Aug 19, 2011

Trucking deal reached, Mexican tariffs lifted

On July 6, U.S. Transportation Secretary Ray LaHood and his Mexican counterpart signed agreements resolving the dispute over long-haul, cross-border trucking services between the United States and Mexico.

The new deal goes back to March, when President Obama and Mexican President Felipe Calderón announced that the two countries had found a resolution to the trucking dispute. According to a White House press release, the deal will allow both Mexican and U.S. long-haul carriers to engage in cross-border operations under the North American Free Trade Agreement (NAFTA).

The deal also will pave the way for Mexico to lift retaliatory tariffs it imposed more than two years ago, tariffs worth more than $2 billion in U.S. manufactured goods and agricultural products. Mexico agreed to suspend 50 percent of the retaliatory tariffs within 10 days of signing. The country will suspend the remainder of its tariffs within five days of the first Mexican trucking company receiving its U.S. operating authority. As a result, Mexican tariffs on an array of U.S. agricultural products, including apples and frozen potatoes, should disappear entirely within a few months, according to the U.S. Transportation Department.

“This dispute has had a profound impact on the fresh produce industry in particular,” said Bryan Silbermann, president of Produce Marketing Association (PMA). “Mexico is a critical trading partner for our members and the resolution of this issue not only allows for greater export opportunities, but also impacts job creation and demand for produce in both countries.”

The tariffs on an estimated $900 million of U.S. agricultural products created an immediate drop in sales for many produce commodities destined for the Mexican market, according to PMA.

Mexico is the largest export market for U.S. apples. In the year before Mexico enacted a 20 percent tariff last August, the southern country imported 11.5 million bushels of fresh U.S. apples, worth $207 million. That’s 27.5 percent of the total value of all U.S. apple exports, according to the U.S. Apple Association.

“American apple growers will continue to encourage Congress to fully support this agreement and see it to fruition so that we can resume normal trade with Mexico,” said Nancy Foster, president of the U.S. Apple Association.

Mexico is the third-largest market for U.S. potatoes. Since the retaliatory tariff on potatoes was enacted in March 2009, U.S. growers have seen revenues from frozen potato exports to that country decline by more than $70 million – nearly half, according to the National Potato Council.

The trucking dispute goes back more than a decade, when the United States and Mexico were to open their borders to each other’s trucks starting Jan. 1, 2000, as part of NAFTA. Due to pressure from domestic truck drivers, however, the U.S. government did not open its borders to Mexican trucks, citing safety concerns.

A NAFTA arbitration panel ruled against the United States about a year later, and a bi-national committee was put together to try to fix the problem. In 2007, both governments agreed to create a pilot program that would allow Mexican trucks into the United States on a limited basis. In March 2009, however, the U.S. Congress cut funding for the program and it was canceled.

Mexico retaliated, putting tariffs on 89 U.S. products – including 10 percent tariffs on onions, cabbage and lettuce; 20 percent tariffs on strawberries, frozen potatoes, peas, pears and cherries; and a 45 percent tariff on fresh grapes.

In August 2010, the United States still wasn’t allowing Mexican trucks into its territory, so the Mexican government expanded the tariff list: Apples, onions, lettuce, grapes, potatoes, strawberries, cherries, apricots, peas, dates, sweet corn, pears, dried fruit, fruit nectar, fruit juices, wine and Christmas trees were all burdened with a 20 percent tariff.

By Matt Milkovich, managing editor