1. Consideration of Sonora, Mexico as hog cholera free and the Mexicali Valley, Mexico as Karnal bunt free - The Members of the Committee on Agriculture Delegation to Mexico sent correspondence to the President, Secretary of Agriculture, U.S. Trade Representative, and the President's Special Envoy for the Americas asking that the United States do all it can to implement a protocol declaring the Mexican State of Sonora as hog cholera free and the Mexicali Valley as Karnal bunt free for wheat. It is expected that the results of these efforts will be achieved during the President's planned May trip to Mexico. Members believe that by demonstrating the U.S. willingness to resolve such issues, the Mexican government will reciprocate on issues of importance to U.S. agricultural trade.
   
2. Regionalization as key to increased trade between the United States and Mexico - During meetings with Mexico's Secretary of Agriculture Labastida and Secretary of Commerce Blanco, the issue of regionalization was discussed as one of the primary ways to keep the problems associated with sanitary and phytosanitary barriers to a minimum. By identifying the problems and region, both sides can isolate sanitary and phytosanitary issues and work to resolve them. Isolating one region in which a problem may be found or opening up a region which has never had the problem in question, can enhance the trade relationship between Mexico and the United States.
   
3. Railroads, trucking, and border crossing problems/delays - There have been several problems raised regarding the delays at border crossings. Delays stem from too many rail cars at the border at one time, trucking regulations at the border which delay shipments because of unloading and reloading, and an insufficient work week to handle the increase in border traffic. The Committee Delegation suggested that a 7 day work week at the border is necessary. The Committee has written to the appropriate authorities on both sides of the border asking that this be considered.
   
4. GSM-103 program - The United States has approved $125 million in the GSM-103 credit guarantee program to encourage the Mexicans to buy U.S. breeder cattle. However, the program has not been utilized, thereby affecting U.S. exports of breeder livestock. The problem appears to be one associated with the Mexican banking system. During the peso devaluation of 1995 many banks and financial institutions were adversely affected. The Central Bank of Mexico instituted very restrictive rules for financial institutions, requiring high interest rates and short repayment periods for most loans. This has made borrowing, even with guarantees, difficult. The Committee Delegation discussed this situation with Secretaries Labastida and Blanco to encourage the Mexican banks to make the loans. The Committee has written to the Texas and Southwestern Cattle Raisers Association, the Independent Cattlemen's Association of Texas, and the Texas Cattle Feeders Association to encourage these groups to inform their membership of the GSM-103 program.
   
5. North American Free Trade Agreement (NAFTA) - The Committee Delegation discussed NAFTA as a dynamic treaty. The United States and Mexico both have to make adjustments for each other's economies. The Committee Delegation also discussed that in the global economy, especially for agricultural trade, it is not the United States and Mexico, but the Western Hemisphere versus Asia and the European Union.
   

Committee Members traveled to Mexico to meet with government officials and private sector organizations on matters related to U.S. agricultural trade. The United States and Mexico share the goals of open and fair trade and the reduction of barriers to world-wide agriculture trade. The issues discussed included non-tariff trade barriers; continuation of efforts to liberalize world-wide agricultural trade with emphasis on resolution of sanitary and phytosanitary restrictions; particular concerns regarding NAFTA; and the on-going bilateral meetings between the United States and Mexico.

Members discussed specific barriers to United States agriculture exports and the importance of market access as a basis for equitable bilateral trade.

MEXICO

Mexico is the United States' third-largest trading partner, with total trade values expected to exceed $140 billion in 1997. This is exceeded only by Canada and Japan. The United States is the dominant supplier of agricultural products to Mexico, providing almost 75 percent of its agricultural imports. The most important U.S. agricultural exports to Mexico in value terms are wheat, corn, soybeans, cotton, forest products, and animal products, including red meat, poultry and dairy products. In fiscal year 1996, agricultural trade between Mexico and the United States reached $8.7 billion, with a $1.7 billion surplus to the United States. Agriculture exports to the United States from Mexico include fruits and vegetables, coffee, cattle, and seafood. The six most important agriculture imports from Mexico to the United States in value terms are tomatoes, peppers, onions, cucumbers, grapes and melons. These commodities account for about one-third of total agricultural imports from Mexico.

Members of the Committee met with Mexico's Secretaries of Agriculture (SAGAR) Francisco Labastida and Commerce (SECOFI) Herminio Blanco to discuss trade issues. Members also met with their Congressional counterparts and Mexican agribusiness leaders, emphasizing the U.S. desire that the Mexican government improve market access by eliminating sanitary and phytosanitary barriers to trade.

BRIEFINGS FOLLOWING THE COMMITTEE ON AGRICULTURE'S TRIP TO MEXICO

Upon return, Chairman Smith and Members of the Committee discussed results of the meetings in Mexico and their observations with the Secretary of Agriculture, the Honorable Dan Glickman, and the President's Special Envoy for the Americas, Mr. Thomas (Mack) McLarty.

Chairman Smith and Members of the Committee Delegation wrote to the President to advise him of the Committee's trip and the issues related to access to the markets of Mexico for United States agricultural products. They requested that the President take concrete actions as a demonstration of our willingness to continue working toward solving agricultural trade issues each country has encountered. It was recommended that the U.S. recognize the Mexican State of Sonora as hog cholera free and the Mexicali Valley as Karnal bunt free. It is expected that the United States will receive similar flexibility toward U.S. products by Mexico. The Chairman also wrote to the Secretary of Agriculture, the U.S. Trade Representative, and the President's Special Envoy for the Americas informing them of the trip's results.

MEXICO BRIEFINGS/MEETINGS

Mexico City, Mexico

March 31 - April 2, 1997

Mexico City, Mexico:

U.S. Ambassador James R. Jones

Deputy Chief of Mission Charles Brayshaw

Minister Counselor for Agricultural Affairs Norval Francis

Senior Agricultural Attaché Rod McSherry

Minister Counselor for Economics William Brew

Secretary of Agriculture Francisco Labastida

Secretary of Commerce Herminio Blanco

Asociacion de Proveedores de Productos Agropecuario Mexico Ac. (APPAMEX) (Mexican Grain Importers Association), Arturo C. Enriquez

Consejo Nacional Agropecuario (National Agriculture Committee), Miguel Castro

Farmland Industries, Stephen Dees

CoBank, David Barraza

Laredo, Texas

April 4, 1997

Laredo, Texas:

Animal and Plant Health Inspection Service (APHIS),

Regional Director Peter J. Fernandez

APHIS, Senior Program Manager Phillip Garcia

APHIS, Port Director Jose Uribe

APHIS, Director of Field Operations, Edwin J. Bowers

Minister Counselor for Commercial Affairs Kevin C. Brennan

U.S. Customs Service, Port Director Leticia Moran

Immigration and Naturalization Service, Area Port Director Ramone T. Juarez

Food and Drug Administration, District Director Joseph Baca

Major Issues Discussed

--- The Committee Delegation agrees with Mexico, that if the State of Sonora is found to be hog cholera free by USDA/APHIS there should be established a protocol allowing hogs from this region into the United States. The Mexicans also asked that USDA/APHIS look into consideration of the Yucatan as hog cholera free.

--- The Committee Delegation agrees with Mexico that if the Mexicali Valley is found to be Karnal bunt free by USDA/APHIS there should be established a protocol allowing wheat from this region in the United States.

The issue of fumigating all shipments of wheat was discussed with the Members. It was suggested by the Members that the Mexican milling industry should be asked to certify what imports are for milling purposes only, since this was done primarily for seed wheat.

The issue of import licenses/trading certificates was raised. The Members urged Mexican authorities to use this system as a permit system to facilitate imports, since formal paperwork and inspections must be performed separately. The Members asked the Mexican authorities to review this practice, which may be impeding free trade.

--- Regionalization was discussed as a key to the U.S.-Mexico trading relationship. By identifying sanitary and phytosanitary restrictions and the regions to which they are associated, both countries can identify the issues and work to resolve them. Isolating one region in which a problem may be found, or opening up a region which has never had the problem in question, can enhance the trade relationship between Mexico and the United States. It was agreed that implementation of NAFTA regionalization requirements would contribute to freer trade.

--- There were several issues raised in regard to railroad and trucking delays at the border. Delays stem from too many rail cars at the border at one time, trucking regulations at the border which delay shipments because of unloading and reloading, and a limited work week to handle the increase in trade. The Committee Delegation suggested that a longer work week is necessary, possibly even 7 days, to handle the workload. There also appears to be a commercial problem, because rail companies load cars before they are ready with the paperwork. This also causes border delays.

--- The United States has approved $125 million under the GSM-103 credit guarantee program for Mexico. The intent of this funding is to encourage Mexico to buy U.S. breeder cattle. The problem, as was discussed particularly with Secretary Blanco (SECOFI), is associated with the Mexican banks. During the peso devaluation of 1995 many banks and financial institutions were adversely affected. The Central Bank of Mexico instituted very restrictive rules for financial institutions, requiring high interest rates and short repayment periods for most loans. This has made borrowing by farmers and ranchers, even with guarantees, difficult.

--- Issues with particular commodities that were discussed include:

1. Imports of Florida and Arizona citrus and improving access for U.S. citrus exports to Mexico were encouraged by the Committee Delegation.
2. A recent pilot program to export U.S. stonefruit to Mexico is going well, but the Committee Delegation asked the Mexican government to consider including peaches from Georgia in the program.
3. The Committee Delegation emphasized the importance of strict enforcement of rules of origin, particularly with regard to peanuts.
4. The United States has not been able to fill its Tariff Rate Quota (TRQ) on eggs into Mexico because most of this quota is being filled by the Mexicans with hatching eggs and not table eggs. The Committee Delegation asked the Mexicans to consider importing more table eggs.
5. The Committee Delegation notified the Mexicans that it would ask the Administration to include pecans on the agenda of issues for discussion with Mexico. Notification was given to the U.S. Embassy staff accompanying the Committee Delegation.
6. The United States is not able to fill its quota on milk powder with Mexico, because Mexico is buying it at lower prices from other sources. The Committee Delegation agreed that the issue was one of price and that only lower prices would solve the problem.
7. The announcement of the dry bean TRQ earlier in the year by the Mexican government would allow forward contracting, thus allowing growers to make better planning decisions and would result in lower prices for Mexican consumers.
8. The decline in the export of U.S. forest products to Mexico appears to be largely the result of the Mexican recession rather than trade barriers.
9. Representatives of APHIS agreed to review limitations with the Mexican government on access of U.S. watermelon seeds to the Mexican market.
10. The United States imposed restrictions on the import of Mexican made broomcorn brooms. Mexico retaliated by implementing an anti-dumping investigation of high fructose corn syrup from the United States. The issue was discussed and the parties agreed to continue working to resolve the issue.
11. The issue of illegal immigration from Mexico to the United States was discussed. It was agreed that the primary way to solve illegal immigration is for the Mexican economy to expand. Another solution is to work out a better temporary workers program, as Mexico now has with Canada.
12. The import/export of poultry is a problem because there are phytosanitary issues on both sides of the border. The Mexican and U.S. governments both restrict access because of inspection system equivalencies and because the U.S. is reviewing Mexico's poultry disease status. Resolving this issue was a high priority for both the Committee Delegation and the Mexican government because it was agreed that freer trade in poultry will be good for both sides.
13. Representatives from the Mexican State of Sonora asked that the U.S. consider inspecting grapes at point of origin to speed them to market. It was recognized, however, that the cost would add greatly to the price of the grapes.
    

--- Both sides agreed that discussions are needed to work toward tariff reductions to expand trade between the U.S. and Mexico.

--- There were also areas in which agreements have been made that appear to benefit both sides. These include: regionalizing areas in the United States and Mexico so that U.S. cherries may be exported to Mexico and Mexican avocados may be imported into specific areas of the United States; a separate agreement in regard to the importation into the United States of tomatoes from Mexico; and the continued export of U.S. pears and apples to Mexico.

--- Both sides also discussed the idea that in the global economy, especially for agriculture, trade should not be viewed in terms of the United States and Mexico, but the Western Hemisphere versus Asia and the European Union. NAFTA is a dynamic treaty and both sides have to make adjustments for each other's economies.