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Trade Experts Support Mexico

Experts say Mexico was right to retaliate for U.S. violations of NAFTA and warn against rising protectionism in the United States.



Several leading trade experts support Mexico’s trade retaliation against the United States for violating the North American Free Trade Agreement (NAFTA). Last week, Mexico announced that it would slap tariffs of 10 percent to 45 percent on at least 90 U.S. products after U.S. lawmakers stopped a pilot program that had been in place since April 2007 allowing a select number of Mexican trucks free access to the United States after passing safety tests.


“Mexico’s retaliation was only surprising in that they were so patient ... so long,” Gary Hufbauer, the Reginald Jones Senior Fellow at the Peterson Institute for International Economics, said today during a meeting in Miami organized by the law firm Hughes Hubbard. “This has gone on since 1994.”

Kenneth Pierce, a Hughes Hubbard partner specializing in international trade issues, agrees. “The Mexicans are right,” he said during the meeting. “They won the NAFTA case,” he said referring to a NAFTA arbitration panel that in 2001 ruled that a U.S. delay of allowing the trucks in was illegal.


NAFTA called for the United States to permit Mexican trucks first in the border states in December 1995 and then throughout the country in January 2000. But due to opposition by U.S. unions and their backers on Capital Hill, the move was repeatedly delayed. “We have denied them their greatest advantage to the U.S.,” said Hufbauer, who has written several books on NAFTA. “It does hurt Mexico in terms of proximity to U.S.



The trucking dispute is only one example of the growing protectionism in the United States, experts warn.


“We have already threatened to renegotiate NAFTA [and] have driven Mexico to retaliate because of our unwillingness to allow a trucking test, agreed to in NAFTA, to proceed,” Carlos Gutierrez, a former CEO of Kellogg’s and U.S. commerce secretary from 2005 until January, tells Latin Business Chronicle.


Instead of the United States admonishing Latin American nations on protectionism, as has traditionally been the case, the tables have turned, he points out.  “In his recent trip to the White House, President [Luiz Inacio Lula da Silva] of Brazil urged President Obama to not adopt protectionist measures and pressed for conclusion of the Doha round of WTO talks,” Gutierrez says. “How things have changed: our neighbors are now trying to convince us to believe in free trade.”


Hufbauer agrees. "President Lula has led the effort against protectionism," he said. The new stimulus bill passed by Congress last month, which includes restrictions on buying steel from Brazil and other foreign countries, is heavily protectionist, Hufbauer adds. “We have a lot of opportunistic protectionism in the stimulus bill,” he said.


Pierce believes the new U.S. Congress elected in November will be more protectionist than previous ones.  As a result, Hufbauer sees a possible showdown with President Obama. ”He’s got to be presidential,” he said. “If he doesn’t stand up [to congressional protectionism] other leaders will take notice. …I expect that after the G-20 [summit in London next week] he will rebuff the next congressional protectionist measure.”


Obama officials say they are trying to reach a solution to the trucking dispute before the president travels to Mexico next month. “I think the Obama Administration will negotiate a solution,” Pierce said. “It will make Congressman [Byron] Dorgan a fool for having done this.”

Dorgan, a US Senator from North Dakota, led efforts to stop the pilot program and is also harshly critical of Mexico’s position. “The announcement by the Mexican government that it will apply $2.4 billion in tariffs to American agricultural and industrial products is an outrage,” he told the Inter-American Dialogue’s Latin America Advisor yesterday. “A country that has a $453 billion trade surplus with us over the past 10 years has a lot of nerve to suggest in any way that we are being unfair to them.”

Hufbauer also believes the issue will be resolved, but not necessarily before the end of the year. “I think it will be a thorn in the side of [the Obama Administration],” he said.




Meanwhile, the U.S. Congress has yet to approve free trade agreements with Colombia and Panama from February and December 2006, respectively.  Colombia is the fourth-largest U.S. trade partner in Latin America, with trade reaching $24.5 billion last year. Panama is the13th largest trade partner with $5.3 billion in U.S. trade last year, according to a Latin Business Chronicle analysis of U.S. Census Bureau data.


”The Colombian FTA should be submitted for a vote as soon as possible [and] will win a majority of votes in both houses,” Gutierrez says. “There is no excuse that justifies holding up an agreement that benefits U.S. exporters and workers, that recognizes the courage and progress of the Colombian leadership and people and that confirms our friendship with that great country. There simply is no excuse. The credibility of the United States is at stake. The well being of an ally is at stake and the security of our hemisphere is at stake.”

Hufbauer believes both treaties will be approved, starting with Panama. “Panama will be relatively easy,” he said. “I expect it ratified by July.”

But the Colombia FTA will likely be approved late this year or in 2010, Hufbauer predicts.  However, rather than selling the treaty’s economic benefits, the Obama Administration will likely sell it as a key foreign policy measure, he believes. The Colombia FTA, along with the Korea FTA, “will be ratified for foreign policy reasons,” he said. Secretary of State Hillary “Clinton has no interest in alienating Colombia or South Korea over the free trade agreements.”

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