The U.S. press has given the flare-up an ascending series of alarming descriptions: "a dispute that could lead to a trade war"; a "minitrade war"; and the full, flaming "Obama's first trade war." This month's ban on Mexican truckers operating in U.S. territory quickly led to Mexico's imposing retaliatory tariffs on a wide range of American products. The speed with which the two governments have been willing to sacrifice free trade for a political spat has politicians and business lobbies south of the border increasingly worried about how well the fragile Mexican economy can survive the fracas and how much stomach the country has for a confrontation with the still formidable economic power to its north.
"With the world economy being so unstable and the Mexican peso falling, it is crazy to get into this protectionist trade dispute now," says Representative Edmundo Ramirez of Mexico's former ruling Institutional Revolutionary Party. "Our governments should be sitting down and negotiating solutions, not slapping on retaliatory measures." (See pictures of the Great Wall of America rising on the Mexican border.)
The spat, which will at least give Secretary of State Hillary Clinton something other than drug gangs to discuss during her visit to Mexico on Wednesday and Thursday, was kicked off when President Barack Obama signed a spending bill on March 11. Embedded in the bill was a clause that prohibits funds from being used to "implement, continue, promote or in any way permit" a two-year-old pilot program that allowed some Mexican trucks to operate in the U.S. Pressure for the clause had come directly from the Teamsters, who have long opposed competition from the Mexican 18-wheelers on their turf, complaining that the foreign truckers don't meet U.S. safety standards.
Down in Mexico, the administration of President Felipe Calderón accused the U.S. of being hypocritical and protectionist. It has a strong case. Under NAFTA, Mexican trucks were meant to be roaming some U.S. roads in 1995 and the width and breadth of the whole country by 2000. However, successive U.S. administrations could not say no to Teamster complaints that Mexican trucks were not fit for the interstates. Finally, both sides agreed on the pilot program to break the deadlock.
"We consider that the United States is mistaken, protectionist and clearly violating the treaty," Mexico's Economy Secretary, Gerardo Ruiz Mateos, told a news conference on March 16. "To decide to protect their own transport sector, they have decided to affect the competitiveness of our countries and of the region, impacting many other productive sectors." (Read a story about the new world sprouting on both sides of the U.S.-Mexico frontier.)
Ruiz Mateos made the angry statements as he announced that Mexico would slap tariffs across 90 U.S. products that were worth $2.4 billion in trade in 2007. He pulled no punches about his goal: the tariffs were designed to hit as many different U.S. states as possible. Going into effect on March 19, the tariffs of 10% to 45% affected goods ranging from onions and shaving cream to fruit juice and red wine. There was even a tariff on Christmas trees, which may not have worried the growers too much because they don't sell many in March.
However, while Mexicans are normally pleased to celebrate any chance to hit back against the imperialist gringos, there was little popular applause for the latest measures. As the world economy is suffering, the Mexican peso has lost about 40% of its value against the dollar in the past four months. That means higher prices for just about any product imaginable in the supermarkets and stores of Mexico, which imported $151 billion worth of goods from its northern neighbor last year. The new tariffs mean the prices will go up even further. "This will hit poor people, whatever the government says," Ramirez says. "Poor families use many of these products mentioned."
Even the Mexican trucking companies were reluctant to praise the measures. Indeed, right now their trucks are busy blocking city streets to protest high diesel prices set by government oil monopoly Pemex. They have nothing nice to say about their own government. Adolfo Torres, a regional leader of the National Chamber of Cargo Transporters, said the U.S. ban on Mexican trucks shows that the White House is better at supporting its own industries. "The U.S. government is defending its people, closing the border to Mexican transport, while here we have to turn to drastic measures like a strike to get the ear of our government," Torres told Mexican reporters.
An end to the dispute may be in sight, though. Obama's Transportation Secretary, Ray LaHood, met with U.S. lawmakers Tuesday, saying he planned to restart the pilot program with sufficient safety requirements imposed on Mexican truckers. Though key American Representatives have yet to sign on to LaHood's initiative, Ruiz said the same day that Mexico would remove the tariffs to reciprocate if the program were reinstituted. "For us, the solution is to go on with the program that we had," he said. "In the moment the United States returns to its commitments, we will eliminate all the tariffs we imposed." Clinton may be able to come home from her Mexico trip with some good news.