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The First Shot of an Obama Trade War?

Posted By Kevin Binversie On March 17, 2009 @ 10:05 am In International | Comments Disabled

Last week, with the signing of his pen on the Omnibus Spending Bill, President Barack Obama ended a pilot program [1] designed to allow Mexican trucking companies to ship goods deep inside the United States.  While controversial with some quarters of the American public, the program was necessary to ensure U.S. compliance with the North American Free Trade Agreement, commonly known as NAFTA.

With the program no longer funded, the United States would be willingly violating that trade treaty.  As a result, the government of Mexico announced plans [2] to retaliate against the U.S. by raising entry tariffs on 90 products imported to Mexico from the United States with an annual worth of at $2.4 Billion. The Houston Chronicle reports [2]:

“These are what are commonly known as reprisal measures,” Mexican Economy Secretary Gerardo Ruiz said in announcing the tariffs. “The reprisals are the cost the United States will have to pay.”

If carried out, the Mexican retaliation would be the first of its kind since the signing of the 1994 North American Free Trade Agreement, or NAFTA, which has erased most commercial barriers among the United States, Mexico and Canada.

Mexico has yet to publish the list of effected products.  Only stating at the moment it will include a mix of agricultural and industrial products produced in some 40 states.  The full list is expected to published near the end of the week.

The issue of Mexican Trucking under NAFTA has long been a contentious one since NAFTA’s inception.  The dispute between the two nations reached a previous high watermark when Mexico took the United States to the five-member NAFTA Arbitration board in 2001 over the issue.  The Mexicans won [3] with the board saying the U.S. was in non-compliance.

The Obama Administration has stated publicly they will work on replacing the program, but no one knows where Congress stands on recreating the program. Financial Times reports [4]:

The pilot programme has been opposed by many lawmakers and by the Teamsters Union, which says that Mexican trucks are unsafe. Because they are largely restricted to short-run hops over the border, most Mexican trucks entering the US are run by so-called “drayage” operations that use older vehicles more likely to fail inspection tests. But a study funded by the US Department of Transportation found that when comparing like with like, Mexican trucks were often safer than their US counterparts.

“The Mexicans have been extraordinarily patient on this,” said Edward Alden, senior fellow at the Council on Foreign Relations. “The pilot project was enough to give them glimmerings of hope for a long time.”

Heritage fellow James Roberts also wants to see an expansion of the program: [5]

The U.S. and Mexican economies are deeply intertwined, and both are facing problems. Increasing efficiency in trade between the two countries will benefit both sides and strengthen the pro-market-based democratic approach of Mexican President Felipe Calderon. Improved safety of both the U.S. and Mexican long-haul truck fleet will also contribute to improved national security in both countries.

Congress, President Obama, and his new transportation secretary, Ray LaHood, should reject calls by protectionists to end the cross-border trucking program and, instead, take immediate steps to expand it and make it permanent.


Article printed from The Foundry: Conservative Policy News from The Heritage Foundation: http://blog.heritage.org

URL to article: http://blog.heritage.org/2009/03/17/the-first-shot-of-an-obama-trade-war/

URLs in this post:

[1] ended a pilot program: http://features.csmonitor.com/economyrebuild/2009/03/11/us-legislation-will-stop-mexican-truckers-at-the-border/

[2] the government of Mexico announced plans: http://www.chron.com/disp/story.mpl/front/6313809.html

[3] Mexicans won: http://www.naftaclaims.com/disputes_us_trucking.htm

[4] reports: http://www.ft.com/cms/s/0/ce2431c4-126b-11de-b816-0000779fd2ac.html?nclick_check=1

[5] also wants to see an expansion of the program:: http://www.heritage.org/Research/tradeandeconomicfreedom/wm2296.cfm

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