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Emerging Markets

Mexico protectionism charges dismissed

Economists and analysts on both sides of the border have dismissed US politicians’ accusations that Mexico is raising protectionist barriers.

Economists and analysts on both sides of the border have dismissed US politicians’ accusations that Mexico is raising protectionist barriers.

Mexico’s imposition last month of higher tariffs on $2.4 billion worth of US imports was not protectionist, but a reaction to a long-standing breach of the NAFTA agreement by Washington, Barbara Kotschwar, research associate at the Peterson Institute for International Economics (IIE), said.

“This is not in the paradigm of global protectionism”, Kotschwar told Emerging Markets. A NAFTA panel had ruled in Mexico’s favour in a dispute over its trucks being allowed to enter the US, “and Mexico has held off from reacting until now”.

The US had introduced a pilot scheme to give the trucks access, but it was scrapped in the 2009 appropriations bill, after energetic lobbying by the US teamsters’ union, which represents truck drivers. Mexico then retaliated by imposing tariffs on 90 US products that had earlier been imported duty free, including mineral water, pet food, fruit juice, wine and some fresh fruit and vegetables.

The US trade representative’s office said last week that the Obama administration had tasked the transport department with setting up a new access scheme for Mexican truckers.

But some politicians denounced Mexico for obstructing trade. Democratic senator Byron Dorgan said the new tariffs were an “outrage”, and that it was time to “restore some balance to our bilateral trade”.

But Andres Rozental, a lawyer and former deputy foreign minister of Mexico, said it was wrong to describe the tariffs as “retaliation”: it was a “long overdue” reaction to US failure to meet its NAFTA commitments.

And Kotschwar at the IIE argued the Mexican measures were exceptional, in the context of one of the most consistently free-trade approaches in Latin America.

“Firstly, Mexico has gone about imposing the retaliatory measures very sensitively,” she said. “It has made sure that poor people in Mexico would not be adversely affected – so the list does not include rice, corn or beef.

“Secondly, Mexico’s overall policy during the economic crisis has been to reduce trade barriers. In December they cut the Most-Favoured-Nation tariffs on 70% of the items on the tariff schedule.

“Until about two days ago, Mexico was one of three G20 countries that had imposed no protectionist tariffs, or used protectionist subsidies, at all. They then imposed some minor tariffs on imported truck and trailer parts.

“Mexico is a free-trade country. It is just trying to get its biggest trading partner to sit up and take notice of its viewpoint on the trucks issue.”

Kotschwar said that the economic crisis would certainly exacerbate trade disputes “in all sorts of ways, and so countries need to be careful”. In the US-Mexico dispute, the US administration had to reconcile its anti-protectionist policy agenda with pressures on it from labour interests and other domestic lobbies.

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