Dumping on Mexico

            Domestic supporters of U.S. antidumping laws are beginning to learn that what goes around, comes around.

            Since 1990, the United States has accused Mexico of being an “unfair” trader in ten antidumping cases involving cement, various steel-related products (pipe, sheet, rod, etc.) and fresh tomatoes. Mexico caught onto the game slowly, sticking U.S. ammonium sulfate producers with antidumping duties in 1995. But since 1997, Mexico has enthusiastically targeted Americans with twelve more antidumping actions.

            The Senate Finance Committee recently heard anguished testimony from key U.S. farm lobbyists who have been on the receiving end of Mexico’s abusive antidumping regime. The U.S. beef, rice, pork, apples, and corn lobbies are irate that they have been branded as “unfair” competitors by Mexican antidumping officials who are fronting for their uncompetitive domestic lobbies.

            Finance Committee Chairman Chuck Grassley (IA.) and ranking Democrat Max Baucus (MT.) were shocked at the revelation that Mexico’s antidumping actions are really not-very-thinly disguised protectionism. They were shocked in the same way that the French detective in Casablanca was shocked to find gambling going on. When the United States hits Mexico with antidumping tariffs, nobody in the U.S. Senate complains.

            From the Mexican perspective, its only payback time for the gringos.

            Perhaps the key turning point in attitudes south of the border came in 1996, the year that Florida tomato farmers filed an antidumping case against imports of winter tomatoes from Sinaloa. If they hadn’t known it before, the Mexicans quickly learned just how abusive the American antidumping regime can be.

            U.S. officials who reported to Commerce Secretary Mickey Kantor knew that Mexico grew winter tomatoes in Sinaloa from January through April. The honest way to calculate the pricing of those tomatoes would naturally have been to analyze prices for the entire season — the months between January and April. But to come up with high antidumping margins, the Americans looked at only the first two months of the 1996 season (January and February) and the last two months of 1995 (March and April). Since January/February and March/April happened to be the months when prices were at their lowest, Commerce was able to calculate a high antidumping margin.

            Infuriated, in March, 1997 the Mexicans retaliated by filing an antidumping petition against U.S. Red and Golden Delicious apples, and later that year stuck the American apple industry with an antidumping tariff of nearly 47 percent. Ironically, many of those American apples were being picked by Mexican migrant workers.

            Outraged at the tariffs, the U.S. Apple Association announced its intention to lobby for the exemption of agricultural products from antidumping laws. But pretty soon, the American apple guys noticed that China has an awful lot of apple trees. USApple filed its own antidumping case against Chinese apple-juice concentrate in 1999. That case ended up defining the U.S. antidumping regime at its most cynical. To calculate the costs of producing apple-juice concentrate in China — a “non-market” economy — the U.S. Commerce Department picked India as an appropriate “market” surrogate. Commerce pretended that the costs of producing apple-juice concentrate by an Indian firm named HPMC could be a free-market substitute for China. Problem was, as U.S. Judge Richard Eaton of the Court of International Trade in New York ultimately discovered, HPMC was an awkward choice as a free-market surrogate. The Indian firm is “a government-controlled company” that subsidizes Indian apple growers by artificially raising prices, the judge found (for details, see Mixing Apples and Protectionism, The Rushford Report, October 2002, www.RushfordReport.com).

            Last year, the U.S. apple industry joined the usual suspects — steel, textiles — in urging President George W. Bush to protect U.S. antidumping laws from being reformed in the WTO’s Doha Round negotiations. But when John Rice, an apple grower from Pennsylvania and the immediate past chairman of USApple, testified before the Finance Committee on September 23, he didn’t have anything good to say about antidumping laws — at least when Mexico applies them. Rice complained that it was “unfair” for Mexico to have stuck U.S. Red and Golden Delicious apples with an antidumping tariff of 47 percent.

            Likewise, in his Sept. 23 congressional testimony, rice farmer Travis Satterfield — with the full support of the U.S. Rice Producers Association and the USA Rice Federation — complained about the “punitive” antidumping duties that Mexico has imposed on American rice. When the U.S. hits Mexico with antidumping duties on anything, the duties are never punitive; they are always said to be aimed at achieving “a level playing field.”

            “The consequences of the anti-dumping penalties against U.S. milled rice are already registering problems as we look at a 34% decline in exports of U.S. milled rice during the first three months of 2003, as compared to 2002,” Satterfield complained. “We value Mexico as our primary market for rice, but in the spirit of enforcing existing agreements and obligations which are critical to maintaining open markets, we hope that the United States government will consider the recent imposition of anti-dumping duties on milled rice and other U.S. commodities by the Ministry of the Economy for Mexico as a very serious matter.”

            Indeed, the U.S. government considers it a serious matter when American exporters are targeted with antidumping suits. The Bush administration is challenging Mexico’s antidumping abuses against American rice and beef in the WTO. These are the same kinds of cases that, when WTO dispute panels rule against the U.S. anti-dumping regime, lawmakers cry foul.

            To be sure, the heavily subsidized American farm lobbyists who have complained to Congress about foreign antidumping regimes don’t necessarily have tremendous moral standing to complain about anyone’s unfair trade practices. Think only of what subsidized rice and corn exports do to poor farmers in the Third World. Still, that doesn’t mean that Mexico is above criticism. Far from it. The Mexican antidumping regime has a well-earned reputation for being abusive.

            Presently, Mexico has a pending antidumping investigation that threatens to slap antidumping tariffs on imports of pork from the United States — while at the same time urging that Japan do more to lower tariffs and thereby increase its imports of pork from Mexico. Hmm…wonder where the Mexicans learned that game?

            Perhaps the worst Mexican antidumping abuse has involved actions against American high fructose corn syrup. Michael Jorgenson, the immediate past chairman of the U.S. Corn Refiners Association, testified convincingly about this at the Sept. 23 hearing. “This sweetener dispute and the resulting actions taken against our industry by Mexico has exacted a heavy toll on the corn refiners — jobs have been lost, plant capacity has been idled, and significant losses in investment have occurred,” Jorgenson noted.

            Jorgenson related how U.S. corn interests have won five WTO and Nafta panel rulings against Mexico since the first antidumping case on HFCS — the acronym for high fructose corn syrup — was brought in 1997. After losing those cases, the Mexican government simply slapped a 20 percent duty tax on all beverages that aren’t sweetened with Mexican cane sugar — thus cutting the American industry out of Mexico.

            Perhaps the next time that the Bush administration is asked by some country like Brazil to consider antidumping reforms in international trade negotiations, someone will think of doing something about Mexico. The earliest opportunity will come later this month in Miami, when officials meet to discuss the proposed Free Trade Area of the Americas.

            Stay tuned.