Article

2009-03-19 Home Front Economy

Mexico Retaliates

When the U.S. closed the southern border to Mexican trucking last week -- in violation of the North American Free Trade Agreement -- Mexico promised to retaliate. Yesterday it did, releasing a list of 89 U.S. products that will face new tariffs of 10% to 45%.

Mexico's decision wasn't taken lightly. Since 1995, three successive Mexican administrations have worked to get the U.S. to respect its Nafta obligation of allowing long-haul trucks across the border. In 2007 the two countries agreed to a pilot program that permitted a limited number of Mexican carriers into the U.S. under rigid safety regulations. After 18 months that program proved that Mexican carriers are as safe as their U.S. counterparts. That was bad news for the anti-competition Teamsters union, and last week it got Congress to kill the pilot program. Yesterday Mexico fired back.

Trade wars are never pretty. But given the downturn in demand that already exists in the U.S. economy, this one could be ugly, and dangerous. Mexico is the U.S.'s third largest trading partner and the new tariffs will affect some $2.4 billion in goods across 40 states.

California, an important supplier of fresh fruits, dried fruits and nuts to Mexico, will be hit hard. Table grapes will face a 45% duty at the Mexican border; wine, almonds and juices among other agricultural products will pay 20%. Some 90% of Christmas-tree exports from California and 65% from Oregon go to Mexico. It's doubtful volumes will hold up beneath a 20% tariff.

Alongside Oregon, Washington state will pay dearly to protect the Teamsters. Four out of 10 pears that the U.S. exports go to Mexico and half of those come from Washington. Under the new rules, American pears now face a 20% tariff, as do a host of paper products from the Pacific Northwest and Wisconsin.

Wisconsin's scrap battery industry, which exports $128 million annually to Mexico, won't be as competitive after it pays a 20% tariff. Nor will New York's $24 million annual exports in personal hygiene products or its exports of $250 million in precious-metals jewelry. President Obama's home state of Illinois can't be happy to learn it will lose competitiveness under a 20% tariff on its plastic tableware and kitchenware exports to Mexico ($57 million annually) and on its printed leaflets and brochures ($68.7 million).

North Dakota Senator Byron Dorgan sponsored the amendment that closed the border and his constituents will pay. North Dakota only exports $1 million in oil seeds annually but 80% of that goes to Mexico. They now face a 15% tariff.

With the cost of imported U.S. products now higher, Mexicans will substitute these U.S. brands with products from Europe, Canada and Latin America. The retaliation appears to take care not to punish Mexican consumers or producers nor give new protection to any special interest in the domestic market. Its purpose is to focus Washington on its Nafta commitments.

While Americans wait for that moment, U.S. exporters will lose market share. That will put more American jobs, household incomes, and, yes, even mortgage payments at risk. President Obama said earlier this week that he wants to work with Congress to see if he can reopen the border. When he sees how much banning trucks is going to cost the flat U.S. economy, he may want to step on it.

So much for the promise to save US jobs. The administration is in overdrive.

On crack, it would appear.

Barry never liked NAFTA anyway. And he clearly hasn't learned from history ...

Posted by Omoter Speaking for Boskone7794 2009-03-19 02:46|| || Front Page|| [11135 views ] Top

#1 Does anyone know if it is a verifiable fact that this is in violation of NAFTA? That seems to be a key question. I never trust articles that make sweeping statements at their outset, and then build on the statements.

Posted by Whiskey Mike 2009-03-19 08:04|| 2009-03-19 08:04|| Front Page Top

#2 2008 US trade deficit w/ Mexico: $64.4 billion. 2008 Mexican GDP: $886 billion
US Trade deficit as % of Mexican GDP: 7.27%

Who has more to lose?

Posted by ed 2009-03-19 08:12|| 2009-03-19 08:12|| Front Page Top

#3 We do, when the Mexican economy implodes, their government loses the war with the drug cartels and huge numbers of people flee across the border to AZ, CA, TX and NM, and when cartel violence follows them in increasing tempo.

Posted by lotp 2009-03-19 08:27|| 2009-03-19 08:27|| Front Page Top

#4 Well the huge numbers of illegals and drug cartels are already here. Something like 20% of Mexico's population already lives in the US, legally and illegally. How about using some of the trillion $ stimulus and building a border fence and obstacles, actually enforcing immigration law and work to reduce the illegal alien crime problem and reducing the drain on the US taxpayer? $64.4 billion a year properly applied could go a long way to reducing that problem.

Posted by ed 2009-03-19 08:36|| 2009-03-19 08:36|| Front Page Top

#5 Can't build a border fence, Ed. San Fran Nan said immigration enforcement is un-American. Plus it might impede the migration of the yellow-spotted ground sloth or something.

Posted by Glenmore 2009-03-19 08:58|| 2009-03-19 08:58|| Front Page Top

#6 All brought to you by the Teamsters and their Donk sock puppets.

Posted by Procopius2k 2009-03-19 09:17|| 2009-03-19 09:17|| Front Page Top

#7 Something for Arnold and Nacy to chew on:
Costs of Illegal Immigration to State Match Amount of the Budget Deficit
While Governor Arnold Schwarzenegger has called for increases in the sales tax and cuts in services to reduce the budget deficit of $11.2 billion, a population group has noted that the shortfall is about the same as the costs of illegal immigration to the state.

Californians for Population Stabilization (CAPS) says that a 2004 study indicated that California's illegal alien population imposed a net cost of $9 billion per year on the state's taxpayers just for education, medical care and incarceration. After adjusting the figure for current costs and increases in the number of illegal aliens, it would exceed the states projected deficit, according to Diana Hull, the organizations President, and this is a very conservative estimate.

Other states are taking steps to reduce illegal immigration and the burdens it imposes. Arizona, for instance, passed legislation requiring that employers use the E-verify system to check the work eligibility of employees. Unfortunately, California is going the other direction, and taxpayers get stuck with the bill, said Hull.

The costs of illegal immigration to California are likely much higher. A 2007 study by Philip J. Romero, formerly a research economist at RAND, top economic adviser to Governor Pete Wilson and later Dean of the University of Oregon School of Business, estimated that illegal aliens in California receive somewhere between $10 and $38 billion more in state services than they pay in state taxes.

I believe this was written before the Fanny Mae collapse and the current year CA deficit is around $15 billion.

Posted by ed 2009-03-19 09:22|| 2009-03-19 09:22|| Front Page Top

#8 Seems like a stupid thing to do but, still, I have mixed feelings. Traffic on Interstate 5 in San Diego is already bad enough without thousands of Mexican trucks full of plastic crap from China being added to the mix. I don't believe anybody was thinking about I-5 when they approved NAFTA. This little bit of infrastructure is simply not up to it. Add to that a high probability that those trucks will be carrying cocaine, heroin and marijuana as well as plastic crap from China. They can deny it all they want but I won't believe them. I dunno, maybe some of our businesses can find new markets or, maybe, we could get wise and start slapping some tariffs on China. But I guess that isn't likely with them holding all our T-bills.

Posted by Ebbang Uluque6305 2009-03-19 12:07|| 2009-03-19 12:07|| Front Page Top

#9 I saw somewhere that there are 6 million semis on US roads, of which 98 are from Mexico.

Not 98 thousand, but 98. Less than a hundred. Two-digit number.

Maybe 98 more Teamsters will get trucking jobs as a result of this, but how many thousands of non-Teamsters get to lose their jobs because Obama's "best and brightest" Ivy League minds just violated international law and torpedoed our trade relationship with one of our two adjacent neighbors?

Posted by Mike 2009-03-19 12:49|| 2009-03-19 12:49|| Front Page Top

#10 The lesson on trade wars is that both sides lose, just like in nuclear wars.

Posted by European Conservative 2009-03-19 15:53|| 2009-03-19 15:53|| Front Page Top

#11 After 18 months that program proved that Mexican carriers are as safe as their U.S. counterparts.

Who's conclusion was this and who verifies continued compliance? The same overloaded agencies that can't stop smuggling would then have to ensure trucking safety as well? Or perhaps the various county agencies tasked with such (though what enforcement would there be of violations?)???

NAFTA was a disaster from the beginning. It's only right that Bambi gets to deal with this little Clinton legacy.

Posted by logi_cal 2009-03-19 16:37|| 2009-03-19 16:37|| Front Page Top

#12 My granddad used to say "if trade doesn't cross borders, tanks will"
In my callow youth I thought that was silly, but for some reason I'm coming around to that point of view.

Posted by tipper 2009-03-19 16:58|| 2009-03-19 16:58|| Front Page Top

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