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Trade dispute with Mexico resolved

by Tim Linden | July 07, 2011

Produce industry representatives were elated by the news July 6 that the United States and Mexico inked a deal ending their two-year trade dispute that immediately cut in half Mexico’s retaliatory tariffs that were placed on many U.S. products in 2009. Those tariffs will be eliminated completely once the new transportation program is up and running.

The dispute began when Congress eliminated the funding for a pilot program that allowed Mexican trucks to operate in the United States in compliance with the North American Free Trade Agreement. NAFTA, which was signed in 1994, had a provision allowing Mexican trucking firms to haul Mexican goods into the United States on U.S. highways.

That provision became a political football when several U.S. unions successfully lobbied to delay the enactment of that concept into the new century. Eventually, a very limited pilot program was established, but when the funding was yanked in early 2009, Mexico retaliated.

Mexico slapped tariffs on almost 100 products with some fresh produce commodities being hit the hardest. Among those items with tariffs were grapes, strawberries, potatoes and pears. Barry Bedwell, president of the California Grape & Tree Fruit League, said that the 45 percent tariff on grapes had a very adverse effect on shipments to Mexico.

The California Table Grape Commission said that Mexico had long been one of the larger export markets for California’s fresh grape industry, with shipments ranking second in 2008, valued at more than $61 million. The increased tariff has been blamed for causing exports to drop by almost 73 percent to a value of $16 million in 2009. Volume decreased from nearly 5.8 million 19-pound boxes in 2008 to 1.7 million boxes in 2009. The 45 percent tariff was reduced to 20 percent for the 2010 season, which did result in increasing exports to more than 3.4 million cartons.

Mr. Bedwell expects the immediate reduction of the tariff to 10 percent and its eventual elimination to help the industry recover those annual losses and get back to pre-tariff shipments. “The signing of the agreement will have an impact this year, as almost all of the export shipments to Mexico occur from September to the end of the year,” he said.

Kathleen Nave, president of the California Table Grape Commission, praised the signing of the agreement. “The Obama administration, the U.S. trade representative and [Department of Transportation] Secretary [Ray] LaHood made resolving this dispute a priority,” she said in a press release. “We are grateful for their hard work on this matter and look forward to resuming normal shipments.”

Ms. Nave said that the commission’s marketing staff will now be able to increase their summer promotional efforts in Mexico, including consumer and retail promotions, in-store sampling and providing point-of-sale materials for key retailers across the country.

Another voice in support of the agreement was the Western Growers Association, which also lobbied for the United States to comply with the terms of NAFTA. “Today’s agreement between the United States and Mexico means the fresh produce industry will no longer be caught in the middle of a dispute that created an economic barrier to trade for our farmers,” said Tom Nassif, president and chief executive officer of the association. “We’re happy the two governments are moving forward and look forward to full implementation later this summer.”

The United Fresh Produce Association also issued a complimentary statement. “This accord is fantastic news for the produce industry, and we are excited to see more trade with Mexico, which provides such a valuable market for American produce,” said Julie Manes, United’s director of government relations.

Under the new agreement, Mexican trucks will have to comply with standards that are tougher than those established in NAFTA and somewhat tougher than those currently in force for American truckers. Mexican trucks will have to carry electronic recorders to make sure that they only complete their cross-border runs and do not engage in domestic hauls. In addition, the electronic recorders will monitor the truck’s service hours to make sure it is in compliance with the U.S. hours-of-service laws.

Mexican trucking firms will have to be certified under the new Cross-Border Trucking Program before being allowed into the United States. While all the existing tariffs were cut in half as of Friday, July 8, the remaining tariffs will be lifted when the first Mexican carrier is authorized to come into the country. Experts are predicting that this will occur within about 60 days.