Mexico Announces $2.4 Billion in Retaliatory Tariffs in US Cross-Border Trucking Dispute

March 17, 2009

Yesterday, Mexico’s Secretary of Economy Ruiz Mateos announced that his country will begin assessing $2.4 billion in tariffs against US products in retaliation for last week’s decision to end a pilot program that allowed some Mexican trucks to transport goods in the US. According to a statement posted on the Mexican Economic Ministry website, the tariffs will be applied to 90 agricultural and industrial products from 40 US states. In the detailed list which sources have indicated will be published in the Diario Official tomorrow, Republican members of the House of Representatives expect wheat, beans, beef, rice, and corn will likely be targeted for higher tariffs.

When the US signed the North American Free Trade Agreement (NAFTA), it agreed to allow Mexican trucks to start using US highways by 1995. However, due to public safety concerns and union pressure from teamsters, the US never implemented those provisions of the agreement.  In 2001, Mexico received a favorable unanimous ruling under NAFTA’s dispute settlement system that the US practice was inconsistent with its obligations under the agreement.

Since 2001, both sides have been working to resolve the dispute and in 2007 the US launched a pilot program that allowed a limited number of Mexican trucks to use US roads. That program, according Secretary Mateos, demonstrated that Mexican trucks crossing the border are safe and “even exceeded the U.S. safety standards in some cases.”

Despite that success, the US Congress voted to prohibit the US Department of Transportation (DOT) from continuing to operate the program in its Omnibus Appropriations Bill. In response, the Mexican government announced retaliatory tariffs on Monday. Mexico won authorization to impose $2 billion in annual retaliation against US goods in 2001, but has not exercised that right until now.

For its part, the Obama Administration announced that it has tasked the Office of the US Trade Representative (USTR) to work with the DOT, the Department of State, leaders in Congress, and Mexican officials to draft legislation which fulfills the US obligations under NAFTA and meets public and trade union concerns.

In 2008, Mexico was the third largest US trading partner with over $368 billion in total bi-lateral trade.