Mexico Is Said to Plan Tariffs on U.S. Pork, Oranges in Trucking Dispute

Mexico will impose import tariffs on pork, oranges and other U.S. goods because of the U.S. government’s failure to restore a program allowing Mexican trucks to operate north of the border, a Mexican official said.

The new U.S. goods subject to tariffs also include grapefruit, pistachios, chewing gum, cheese and ketchup, said the official, who declined to be identified because he wasn’t authorized to speak on the subject. The U.S. National Pork Producers Council also said in an e-mailed statement that pork will be added to the list of products facing tariffs.

Mexico’s government is waiting for the U.S. to propose a resolution to the standoff, which started when the U.S. Congress ended a pilot program allowing Mexican trucks to deliver goods in the U.S. Mexico responded in March 2009 by putting tariffs of 10 percent to 45 percent on U.S. goods including vegetables, wine, juices, sunglasses and toothpaste. Now, authorities are imposing a second round of tariffs covering more goods.

“Mexico’s retaliation against U.S. pork will have negative economic consequences for America’s pork producers,” Sam Carney, president of the pork council, said in the statement. “We are extremely disappointed that our top volume export market has taken this action.”

Hog futures for October settlement rose 0.2 cent, or 0.3 percent, to 74.85 cents a pound on the Chicago Mercantile Exchange.

Investor Reaction

Investors are waiting to see how big the tariffs will be and whether Mexican demand will decrease because of the measure, said Dennis Smith, a senior account executive at Archer Financial Services Inc. in Chicago.

“The news is still pretty fresh,” said Adam Stout, a risk-management consultant at FCStone Group Inc. in Kansas City, Missouri. “My guess is tomorrow we’ll have a bigger reaction.”

Mexico is the second-largest export market for U.S. pork products, with $762 million worth exported there in 2009, according to the pork council. Japan is the largest export market.

“The fact that we haven’t found a solution yet doesn’t benefit either side of the border,” Mexican Economy Minister Bruno Ferrari told reporters today. “We have to simplify transportation without it being stopped on either side of the border.”

Mexico will charge the duties on a rotating list of 99 U.S. products worth about $2.5 billion, Ferrari told reporters today in Mexico City. The government will publish an official list of the products subject to tariffs “in the coming days,” he said.

Agricultural Goods

U.S. Trade Representative Ron Kirk said the U.S. is working with Congress to resolve the trucking dispute. “We are disappointed that the Mexican government has announced its intention to impose duties on additional U.S. products related to the cross-border trucking,” Kirk said in a statement. Kirk added that he is committed “to resolve the dispute and end these duties.”

Fifty-four of the products that will be subject to tariffs will be agricultural and the rest will be manufactured goods, said the Mexican official who can’t be identified.

The 2007 pilot program, which let as many as 100 Mexican trucking companies that met safety rules haul cargo into the U.S., was canceled last year under a provision in a spending bill passed by Congress.

Cross-Border Plan

The dispute first erupted in 1995 after the U.S. refused to implement a cross-border plan agreed to under the North American Free Trade Agreement amid opposition from U.S. labor groups.

The trucking dispute “is a real pickle for the administration,” said Lori Wallach, director of Global Trade Watch in Washington, which opposes the trucking provisions in the trade deal. “There is no foreseeable moment when Congress lets Nafta trump safety.”

The Teamsters union, which fought against what it has called the unsafe foreign competition, called the new tariffs excessive and urged the Obama administration to challenge them.

“Instead of slapping additional tariffs on U.S. goods, Mexico should be living up to its end of the bargain by making sure its drivers and trucks are safe enough to use our highways,” James Hoffa, the Teamsters president, said in a statement.

U.S. officials have promised on multiple occasions to take steps to resolve the standoff. President Barack Obama said in August 2009 he was committed to finding a solution.

To contact the reporter on this story: Jens Erik Gould in Mexico City at jgould9@bloomberg.net.