Mexico Takes a Harder Line on Imports : Trade: Recent tariffs on U.S. and Chinese goods indicate that the liberalization honeymoon may be over.

Faced with a worsening trade deficit, Mexico is showing signs of backtracking from its much-touted trade liberalization.

Last month, the government slapped tariffs of up to 1,105% on Chinese goods and up to 81% on U.S. steel products. It is generally stepping up investigations of unfair trading practices and moving faster to enforce sanctions.

U.S. steelmakers and makers of more than a dozen imported Chinese products are accused of dumping, or selling goods for less than it cost to make them or at prices lower than are charged in the producer’s home market.

The duties on Chinese goods, in particular, are a sign that the government is going after low-cost imports it believes are priced unfairly to harm Mexican products, said economist Rogelio Ramirez de la O. “Of course, this is just the beginning,” he predicted. Products from “Taiwan, Thailand and Singapore will be next, then probably Brazil, which has been selling aggressively into the Mexican market.”

Commerce Minister Jaime Serra Puche denied during a recent news conference that trade restrictions will be extended to other products and countries. However, his ministry is investigating 27 charges of unfair practices by foreign countries. Pending complaints involve products such as Brazilian specialty steels, Danish processed meats, Colombia zippers and U.S. packaging plastics.

The tariffs on Chinese products were unusual in that Mexico imposed them before completing its investigation into whether dumping had occurred.

“This is the first time we are applying compensatory tariffs at the beginning of an investigation, because the initial investigation showed us that they are selling at very low prices,” said Serra Puche. Many Chinese goods are being sold for less than the cost of the raw materials used to make them, he said.

The Chinese government vigorously denied the charges. “Chinese goods are competitive because raw materials and labor are cheap; it has nothing to do with dumping,” said a prepared statement from the Chinese Embassy here.

Serra Puche announced the investigation and additional tariffs after months of pressure from Mexico’s import-battered makers of shoes, toys and textiles.

Tariffs have also been placed on a dozen other products from China, from bicycle parts to candles. In all, the tariffs affect categories of goods that accounted for about three-fourths of the $300 million in products Mexico bought from China last year.

The ruling in the U.S. steel case was less surprising because it followed, rather than preceded, an investigation, and is part of an ongoing squabble among international steelmakers. In December, the U.S. Commerce Department accused companies in 12 countries--including Mexico--of dumping steel and imposed stiff tariffs.

Serra Puche also brushed aside suggestions that new restrictions on some imports indicate that trade liberalization is not working. An open economy and unfair trade practices are entirely different things, he said.

Until 1985, when Mexico joined the General Agreement on Tariffs and Trade, the government protected domestic producers with quotas and other trade barriers, including tariffs that tripled the price of some imported goods. The average tariff has since dropped to 10%. Permits, once needed for all imports, are now required only for about 3% of foreign products.

As the barriers fell, imports flooded the country. Mexico’s current account deficit deepened to $22.8 billion last year, 71% more than in 1991.

Lower-priced imports helped the country wrestle the triple-digit inflation of the mid-1980s down to 12% last year. However, domestic manufacturers across industries were badly hurt.

Steelmaker Industrias CH’s two top clients began buying imported steel. As pork imports tripled over a three-year period while the market was shrinking overall, domestic pork production dropped by half. Imports also gradually displaced Mexican- made shoes, toys and textiles.

But the government will not admit that the trade measures it is taking are related to the deficit, said economist Ramirez. “That would be showing vulnerability on the trade deficit.”

Instead, the government’s posture is to cast doubt on the legitimacy of imported products, he said. Chinese products were an ideal example because they are highly visible but represent only about 1% of foreign trade.

Casting imported goods in the context of unfair trade helps support a nationwide “buy Mexican” campaign launched in the capital early this year. The campaign, a joint effort of the National Manufacturing Chamber and the government, emphasizes the quality of Mexican goods and their connection with domestic jobs.