Preventing An Obama Trade War

As FF warned last week, Mexico has now announced increased tariffs on 90 U.S. exports in retaliation for Congress’ decision to end a pilot program permitting certified Mexican trucks to operate across the United States. The actual list will be published later this week, but it’s likely to include higher duties on both agricultural and manufacturing products, designed to punish key U.S. exporters to Mexico.

If the higher tariffs go into effect, first blame should be on the Congressional Democrats who made this happen by killing the pilot program for Mexican trucks. These trucks and the companies that own them have to be certified by American regulators, so they must meet U.S. safety standards. This is not about safety. This is protectionism, pure and simple.

And it’s protectionism of the worst kind. We are over nine years behind on our commitment to open our roads to certified Mexican trucking companies. The Clinton Administration refused to take action. The Bush Administration did what it could in the face of Congressional opposition, starting the pilot program.

The Obama Administration apparently just thought they’d get a pass for now and could shove the issue under the rug. They were wrong. Mexico rightly fears that not having acted now, the Administration would face no real pressure to act and would simply blame Congress whenever the issue comes up. So they decided to take the first step towards retaliation, as they have a legal right to, rather than waiting another eight years to help their companies.

I’d also blame the too-tender consciences of some lawyers who have advised the President not to issue signing statements on legislation. Even if he didn’t want to take the strong step of saying that he would not enforce the provision as inconsistent with international obligations, he should have signaled his opposition to an actual violation of NAFTA as loudly as he did about a theoretical violation of World Trade Organization commitments. Signing statements have been issued by Presidents since James Madison. President Obama will come to regret not having this tool.

(And while we’re looking for explanations, this is a bit of inside béisbol­, but I also wonder whether this would have happened if Bill Richardson had been Secretary of Commerce. He’s Governor of a border state and he would have found this very tough to swallow. Perhaps he could have convinced Congress why this was a terrible idea.)

For now, the President must clearly instruct his Administration to work to restore at least the pilot program. Thanks to the Congressional vote and Obama’s signature, it will take a legislative solution to restore the program. The Administration needs to find a legislative vehicle for this and inform Mexico that it will push aggressively for its enactment.

If that bill fails, if we can’t even commit to opening our markets to one of our closest economic partners in an area where the law is clearly against us and we retain the right to certify the safety of the trucks, it would be a terrible signal to the world about America’s commitment to the world and the world economy. It would not be surprising if the global reaction, both political and economic, were highly negative – so that when historians study the second Great Depression, they can write about “Dorgan and Specter” instead of “Smoot and Hawley.”

Mexico is our neighbor and partner. It is undergoing a difficult period, not only because of the global economic problems but also in large part because of American demand for illegal drugs that pass through Mexico, which fuels crime and violence in its cities.

Clear leadership, Mr. President. And Vice President Biden and Secretary Clinton have a responsibility to tell him this.