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U.S. GOVERNMENT EXTENDS DUTY ON MEXICAN CEMENT.

Hopes for a truce in the bitter US-Mexico dispute regarding cement trade evaporated after the US government announced plans to retain an anti-dumping duty on imports of Mexican cement. The level of the duty has been subject to review on an annual basis. But this year, the US International Trade Commission (ITC) had scheduled a sunset review to determine whether the duty should be retained at all.

After consulting with various parties, including US and Mexican cement manufacturers and US importers, the ITC decided in early October to retain the duty, citing concerns that US cement manufacturers continue to be harmed by imports of low- priced imports.

Decision surprises Mexican cement manufacturers

The ITC decision caught Mexican cement manufacturers by surprise, since the industry had widely expected the US government to either eliminate or greatly reduce the duty.

"The possibilities of eliminating the duty on Mexican cement are very strong," analyst Carlos Perezalonso of the brokerage ABN Ambro said in early June. "There are many factors supporting this outcome."

Perezalonso said US imports of Mexican cement have declined to 1.5 million metric tons this year out of total imports of 30 million MT. In 1990, when the US imposed the duty, the US was importing 3.5 million MT of Mexican cement out of total cement imports of 11 million MT.

Mexican cement manufacturers have contested the duty since its inception, bringing the matter before the General Agreement on Tariffs and Trade (GATT) in 1992 and 1994. The GATT is the predecessor of the World Trade Organization (WTO). In both cases, the GATT ruled that the duty was inappropriate, but was powerless to enforce its findings. In one of those instances, the US government actually increased the duty on Mexican cement even after the GATT announced its decision (see SourceMex, 1994-06-05, 1994-08-10).

"Within GATT, the decisions were not compulsory and the US blocked the resolution," said Fernando Barney, operations and logistics manager at Grupo Cementos Chihuahua (GCC).

CEMEX leads effort to challenge US duty

Following this year's decision to retain the duties, the Mexican government and Mexican-based multinational company CEMEX announced plans to resubmit the complaint before appropriate international-trade authorities, including the WTO and the North American Free Trade Agreement (NAFTA). The GCC's Barney said Mexico will restate its argument that the duties are an unfair trade barrier, especially since Mexico's lower cement prices are not the result of government subsidies.

CEMEX president and director-general Lorenzo Zambrano called the ITC decision "highly politicized" and vowed to pursue the matter vigorously. "I consider this move greatly unjustified given the current circumstances," said Zambrano. "We are going to file appeals both via NAFTA and via other international-trade organizations."

But Barney said an appeal before the WTO could be more difficult than the appeals before the GATT. "In the WTO it's not so easy; the WTO is more rigorous," he said.

Juan Prestamo, commercial-planning director for CEMEX's North America division, said concerns of US cement producers have been overstated, since there was little possibility that Mexican cement would flood the US even if the duties were eliminated. This is because the US has limited cement- processing capacity.

"The owners of the terminals would be the ones who decide how much cement enters the country," said Prestamo.

The push to eliminate the duty on cement was strongly endorsed by governors of northern states, where the operations of Mexican cement manufacturers are concentrated. "The US is importing about 20 million MT of cement from other countries like Canada and Japan," Nuevo Leon Gov. Fernando Canales Clariond told reporters at this year's conference of border governors in California in June. "We should be able to take better advantage of our proximity to the US market."

CEMEX's Zambrano echoed Canales' concerns, saying the duty had prevented his company's US operations from expanding imports from Mexico. "We are importing cement to our US operations from China, South Korea, Thailand, Turkey, Venezuela, and Spain," said Zambrano. "It is sad that cement is brought from such distant places and that we are unable to bring it in from a neighboring country."

CEMEX completes purchase of US cement manufacturer

While CEMEX is fighting the duty vigorously, the company continues to expand its presence in the US market. In late September, it completed the purchase of Houston-based cement manufacturer Southdown for US$2.8 billion. The acquisition of Southdown, the second-largest cement company in the US, is expected to triple CEMEX's sales in the US market from the current level of US$600 million.

The boards of directors of both companies have approved the deal, which is still subject to regulatory approval.

In recent years, CEMEX has acquired cement manufacturers in Venezuela, Colombia, Indonesia, the Philippines, Costa Rica, Chile, and Egypt (see SourceMex, 1999-06-30). CEMEX is now the world's third-largest cement manufacturer, surpassed only by Switzerland's Holderbank Financiere Glarus AG and French-based Lafarge SA.

Recent trade disputes involving Mexican cement companies have extended to its southern border. In early October, the Guatemalan government suspended a three-year duty of 89% against Mexico's Cooperativa Cruz Azul. Guatemalan President Alfonso Portillo said the decision was taken because the duty was counterproductive, promoting cement smuggling "to the detriment of Guatemalan producers."

In 1998, the WTO ruled that the duty was improper because the Guatemalan government failed to notify Mexico before publishing the announcement of the anti-dumping investigation (see SourceMex, 1998-05-27).

"We were not certain that we could win the case before the WTO," Portillo said in an interview with Mexico's official news agency Notimex. (Sources: Dow Jones Newswires, 10/02/00; Excelsior, 10/03/00; Notimex, 10/08/00; Reuters, 06/02/00, 10/06/00, 10/09/00; Reforma, 06/07/00, 10/06/00, 10/10/00; El Financiero, 06/29/00, 09/21/00, 09/26/00, 10/06/00, 10/09/00, 10/10/00; El Economista, La Jornada, 10/10/00)
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Publication:SourceMex Economic News & Analysis on Mexico
Date:Oct 11, 2000
Words:981
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