Posted by Joseph Y. Calhoun, III

Mexico is set to impose tariffs on some US goods. The tariffs are a direct consequence of the Obama administration’s ending of a pilot trucking program:

A long-simmering trade dispute boiled over into sanctions on Monday after Mexico said it would raise tariffs on $2.4bn of US exports in retaliation for ending a pilot programme to allow Mexican trucks on American roads.

The announcement marks one of the first big tests for trade policy under President Barack Obama, who has sought to tread a fine line between assuaging his domestic constituencies and upholding the US’s international obligations.

Mexico said it would increase tariffs on 90 industrial and agricultural goods, likely to include politically sensitive farm products, after Congress last week killed a pilot programme allowing a limited number of Mexican trucks on American highways. Mexico obtained a judicial ruling in 2001 under the North American Free Trade Agreement (NAFTA) allowing it to impose such sanctions, but has held off since the US introduced the pilot scheme.

The sanctions, which Mexican officials say are set to be imposed later this week, will be one of the largest acts of retaliation against US exports. US goods exports to Mexico totalled $151.5bn last year. On Monday, Gerardo Ruíz Mateos, Mexico’s economy minister, said: “We believe that the action taken by the US is wrong, protectionist and in clear violation of Nafta.”

This is a violation of NAFTA and while the Obama administration gets the blame for ending the pilot program, this feud had developed over many years. NAFTA originally stated that Mexican trucks would have full access to US roads by 2000. The International Brotherhood of Teamsters has opposed allowing Mexican trucks on US highways since NAFTA was enacted and has used the safety canard as a way to delay the implementation. Maybe they should remove the International part of their name?

The Teamsters claim that Mexican trucks are unsafe and that is partially true for the short trips into the US that are still allowed. Mexican trucks are only allowed to travel 20 miles over the border and Mexican trucking firms aren’t sending their best trucks for such short trips. When you compare the safety record of long haul trucking in Mexico versus the US there is essentially no difference in the safety record.

The tariffs will not punish US truck drivers directly because the tariffs will be on other US goods exported to Mexico (likely agricultural products), so US producers and Mexican consumers will pay the price. With world trade falling rapidly, this is a dangerous path.