The Mexican government seems to think that trade disputes are like the NBA championships or the Stanley Cup finals--a best of seven series.
That’s because, for almost five years the Mexicans ignored two high-level rulings that declared their antidumping duties on U.S. produced HFCS to be illegal. Panels affiliated with the North American Free Trade Agreement and the World Trade Organization have declared Mexico to be in the wrong - this levy was a form of illegal protectionism that restricts high-fructose corn syrup from the United States.
Mexico finally complied with the rulings by lifting the antidumping duties, but instead substituted a new measure that was more dramatic – the so-called soda tax. All beverages sold in Mexico that are not sweetened with Mexican cane sugar are assessed a 20-percent surcharge. This tax shut down the Mexican market to our HFCS exports overnight.
Maybe the Mexicans think that if the U.S. challenges them again, this time on the soda tax, they’ll prevail. Except that this controversy isn’t a bit of athletic entertainment--it’s a serious threat to our most important free-trade agreement.
Mexico’s challenge strikes at the very heart of NAFTA and the idea that our two countries should be removing old trade barriers rather than building new ones. The Mexicans insist that their retaliation is fair because the United States restricts the import of Mexican sugar.
In addition, Mexico’s arbitrary reprisal hurts Mexican consumers by increasing the price of their soft drinks and American farmers by taking away an important export market.
When a country loses one of these free-trade rulings, there are no WTO police to force them to change their practices. Instead, the winning country is granted the right to retaliate--in other words, to counter with their own legal tariffs to gain the leverage necessary to break the protectionism. As Allen Johnson, one of America’s top trade negotiators has said, “If we do not see an improvement in our agricultural trade relationship [with Mexico], we are prepared to take the necessary actions to protect our agricultural interests.”
Such drastic action may be necessary, but it doesn’t address the real issue, which is lowering trade barriers rather than building new ones. It’s a one-step-backward, two-steps-forward approach. The problem is that we run the risk of not taking those two steps forward--or worse, we find ourselves in an escalating trade war that has us rushing away from trade liberalization in a headlong retreat.
Trade relations with Mexico are deteriorating rapidly. In addition to the corn-syrup mess, Mexico placed a 46-percent duty on apples grown in the United States earlier this year. Now there’s talk about restricting U.S. beef, white corn, and dried beans.
We can cross our fingers and hope that much of this is hot air coming from Mexican political candidates who are up for election next month. Then again, our own politicians haven’t made enough of a fuss over Mexican trade policies. They need to understand that NAFTA, achieved after so much struggling a decade ago, is headed toward free fall. This is the most important issue now facing our two countries.
One lawmaker who has spoken out is Senator Chuck Grassley of Iowa. Last month, in a meeting with Mexican senators, he said the corn-syrup issue must be resolved. “Unless Mexico begins complying with its NAFTA obligations, and soon, I’m concerned that the support of U.S. agriculture for trade liberalization will decline. That would benefit neither the United States nor Mexico,” he said.
He’s right about that, everybody would lose. I’ve noticed that many farmers are souring on free trade because they see Mexico skirting its obligations--and getting away with it, despite those panel rulings. They believe that if this corn-syrup issue can’t be resolved in a positive way, then what’s the point of spending enormous capital to produce trade deals that are so easily violated? Farmers are a vital constituency for free trade. If they start losing faith in it, then the powerful forces of protectionism will have won a crucial victory.
We can’t let that happen, because free trade is such an important part of a bustling global economy. If somebody would just step forward and save NAFTA, we might want to award him an MVP trophy.
News 
The Mexican government seems to think that trade disputes are like the NBA championships or the Stanley Cup finals--a best of seven series.
