A Tit for Tat over Trucks AS/COA Online 03/20/09

Trucks at the U.S.-Mexico border. (AP Photo)

A move by U.S. Congress to stop a cross-border trucking program drew a counterpunch from Mexico this week. The recently signed U.S. spending bill ended funding for a pilot program allowing Mexican trucks to transport cargo inside the United States and vice versa. With the program a long overdue part of the North American Free Trade Agreement (NAFTA), Mexico chose to retaliate. The administration of Mexican President Felipe Calderón unveiled new tariffs for close to 90 industrial and agricultural products imported from the United States. Yet Washington announced a pair of high-profile visits to Mexico by U.S. Secretary of State Hillary Clinton and U.S. President Barack Obama, opening the door to smooth the turbulence over trade and security issues.

As the tariffs were announced, Mexico’s Economy Secretary Gerardo Ruiz Mateos said that the now-suspended pilot program had been successful with no major safety incidents. He also said the cancellation of the program is “wrong, protectionist, and clearly violates the [NAFTA] treaty.” A Department of Transportation report found that Mexican truckers registered under the program met all 22 safety mandates demanded by U.S. Congress.

The duties, which went into effect on March 19, represent tariff increases of as much as 45 percent on $2.4 billion worth of exports, explains Sidney Weintraub of the Center for Strategic and International Studies in a Forbes.com editorial that breaks down the history of the trucking plan. The Mexican government carefully chose the products on the tariff list “to avoid pushing up prices of staples in Mexico while hitting goods that are important exports for a range of American states. That way, it could have maximum political effect north of the border,” The Economist explains. Wall Street Journal warns that Mexico can turn to other trading partners—Europe, Canada, and Latin America—to replace the U.S. brands. Total trade between Mexico and the United States stood at over $367 billion in 2008.

Trade and trucks are not the only matters troubling U.S.-Mexican relations at the moment. At AS/COA’s recent annual Mexico City conference, Calderón condemned remarks originating in the United States that question Mexico’s institutional strength in the face of violent organized crime. He raised concerns about U.S. drug consumption and arms smuggling and urged joint U.S.-Mexican action to fight drug cartels.

Given the tensions, the timing of the upcoming visits by Obama and Clinton could prove crucial to giving ties between the neighbors a boost. Appearing on National Public Radio’s “Diane Rehm Show,” COA’s Eric Farnsworth explained expects that this bump in trade relations won’t escalate “at a time when, I think, neither nation could afford it.”

Mexico’s El Universal takes a closer look at the trade rift and plans for Obama’s trip to Mexico in advance of April’s Summit of the Americas. Clinton’s visit next week will pave the way for Obama’s. Moreover, the appointment of former Dallas Mayor Ron Kirk as the new U.S. Trade Representative gained congressional approval this week, just in time to tackle the problem. “It will be one gnarly challenge after the next for the new U.S. trade representative, starting with the trade war that erupted this week with Mexico,” says Dallas Morning News.

Some contend that killing plans for a trucking program will result in higher shipping costs. Bloomberg reports that what a truck could haul from one point in Mexico to another in the United States will take three different trucks and one extra day without the program. The Bureau of Transportation Statistics shows that the value of goods transported by truck between both countries rose to $234 billion last year. Mexico’s decision came as the World Bank raised alarm about protectionist measures undertaken by G20 members in the midst of the global financial crisis.

AS/COA hosts a program on March 24 in advance of the Obama and Clinton visits. Learn about the event, which will involve a panel videoconferenced in New York and Washington.

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Mexico Revamps Its Judicial System AS/COA Online 06/19/08

President Calderón signs the judicial reform at Palacio Nacional in Mexico City.

Earlier this week, Mexican President Felipe Calderón signed a constitutional amendment designed to reform his country’s antiquated judicial system. Experts hail the reform as a major step forward in terms of rule of law in Mexico; new laws guarantee presumption of innocence, public and oral trials, and access to qualified defense lawyers.

Under prior law, those accused of a crime are presumed guilty in Mexico. With the reform, an investigation will precede detention and defendants are considered innocent until proven otherwise. Representative César Camacho, a strong supporter of the reform before Mexico’s Congress, argued that—according to the previous law—the country’s judicial system had become taxed; roughly 90,000 suspects remain incarcerated without a formal sentence. The reform also changes the manner in which trials will be conducted, replacing closed-door hearings with U.S.-style public and oral trials in an effort to ensure transparency and the opportunity to fair legal representation. Such changes require training for judges and court employees, as well as a complete physical makeover of the courts to accommodate the new proceedings style.

The judicial reform evolved from a proposal by Calderón that aimed to combat organized crime. Under the initial proposal, police and security forces could conduct raids and home searches without a permit from a judge under the assumption of illicit activities. As part of efforts to widen the reform, Congress vested municipal and state agencies with the authority to fight organized crime—a task previously in the hands of the federal government.

But even as the reform seeks to create a more transparent, fair judiciary, it is not free of controversy. A provision known as arraigo allows detention of organized crime suspects for up to 80 days without formal charges. The measure sparked an outcry from human rights organizations. Human Rights Watch describes the detention period as “the longest of its kind in any Western democracy,” and that it violates “protections against arbitrary detention enshrined in international law.”

Another challenge rests in the need to reeducate career lawyers and revamp law school curriculums to reflect systemic change, as well as to strengthen forensic investigation agencies. The next step for the reform package rests with state legislatures, who must ratify and enforce the measure. Implementation is expected to be gradual with a deadline for the new rules to be fully operational nationwide by 2016.

Mexico may be able to draw some insight from the experience with judicial reform in Colombia, where new laws were implemented in 2005 and national coverage achieved in December 2007. An academic study conducted after the reform’s first year in place showed an improvement in the number of cases processed by the courts. The survey also argues that without the proper academic, technical, and forensic tools, courts may not administer justice effectively and may perpetuate impunity. However, Colombian authorities reported positive results in the legal system’s performance: In 2007, courts processed more than 2.7 million cases across nearly the entire country.

Read AS/COA’s Rule of Law Working Group report, which discusses how to improve and strengthen the rule of law in the Americas.

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Leaders Stand Up for NAFTA AS/COA Online 04/22/08

North American leaders at the New Orleans’ summit. (AP Images)

With a race for the White House in full swing and dominated by issues that hinge on North American relations—including trade policy, immigration, and border security—the leaders of Canada, the United States, and Mexico met in New Orleans for the April 21 and 22 North American Leaders’ Summit.

In response to recent criticism of the North American Free Trade Agreement (NAFTA) by Democratic presidential candidates, U.S. President George Bush, Canadian Prime Minister Stephen Harper, and Mexico’s President Felipe Calderón praised the trade pact. Harper called NAFTA “our best option to create jobs and compete effectively” while Calderón said the agreement created jobs in Mexico that helped slow emigration to the United States. Bush voiced support for NAFTA and also argued for passage of bilateral deals with Colombia, Panama, and South Korea. The North American Competitiveness Council presented a report—called Meeting the Global Challenge—voicing concern about recent isolationist rhetoric and providing recommendations to improve border management.

Information released by the White House in advance of the meeting emphasized the benefits of NAFTA: Canada serves as the United States’ number one trading partner while Mexico ranks third; combined three-way trade reached $930 billion last year and will likely hit $1 trillion by the end of 2008. In a Wall Street Journal op-ed, John Engler of the National Association of Manufacturers takes on the argument that a trade deficit between the United States and its NAFTA partners has led to job losses; he points out that the deficit relates largely to energy imports and not manufactured goods. On C-SPAN’s Washington Journal COA’s Vice President Eric Farnsworth explains that, “For what NAFTA was designed to do, it’s been a success.” He describes the treaty as a “living document” that’s frequently revised by the three countries to make improvements.

In addition to NAFTA, regional security emerged as a paramount issue; Calderón emphasized the importance of bolstering security along the U.S.-Mexican border and applauded recent efforts by the Bush administration to halt arm smuggling and illegal crossings. Bush, in turn, lauded praised Calderón’s anti-drug efforts and encouraged Congress to approve the proposed Merida Initiative, a $1.4 billion project that aims to fight gangs, drug trafficking, and human smuggling in Mexico and Central America. A Brooking Institute analysis takes a closer look at how U.S. national security policy has shifted its attention to transnational crime in Latin America. At a recent AS/COA roundtable, Assistant Secretary of State David T. Johnson of the Bureau for International Narcotics and Law Enforcement Affairs discussed the Merida Initiative.

Calderón also raised the issues of immigration, bringing attention to the contribution of Mexican immigrants in the rebuilding of New Orleans during the aftermath of Hurricane Katrina. He emphasized the importance of finding a solution to the question of immigration reform “with respect and responsibility.” The U.S. presidential cycle has coincided with an upswing in anti-immigrant rhetoric and a patchwork of state immigration laws in the United States. The shift toward immigration crackdowns may be having an economic impact; according to the World Bank, remittances slowed down (PDF) last year for the first time since they began being tracked tracked, affecting recipients in Latin America.

In an op-ed for the Calgary Times, AS/COA President Susan Segal highlights NAFTA as “the most effective tool we have to increase trade among the United States, Canada, and Mexico.” AS/COA Online takes a closer look at the remittance slowdown as well as Calderón’s support for Mexican immigrants during his January visit to the United States.

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Deepwater Troubles AS/COA Online 02/21/08

The Calderón administration hopes to reform laws guiding investments in Pemex.

Last week, Pemex declined an invitation to join Petrobras as a minority partner in a deepwater exploration in the U.S. side of the Gulf of Mexico. This despite Pemex’s twin problems of declining production and limited exploration capacity to tap large oil reserves in deeper waters. The conundrum rests now in how to get to those reserves without the technical ability and with constitutional hurdles barring privatization of the government’s energy monopoly.

Pemex’s production woes are not new and, according to the Energy Information Administration, Mexico’s proven oil reserves continue to fall. Cantarell, once the world’s biggest offshore oil field, reached its peak production capacity in 2004, but has seen production rates shrink by 500,000 barrels of oil a day.

In early February, Mexican Energy Secretary Georgina Kessel predicted that Mexican oil production would drop by another 200,000 barrels in 2008. She also stressed that Mexico holds roughly 100 billion barrels of equivalent crude oil, saying the country has “plenty of oil, but we need to find ways of turning these reserves into production and into resources for the Mexican people.” In a report setting out a five-year strategy, the energy ministry reports that total oil production could declice by 2.5 million barrels a day.

Mexico’s President Felipe Calderón—who served as energy minister in the Fox administration—echoes Kessel’s concerns. During his recent tour of the United States, he said, “The problem is that this treasure is buried beneath the ocean. To reach that oil we need to strengthen Pemex.” To meet that goal, Calderón has worked to push through reforms of constitutional law (PDF), which keeps Mexico’s hydrocarbons in the hands of the state. Mexico was the first developing country to nationalize its oil industry, expropriating U.S. and British holdings in 1938. As the Economist notes, Pemex’s failings are related to “two wasted decades in which governments have milked Pemex of cash which it might otherwise have invested.”

But Calderón’s efforts to open up Pemex to private investment have hit a roadblock in Mexico’s opposition-controlled Congress. As a Houston Chronicle analysis reports, opponents to the reform say the Calderón administration paints a dark future for Pemex to rally support for privatization. Among the critics stands Calderón’s political adversary Andrés Manuel López Obrador, who lost the presidential election by a hair in 2006. The former Mexico City mayor argues that rooting out corruption would serve to fix Pemex’s troubles. López Obrador may be able to strike a chord among Mexicans who remember a former privatization by President Salinas de Gortari’s, which gave Mexican billionaire Carlos Slim a monopoly over the telecommunications industry. As Newsweek’s “Why It Matters” blog reports, Calderón must ensure that reforms occur “under circumstances that primarily benefit the Mexican people.”

Enter energy giant Petrobras, which could serve as a role model—and potential partner—for Pemex. The Brazilian firm’s aggressive energy exploration policy led to two major offshore oil discoveries in 2007 plus more ventures in the U.S. Gulf Coast, West Africa, Turkey, Colombia, and, recently, Cuba. While Mexico began deepwater exploration in 2006, Petrobras drilled its first deepwater well in 1992, at a depth of more than 3,250 feet deep. The company has hit some hurdles along the way, such as a failed $135 million exploration venture with ExxonMobil and Colombian state-owned Ecopetrol in the Caribbean coast. Still, Petrobras, which the government maintains a 55 percent stake in and which began accepting private investment in the early 1970s, has been recognized as a model for other national oil companies to follow. For now, Pemex has turned down Petrobras’ partnership offer; energy reform could open the door to similar agreements in the future.

View a report by COA’s Energy Action Group on building lasting energy partnerships to improve security and prosperity in the Americas.

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