March 27, 2009


The Perils of Protectionism

By Israel Ortega

A war with our neighbors to the South has broken out. Not a conventional war of armies, firepower, or weapons, but a trade war. And although we may be spared the violence of a shooting war, a trade conflict poses a serious threat to our economy — and in these dire times we cannot afford to put U.S. jobs and exports at greater risk.

Our relationship with Mexico is almost as long as the history of our own country. And while our relationship hasn’t always been amicable (consider the U.S.-Mexican War, 1846-1848), the last few decades have arguably ushered in a resurgence of cooperation, partnership and even friendship.

The most prominent example is the North American Free Trade Agreement (NAFTA), which opened trade and investment with our neighbors to the South. With the stroke of a pen, former President Bill Clinton dramatically reduced existing tariffs on goods and services levied on Mexico in the hopes of encouraging trade and job creation on both sides of the border.

And although it’s a bit too early to effectively judge the extent of NAFTA’s success, few doubt that the trade agreement was an important milestone in U.S.-Mexico relations. Before even considering the substantial economic gains resulting from NAFTA, any fair-minded observer would have to concede that the signing of the trade agreement was a remarkable gesture, with three of the world’s biggest economies (Canada also signed) pledging to forge economic and political ties. NAFTA has helped Mexico to achieve more stable governance and to develop more middle-class jobs.

Unfortunately our relationship with Mexico is now in peril, a victim of the politics of protectionism and populism.

Unknown to many, Congress recently included language in a massive (1,000 page-plus) omnibus bill that cuts funding for a pilot program to allow a limited number of Mexican trucks to travel on U.S. highways. Eliminating that program amounted to a proverbial diplomatic slap in the face, since the program started after a legitimate complaint filed by Mexico under the NAFTA agreement objecting to U.S. protectionism for U.S. truckers.

Claiming environmental and safety concerns, a number of lawmakers from both sides of aisle voted to eliminate funding for the pilot program. While ensuring that environmental and safety standards are being met is a legitimate concern, cutting the funding seems aimed at appeasing protectionists rather than protecting motorists.

Labor unions never liked NAFTA for opening up the various industries they represent to greater competition. Now they’re predictably rejoicing for Congress’ recent move, even though it amounts to foolishly attempting to close ourselves off from the rest of the world at a time when unemployment rates are climbing.

Unfortunately, Mexico has responded by levying tariffs on various U.S. exports that, according to my colleague James Roberts, an expert on international trade, amount to some $2.4 billion in annual sales for U.S. companies. The tariffs range from 10 percent to 45 percent on 89 products such as toilet paper, Christmas trees, sunflower seeds, soy sauce, beer, frozen French Fries and deodorant, to name a few. And with our economy slowly trying to climb its way out of a recession, tariffs are absolutely detrimental.

In a trade war, Mexico’s retaliatory actions amount to a direct counter-attack.

Clearly a cool-headed leader is needed to settle these trade differences. Thankfully President Obama has an opportunity to be such leader when he travels to Mexico in the coming weeks to sit down with Mexican President Felipe Calderon ahead of the Summit of the Americas.

Let’s hope that President Obama takes a step back from the protectionism that’s endangering our centuries-long-relationship with Mexico and further putting our economy at risk at this critical juncture.

Israel Ortega is a Senior Media Services Associate at The Heritage Foundation,

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