Business, Finance & Economics

'Three Amigos Summit' highlights split on trade


MEXICO CITY — With the meeting dubbed the “Three Amigos Summit” and an abundance of handshakes and hugs for the cameras, relations between the three nations of North America have never looked better on the surface.

But behind the camaraderie of President Barrack Obama, President Felipe Calderon and Primer Minister Stephen Harper, the get-together in Guadalajara this Sunday and Monday highlighted deep divisions in how to pull the region out of the biggest economic slump since the Great Depression.

At the center of the differences are fears south of the Rio Grande and north of the Appalachians that the economic colossus of the U.S. is turning protectionist.

Such worries have been particularly stoked by the so-called “Buy America” provisions in Obama’s stimulus laws, aimed at helping struggling U.S. sectors such as the iron and steel industries.

This kind of language sparks major concern in Canada and Mexico, the United States’ No. 1 and No. 3 trading partners.

Both Calderon and Harper pressed the Buy America points in the meeting, officials said.

Obama reacted in the summit news conference by saying that he was personally against the provisions but that they should not disrupt trade. “I think it's important to keep it in perspective. We have not seen some sweeping steps towards protectionism,” he said. “This in no way has endangered the billions of dollars of trade taking place.”

However, other recent U.S. protectionist measures have also hit out at the North American partners.

In March, Obama signed a spending bill with a clause that shut down a two-year-old pilot program that allowed some Mexican trucks to operate in the U.S.

Pressure for the clause had come directly from the Teamsters, who have long opposed competition from the Mexican 18-wheelers on their turf and use the complaint that the foreign truckers don't meet U.S. safety standards.

Mexican officials reacted angrily to the action, pointing out that under the North American Free Trade Agreement, their trucks should have been permitted to haul cargo the width and breadth of the union from 2000 onward.

"We consider that the United States is mistaken, protectionist and clearly violating the treaty," Mexican Economy Secretary Gerardo Ruiz Mateos said following that move.

In retaliation, Mexico slapped tariffs on 90 U.S. products — ranging from onions and shaving cream to fruit juice and red wine — worth a total of $2.4 billion in trade. Obama had promised in March he would quickly resolve the dispute and many pundits had predicted a new agreement in Guadalajara to get Mexican trucks driving in “El Norte.”

But no such concrete measure came out of the summit.

Instead, the three “amigos” signed a joint statement condemning such policies in very general language.

“North American trade is a vital component of our economic well-being and we pledge to abide by our international responsibilities and avoid protectionist measures,” the statement said.

The worry about the United States turning inward is particularly intense in Mexico because the Mexican economy rests on it.

Since NAFTA was signed in 1994, Mexico increasingly geared its economy toward trading with its northern neighbor.

Under favorable terms, assembly plants and sweat shops multiplied across the country churning out everything from washing machines to the SUVs for American consumers.

By 2008, Mexico exported a whopping $215.9 billion worth of goods over the Rio Grande, providing it with almost a quarter of its entire Gross Domestic Product.

As U.S. spending plummeted this year, Mexican exports to the U.S. fell by more than 20 percent in the first five months.

This slump has hammered the Mexican economy, which analysts now predict will shrink by a painful 7 percent — the worst loss since the 1930s. This deep recession is seen as a key factor fuelling the relentless drug violence in Mexico, with the cartels armies recruiting from the ranks of the unemployed.

Last month was the most violent in Mexico’s recent history with 854 drug related killings — prompting the three amigos to promise they will stand firm against the cartels.

Such economic vulnerability has prompted many in the Mexican public to question the whole direction of the nation’s trade policies.

“Making ourselves so dependent on the United States has become a national security liability,” said financial consultant Ricardo Bernal, watching a live broadcast of the Guadalajara summit. “We need to look more to trading with the south. We have much more in common with the rest of Latin America.”