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Mexico threatening stiff tariffs on U.S. products

By DOUG SCHMITZ
Iowa Correspondent

WASHINGTON, D.C. — The U.S. Grains Council (USGC) reported last week that Mexico’s Secretary of Economy would impose stiff import tariffs on 90 American agricultural and industrial products.
This is a retaliation, according to some reports, for a cancelled 2007 U.S. pilot program that allowed Mexican trucks full access to U.S. highways.

Among the items on Mexico’s import tariff list of 36 U.S. agricultural and 53 industrial products included everything from onions, pears, apricots, cherries, strawberries, mixed fruits, potatoes, almonds, peas, fruit juices and soy sauce, to Christmas trees, shampoo, toothpaste, pet food, books, pencils and dishwashers.
“The point of developing this list was not to stimulate the falling Mexican economy, which relies heavily on grain imports,” said Chris Corry, USGC senior director of International Operations for Rest of the World.

“The Secretary of Economy wanted to avoid products found in the ‘basic basket’ (a method of tracking food prices and inflation), which includes about 22-23 commodities, including corn, rice, wheat, beans, corn flour, etc.,” he added.

Under the 1994 North American Free Trade Agreement, the U.S. was required to grant Mexican trucks full access to its highways by January 2000. But some trucks weren’t allowed full access until Congress adopted the pilot program in 2007.

However, the U.S. ended the pilot program last week, which prompted Mexican Economy Secretary Gerardo Ruiz Mateos to claim that the ban was “wrong, protectionist and a clear violation” of NAFTA, which allowed Mexico to subsequently collect any loses from the moratorium.

The Obama administration claimed last week it would be working with Congress to provide an alternative to the pilot program, the USGC said.

Obtained and drafted by Iowa State University (ISU) Economist Dermott Hayes, the list of U.S. agricultural products to receive tariffs would affect $2.4 billion of exports in 40 states, the USGC said. Corn and grain sorghum commodities, which are not on the list, are utilized by Mexico’s livestock, poultry and food sectors, said Julio Hernandez, USGC director in Mexico and Central America.

“If Mexico would have allowed a tariff on corn and sorghum, it would have had a direct effect on its feed and food prices,” he said. “This in turn would have increased the prices of meat, milk and eggs, consumers’ basic staples.

“It would behoove the Secretary of Economy to keep U.S. corn and sorghum off their tariff list,” he added.

In a March 17 teleconference with reporters, Iowa Sen. Chuck Grassley, R-Iowa, who sits on the committee that oversees trade, said he never supported banning Mexican trucks from U.S. highways.

“We can’t afford the impact of trade sanctions,” he said.

A spokesman for the Mexican economy ministry said the new tariffs wouldn’t affect rice, corn, beans or wheat, which are the main U.S. farm products exported to Mexico, and make up much of the average Mexican’s diet, said Mindy Williamson, director of communication and public relations for the Iowa Corn Promotion Board (ICPB) and the Iowa Corn Growers Assoc. (ICGA).

“We support trade, and limitations on our markets are never a step in the right direction,” she said.

Tim Burrack, incoming ICPB chairman and Arlington, Iowa corn grower, said most Midwest farmers are not now concerned, but that wasn’t the bigger issue.

“Mexico is our number two trading partner for corn, soybeans and DDGS,” he said. “We need more trade, not less with them. It’s good for peoples’ standards of living on both sides.”
Williamson said the ICPB and the ICGA are also monitoring the situation closely.

“Two Iowa corn growers were talking to legislators about it while they were in Washington, D.C. earlier (last) week,” she said.
“Although corn is not on the list, we are still concerned about the ramifications the truck restriction will impose on all of U.S. agriculture in general,” she added.

Ron Litterer, a Greene, Iowa corn grower who chairs the National Corn Growers Assoc. (NCGA), said the NCGA is currently monitoring the impact this tariff barrier would likely have on U.S. farmers.
“This is not a single commodity industry; we’re all in this together,” he said.

4/2/2009