Color me completely unsurprised by this development. The Obama administration, under pressure from the protectionist wing of the Democratic Party, reneged on a key NAFTA component regarding international trucking. In response, Mexico has slapped tariffs on American exports, and ag producers are steamed:
Mexico said Monday it will increase tariffs on about 90 U.S. products in retaliation for last week’s decision to end a pilot program that allowed some Mexican trucks to transport goods in the United States.
Economy Secretary Gerardo Ruiz Mateos said the U.S. decision violates a provision of the North American Free Trade Agreement that was supposed to have opened cross-border trucking by January 2000.
“We consider this U.S. action to be wrong, protectionist and a clear violation of the treaty,” Ruiz Mateos told reporters. “By deciding to protect their trucking industry, they have decided to affect other countries and the region.”
The measure will affect about $2.4 billion in trade involving approximately 90 agricultural and industrial products from 40 U.S. states. Ruiz Mateos said the department later this week will publish a list of the products, which he said were chosen to represent a large number of U.S. states and significant trade items.
The US has claimed that Mexican trucks lack safety equipment required for American truckers, giving them an unfair advantage. Mexico says that safety concerns are nonsense, pointing to the comparable safety records of Mexican and American truckers during the pilot program. Now, trucks will have to stop at the border and workers will have to transfer loads from Mexican to American trucks.
Why did Obama end the pilot program? For a politician as friendly to open borders as Obama and his allies are, it doesn’t make much sense — until one considers the unions. The Teamsters pressed hard to end this program to protect themselves and their union jobs. Obama’s NAFTA Dance on the campaign trail ended with Austan Goolsbee insisting that Obama remained committed to the trade pacts, but hoped to negotiate on open issues of safety and outsourcing. It looks more like Obama intended to begin abrograting key pieces of the agreement as soon as practical.
What does this mean for American jobs? The trucking jobs may be safe in the short run, but the tariffs threaten to curtail the reason for them. Kevin Brady, the ranking Republican on the trade subcommittee of the House Ways and Means Committee, says that wheat and beef exports will start drying up. In this economy, that could put some farms on the edge of bankruptcy, precipitating another land crisis on top of the burst housing bubble in the cities and suburbs. This time, few people will have the means to help through Farm Aid telethons.
Obama now says he’ll work something out with the Mexican government, but perhaps he should have done that first.