Truck Provision Prompts Mexican Retaliation Threat

March 16, 2009 07:00 PM

via a special arrangement with Informa Economics, Inc.

Details of products targeted seen this week

NOTE: This column is copyrighted material, therefore reproduction or retransmission is prohibited under U.S. copyright laws.

Mexico threatens retaliation over canceled truck program.. Mexican officials on Monday said they would increase tariffs on about 90 U.S. industrial and agricultural products worth about $2.4 billion in annual trade in retaliation for Congress ending a pilot program that allowed some Mexican trucks to transport goods within the U.S..

The move in part was expected after the language halting a truck pilot program was contained in the Fiscal Year 2009 omnibus spending bill, which recently cleared Congress and was signed into law by President Obama. Until the program was halted, the pilot program allowed up to 500 Mexican trucks to move beyond the strict mileage limits along border.

Mexico's Economy Minister Gerardo Ruiz Mateos said Monday the legislation signed by Obama was "wrong, protectionist, and clearly violates" the North American Free Trade Agreement (NAFTA) signed by the US, Mexico and Canada in 1994. Ruiz Mateos said the ban protected U.S. truckers while hurting Mexico's ability to compete.

Sen. Byron Dorgan (D-N.D.), who led the effort to end the pilot program, responding to Mexico's using tariffs, said: "It's an outrage and should not stand.” Dorgan said Mexico "has a lot of nerve” and may rethink its response when it considers its $66 billion trade surplus with the U.S. last year. He said he would work with the Obama administration to address the safety concerns. "I have said all along that I have no problem with Mexican long-haul trucks being allowed into the U.S. if it can be done safely," Dorgan said.

Sen. John McCain (R-Ariz.) said, "I deeply regret the action taken by the Mexican government and the harm it may cause to American businesses. Unfortunately, this is a predictable reaction by the Mexican government to a policy that now puts the U.S. in clear violation of NAFTA and was inappropriately inserted into the omnibus appropriations bill. We must take steps to prevent escalation of further protectionist measures – actions that only serve to harm American business during these tough economic times when these businesses need a worldwide marketplace to prosper. This is another reason why the President should have vetoed the omnibus spending bill.”

U.S. supporters of the program previously predicted that Mexico would retaliate under terms of NAFTA. "This was the worst idea Congress has ever come up with,” Sen. Kit Bond (R-Mo.) said of the language terminating the pilot program. Mexico's reaction, Bond said, is exactly what he predicted. U.S. labor unions have aggressively sought to keep Mexican trucks off U.S. highways, despite long-standing agreements by the two countries to eventually allow their passage.

The International Brotherhood of Teamsters welcomed the end of the trucking program, and issued a sharp rebuke of Mexico's retaliatory action. "The right response from Mexico would be to make sure its drivers and trucks are safe enough to use our highways without endangering our drivers," Teamsters President James Hoffa said. The Owner-Operator Independent Drivers Association said they will not support giving Mexico access to U.S. highways unless Mexico significantly changes its commercial driver's license criteria. "I think before we get another pilot program or demonstration, Mexico has to get their laws up to United States standards, and then we can talk about moving forward,” said Rod Nofziger, the group's director of government affairs.

The Obama administration on Monday responded to the tariff threat with assurances that Obama would work with Congress to create a new cross-border trucking program that addresses safety concerns. White House spokesman Robert Gibbs said "The president has tasked the Department of Transportation to work with the U.S. Trade Representative and the Department of State, along with leaders in Congress and Mexican officials to propose legislation creating a new trucking project that will meet the legitimate concerns of Congress and our NAFTA commitments.”

”Congress has opposed the (trucking) project in the past because of concerns about the process that led to the program's establishment and its operation,” Gibbs said, and added that Dorgan had written the White House to ”express his willingness to work with the administration in good faith to address this issue.”

While the Mexican government provided no details on which products would be impacted with tariffs, officials said the total value of the products was $2.4 billion in 2007 and originated in 40 states. A detailed list will likely be published this week -- Mexican Economy Minister Gerardo Ruiz said Mexico would soon publish a list of goods to be hit with the increased duties. Mexico will not include rice, corn, beans or wheat among imports from the U.S. facing increased tariffs, a spokesman for the Mexican economy ministry told Reuters on Monday. That is despite a statement from Rep. Kevin Brady (R-Tex.) saying the retaliation list could include what, beans, beef, and rice.

Last year, Mexico was the top export destination for U.S. rice, the No. 2 destination for soybeans and the third largest buyer of U.S. wheat. In 2008, the U.S. and Mexico had $368 billion in total trade, making Mexico the third-largest U.S. trading partner after Canada and China, according to the Commerce Department.

Background: A trans-border trucking program was intended to be created under NAFTA in 1993, and has been an issue in US-Mexico economic relations for years. The program was halted by safety concerns and political objections during the Clinton administration. As senators, both Obama and Vice President Joe Biden voted against Mexican truckers in 2007. Under President George W. Bush, the Transportation Department eventually put a demonstration project in process 18 months ago, hoping it would prove Mexican carriers could safely operate on U.S. roads. Instead, the program met fierce opposition. Democratic members of Congress have questioned whether Mexican authorities maintained adequate safety records on drivers, as well as whether Mexican drivers spoke English and were adequately tested for drugs and alcohol. The pilot program involved 29 Mexican carriers and roughly 100 trucks, far less than the 100 carriers and 500 to 1,000 trucks initially projected by the Transportation Department. A NAFTA tribunal has held the U.S. in violation of the deal because of the new restrictions on access for Mexican trucks.

Comments: Lawmakers like Sens. Bond and McCain knew that Mexico could and would retaliate. That did not stop others like Sen . Dorgan from still going ahead with their language in the omnibus spending measure. Mexico will pick products that will least harm there own economy. One cannot rule out beef and pork from being on the retaliation list, as Mexico is already upset about recent changes to mandatory country--of-origin labeling provisions.

NOTE: This column is copyrighted material, therefore reproduction or retransmission is prohibited under U.S. copyright laws.


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