The Truth about Trade
Dean is Chairman Emeritus of 'Truth About Trade & Technology, a nonprofit advocacy group led by a volunteer board of American farmers.
Declare Trade Peace
Jun 11, 2009
The Constitution gives Congress the power to declare war. Unfortunately, some lawmakers see this as an excuse to ignite a trade war--one that’s hurting Americans economically during our worst financial crisis in at least a generation.
As if that weren’t bad enough, they’re also making Americans look like scofflaws for failing to live up to our treaty obligations.
Last week, a Mexican trade association announced that it was seeking $6 billion in damages from the U.S. because officials in Washington have broken longstanding promises about access to our markets. I’m reluctant to side with foreigners against my own government. On the merits, however, I’m forced to conclude that the Mexicans make a good case. Regrettably, our own representatives are working against the interests of the American people.
The controversy surrounds trucking. Under the terms of the North American Free Trade Agreement (NAFTA), the U.S. was supposed to begin allowing Mexican long-haul trucks to carry cargo on American roads nine years ago, by 2000. This never happened, however, due to the political influence of Big Labor. The union bosses worked with their protectionist collaborators in Congress to keep a treaty obligation from becoming a concrete reality.
Talk about misplaced priorities. Our "politics-as-usual" officeholders are determined to keep fully documented Mexican trucks from entering our country and engaging in aboveboard business with Americans, in accordance with an international agreement that Congress voted to approve.
For eight years, the Bush administration tried to solve this problem. It developed pilot programs and safety rules for Mexican trucks. These good-faith efforts kept the Mexicans at bay. They were frustrated by Washington’s refusal to live up to its agreements, but they were also reluctant to retaliate. Trade wars never have winners. U.S. consumers, for their part, have been losing this one from the get-go: The obligation to move cargo from Mexican trucks to American big rigs reduces efficiency, which leads to higher prices for all consumers.
Yet the protectionists made a potentially compelling claim. They said that Mexican trucks were not safe enough to travel on U.S. roads. Nobody wants American lives jeopardized, after all.
We now know that this is a bogus argument. Mexican trucks are currently allowed to drive a few miles into the U.S. During these trips, they often undergo roadside inspections. Their rate of passage is about the same as that of U.S. vehicles. (Actually, it’s a couple of percentage points higher.) Trucks that take to American roads, whether they’re driven by plaid-flannel-wearing guys named Dave or mariachi-listening muchachos named Jose, will always have to meet American standards.
I dislike saying it, but the protectionists are playing to prejudice--the assumption that because Mexico is a poor country, its truck drivers won’t bother to have their brakes checked before they rumble across the Rio Grande. This assumption is perhaps not totally unreasonable. But when its falsehood is empirically proven, we have a responsibility to abandon it.
Yet members of Congress have embraced it. In March, they passed a bill that essentially bans Mexican trucks from American roads. President Obama put his signature on the legislation.
So Mexico quickly struck back. It slapped new tariffs on made-in-America products--exports valued at $2.4 billion. In all, some 89 consumer items from 40 states are affected. California table grapes face a new 45% duty at the border. Christmas trees grown in Oregon must endure a 20% tax. Scrap batteries from Wisconsin, jewelry from New York, and oilseeds from North Dakota are affected as well.
When Mexicans shop for these products, they are now almost certain to turn to suppliers from other countries. We lose sales.
“In view of the economic downturn, the loss of any market for our agricultural producers is especially troubling,” said Christine Gregoire, the Democratic governor of Washington, last month. Her state’s pears, cherries and frozen potatoes pay a 20% duty as they enter Mexico. Gregoire is calling on Congress and the Obama administration to resolve this dispute as quickly as possible.
This destructive trade war was launched for the benefit of a special-interest lobby. Now it forces ordinary Americans to suffer a new economic blow, whether their jobs are tied to exports or they purchase consumer items from abroad.
It’s time for Washington to pursue trade peace.