Name(s) |
William A. Hagedorn |
Organization(s) |
Comstock & Theakston, Inc. |
Country: |
U.S.A. |
EXECUTIVE SUMMARY
To: Chair of the Committee of Government
Representatives on the Participation of Civil Society
Reference: Free Trade Area of the Americas
Draft Agreement
Chapter on Market Access (The draft texts pertaining to the issue area
of the NGMA are included in the Annex.)
Annex
[CHAPTER ON] TARIFFS AND NON-TARIFF MEASURES
Section Two. Tariffs
Article 5. Provisions on special regimes
Paragraphs 5.1.1. through 5.1.5.
Abstract: The subject of duty drawback should
not be included in the Free Trade Area of the Americas.
I.The effect of NAFTA on the balance of trade
in the United States
- In the 9 years before NAFTA, the U.S. trade
deficit with Mexico was 6%.
- In the 8 years since NAFTA started, the U.S.
trade deficit with Mexico has been 23%.
- In the 9 years before NAFTA, the U.S. trade
deficit with Canada was 16%.
- Since 1998, the deficit with Canada rose from
19% in 1999 to 29% in 2000 to 33% in 2001.
- In 1994, the U.S. had a trade surplus
with Mexico of more than $1 billion.
- In 1995, the U.S. had a trade deficit with
Mexico of more than $15.8 billion.
- Through January 2002, the deficit with Mexico had
increased to more than $32 billion.
- NAFTA-specific transactions with Canada averaged
$40.6 billion deficit, 1994-2001.
- Non-NAFTA transactions with Canada averaged $12.8
billion surplus over this period.
II. The effect of NAFTA on labor in the
United States
398,089 U.S. manufacturing
workers (as of 4/4/2002) have lost jobs or had hours and wages reduced
as a direct result of NAFTA (considering only the NAFTA-TAA
Program).
III.
The Intent and the Result of Restrictions on Duty
Drawback in NAFTA
A.
The intent of restrictions on duty drawback in NAFTA was to ensure
that none of the NAFTA countries could become an "export platform" for
materials produced in other regions of the world.
B.
However, the pending restrictions on duty drawback prompted major
industry and government concerns in Mexico that investment in the
maquila sector of the Mexican economy by non-NAFTA countries would fade
away as a result of the restrictions on duty drawback and duty deferral.
C. “The Impact of the 2001
NAFTA Changes: Report to the U.S. Customs Service” made the assertion
that “The duty waiver provisions that were in place until January 1,
2001 have been a key feature of the growth of the maquiladora program
since the mid-1960s, and their elimination will have enormous direct and
indirect impact on these firms and on the United States and Mexico.”
D. The Actual Results of
Restrictions on Duty Drawback in NAFTA, effective 01/01/2001
Mexico’s Secretary of Economy
identified the changes to customs laws in accordance with rule 303 of
NAFTA as a factor that had contributed to the contraction of the maquila
industry.
The president of The Confederation
of Industrial Councils reported that 70 percent of the Mexican workers
who lost their jobs in 2001 were from the export manufacturing industry,
and that it would take several years before those jobs are
replaced.
More than 238,000 positions [20%
of the total work force] were eliminated in Mexico’s maquiladora sector
as a whole. As a result, some of the maquiladora operators have shifted
production to even lower-wage countries such as China, Malaysia,
Thailand, Ecuador, Guatemala and Honduras.
Foreign investment - a total of
$2.17 billion - was off by almost $1 billion from the previous year. In
the last quarter of 2001, foreign investment in maquiladora activities
barely reached $500 million.”
IV. The remedial effect of
duty drawback
-
“The general purpose
underlying the drawback law is to assist American business and labor to
compete more effectively in foreign markets. U.S. export trade
is facilitated; the balance of trade is improved; jobs are
created; the general economy thereby benefits. To this end,
the drawback law is remedial in character.” [Customs HQ Ruling 216658]
-
“Remedial statutes are those which
are designed to correct an existing law, redress an existing
grievance, or introduce regulations conducive to the public good”.
[Customs HQ Ruling 101421]
-
“to correct an existing law”
(e.g., NAFTA, by removing the section on duty drawback); and
-
to “redress an existing grievance”
(e.g., the injurious effect of NAFTA on the U.S. balance of trade and on
the loss of manufacturing jobs in the U.S.)
-
The drawback statute must have its
full, unrestricted effect to accomplish its purpose.
V. Conclusions
A. The subject of duty drawback
should not be included in the Free Trade Area of the Americas;
and
B. The section on duty drawback
(Sec. 203. DRAWBACK) should be removed from the NAFTA Implementation Act
(Public Law No. 103-182).