Mexico announced on Aug. 16 its plans to impose tariffs on an expanded list of U.S. products in an effort to keep U.S. officials' feet to the fire regarding a continuing U.S. ban on Mexican truckers operating north of the border.
Mexico 's Economy Ministry says it plans to add 26 U.S. products to its tariff list while removing 16 others. The tariffs involve a relatively small slice of U.S. exports, but do target products such as pork, apples and California oranges, and so spreads the pain around and increase pressure on the Obama administration to resolve the disagreement which has run more than 15 years.
By adjusting the list of goods, Mexico hopes to add an element of uncertainty that might prompt U.S. exporters not directly affected by the tariffs to become more vocal against the cross-border trucking ban, Mexican Economy Minister Bruno Ferrari said.
Mexico said the levies would now affect 54 agricultural products and 45 manufactured ones. The new Mexican tariffs include a 5 percent duty on various pork and ham products, with pork rind pellets receiving a 20 percent tariff. Mexico is the second largest importer of U.S. pork. In addition, various cheeses received tariffs of between 20 percent and 25 percent, and frozen sweet corn was assigned a 15 percent duty. Also on the list are oranges, grapefruits, apples, chewing gum, pistachios, chocolate, and ketchup, all with 20 percent tariffs.
The Economy Department said the latest step will affect about $2.5 billion worth of trade involving agricultural and industrial products from 43 U.S. states. Mexico didn't release details on the new tariffs, though a Mexican government official said the duties would be "modest." The duty on most pork products is 5 percent.
Under the North American Free Trade Agreement, which took effect in 1994, the United States agreed to open its market to Mexican trucks. Congress in early March 2009 failed to renew a pilot program that had allowed a limited number of Mexican trucks to haul freight into the United States beyond a 25-mile commercial zone. The cross-border trucking pilot program was started by the U.S. Department of Transportation in September 2007 as a way to begin implementing the NAFTA trucking provision, which was supposed to take effect in December 1995.
In February 2001, a NAFTA dispute-settlement panel ruled that excluding Mexican trucks violated U.S. obligations under the trade deal. The ruling gave Mexico the right to retaliate against U.S. products, which it did in March 2009, placing higher tariffs on more than $2.4 billion of U.S. goods. Pork was not included on that initial retaliation list.
Mexico's latest move promises to add to the friction between a White House that says it wants to expand trade opportunities and congressional Democrats aligned with unions who support the trucking ban, and who cite safety concerns as their motivation in blocking Mexican trucks.
President Obama could end the ban on Mexican trucks without congressional approval, but that would risk an election-year backlash from unions and powerful congressional Democrats who oppose opening the borders to Mexican trucks. Instead, the administration has sought to work with Congress on a resolution to the trucking dispute.
Mexico defended its most recent action by noting that the decision by the United States to unilaterally suspend the pilot program violated NAFTA. "For 15-plus years, we've been more than patient trying to constructively work with the United States to have this solved, and it hasn't happened," said Ricardo Alday, a spokesman for the Mexican embassy in Washington .
The Mexican government said in a statement that it would "avail itself of all legal means to achieve full compliance by the United States with its commitments under NAFTA."
"Notwithstanding, the government of Mexico underscores its willingness and commitment to continue to ... engage with the administration and with Congress in finding a mutually acceptable long-term solution to this dispute," the statement says.
The Mexican Embassy statement also says the cross-border trucking program produced positive results during its 18 months of operation. The statement says that the program demonstrated compliance by Mexico 's long-haul trucks with U.S. regulations as well as "a superb and unmatched safety record."
The decision to end the program was driven by protectionism, the costs of which are borne by businesses, workers and consumers in both nations, the statement says. "The result, unfortunately, has been one of lost jobs and higher prices."
The government of Mexico underscored its willingness and commitment to find a mutually acceptable long-term solution to the dispute. Also, Mexico will continue to grant U.S. trucks access into its territory under the same basis of the demonstration program, the statement says.
"A seamless operation of cross-border trucking is essential for the competitiveness of our two countries and of the entire North American region in the global market place," the statement concludes.
U.S. Trade Representative Ron Kirk said the administration was "disappointed" by the new tariffs. " Mexico is an important U.S. export market and President Obama understands the economic pain that these tariffs cause for American farmers, companies and workers," Kirk said in a statement, adding that he is committed to finding a resolution.
A spokeswoman for Transportation Secretary Ray LaHood said he is working on a proposal that would address congressional concerns about safety while complying with international trade obligations.
The National Pork Producers Council warned that the new tariffs will have "negative economic consequences" for the industry and criticized the U.S. government for "not living up to its trade obligations." Nick Giordano, a lobbyist for the group, said the trucking restrictions contradict the renewed focus by the United States on enforcement of international trade agreements.
NPPC President Sam Carney said Mexico 's retaliation against U.S. pork would have "negative economic consequences for America 's pork producers." And, he added, "We are extremely disappointed that our top volume export market has taken this action, but we're more disappointed that the United States is not living up to its trade obligations.
"That failure not only has hurt dozens of U.S. industries economically, but it could prompt other countries to think twice about entering into trade deals with the United States ," Carney added. "Our trading partners need assurance that the United States will live up to its trade obligations."
National Association of Manufacturers Trade Policy Director Douglas Goudie noted that the basic underlying issue has not changed in that "the United States has violated the terms of a trade agreement, and thousands of U.S. manufacturing jobs are at risk if the administration and Congress don't take the necessary steps towards compliance."
Goudie also pointed that the lack of action by the U.S. government on this issue "will now result in more American manufacturing firms facing retaliation on their exports. This issue can be resolved through cooperation between the administration and Congress and the United States and Mexico so that unnecessary tariffs aren't imposed on U.S. companies."
