President Miguel de la Madrid of Mexico has made a strong start in his efforts to abandon what Mexican planners term the "fantasy economy" of unrealistic domestic subsidies, a dual exchange rate, excessive regulation and corruption. But his best efforts will be for nothing if he does not receive the full support of the United States.
The Reagan administration is helping Mexico deal with its massive debt, providing credit for agricultural purchases and stepping up petroleum purchases for the U.S. strategic reserve. But understanding and cooperation in trade issues have been conspicuous by their absence.
U.S. trade restrictions worsen Mexico's chances for reversing its chronic trade deficit. Disputes between the two countries concern perennial American pressures to get Mexico to join the General Agreement on Tariffs and Trade by enforcing stricter sanctions against Mexican imports to the United States than are applied to the exports of GATT signatories, exclusion of many Mexican products from the benefits of the General System of Preferences, and threats to "graduate" Mexico from GSP eligibility and other favorable treatment on the basis of a claim that Mexico is already a "newly industrialized country." The United States also maintains a formidable array of barriers to many Mexican exports.
Our most persistent problems arise in enforcement of our unfair trade statutes, particularly on export subsidies. From the Mexican point of view, export subsidies are not necessarily "unfair" trade practices but rather legitimate means to offset the handicaps under which developing countries compete with their industrialized partners. This principle has been recognized in international agreements, including the subsidy code negotiated under the auspices of the GATT, but it has run afoul of the U.S. concept of fair trade.
Mexico is now threatened by a record number of countervailing duty cases, ranging from petrochemicals to toy balloons and manhole covers. Because Mexico has neither entered into an agreement to phase out its export subsidies nor joined the GATT, the American petitioners are not required to demonstrate actual injury in order to receive protection from Mexican competition. These cases have continued even after Mexico eliminated its only direct export subsidy, which was the original source of complaints.
Especially frustrating for Mexico is the fact that Brazil and India, both of which today have bigger subsidy programs than Mexico, receive more favorable treatment under U.S. law than does Mexico by virtue of their status as GATT subsidy code signatories. In fact, Brazil was accorded even more lenient treatment in the aftermath of President Reagan's recent trip.
Creeping protectionist sentiment in the United States is leading to the creation of a double standard under which we demand theoretically perfect performance from our trading partners while increasingly adopting expedient deviations from liberal trade precepts in our own policies.
The United States even maintains its own export subsidy programs. Export-Import Bank credits, the DISC program, shipping regulations and certain aspects of the PL480 program all fail to live up to the high standards of non-subsidization that we apply to others.
These programs can be taken as an implicit recognition by the United States that economic realities can necessitate certain deviations from the dictates of free trade purism. If the United States can maintain protection and indirect subsidization in its own economy, we should be willing to accept similar actions in Mexico during these times of severe economic crisis.
We can be more sensitive to Mexico's development needs. We should reconsider restrictions on imports from Mexico (fruits and vegetables, tuna, textiles, etc.), expand the benefits to Mexican products under the General System of Preferences, and above all, tolerate temporary subsidies (in the absence of findings of real injury to U.S. firms and workers) as legitimate tools of Mexico's economic development.
There is admittedly little sympathy for such proposals these days in Congress. However, Mexico is not a threat to U.S. employment. In fact, increased Mexican exports, especially at the expense of the Far East, create jobs in the United States. Despite the alleged unfair trade practices carried out by Mexico and the closed nature of the Mexican market, the United States runs a perennial trade surplus with Mexico--even with Mexico's sizable oil exports included.
The advent of the new Mexican administration creates an opportunity for both the administration and Congress to undertake a full review of U.S. trade relations with Mexico. We should get on with it.