From The Capital Press, Salem (Ore.), “Mexico tariffs freeze pears“:

Exports of Northwest pears to Mexico have ground to a halt because of a new tariff.

Mexico last week imposed tariffs of 20 percent on pears, cherries, apricots, Christmas trees, frozen potatoes and other products. The tariffs are in retaliation for the U.S. ending a pilot program that allowed some Mexican trucks to transport goods in the U.S. as part of the North American Free Trade Agreement.

The American Farm Bureau has called on President Obama to fix the problem:

Expressing disappointment in Congress’ decision …to end the Transportation Department’s Cross Border Trucking Pilot Program, AFBF President Bob Stallman said Mexico has already responded by imposing $2.4 billion in trade retaliation.

“This action by Congress has come at a cost to U.S. agriculture and our exports to one of our top markets,” Stallman said. “We urge you to find a resolution that will honor our obligations under NAFTA, eliminating any cause for Mexico to halt U.S. trade.”

The Oregonian, “Mexico’s new tariffs could cost Oregon millions”

Mexico, angered by a ban on its trucks entering the United States, slapped tariffs on 90 U.S. products — a move effective today that could cost Oregon exporters tens of millions of dollars.

The duties include 20 percent tariffs on Christmas trees, pears and frozen potatoes, all of which Oregon sells to Mexico. A Mexican official confirmed his government chose the $2.4 billion worth of products partly to target states with powerful Democratic politicians….[snip]

“The vote was to save jobs for the unions, but it’s going to cause problems for several other industries,” said Bill Brewer, executive director of the Oregon Potato Commission.

He said the United States could lose its entire $80 million in annual french-fry exports to Mexico, for example, because Canadian competitors won’t have to pay $16 million in tariffs.

Exports of fresh grapes get hit the hardest (45 percent), and as the Oregonian reports, the focus is on agricultural products. But there are still plenty of manufactured goods that will suffer from the new tariffs. As Bloomberg reports, Procter & Gamble is assessing the impact on its household products like shampoos and deodorants.

The National Association of Manufacturers in Washington sent a note to members asking them to identify any impact.

“We need our members’ input to know how you will be affected by these new tariffs,” the memo said. “The NAM will be working with the administration and Congress to try to resolve this dispute quickly.”

All this said, it would be a mistake to say a trade war is here or on its way. Many trade observers say Mexico was relatively restrained, and the Obama Administration has been conciliatory on the Mexican truck issue, saying they want to work with the Mexican government to resolve the conflict. President Obama is apparently traveling to Mexico next month (CNN reports), which is an important diplomatic gesture.

So welcome to the post of U.S. Trade Representative, Ambassador Ron Kirk. The former mayor of Dallas has many things to work on.

Dallas Morning News, “Kirk easily confirmed as trade rep, now faces pressing challenges“:

We all know this must be solved,” said Sen. Kay Bailey Hutchison, R-Texas, who strongly supported the nomination. “I will say that the person who understands it best is Ron Kirk. He lives in Texas. He knows how important free trade is with Mexico.”

An unofficial list of goods that the Mexican government has applied new tariffs on in retaliation to Congress passing and President Obama signing the omnibus appropriations bill that ended a Mexican cross-border trucking program.

Most of the charges range from 10 to 20 percent. The notable exception is 45 percent applied to fresh grapes.

Many, many manufactured goods are included in the list. For example:

• Manicure or pedicure preparations
• Shampoos
• Hair lacquers
• Other preparations for use on the hair
• Dentrifrices
• Filament nylon yarn used to clean between the teeth (dental floss)
• Other yarn used to clean between the teeth (dental floss)
• Other preparations for oral or dental hygiene, including denture fixative pastes and powder; in individual retail packages
• Pre‐shave, shaving or after‐shave preparations
• Personal deodorants and antiperspirants
• Tableware and kitchenware, of plastics
• Other household articles and toilet articles, of plastics
• Statuettes and other ornamental articles
• Self‐copy paper
• Toilet paper
• Notebooks (exercise books)
• Other printed books, brochures, leaflets and similar printed matter, whether or not in singles sheets
• Other trade advertising materials

Earlier posts:

• No Surprise: Mexico Slaps Tariffs on U.S. Goods Over Truck Dispute
• Just a Little Protectionism? Then Comes the Escalation
• Por Favor, Mexico: Reinventing the Border Truck Program

From Bloomberg:

March 18 (Bloomberg) — Mexico will apply tariffs of 10 percent to 45 percent on at least 90 products from the U.S. in retaliation for the U.S. scrapping a test program allowing Mexican trucks to deliver goods beyond a U.S. border zone.

The products include some fruit and vegetables, wine, juices and sunglasses, according to the online version of the State Gazette. Most tariffs are 10 percent to 20 percent, with unspecified fresh products subject to a 45 percent tariff. The tariffs, which will apply to $2.4 billion of goods, take effect tomorrow, Economy Minister Gerardo Ruiz Mateos said yesterday.

Talks to diffuse the first trade spat of President Barack Obama’s administration can’t begin until the U.S. has a Commerce Secretary, Ruiz Mateos said. Discussions to resolve the dispute will start once his counterpart is ratified, he said. Ruiz Mateos said that the trade dispute with the U.S. is hurting the region and giving an advantage to other parts of the world.

“We’re waiting to begin work,” Ruiz Mateos said. “Unfortunately, the U.S. Senate hasn’t designated our counterparts yet.”

The list of goods is here, in Spanish. We’ll post the English version as soon as it’s available. [UPDATE: Here it is.] Most do seem to be agricultural products, but there are plenty of manufactured goods too: “Rotuladores y marcadores con punta de fieltro u otra punta porosa.” Take that, Congress says to U.S. felt-tipped pen manufacturers.

Congress killed the border truck program in the omnibus appropriations bill, signed into law by President Obama.

Columnist Charles Krauthammer assessed the provisions in comments yesterday on Fox News:

There are over 6.5 million trucks in the United States. This program allows 98 Mexican trucks to roam among them. And over that, they are willing to risk a trade war with Mexico.

If you wanted to do protectionism, do it competently. Go the full Smoot-Hawley. But over 98 to enrage Mexico, to threaten to destroy NAFTA, and to show the world that the American Congress is willing to impose protectionism over trivialities at a time when the economy is hanging by a thread, where every other country is looking to see if American is going to turn protectionist.

In an editorial, the National Review notes exports to Mexico have already fallen 17.5 year-to-year, and, “The tariffs would deliver another crushing blow to exporters at the worst possible time. ”

From Reuters, “Mexico slaps tariffs on U.S. goods in truck feud“:

MEXICO CITY/WASHINGTON (Reuters) - Mexico slapped tariffs on 90 American agricultural and manufactured exports on Monday in retaliation for Washington’s move to block Mexican trucks from using U.S. highways.

Mexican Economy Minister Gerardo Ruiz said about $2.4 billion worth of exports from 40 U.S. states would be affected and that his government would soon publish a list of them.

Last week, the U.S. Congress canceled funding for a test program begun by the Bush administration that allowed Mexican long-haul trucks to circulate in the United States in compliance with the North American Free Trade Agreement.

“We consider this action by the United States to be mistaken, protectionist and clearly in violation of (NAFTA),” Ruiz told reporters in Mexico City.

More…

• Wall Street Journal editorial, “The Teamsters War“
• Wall Street Journal, Mary Anastasia O’Grady, “Washington Starts Another Trade War“

In related news, Brazil’s president issues a warning, “Lula Urges Nations to Avoid ‘Drug’ of Protectionism“:

March 16 (Bloomberg) — Brazilian President Luiz Inacio Lula da Silva said countries seeking to help their economies weather the global slump must avoid turning to protectionist policies.

“Protectionism is a drug that provides temporary relief, but in the end leads to major crisis,” Lula told investors in New York today.

From an editorial in today’s Washington Post, “Truck Stop,” about provisions in the omnibus appropriations bill to kill a cross-border trucking program, i.e., the ability of safety-inspected Mexican trucks to carry goods beyond a narrow strip of border territory:

The Mexican trucks compiled a safety record comparable to that of American rigs. Mexican participation was limited, however, because of the political uncertainty. And safety was always a smokescreen for the Teamsters’ real concern — economic turf — anyway. Now the Democratic majority on the Hill has slipped into the omnibus bill a provision killing the program. The provision seems certain to survive, given that the president supported such a measure when he was a senator; his transportation secretary, Ray LaHood, backed it as a member of the House.

When the U.S. economy needs all the help it can get, this legislation perpetuates inefficiency and invites Mexican retaliation against U.S. exports. To a world looking for signs that Democratic rule in Washington would not mean revived protectionism, this can only be a disappointment.

See our earlier post, “Protectionism, Bit by Bit, Mile by Mile”

Daniel Griswold, trade expert at Cato, comments:

Buried in the $410 billion catch-all appropriations bill now before the U.S. Senate is a provision that would end a program that has allowed Mexican truck drivers to deliver goods to destinations inside the United States.

A provision in the original North American Free Trade Agreement of 1994 was supposed to allow U.S. and Mexican trucking companies to deliver goods in each other’s country. But opposition from the Teamsters union and old-fashioned prejudice against Mexicans has derailed implementation of the provision.

Prejudice is a strong word that implies dark motives behind populism and protectionism. Not sure it helps move the debate forward. “Anti-competition” is another, more identifiable critique. So is “unworthy, unreliable” negotiating partner.

The trouble with the anti-trucking, anti-trade policies being tacked onto an omnibus bill is that it undermines the clear intention of NAFTA and ancillary agreements (as explained by Griswold in this 2007 paper). Congress is sending this message to all potential trade partners (again): “We’ll sign an agreement, yes, but we’ll do everything to undermine its consistent application. So you’re an idiot to trust us.”

Now that’s leadership.

For the text of the provision, read below in the extended entry.

A McClatchy newspapers’ story, “With U.S. economy stuck, economists look abroad for growth“:

WASHINGTON — As U.S. consumers stop spending and investors keep their money to themselves, government and business leaders hoping to get the country’s ailing economy moving again are playing one of their few remaining cards.

They’re trying to sell more U.S. goods overseas despite the decline of both global demand and U.S. competitiveness.

Exports currently make up about 13 percent of the country’s total economic activity, far less than the 70 percent taken up by production for domestic consumption. But that’s where economic growth can still happen, analysts say, especially as the domestic housing and credit crises promise to freeze spending at home for at least another year.

Economists and business leaders suggest the incoming Obama administration implement export-friendly measures such as streamlining U.S. customs operations, negotiating more free trade agreements and developing industries such as alternative energy that can become the next generation of U.S. economic powerhouses.

We see President-elect Obama is meeting with Mexico President Calderon today, and we trust the campaign malarky of renegotiating NAFTA has been shelved. Given the state of the economy, let’s shelve lots of the more burdensome, anti-competitive, economy-slowing policies that were bandied about during the Democratic primaries.

The New York Times suggests caution will, indeed, be the byword in the early days of the new Administration. From “Economy May Delay Work on Obama’s Campaign Pledges“:

Although Mr. Obama has not publicly identified which priorities will have to wait, advisers and allies have signaled that they may put off renegotiating the North American Free Trade Agreement, overhauling immigration laws, restricting carbon emissions, raising taxes on the wealthy and allowing gay men and lesbians to serve openly in the military.

And the Employee Free Choice Act, too, right?

In his first one-on-one newspaper interview since winning election, President-elect Obama comments on a wide range of issues, including those of keen interest to those involved in the manufacturing economy — trade, union issues and the proposed financial relief to the domestic automakers.

He comments but doesn’t really provide any clear answers. The media will give him a pass for a while on this non-commitalness, but they’ll get frustrated soon enough.

The interview was conducted Tuesday in Chicago by the Los Angeles Times the Chicago Tribune.

On card-check protection [which would make it easier for unions to organize], we’ve heard that there might be a delay on that, or it might not be an immediate priority? Also, on NAFTA, we’ve heard that you might support maybe a study and then a report, instead of a wholesale reworking of the agreement right away?

Well look, my economic team is reviewing these issues. You know, I’ve consistently said on trade issues that I want environmental and labor provisions that are enforceable in those trade agreements. But I also have said that I believe in free trade and don’t think that we can draw a moat around the American economy. I think that would be a mistake. When it comes to unions, I have consistently said that I want to strengthen the union movement in this country and put an end to the kinds of barriers and roadblocks that are in the way of workers legitimately coming together in order to form a union and bargain collectively. My economic team is going to put together a package on trade and on worker issues that will be presented to me. I don’t want to anticipate right now what sequences will be on these issues.

No answers there.

And on the auto industry…

The Heritage Foundation’s Foundry blog has noted another astonishing omission from the presidential/vice presidential debates, that is, any serious inquiry into the candidates’ position on free trade. From “Morning Bell: A Trade Free Zone“:

International trade has been one of the biggest drivers of economic growth in recent years. The one bright spot in the American economy this past year has been the continued growth in U.S. exports. Exports generated an impressive two-thirds of U.S. economic growth over the past year. With the Doha round of trade talks grounded, bilateral free trade agreements (like those Obama voted against for Panama, Colombia and South Korea) are one of the only options for expanding trade. Although they comprise only 7.5% of global GDP (not including the U.S.), the countries the U.S. has free trade agreements with accounted for more than 42% of U.S. exports. Shutting down free trade now would be disastrous for the U.S. economy. The last time the U.S. reverted to protectionism in a time of economic turmoil President Herbert Hoover’s Smoot-Hawley Tariff helped usher in the Depression. This is not the direction our country needs to go.

Definitely not, but in a strange way, the financial crisis may have done some modest good for the cause of free trade, politically, that is. Everytime a candidate or politician denounces this or that policy for threatening “The Even Greater Depression,” he serves to remind the public of that era’s mistakes, including its worst until FDR took office, the Smoot-Hawley Tariff that led to a nascent, global trade war. (That’s Hawley on the left, Smoot on the right — both Republicans.)

And to every Democrat who denounces a Republican today for being a new Herbert Hoover, we say, denounce away — as long as you include Hoover’s signing of Smoot-Hawley as one of the appalling enactments needing repudiation.