Obama

Obama's First Trade War: The US-Mexico Cross-Border Trucking Dispute and the Implications of Strategic Cross-Sector Retaliation on U.S. Compliance Under NAFTA
Klitit W. Alexander* Bryan J. Soukup**
I.
INTRODUCTION

In March 2009, President Barack Obama signed legislation suspending a pilot program that allowed a limited number of Mexican trucking firtns to operate within designated areas onU.S. soil. President George W. Bush enacted the program during the last year of his presidency in preparation for a larger, more inclusive US-Mexican cross-border trucking program. With trucks carrying 90 percent of the goods traded between the United States and Mexico, the border-opening program was viewed by proponents of the North American Free Trade Agreement (NAFTA) as an irrportant step inliberalizing trade and itnproving relations with Mexico. Opponents of NAFTA, however, have been critical of the program on the basis that Mexican trucks and their drivers endanger motorists, threaten national security, destroy the environment and contribute to the loss of thousands of American jobs.' Following the suspension of the pilot program, the Mexican government

• Dr. Klint Alexander isSenior Lecturer of International Law and Politics at Vanderbilt University and a Visiting Fellow of International Economic Law at the Institute of Advanced Legal Studies, University of London, U.K. *• Bryan Soukup is a Legislative Fellow for the Office of Federal Affairs, City of Los Angeles, California. 1. Associated Press, Bush Plan to Allow Mexican Truckers Throughout U.S. Draws Criticism, N.Y.TIMES, Feb. 24, 2007, available at http://www.nytimes.com/ 2007/02/24/washington/24trucks.html.

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retaliated against the United States by imposing 90 tariffs ranging between 10 and 45 percent on U.S.-produced goods totaling $2.4 billion.^ Though trucking falls within the seryices sector, Mexico has targeted its tariff hikes onspecific goods in key states where powerful politicians have been pressuring the Obama administration to impose tighter limits on Mexican truck traffic. This method of "cross-sector retaliation" is different fi-om the usual approach in international trade disputes whereby the injured state retaliates in the same commercial sector in which the harm occurs, also known as "same-sector retaliation."Cross-sector retaliation is permitted under international trade rules as an alternative remedy for smaller states who seek to improve compliance levels among larger states in asymmetric disputes.^ The purpose of this article is to examine Mexico's approach to U.S. noncompliance with NAFTA trucking regulations and assess whether strategic cross-sector retaliation is an effective tool to compel theUnited States to comply with its NAFTA obligations. Part II wiW describe the background to NAFTA and the U.S.-Mexico cross-border trucking dispute. Part ni will examine U.S. policy towards Mexican trucking since the creation of NAFTA and the implications of the 2001 NAFTA arbitration decision that paved the way for Mexican retaliation against the United States today. Part IV will discuss thespecifics ofthe 2007 pilot program and the Obama administration's reasons for suspending the program. Part V will analyze the concept of strategic crosssector retaliation in international trade where smaller states have effectively utilized this remedy to compel larger states to comply with trade rules in asymmetric disputes. Finally, this article will discuss Mexico's current program of strategiccross-sector retaliation against the United States, its political and economic ramifications, and the likelihood that Mexico's retaliation will change U.S. policy. II.
THE U.S.-MEXICO CROSS-BORDER TRUCKING DISPUTE AND

NAFTA

A.

Origins ofthe Cross-Border Trucking Dispute

The dispute between the United States and Mexico over cross-border trucking rights arose following the passage of the...