By Philip I. Levy Wednesday, August 18, 2010
Filed under: Economic Policy, Boardroom, Government & Politics, World Watch
If only the roles were different, the administration would be thrilled.
The U.S. Trade Representative has called for a renewed emphasis on enforcing trade agreements. During the campaign, then-Senator Barack Obama criticized the North American Free Trade Agreement (NAFTA) for failing to deliver on its promises. Now, at last, we have a strong enforcement action meant to pry open a closed market and bring about the kind of economic integration that NAFTA signatories foresaw.
The only problem is that it is Mexico applying tariffs to billions of dollars of U.S. exports in an attempt to access the U.S. trucking market. From this week’s Wall Street Journal:
Mexican officials said Monday they were retaliating against a violation of Nafta. "For 15-plus years, we've been more than patient trying to constructively work with the U.S. to have this solved, and it hasn't happened," said Ricardo Alday, a spokesman for the Mexican embassy in Washington.
Mexico waited all that time while the United States undertook trial measures to demonstrate the safety of allowing Mexican trucks to operate across the border. It began its retaliation a year ago after President Obama signed legislation canceling that pilot program. Mexico expanded the retaliation yesterday. When President Bush blocked Congress from killing the program in the fall of 2008, the Dallas Morning News reviewed some of the arguments in the case:
• Since 1995, the federal government has spent $500 million to improve border inspection facilities and hire 600 new inspectors.
• All Mexican trucks entering the United States must meet all U.S. safety and security requirements.
• Mexican truck drivers must meet U.S. licensing and safety requirements, without exception. …
• Mexican trucks in the program have a better safety record than their American counterparts.
There is scant evidence to support assertions that Mexican truckers are inherently unsafe, but Congress wants to kill the pilot program regardless.
In its response to the program’s closure under President Obama, the Mexican government demonstrated it understands the political economy of U.S. trade policy, as reported by the Wall Street Journal:
The tariffs involve a relatively small slice of U.S. exports. But by targeting products such as pork, apples and California oranges, Mexico appeared to be trying to engage powerful lobbies—and influential lawmakers—to increase pressure on the Obama administration to resolve the long-running spat.
Sure enough, U.S. agricultural producers drew the connection:
The National Pork Producers Council, a trade group, said the tariffs imposed by the industry's second-biggest export market would have "negative economic consequences" and criticized the U.S. government for "not living up to its trade obligations." …The U.S. must make sure that "when the shoe's on the other foot .... we come into compliance with those agreements," [a lobbyist for the council] said. "We are going to lose more jobs and more exports the longer this problem languishes."
Particularly noteworthy about the trucking case, in contrast to other impasses plaguing the administration’s trade agenda, is that the remedy is available to the president whenever he chooses.
Mr. Obama could end the ban on Mexican trucks without congressional approval, but that would risk an election-year backlash from unions and powerful congressional Democrats who oppose opening the borders to Mexican trucks.
Until two months ago, one could characterize Obama administration trade policy as replete with good intentions, devoid of deadlines or firm commitments, and entirely bottled up by potential opposition from powerful opponents within the Democratic Party. Then, on the margins of the G-20 meetings in Toronto, there was a bold shift. The president declared that his administration would reach agreement on the pending Korea free-trade agreement (FTA) by November and submit it to Congress within months thereafter.
There is a world of difference between a Hyundai subcompact and a semi from Ciudad Juárez, but they both offend the same constituencies. In the wake of the president’s Korea announcement, leading congressional Democrats and labor leaders openly denounced the move.
By any measure, passing the Korea FTA is politically more difficult than opening the border to Mexican trucking. For the FTA, the president must rely on Congress to take up and pass the agreement. The FTA involves more sectors and will have a broader impact. Yet the political battle lines are remarkably similar and each affects the state of relations with an important ally.
It will be interesting to see whether the explicit promise to conclude and pass the Korea FTA will exhaust the administration’s willingness to take on these opponents, or whether it will signal a political realignment that may open the way for a constructive U.S. trade policy. One telling sign would be a convoy of tractor-trailers heading north across the border.
Philip Levy is a resident scholar at the American Enterprise Institute.
Image by Darren Wamboldt/Bergman Group.
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