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Politics : American Presidential Politics and foreign affairs -- Ignore unavailable to you. Want to Upgrade?

To: Peter Dierks who wrote (32308)	3/16/2009 10:24:43 AM
From: Peter Dierks	Read Replies (1) \| Respond to of 71588

Washington Starts Another Trade War By MARY ANASTASIA O'GRADY MARCH 16, 2009 When G-20 finance ministers met in England over the weekend to discuss a way out of the global financial crisis, the group pledged to eschew trade protectionism. That sounds good. But some of the governments represented at the meeting aren't walking the walk on global commerce at home. Instead they're taking the side of special interests that want to weaken foreign competition. One culprit that comes to mind is the U.S. In violation of the North American Free Trade Agreement, the U.S. last week again closed its southern border to any Mexican trucks additional to those with existing permits. It did so on the usual grounds that Mexican trucks are unsafe, even though that hoary claim has been demolished by extensive testing. But Congress and President Barack Obama are catering to the Teamsters union, which has spent more than a decade lobbying to keep Mexican competition off U.S. highways. Candidate Obama ran for president as a protectionist, with a special emphasis on a promise to block ratification of U.S. free trade agreements with South Korea and Colombia. Big Labor was a big giver to Mr. Obama's campaign and he owes it big time. Last week he began paying up. During confirmation hearings, his nominee to be U.S. Trade Representative, Ron Kirk, sharply criticized both agreements. Yet if Mr. Obama and congressional Democrats were not expected to champion freer trade, some hoped they would not reverse liberalization gains of recent years. The decision on Mexican trucks last week shows they are doing just that. Under Nafta, Mexican carriers were authorized to deliver their cargo to any border state starting in 1995 and anywhere in the U.S. as of 2000. This would boost both economies because some 75% of U.S. trade with Mexico moves by truck. Eliminating the border process of unloading cargo from one set of trucks and reloading it on another would greatly enhance efficiency. New competition would lower prices and improve service. There would also be security gains if trucks carried cargo in both directions. As it stands now, once cargo is off-loaded in the border zone, the vehicle returns home empty. This creates many opportunities for smuggling drugs, weapons and cash. President Bill Clinton's agenda was similar to that of Mr. Obama. In a sop to Teamsters in 1995, he nixed the opening to Mexican trucks, citing safety concerns. In 1998 Mexico filed a complaint against the U.S. with a Nafta panel. In 2001 the panel ruled unanimously in Mexico's favor. But Mexico was still not home free. In a 2002 appropriations bill, Congress said that before the Department of Transportation (DOT) could grant long-haul operating authority to Mexican trucks, a list of 22 safety requirements had to be met. Yet as John Hill, a former administrator of the Federal Motor Carrier Administration, explained to me on Thursday, Congress seemed to be acting in bad faith. "When the inspector general confirmed that the department was making substantial progress toward those goals, Congress began adding additional requirements in subsequent appropriations bills. And it continues today." Mexican trucking in the U.S. is not new. More than 800 Mexican carriers -- all of which are majority owned by Americans -- have permits that were grandfathered more than 20 years ago. And their safety record is enviable. A 2007 DOT study of the performance of Mexican carriers in the U.S. from 2003-2006 found Mexican trucks to be safer than U.S. trucks. Even Mexican short-haul trucks operating in the border zone had a better record than U.S. trucks. In 2007, frustrated with Congress, the Bush administration worked with Mexico -- which was under pressure from its own protectionists -- to launch a pilot program allowing a limited number of new Mexican carriers into the U.S. and a limited number of U.S. carriers into Mexico. The U.S. goal was to prove there was a way to enforce safety standards among Mexican truckers. The 27 Mexican carriers in the pilot program compiled an impressive safety record in 2008, judging by the rate at which randomly stopped vehicles received an "out-of-service" designation -- meaning they did not comply with all safety regulations -- from DOT inspectors. Whereas all U.S. carriers had a vehicle "out-of-service" rate of 21.6%, all Mexican carriers had a rate of 20.7% and Mexican carriers in the pilot program had a rate of 7.3%. So how have Congress and President Obama responded to this success? They killed the program by prohibiting its funding in the new $410 billion omnibus spending bill. This ends new Mexican competition in trucking. Mexico says it will retaliate, and if it's smart it will hit U.S. producers in strategic markets. This will be bad for Mexican consumers, but if constituents of protectionist U.S. senators feel the pain, it might succeed in changing attitudes in Congress. Given the political muscle of the Teamsters, there aren't many other options. Write to O'Grady@wsj.com online.wsj.com