Glick, Leslie Alan

English

University of New Mexico

United States - Mexico Law Journal
Volume 2 Current Issues in U.S.-Mexican Business
Law Article 8
3-1-1994
Recent Legislative Developments Affecting U.S.-
Mexico Trade and Investment
Leslie Alan Glick
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Recommended Citation
Leslie A. Glick, Recent Legislative Developments Affecting U.S.-Mexico Trade and Investment, 2 U.S.-Mex. L.J. 37 (1994).
Available at: https://digitalrepository.unm.edu/usmexlj/vol2/iss1/8
RECENT LEGISLATIVE DEVELOPMENTS AFFECTING
U.S.-MEXICO TRADE AND INVESTMENT
LESLIE ALAN GLICK, ESQ.*
I. INTRODUCTION
I have been asked to discuss legislative developments that affect U.S.-
Mexico trade and investment, other than the North American Free Trade
Agreement (NAFTA) itself. There are two principal areas that I would
like to discuss that have an impact on Mexico. The first is the so-called
NAFTA parity legislation that will give equivalent NAFTA benefits to
other developing countries. The second area is the short and long term
extension of the Generalized System of Preferences (GSP). Mexico has
been one of the major beneficiaries of the GSP program and is now
among the leading recipients of GSP benefits. The extension of GSP and
its inter-relationship with NAFTA raise some thought-provoking questions
that I will address below.
II. NAFTA PARITY
Before the ink on NAFTA was dry, efforts began to extend NAFTA
benefits to other countries, particularly those in the Caribbean and Central
America which are countries covered by the Caribbean Basin Initiative
program (CBI). Representatives of these countries expressed concern that
NAFTA, with its elimination of tariffs on all products from Mexico,
would dilute the benefits given to their respective countries under the
CBI because the CBI program is not as extensive as NAFTA.
On March 18, 1993, Congressman Sam Gibbons, Chairman of the
Subcommittee on International Trade of the House of Representatives
Ways and Means Committee, introduced a bill entitled, "The Caribbean
Basin Free Trade Agreements Act," H.R. 1403. The purpose of this bill,
commonly referred to as the "Gibbons Bill," is to extend the benefits
that Mexico will receive under NAFTA to the twenty-four Caribbean and
Central American CBI beneficiary countries. Congressman Gibbons, in
introducing the bill on the floor of the House of Representatives, indicated
that he felt that NAFTA will adversely impact these countries by attracting
existing and potential investment from the region to Mexico. Gibbons
noted that "the Bill I introduced today would provide so-called NAFTA
* Leslie Alan Glick is a partner in the Washington, D.C. office of Porter, Wright, Morris &
Arthur. Mr. Glick has specialized in international trade, business and customs law since 1971. He
formerly served as counsel to the Subcommittee of International Trade of the United States Congress,
House of Representatives, Select Committee on Small Business. He is the author of several books,
including Understanding the North American Free Trade Agreement and Guide to U.S. Customs
and Trade Laws. J.D. 1970, Cornell Law School.
U.S. -MEXICO LAW JOURNAL
parity to these countries by granting them the same tariff and quota
treatment that will apply to imports from Mexico of textiles and apparel
and other products currently excluded from the CBI program once the
NAFTA enters into force."'
There are a number of products that currently are excluded from the
duty-free benefits of the CBI program that are not excluded from NAFTA.
The products include textile and apparel products, footwear, handbags,
luggage, work gloves, leather apparel, canned tuna, petroleum and pe-
troleum products, and wrist watches. Many of these products are im-
portant exports from both the CBI countries and Mexico, particularly
textiles and leather goods.
At present, CBI products exported to the United States are subject to
duties. Also, their textile products are subject to quotas. NAFTA elim-
inates quotas immediately and phases out duties on textile and apparel
products over a ten-year period. If passed, H.R. 1403 would extend these
same benefits to the CBI countries under the same timetable as NAFTA.
It may be argued, certainly by Mexico, that such parity legislation is
unfair since it dilutes the negotiated advantages received by Mexico under
NAFTA. Moreover, Mexico in effect bargained for these tariff preferences
by removing its own duties and making changes in its trade and investment
laws desired by the United States. The CBI countries, therefore, would
be getting these benefits for free under the "parity legislation." The CBI
countries do not have to remove their duties or make other concessions
relating to United States investment (other than those already required
under the CBI Act) for at least the first three years, after which they
would be expected to negotiate accession to NAFTA. From Mexico's
viewpoint, there is certainly a cause for concern in extending NAFTA
benefits unilaterally to other developing countries that compete with
Mexico, even for three years.
The Gibbons bill addresses this concern in part. It allows the NAFTA
parity for a three-year period, during which time the President of the
United States is authorized to negotiate a reciprocal trade agreement with
CBI countries under the fast track procedure. This negotiation will os-
tensibly require these countries to make concessions in tariff and in-
vestment laws equivalent to Mexico's, although this is not specifically
written in the bill. The bill requires the United States Trade Representative
to negotiate reciprocal trade agreements with CBI countries that "contain
comparable provisions to the NAFTA and achieve applicable objectives
under existing CBI and trade agreement authorities."'
Alternatively, the CBI countries would be encouraged to "accede to
the NAFTA and the supplemental agreements on environmental, labor
and import issues, as appropriate." 3 Thus, the Gibbons bill does not
address whether all twenty-four CBI countries would have to accede to
i. 139 CONG. REC. E698 (1993) (statement of Rep. Gibbons).
2. H.R. 1403, tit. I1, § 201(2); 103d Cong., 2d Sess. (1993).
3. Id. § 201(l).
[Vol. 2
RECENT LEGISLATIVE DEVELOPMENTS
NAFTA with all its provisions and supplemental agreements, or negotiate
a separate agreement which might not be as extensive as NAFTA. The
United States Trade Representative is directed to study this issue under
Title II of the Gibbons bill. The CBI countries, if they are smart, will
lobby for a weaker trade agreement that does not require removal of
their duties or adoption of the NAFTA provisions relating to investment,
intellectual property, labor standards, and the environment to which
Mexico has agreed. The argument should be that the CBI countries are
at a lower state of economic development than Mexico and should not
be required to make the same concessions.
My feeling is that since NAFTA passed, the parity legislation has a
good chance of passing as well. Congressman Gibbons' leadership on
the trade subcommittee is a sign that the bill will move through the
House of Representatives quickly and without many obstructions. The
Senate version of the Gibbons bill is being sponsored by Senator Phil
Gramm of Texas, a Republican, which indicates bipartisan sponsorship
for the bill. Finally, there is likely to be an effort to expand NAFTA
parity to other countries, perhaps those covered by other preference
programs such as the Andean Trade Preference Act (ATPA - Ecuador,
Peru, Bolivia and Columbia).
III. THE GENERALIZED SYSTEM OF PREFERENCES
As noted earlier, Mexico had been one of the largest beneficiaries of
the Generalized System of Preferences (GSP). This program provides
duty-free treatment to over 2,000 products from Mexico. In fact, 53.8%
of all Mexican products were already duty-free under GSP and remained
duty-free when NAFTA took effect on January 1, 1994. The GSP was
due to expire on July 4, 1993. The Clinton administration, committed
to extending GSP, unfortunately did not send the GSP extension legislation
to Capitol Hill until May. The delay was due to an internal disagreement
between the United States Trade Representative's Office (USTR) and the
Office of Management and Budget (OMB) because OMB did not know
where to allocate the revenues needed to cover the loss of duties resulting
in a GSP extension. Consequently, OMB estimated approximately $800
million would be needed to cover the extension.
The GSP renewal package sent to Capitol Hill in May only provided
a fifteen month renewal period for the program. The previous renewal
had been for eight years. The strategy behind the fifteen month renewal
period was that a short term renewal would not receive as much op-
position, and by submitting only an interim renewal proposal opponents
of GSP would save their lobbying efforts to oppose the program until
a long term renewal was introduced.
The administration's strategy in introducing an interim renewal of GSP
was successful because there was no serious opposition to the GSP
extension by members of Congress. The main problem was finding a
fast and efficient way to move the renewal package through Congress.
Ultimately, it was decided that the Budget Reconciliation Bill would be
SYMPOSIUM 1994]
U.S.-MEXICO LAW JOURNAL
amended to include the GSP extension and would certainly be passed
by Congress. The United States House of Representatives passed the
budget bill which included the GSP extension, but the United States
Senate did not agree that the GSP legislation should be part of the
budget bill. The Senate adopted its own version of the budget bill which
did not contain GSP renewal legislation. As a result, the budget bill
went to a joint House/Senate Conference Committee that resolved the
differences between the House and Senate versions of the Budget Rec-
onciliation bill. This byzantine process involves deal-making between
parties regarding the trade provisions of the bill and reached a final
compromise. I was retained by several Mexican firms in the automotive
industry, including divisions of Grupo ICA and the Spicer Group, to
lobby for GSP extension. Needless to say, the GSP extension was approved
in the Conference Committee and the budget package was passed by a
small margin in the House and only a one vote margin in the Senate
with Vice-President Al Gore voting to break a tie vote.
By the time this process ended, the GSP program had expired. Con-
sequently, Mexican exporters had to start paying duties for the first time
in many years on GSP eligible products. There was a gap of approximately
six weeks from the time that GSP expired to when it was renewed.
Fortunately, as a result of extensive lobbying efforts, the GSP renewal
was made retroactive and procedures were established whereby Mexican
exporters could receive refunds with interest. Yet, despite the retroactive
provision, there was still extensive disruption and concern among Mexican
exporters up to the expiration date of the program, during the period
when GSP expired, and for the amount of money that had to be paid
by importers from Mexico.
We must now look on the horizon to the long-term extension of GSP.
The implementation of NAFTA ended GSP benefits for Mexico. I think
this provision in NAFTA is a mistake. For example, Israel has continued
as a GSP eligible country despite the fact that it has a bilateral free
trade agreement with the United States. For Mexico, however, passage
of NAFTA meant all GSP eligible products immediately became duty-
free, and Mexico was removed from the program.
For most countries, the long-term extension of GSP is crucial. The
passage of a long-term renewal is likely to be a tough fight. The last
long-term renewal authorization in Congress resulted in a number of
restrictions on the GSP program, and there is certainly going to be an
effort by many United States Congressmen to continue limiting and
restricting the GSP program. Also, there are likely to be efforts to remove
larger advanced developing countries such as Brazil from the program
entirely.
IVol. 2


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