US-Mexico Blame Game

The nation’s trade deficit hit its lowest point in two years this July, a hopeful sign of economic recovery as U.S. companies increase exports to overseas markets. But this positive news regarding trade largely has been offset by new punitive tariffs imposed on U.S. products by one of our largest trading partners.

What’s worse, these new trade barriers are the result of our own failure to abide by our international obligations.

Mexico’s decision to impose tariffs on a range of U.S. exports came after 15 years of frustration over the United States’ refusal to abide by the North American Free Trade Agreement provision allowing entry of Mexican trucks into the U.S.

The tariffs will cover a rotating list of 99 U.S. product categories — primarily agricultural — slapping U.S. producers with a punitive fee of approximately $2.5 billion.

At first blush, one may think the Mexican government is being unreasonable, that it should suspend the retaliatory tariffs for its largest trading partner and follow the Obama administration’s lead in seeking a resolution to this long-standing dispute.

Upon closer review, however, it’s clear the Mexican government has been exceedingly patient, and that tariffs U.S. companies face are due to failure of our own Congress and administration.

Under NAFTA, the cross-border trucking program was to be implemented in 1995. Facing strong opposition from labor unions, the United States, under the Clinton administration, delayed implementation. Two years later, the Bush administration launched a pilot program to permit Mexican trucks to operate on U.S. roads, and some 100 Mexican trucking companies began operating across the border. That program was later killed by union-supported legislation enacted by Congress and signed into law by President Obama.

Mexico has been waiting 15 years for an adequate resolution to the trucking issue. So it came as welcome news, especially to those sectors facing the retaliatory taxes, when President Obama in August 2009 said he was “committed” to finding a solution. In March, Transportation Secretary Ray LaHood said the administration was “very near” to finalizing a cross-border trucking program. In May, LaHood said the plan was “very close.”

To advocates of free trade, it isn’t surprising that these hortatory remarks have not been followed with action. The Obama administration has made similar promises regarding stalled free trade agreements. For months, the administration responded to criticism of its trade intransigence by promising to release “benchmarks” so our potential free trade partners Panama, Colombia and South Korea — whose agreements have languished in Congress without ratification — know what concerns to address so those pacts can be finalized.

No such benchmarks have been produced, and those trade agreements, which would help stimulate economic activity and create jobs, remain stalled even as the three countries sign other trade agreements with Europe, Canada and other competitors to U.S. companies.

The Mexican trucking dispute is an unfortunate example of how U.S. farmers, ranchers and manufacturers will suffer because of the administration’s adherence to the labor union anti-free trade agenda. As Mexico begins to close its borders to our products, perhaps this concrete, multibillion-dollar penalty on our companies will expose our government’s failure to promote the kind of trade policies that can rescue our economy.

Sage Chandler is senior director of international trade at the Consumer Electronics Association and a former director for Canadian Affairs at the Office of the United States Trade Representative. Contact her at schandler@ce.org.
 

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