Mexico slaps tariffs on U.S. goods in truck feud

Mon Mar 16, 2009 7:51pm EDT

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MEXICO CITY/WASHINGTON (Reuters) - Mexico slapped tariffs on 90 American agricultural and manufactured exports on Monday in retaliation for Washington's move to block Mexican trucks from using U.S. highways.

Mexican Economy Minister Gerardo Ruiz said about $2.4 billion worth of exports from 40 U.S. states would be affected and that his government would soon publish a list of them.

Last week, the U.S. Congress canceled funding for a test program begun by the Bush administration that allowed Mexican long-haul trucks to circulate in the United States in compliance with the North American Free Trade Agreement.

"We consider this action by the United States to be mistaken, protectionist and clearly in violation of (NAFTA)," Ruiz told reporters in Mexico City.

President Barack Obama's administration, facing its first dispute with a major trading partner and neighbor, promptly said it would work to create a new cross-border, long-distance trucking program between the two countries.

"The president has tasked the Department of Transportation to work with the U.S. trade representative and the Department of State, along with leaders in Congress and Mexican officials to propose legislation creating a new trucking project that will meet the legitimate concerns of Congress and our NAFTA commitments," White House spokesman Robert Gibbs said.

It was not immediately clear which exports would be hit.

But a spokesman for the Mexican economy ministry said the new tariffs would not affect rice, corn, beans or wheat, which are the main U.S. farm products exported to Mexico and make up much of the average Mexican's diet.

"It won't be any of these products because Mexicans are sensitive to them," the spokesman told Reuters.

The United States agreed to allow Mexican trucks to start using U.S. highways by 1995 when it signed the NAFTA pact with Canada and Mexico three years earlier.

But Mexican trucks were confined to border zones where they had to offload goods to be carried by U.S. companies. In 2007, the U.S. government launched a pilot program that allowed a limited number of them full access to U.S. roads, while American trucks were also allowed to operate in Mexico.

U.S. organized labor, led by the largest trucking union, the Teamsters, along with highway safety and consumer groups fiercely opposed the initiative, a pet project of former President George W. Bush.

A provision depriving the program of funding was added to a $410 billion spending bill passed by the Democratic-controlled Congress last week.

Backers of the truck program, including former presidential candidate and Arizona senator John McCain, lamented the Mexican decision but said it was expected.

"Unfortunately, this is a predictable reaction by the Mexican government to a policy that now puts the United States in clear violation of NAFTA and was inappropriately inserted into the Omnibus appropriations bill," McCain said.

"We must take steps to prevent escalation of further protectionist measures -- actions that only serve to harm American business during these tough economic times," he said in a statement.

A spokeswoman for the U.S. Trade Representative's office said they could not confirm which U.S. farm or manufacturing products would be hit with increased duties. Major U.S. commodity groups also said they were awaiting details.

The impact of higher Mexican tariffs on U.S. exports of farm products to Mexico would be "huge," said Bill Biedermann, an analyst with brokerage firm Allendale Inc.

"The market would take a very negative tone, and it could throw us right back into that bearish period of a few days ago," Biedermann said, adding that he believed Mexico was only positioning itself to negotiate with the United States.

(Additional reporting by David Alexander in Washington, Noel Randewich in Mexico City, and K.T. Arasu and Karl Plume in Chicago, Writing by Anthony Boadle, Editing by Paul Simao)

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