Category Archives: Politics

Is the NAFTA trucking dispute finally over?

A Mexican truck will make a delivery to a Dallas suburb this afternoon, thereby realizing some of the liberalization promised by NAFTA 17 years ago. WaPo:

The first Mexican carrier to deliver goods in the U.S. interior under a long-delayed free-trade provision is scheduled to enter the country at Laredo, Texas, shortly after midday Friday.

The truck owned by Nuevo Leon, Mexico-based Transportes Olympic will make a delivery to the Dallas suburb of Garland. That’s despite continuing opposition from the Teamsters union and some lawmakers who fear the program will make U.S. highways more dangerous and cost American jobs.

The truck will carry a monitoring device. The move complies with a provision of the 1994 North American Free Trade Agreement.

The company was also the first approved under the 2007 pilot program before President Barack Obama’s administration canceled it [in 2009]. Mexico retaliated by placing tariffs on 99 agricultural products worth more than $2 billion annually.

A little over a year ago, I noted that Washington insiders didn’t expect the dispute to be resolved “any time soon”, but in the broader context, 14 months isn’t bad. So what does the program do? It includes a lot of measures to address the safety concerns raised by its opponents:

Supporters say especially strict safeguards have been implemented: Electronic devices will track the routes drivers take, how long they drive and how long they rest. Participating drivers must undergo national security and criminal background checks, and inspectors will administer oral English-proficiency exams.

Does this end the dispute? Not necessarily. Look up the Federal Motor Carrier Safety Administration’s announcement in the Federal Register and you’ll discover that this is a three-year pilot program, a fact not made clear by some press coverage. From the Federal Register (pdf):

The Federal Motor Carrier Safety Administration (FMCSA) announces its intent to proceed with the initiation of a United States-Mexico cross-border long-haul trucking pilot program to test and demonstrate the ability of Mexico-domiciled motor carriers to operate safely in the United States beyond the municipalities in the United States on the United States-Mexico international border or the commercial zones of such municipalities (border commercial zones)…

In a pilot program, DOT typically collects specific data for evaluating alternatives to the regulations or innovative approaches to safety while ensuring that the goals of the regulations are satisfied. A pilot program may not last more than 3 years, and the number of participants in a pilot program must be large enough to ensure statistically valid findings.

Will the pilot program have large effects on international trade? Both sides claim big numbers:

Todd Spencer, the executive vice president of the Independent Drivers Association, which represents small independent trucking businesses, said 100,000 trucking jobs will be lost. Proponents say it will spur economic growth as companies save millions by sending the goods door-to-door.

But I doubt we’ll see any such impacts soon. Tire Business reports:

So far two small Mexico-based motor carriers have been certified for the program. They are Transportes Olympic of Monterrey, with two vehicles, and Grupo Behr de Baja California S.A. de C.V. of Tijuana, with five vehicles.

However, the FMCSA is withholding Grupo Behr’s permit while reviewing objections raised by the Teamsters and others regarding Grupo Behr’s safety record. The Teamsters also question Transportes Olympic’s record on safety.

You can track the approvals online at the FMCSA’s website. That site says that Transportes Olympic has registered one vehicle and two drivers. It looks like the dispute will continue in some form, for the time being.

Is the US going to impose tariffs on China?

The Currency Exchange Rate Oversight Reform Act of 2011 is headed to a full Senate vote on Tuesday. You can track its congressional actions here.

The legislation, in summary,

  • directs the US Treasury Secretary to report on currency market developments and prevailing real effective exchange rates and to identify countries that manipulate exchange rates
  • requires the US Treasury Secretary to oppose increased “chairs or shares” at any international financial institution for a designated currency manipulator
  • amends antidumping calculations and countervailing duty investigations to include currency undervaluation when looking at exports from a designated manipulator

If you look at the text of the act (PDF), you’ll realize that this bill does not impose any tariffs on China. It changes the criteria that the US Treasury Secretary will consider in choosing whether to designate a country a currency manipulator, and it makes that designation have bite in AD/CVD actions, government procurement, some multilateral financing, and IMF actions.

PIIE’s Nicholas Lardy describes the legislation in an interview, characterizing the inclusion of currency undervaluation in the countervailing duty calculation as the primary thrust of the act.

This legislation changes the trade-policy process; it doesn’t impose tariffs. Of course, the fundamental misalignment criteria may have been chosen with particular outcomes in mind, but the US Treasury has opted to not designate China a manipulator many times before. Will this legislation bind so tightly that the designation is inevitable?

Will the US Congress pass three PTAs this year?

Doug Palmer:

A congressional committee on Wednesday strongly backed deals with South Korea, Colombia and Panama, setting them on course for expected final approval and ending years of trade policy paralysis…

The panel’s chairman, Representative Dave Camp, said approval of the deals could not come at a better time for the struggling U.S. economy…

The three pacts must be approved by the full House and the Senate to become law. The panel backed the pacts on the following bipartisan votes: Colombia, 24-12; Panama, 32-3; and South Korea, 31-5.

Camp said he expected the full House to approve the trade deals next week. The Senate also could move quickly enough for the pacts to be approved in time for South Korean President Lee Myung-Bak’s visit to the White House on Oct 13.

New US trade measures against China TBA

Reuters:

U.S. trade officials will announce a major trade enforcement action against China on Tuesday, according to an advisory from the U.S. Trade Representative’s office. The advisory, which was obtained from a business group, said U.S. Trade Representative Ron Kirk “will hold a press conference to announce a major trade enforcement action against China.” It gave no other details.

via Scott Lincocome.

Revenue-neutral tariff cuts are tricky business

Sallie James:

[B]ecause implementing the FTAs (which will lower tariff revenue) and paying for the billion-dollar-plus TAA extension “requires” offsets, the draft language specifies in Sec. 601 that revenue should be raised by increasing customs user fees.

Scott Lincicome:

But “customs fees” are simply hidden taxes on import consumers.  A quick review of the US Customs website on “customs users fees” makes this clear.  They’re paid (mainly) by commercial transporters bringing goods (imports) into the United States, thus raising the costs of importation…

[A]ssuming that the agreement would raise US customs users fees (or implement new ones) in order to generate revenue for the federal government, it would probably violate GATT Article VIII, which governs WTO Members’ imposition of “Fees and Formalities connected with Importation and Exportation” (in other words, customs fees).  The key provision of Article VIII reads:

1.(a) All fees and charges of whatever character (other than import and export duties and other than taxes within the purview of Article III) imposed by contracting parties on or in connection with importation or exportation shall be limited in amount to the approximate cost of services rendered and shall not represent an indirect protection to domestic products or a taxation of imports or exports for fiscal purposes.

The politics of the Doha round and US PTAs

At VoxEU, Richard Baldwin and Fred Bergsten are debating the state of trade politics. Baldwin thinks that the Doha round is the greatest opportunity for meaningful increases in US exporters’ market access and is pessimistic about the outcomes of pursuing a series of bilateral trade deals. Fred Bergsten thinks that the Doha round is failing because it doesn’t offer meaningful market access improvements and defends the Free Trade Area of the Asia Pacific proposal.