Despite the safety and security implications, looks like Obama is essentially going to say, "Yes Mexico, whatever you say. You're right, we're wrong. We deserve to be punished." Is he ever going to stand up to Mexico and fight back on this or any other issue?

---------------------------

Inside U.S. Trade - 7/31/2009

Kirk Highlights Truck Solution Over Challenge Of Mexican Sanctions

U.S. Trade Representative Ron Kirk has signaled that it his clear preference to address the punitive tariffs that Mexico has imposed on U.S. exports in a bilateral trucking dispute by opening the U.S. market to Mexican trucks instead of challenging the tariffs as disproportionate to the economic damage caused by the U.S. decision to close its market to Mexican trucks.

In a July 1 letter to House Foreign Affairs subcommittee Chairman Brad Sherman (D-CA), Kirk pointed out that challenging the Mexican duties would not succeed in lifting them.

"[E]ven if the United States were successful in challenging the level of retaliation, the likely result would only be a reduction, not a removal, of Mexico's trade sanctions," Kirk wrote, according to a copy of the letter reprinted below. "And our goal is to have the sanctions lifted in their entirety."

At the same time, Kirk insisted that he has not ruled out anything, and that the administration is still examining whether Mexico's retaliation is greater than permitted. He also emphasized that he is working with Secretary of Transportation Ray LaHood to resolve the dispute.

"Although we will continue to consider all of our options, I believe that working with Mexico and Congress to implement a new trucking program that ensures the continued safety of our roads will provide the quickest and surest way to end Mexico's trade retaliation against U.S. exports," Kirk wrote.

But informed sources said this week that the trucking dispute has remained essentially stalled since DOT supplied a series of principles to resolve the trucking dispute to the White House.

This apparent lack of progress makes it doubtful that the bilateral trade dispute will be substantively raised on the margins of the Aug. 9 to Aug. 10 North American Leaders' Summit between President Barack Obama, Mexican President Felipe Calderon and Canadian Prime Minister Stephen Harper, private-sector sources said.

When Mexican Secretary of Economy Gerardo Ruiz Mateos last week met with Kirk and Canadian Trade Minister Stockwell Day on the sidelines of the Asia Pacific Economic Cooperation (APEC) forum in Singapore, Kirk gave no indication that the White House had made any progress on resolving the issue since last June, according to a Mexican official.

In early June, Ruiz Mateos said that he had an agreement with Kirk to have "a different approach" for solving the trucking dispute and a timeline for doing so by the leaders' summit (Inside U.S. Trade, June 5).

Resolving the trucking dispute pits the domestic interests of some U.S. trucking companies and the Teamsters Union against the U.S. relationship with Mexico, and Obama will have to decide if he wants to spend the political capital to reach a resolution, according to Robert Pastor, the co-director of the Center for North American Studies (see related story).

In a related development, a coalition of trade associations and agriculture groups affected by the Mexican sanctions is seeking a meeting with USTR to ascertain the status of efforts to resolve the trucking dispute. Coalition members also want to urge the officials to work toward a quick resolution, according to private-sector sources.

According to the Kirk letter, the USTR assessment of Mexican tariffs involves a review of available economic information, including a report by Public Citizen, which charges that Mexican sanctions exceed the impact of barring Mexican trucks from the U.S. market, according to the letter.

Informed sources said that USTR would very likely seek an economic analysis from the U.S. International Trade Commission to determine if the sanctions do exceed the damage caused by the U.S. failure to implement its NAFTA trucking obligations. At press time, USTR had not done so, though some officials maintain that USTR has economists that could conduct the relevant analysis.

In its mid-March retaliation, Mexico snapped back tariffs to most favored nation levels on $2.3 billion in U.S. trade, generating roughly $427 million in revenue. At the time, a Mexican official said this was close to the amount of income Mexican truckers were losing, which he defined as roughly $500 million (Inside U.S. Trade, March 17).

This week, a Mexican official said that the methodology included variables such as the value of trade transported by Mexican trucks, travel distance for exports and the percentage of market share that Mexican truck would account for in the U.S.

Mexico imposed the tariffs after the U.S. Congress voted to cut funds for a trucking pilot programs that allowed up to 100 trucks to deliver to and pick up cargo in the U.S. The provision was part of the omnibus appropriations bill for fiscal year 2009, which Obama signed.

In a June 16 letter, Sherman pressed Kirk on the U.S. to challenge the Mexican retaliation as "manifestly excessive" compared to the impact of the U.S. failure to open its market to Mexican trucks as obligated under the NAFTA.

Sherman's letter cited an analysis by Public Citizen, which estimated Mexico's highest possible annual losses as ranging from $69 to $227.6 million (Inside U.S. Trade, March 30). "That is to say that Mexico's real losses are 16 to 53 percent of what is being imposed," Sherman said.

He asks Kirk to spell out what activities he is undertaking to initiate a NAFTA challenge and to explain his reasoning if he has decided against that. Sherman also insisted that Mexico still has truck safety issues, emission standards, insurance and data-keeping requirements that it needs to address, and explained that that is why he voted for cutting the funds for the pilot program.

However, Kirk's July 1 response did not address these questions in detail, and he also expressed the hope that Sherman would support the administration's efforts to put in place a new trucking program.

Sherman is not satisfied with this response, particularly since it seems to put the onus of resolving the dispute on Congress and intends to go back to USTR for more detailed answers, according to an informed source.

In last week's meeting, Kirk and Ruiz Mateos did not address the long-standing bilateral fight over whether Mexican tuna can be labeled as "dolphin-safe" based on the method by which it has been harvested. The two sides explored a potential settlement in early June and have subsequently held discussions, even though USTR has held out little hope that the dispute can be resolved since Congress would need to act to change the labeling requirements.

Mexico is also aware that it will be difficult to resolve the dispute, for which it requested a World Trade Organization dispute settlement panel on April 20.

In response, the U.S. has insisted that the dispute should be arbitrated by a NAFTA panel (Inside U.S. Trade, April 24). The panelists for the WTO panel have not been selected and Mexico may ask WTO Director-General Pascal Lamy to select them if there is no agreement with the U.S. on them, according to a Mexican source. -- Brian Scheid