of free trade wilts very quickly.  

  This US attitude means that enthusiasts for free trade and freer markets in developing economies no longer have a champion they can respect, economic commentators such as Enrique Quintana, who writes in Reforma, argue. The WTO round, which started in Doha, Qatar in 2001, set the priority of reducing agricultural subsidies in industrialised countries. In return, emerging economies would open up their service sectors more.  

  The US cancelled the talks after officials calculated that the EU's offer would have enraged the farm lobby in the US since it would have reduced US government payments to farmers. The US farm lobby is particularly vocal given that mid-term elections are imminent. Under a deal negotiated between the White House and congress, congress gave the administration fast-track approval to negotiate the WTO round. Fast track approval means that congress surrenders the right to interfere with the proposal the administration sends to congress, agreeing only to vote to approve it or reject it. This authority expires on 30 June 2007.

• IMMIGRATION: US deploys National Guardsmen

  05 May 2011 Hits: 117

  On 31 July the National Guard announced that it had deployed 6,199 of its members along the border with Mexico. The deployment is code-named Operation Jump Start. The Guardsmen from 18 states are supporting US Immigration and Customs Enforcement (ICE) agents.  

  The US Border Patrol, which is the most public arm of the ICE, said that the deployment had already paid dividends. It noted that the numbers of illegal migrants arrested in July 2006 was 37% lower than in July 2005 at 58,025. The US Border Patrol said that this was because potential migrants were thinking twice before trying to cross into the US. Currently the ICE has 11,713 agents of which around 8,000 are deployed along the Mexican border.  

  The National Guardsmen will not patrol the border. What they will do is carry out engineering works, such as building barriers and improving roads, that will assist the work of the US Border Patrol. According to research by the Pew Hispanic Center in Washington 55% of the illegal immigrants living in the US crossed the border on foot: the other 45% came in legally, usually through an airport, with a visa, but decided to remain in the US when their visa expired.

  Research from academics at the Instituto Tecnológico Autónoma de México (ITAM) found that one in three Mexicans of working age work in the US. Originally migrants were the least educated; then they tended to be the better educated (people who had completed high school). Now, Rodolfo Tuirán, a researcher at ITAM said, migrants come from all parts of the educational spectrum. The problem is that because US jobs are so much better paid than Mexican ones, Mexicans working in the US are often overqualified. Just over 5% of Mexican migrants working in the US have a professional or postgraduate qualification.  

  Mexico's Consejo Nacional de Población (Conapo), which researches demographic changes, noted that since 1986 there have been at least 10% more people of working age in Mexico than there are jobs for them. In 2000 there were 24% more Mexicans of working age than there were jobs for them. The bulk of the migrants are young: according to US census data, cited by Conapo, in 2003 31% of the Mexican (defined as born in Mexico) migrant workers in the US were aged between 15 and 29. This is equivalent to 3.038m people. The number of Mexicans between 15 and 29 living in Mexico was 17.23m. This means that almost 18% of young Mexicans were working in the US in 2003.  

  US implications: A telephone opinion poll by the Tarrance Group, published in the New York Times on 25 July, found that 69% of the Hispanics who had followed the US debate on immigration reform had decided that they would not vote for a Republican candidate in the forthcoming mid-term congressional elections. This is a change from what has happened in recent elections, in 2000 and 2004, when 40% of Hispanic voters backed the Republicans. Just under half the Hispanics polled, (47%), said that they had been insulted or offended as a result of the debate over immigration reform. Almost three-quarters (73%) of this subgroup said that they would not vote Republican in November. Hispanics form 14% of the US population but only 5% of the electorate. Most are well informed about the debate on immigration reform: two-thirds knew that each house of congress had proposed very different immigration reforms.