Alliance to Keep U.S. Jobs

Issue Overview

To encourage the trade relationship between the United States and Mexico, the North American Free Trade Agreement (NAFTA) called for a cross-border trucking program to be phased-in beginning in 1995. Cross-border trucking between the United States and Canada is already in place. Despite Mexico’s compliance with U.S. safety standards, select political interests sought to restrict access of trucks from Mexico in the U.S., and they succeeded in delaying the program for 12 years. Finally, in September 2007, the United States launched the U.S.-Mexico cross-border trucking demonstration program, allowing a modest number of trucks from Mexico to be allowed to travel beyond the 25-mile border “commercial zone” to which they have been restricted, while offering reciprocal access to U.S. trucks in Mexico. Although the program fell short of NAFTA commitments, it was considered a positive signal.

Despite the program’s success, debate over the issue continued until February 2009, when Congress voted to de-fund the pilot program in the fiscal 2009 Omnibus Appropriations bill, thereby terminating the program in March 2009. In response to the United States’ failure to comply with its trade agreement, the Mexican government instituted retaliatory tariffs on $2.4 billion worth of U.S. manufactured and agricultural exports on March 19th. The tariffs, which are allowed under the rules of international trade, range from 10-45 percent, and include products ranging from pears and strawberries to Christmas trees and paper products.

Retaliation Harms U.S. Companies

Trade between the United States and Mexico totaled $368 billion in 2008, making Mexico the third-largest U.S. trading partner. Given this, the tariffs imposed by Mexico are significantly impacting American farmers and businesses of all sizes. Because the targeted items are largely commodities, most with modest profit margins, the tariffs literally have the ability to put U.S. companies out of business in Mexico, where competitors from Asia, Latin America and elsewhere can provide the same goods at more competitive prices. Once U.S. companies are replaced in the Mexican market by their international competitors, they are not likely to be able to re-enter those markets again. That means that good U.S. jobs that are lost as a result of shrunken revenues may be permanently lost. Likewise, the companies that supply goods and services to other U.S. businesses whose exports are now targeted will soon feel the impact of these tariffs as well.

Companies with operations in Canada are preparing to close lines in the U.S. and shift production across the border to Canada where duty-free treatment continues. The shift in production will cost local communities jobs with a ripple effect all along the supply chain.

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