The U.S. and Mexico on Thursday settled a 16-year-old dispute over cement, guaranteeing more shipments of the building material from south of the border to ease current U.S. shortages.
Under the pact, Washington would slash punitive tariffs on Mexican cement while Mexico would grant U.S. firms access to its market, now dominated by a few companies that charge consumers here some of the highest prices in the world.
Thursday’s deal appears to resolve a trade spat that dates to 1990, when a group of 31 U.S.-based cement makers brought a successful anti-dumping case against Mexican producers that sold their product at prices far below those paid in Mexico.
The agreement was hailed by Mexican officials as well as the U.S. construction industry, which has been clamoring for an end to punitive tariffs on Mexico to combat rising prices and shortages of cement, especially in areas damaged by hurricanes Katrina and Rita.
“It’s a big step forward for the U.S. construction industry,” said Ken Simonson, chief economist with the Associated General Contractors of America.
“It’s not going to solve the shortages all over the country. But it should make them less frequent in areas that can be served by Mexico,” he said.
Global cement supplies have tightened in recent years because of a hot U.S. housing market and a building boom in Asia. That has led to shortages and rising prices in the American market that some feared would put a damper on the thriving construction sector, which has helped power the economy. Some state governors pressured the Bush administration to ease trade restrictions with Mexico.
Hurricanes Rita and Katrina ratcheted up the pressure on the U.S. industry to cut a deal. Stung by criticism of its slow response to the worst national disaster in U.S. history, the Bush administration was eager to remove any bottlenecks in the rebuilding phase.
“The agreement will help ensure that Gulf Coast communities have the resources to rebuild, and it will also help U.S. cement producers access the Mexican market,” said U.S. Commerce Secretary Carlos M. Gutierrez in a statement.
Since 1990, Mexican imports have been slapped annually with tariffs ranging from 37.4% to 109.43%. The punishment has sharply curtailed sales. Mexico last year supplied about 1.6 million metric tons of cement to the U.S. market, according to Commerce Department figures, down from about 5 million metric tons in the late 1980s.
Thursday’s agreement, signed in Washington, requires the United States to slash punitive tariffs on Mexican cement to $3 a metric ton from $26. Mexico will be allowed to sell 3 million metric tons annually in the U.S. market over the next three years.
During the same period, Mexico can bring cement only to eight regional markets in the Southwest and along the Gulf Coast.
If Mexico abides by the deal, its cement will be able to enter the U.S. market without duties or quantity restrictions beginning in 2009.
The pact should give an immediate boost to Mexican producers this year. Mexico’s secretary of the economy released a statement calling the cement flap “one of the most debated controversies between the Mexican and American administrations.”
The release praised the agreement and said it would double exports of Mexican cement to the United States.
The benefits for U.S. cement makers won’t be so immediate. U.S. plants are running full bore trying to satisfy domestic demand, and the Mexican market will probably be tough to crack.
Officials tried to put the best face on Thursday’s deal.
Joe Dorn, a Washington attorney who represents the U.S. firms whose complaints sparked the punitive tariffs, called it “a classic situation where everyone can claim victory to some extent.”
Some cement makers expressed resignation and relief.
“It buys peace,” said Charles Sunderland, chairman and chief executive of Kansas-based Ash Grove Cement Co.
“I’m just glad it’s over,” said James Repman, CEO of Glendora-based California Portland Cement Co.