By Mark Drajem
March 19 (Bloomberg) -- Mexico spared Ford Motor Co. and Tyson Foods Co. from $2.4 billion in tariffs on U.S. imports that take effect today, deciding instead to target growers of potatoes, cherries and pears.
Fruits and vegetables are the most common items on the list of 90 products hit with tariffs as Mexico retaliated against a U.S. decision to block Mexican trucks from traveling north of a commercial zone along the border.
The choice may reflect a calculated move by the government of Mexican President Felipe Calderon to exert pressure on U.S. lawmakers to back off on the trucking decision, said Ed Gresser, a fellow at the Progressive Policy Institute in Washington and a former official at the U.S. Trade Representative’s office.
“The agricultural constituencies are powerful and they go to Congress and say, ‘What are you doing to me?’” Gresser said in an interview.
Potato growers alone could lose an annual market of $80 million, said John Keeling, chief executive of the National Potato Council in Washington. “This thing has to be fixed,” Keeling said. “It’s unconscionable that Congress let this happen.”
Mexico acted after Congress inserted in a budget bill a provision to halt funding for a program that let a limited number of Mexican trucks deliver goods throughout the U.S.
$2.4 Billion Value
Trade between the two countries totaled $368 billion in 2008, making Mexico the third-largest U.S. trading partner after Canada and China, according to the Commerce Department. The U.S. exported $11 billion of food and meat, and $63 billion of machinery, autos and transport equipment to Mexico last year.
Given the importance of that market, “we’re not eager for a trade war,” said Myron Brilliant, executive vice president of the U.S. Chamber of Commerce in Washington.
The tariffs apply to goods valued at $2.4 billion in 2007, the Mexican government said. Most tariffs are 10 percent to 20 percent, with some produce subject to a 45 percent charge.
Mexico left untouched the largest exports, those of auto parts and machinery, which could have hurt companies such as automaker Ford of Dearborn, Michigan and appliance manufacturer Whirlpool Corp. of Benton Harbor, Michigan. The tariffs also spared the largest agriculture commodities such as chicken, pork and beef from Springdale, Arkansas-based Tyson.
“I’m shocked that pork and beef are not in there,” said Timothy Keeler, a lawyer at Mayer Brown LLC in Washington and the chief of staff at the U.S. trade office until this year. Including them “would have sent political tremors,” he said.
Pilot Program
Automakers such as Ford weren’t hit by the duties, company spokeswoman Christin Baker said in an e-mail. Spokesman Gary Mickelson of Tyson couldn’t be reached for comment after business hours last night.
A panel of judges ruled in 2001 that the North American Free Trade Agreement required that the U.S. allow Mexican trucks to deliver across the country. The International Brotherhood of Teamsters and Senator Byron Dorgan, a North Dakota Democrat who sponsored the provision suspending the pilot program, say those trucks don’t meet U.S. safety standards.
The Obama administration vowed this week to work with Congress to come up with an alternative to the program, and lawmakers complained to Obama’s nominee for commerce secretary, Gary Locke, that he needed to settle the dispute.
“This has a profound impact on farmers and ranchers,” Senator Mike Johanns, a Nebraska Republican, told Locke at a hearing yesterday.
“In this time of economic turmoil, protectionism is the last thing we need,” said Republican Senator Mel Martinez of Florida.
Campbell’s Soup
Even some of the products that Mexico targeted, such as soup preparations, may have little impact. Campbell Soup Co.’s “business in Mexico is small,” and “most of what we sell in Mexico is made there,” said Anthony Sanzio, a spokesman for the Camden, New Jersey-based company.
Mexico also imposed a duty on paper products such as toilet tissue. Kimberly-Clark Corp., the maker of Kleenex tissue, will see “little or no effect,” spokesman Lance Latham said. Bruce Amundson, a spokesman for Weyerhaeuser Co., North America’s largest lumber producer, said, “We ship an extremely small amount of product across the Mexican border.”
Angela Blackwell, a spokeswoman for Fairport, New York- based Constellation Brands Inc., the world’s largest winemaker, said, “Because of the small amount of sales into the country, we do not view the new tariff making a major impact.”
Procter & Gamble
The tariff list includes deodorants, shampoos and other products made by Procter & Gamble Co., the world’s largest household-products maker.
“We have had manufacturing facilities in Mexico for 60 years but do export to some extent to Mexico,” said Tressie Long, a spokeswoman for the Cincinnati company. The impact of the tariffs “is a complex issue that will take us some time to evaluate.’
Mexican officials want U.S. companies to put pressure on Congress to reinstate the program, said Sidney Weintraub, a fellow at the Center for Strategic and International Studies in Washington.
The National Association of Manufacturers in Washington sent a note to members asking them to identify any impact.
“We need our members’ input to know how you will be affected by these new tariffs,” the memo said. “The NAM will be working with the administration and Congress to try to resolve this dispute quickly.”
In Oregon, Idaho and Washington, growers of pears, cherries and apricots were bracing themselves for damage.
Exporting Pears
Mexico is the largest export market for pears, and the weak peso had already led to a drop in demand there, said Jeff Correa, international marketing director for the Pear Bureau Northwest in Oregon. A 20 percent tax on top of that could “push us entirely out of the market,” Correa said.
“The solution is in the lawmakers’ hands,” said Mark Powers, an official at the Northwest Horticultural Council in Yakima, Washington. “Our growers are caught in a trade dispute that’s not of their making.”
Pressure from the fruit and vegetable producers on Mexico’s tariff roster may not be enough to spur Congress to reverse course, said Gresser, the former trade official.
“It’s an odd list,” he said. “The Europeans are usually a lot meaner.”
To contact the reporter on this story: Mark Drajem in Washington at mdrajem@bloomberg.net
Last Updated: March 19, 2009 13:47 EDT
HOME
