The News
The News
Friday 09 of June 2023

Trade War Begins

Woman puts on labels of tuna cans for Pescados Industralizados S.A. in Mazatlán, Sinaloa,photo: Cuartoscuro/Germán Romero
Woman puts on labels of tuna cans for Pescados Industralizados S.A. in Mazatlán, Sinaloa,photo: Cuartoscuro/Germán Romero
Could this be a prelude to the possible end of NAFTA?

The rumblings of a North American trade war thundered Monday and Tuesday as two conflicts that have in the past been described “as old as the Trojan war” broke out.

The Monday before a group of so-called “U.S. conservative media,” conveniently put together by the White House, President Donald Trump announced plans to slap a trade tariff against Canadian softwood, one of the staple exports of the country to the United States.

U.S. Commerce Secretary Wilbur Ross told the Wall Street Journal that the tariff will be applied retroactively for about $5 billion.

Then on Tuesday, Mexico announced in Geneva that it will immediately request from the World Trade Organization (WTO) authorization to establish backlash on U.S. exports after Mexico won — not without a nearly 28 year old fight that started in 1989 — it’s legal struggle against U.S. tuna fishing companies for labeling rights the United States demanded should read “Dolphin Free,” alleging that Baja California fishermen were unnecessarily slaughtering dolphins in their tuna fishing techniques.

In terms of money, Mexico is demanding it be allowed by the WTO to establish sanctions of up to $163.23 million a year “and begin the necessary internal proceeding to make effective the suspension of the import of U.S. products,” said Mexico in a press release Tuesday.

A WTO arbitration committee resolved Tuesday that Mexico could slap the United States with $163.23 million a year against the U.S. government’s protectionist practice regarding its legal attitude in what was often termed as “the tuna wars.”

These two conflicts come in tandem with the fact that Wed. April 26 President Trump will be releasing his budget proposal for the upcoming fiscal year, which may include, according to Senator Paul Ryan, a calculation for the United States to impose a Border Adjustment Tax (BAT, clearly a countervailing duty) on imports from all over the world but with a special message to the brooding automobile manufacturing industry in Mexico.

BAT would no doubt add dry wood to the fire that seems to be in the making and comes just before the three nations prepare to begin renegotiations of the North American Free Trade Agreement (NAFTA). Are these tariff and punishing duties slapped on Canadian lumber and U.S. protectionism a prelude to the possible end of NAFTA?

Something else that comes in the Trump budget, says U.S. Treasury Secretary Steve Mnuchin, is the reduction of corporate tax from 35 to 15 or 25 percent.

Normally this would not affect Mexico directly but since many of the corporations now operating in the nation also have business in the United States, the question is whether the Treasury and Public Finance Secretariat (SHCP), headed by José Antonio Meade Kuribreña, would also propose lowering tax rates on corporations.

This is a question that was posed to Meade Kuribreña during the recent yearly Banking Convention in Acapulco. He gave a direct answer to those querying him. In a most diplomatic tone he said that Mexico has no plans for a tax reduction. But still, surely the pressure will continue as Mexico’s taxation rates are currently similar to those in the United States.

Another news stemming out of the preliminary glance of the upcoming Trump budget is that if he wants it approved in Congress, there is no room for “the wall” he still claims he plans to build along the border with Mexico. “Trump’s wall crumbles down” are the headlines nowadays in Mexico, which by the way, we predicted over a month ago.

Be that as it may, the countervailing duty — it is no tariff — on Canadian softwood and the legal fight Mexico is about to embark on suing the United States for protectionist damages during the “tuna wars” are not a good prelude to NAFTA renegotiations which are bound to start in the fourth quarter of 2017.

Or perhaps claiming that he has achieved a lot during his first 100 days in office, Trump has actually delivered very little and he has a commitment to those that he promised “Mexico will pay for the wall” and Obama care would be KO’d.

As some analysts are saying, “After 100 days of nothing, he’s got to put something on the table.”

But the fact in Mexico and Canada is that nobody wants a trade war in which the three nations will come out as sore losers.