CANCELLATION OF TRUCKING PROGRAM HURTS U.S. EXPORTS TO MEXICO, ACCORDING TO NEW STUDY

UNCLAS MEXICO 002303 SENSITIVE, SIPDIS STATE FOR EEB/TPP/BTA/GROUT STATE FOR WHA/MEX/LEE STATE PASS TO USTR FOR MELLE/SHIGETOMI NSC FOR RESTREPO/O'REILLY USDA FOR FFAS/MILLER, FAS FOR OA/MICHENER TREASURY FOR OI/JARPE COMMERCE FOR ITA/MAC/ONAFTA/WARD/OLSEN STATE PASS TO DOT FOR TRAINI E.O. 12958: N/A TAGS: ECON ETRD EAGRE NAFTA MX SUBJECT: CANCELLATION OF TRUCKING PROGRAM HURTS U.S. EXPORTS TO MEXICO, ACCORDING TO NEW STUDY ¶1. (SBU) SUMMARY: U.S. exports sharply dropped among several of the 89 U.S. products on which the GOM imposed retaliatory tariffs in response to the cancellation of the U.S.-Mexico Cross Border Trucking Demonstration Project. According to a respected local trade consulting firm, exports to Mexico of these products fell 37 percent in April 2009 compared to exports of these products in April ¶2008. This is the first time advocates of a new, robust replacement trucking program can quantify the negative impact effects on U.S. producers of these agricultural and industrial products. The issue is gaining traction, and we suspect that the GOM will take action soon if no USG action on trucking is forthcoming. END SUMMARY. ¶2. (SBU) On July 30, the Mexican financial daily "Economista" ran a short article explaining the results of a study conducted by IQOM, a reputable trade consulting firm run by former senior Secretariat of Economy (Economia) officials. IQOM analyzed the recent trade numbers and reported that U.S. exports of products affected by the retaliatory tariffs dropped sharply from US$ 200 million in April 2008 to US$ 127 million in April 2009, a 37 percent fall. IQOM told us that it based its findings on data publicly available on the U.S. International Trade Commission website, as well as on information proved by SE. When we raised this finding with his Economia counterpart, the Mexican official said he had seen the article and that Economia was doing whatever it could to help IQOM with its research. ¶3. (SBU) Post intends to run its own numbers to emulate the IQOM study, in order to track IQOM's results. One complication in drawing conclusions from raw trade data, however, is the difficulty of distinguishing between the influence of the global economic downturn and the impact of the punitive tariffs. In fact, trade is down in many product groups, including those enjoying zero tariffs. Given anecdotal feedback from U.S. and Mexican traders, it is clear that the punitive tariffs have had a significant impact on several products, even if we cannot be certain of their exact impact. Naturally, other factors besides the economic downturn may also contribute to the decline in exports. ¶4. (SBU) COMMENT: This is the first quantitative assessment of the impact of Mexico's punitive tariffs on targeted U.S. agricultural and industrial products as a result of the U.S. Congress' cancellation of the U.S.-Mexico Cross Border Trucking Demonstration Project. Not surprisingly, this study will likely find broad readership within the GOM. On several occasions in the last month, the GOM has made clear its intention to revise the punitive tariff list to include more sensitive U.S. exports should the current list not encourage the USG to introduce a new and acceptable trucking program. We believe this issue is gaining traction in GOM circles, and we suspect the GOM will take action soon if no USG action on trucking is forthcoming. END COMMENT. FEELEY