Most, but not all, grains escaped Mexico's trade retaliation measure announced this week which placed tariffs of 10 to 20 percent on certain U.S. products in response to Congress shutting down a pilot Mexican trucking program operating in the U.S.
Dry peas, however, were among a list of about 90 products which received a 20 percent temporary tariff by Mexico. Sunflower meal and rapeseed meal also received a 15 percent tariff. Soy sauce is among processed grain-based products from the Midwest that received a 20 percent tariff.
The Kikkoman soy sauce company, a Japanese company which has a large manufacturing subsidiary plant in Walworth, Wisconsin, is among Midwest based companies which will feel the impact. Commenting on Kikkoman's Mexican business, vice president Dan Miller said, "It's a growing export market for us." Current exports to Mexico, however, account for single-digit percentages of Kikkoman's total Wisconsin output, he said.
Mexico took the action in retaliation for a decision to cancel a program that gave Mexican truckers access to U.S. highways. On March 11 the Omnibus Appropriations A ct, 2009 terminated the cross-border trucking demonstration program that allowed additional Mexican trucks to operate beyond the commercial zones along the international border between the United States and Mexico. The Teamsters Union was successful in pressing for elimination of the program in the legislation.
On March 18th, Mexico announced it was imposing tariffs on 90 U.S. products worth about $2.4 million in goods in response to the ban of Mexican trucks from U.S. roads. Mexican Economy Secretary Gerardo Ruiz Mateos called Washington's action "wrong, protectionist and a clear violation" of the North American Free Trade Agreement. However, he also clearly stated that the measure will be cancelled as soon as a trucking program is restarted.
The Obama Administration on March 19 vowed to work with Congress to come up with an alternative to the pilot program, which meets the concerns of opponents of the program and U.S. NAFTA commitments. North Dakota Sen. Byron Dorgan, D, sponsor of the amendment that removed funding for the pilot program said he is willing to work on the issue.
Observers noted the tariffs may have unintended consequences for the Mexican economy, which contracted 1.6 percent in the fourth quarter of last year. The Mexican currency has fallen 32 percent in the past six months, as the U.S. recession throttles demand for exports and slows inflow of capital. The tariffs may be damaging for Mexicans who would pay a higher price for imported goods.
Sources: Marketing Solutions, Bloomberg news, AgTC, March 19, 2009
