VZCZCXRO7174
PP RUEHCD RUEHGD RUEHHO RUEHMC RUEHNG RUEHNL RUEHRD RUEHRS RUEHTM
DE RUEHME #5323/01 2772222
ZNR UUUUU ZZH
P 042222Z OCT 07
FM AMEMBASSY MEXICO
TO RUEHC/SECSTATE WASHDC PRIORITY 9123
INFO RUEHXC/ALL US CONSULATES IN MEXICO COLLECTIVE PRIORITY
RUEHBJ/AMEMBASSY BEIJING PRIORITY 0426
RUEHCN/AMCONSUL CHENGDU PRIORITY 0011
RUEHGZ/AMCONSUL GUANGZHOU PRIORITY 0048
RUEHHK/AMCONSUL HONG KONG PRIORITY 0325
RUEHGH/AMCONSUL SHANGHAI PRIORITY 0015
RUEHSH/AMCONSUL SHENYANG PRIORITY 0018
RUEHC/DEPT OF LABOR WASHDC PRIORITY
RUCPDOC/DEPT OF COMMERCE WASHDC PRIORITY
RUEATRS/DEPT OF TREASURY WASHDC PRIORITY
RUEAHLA/DEPT OF HOMELAND SECURITY PRIORITY
RHEHNSC/NSC WASHDC PRIORITY

UNCLAS SECTION 01 OF 03 MEXICO 005323 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
STATE FOR WHA/MEX, WHA/EPSC, EAP/CM, DRL/AWR AND ILCSR 
EEB/TPP/BTA/EWH/RECHT, AND EEB/TPP/BTA 
STATE PASS USTR FOR 
EISSENSTAT/STRATFORD/QUESENBERRY/MELLE/SHIGET OMI/MILLER 
COMMERCE FOR ITA/OTEXA 
TREASURY FOR IA (ALICE FAIBISHENKO, ANNA JEWEL) 
NSC FOR RICHARD MILES, DAN FISK, DENNIS WILDER 
STATE PASS TO FEDERAL RESERVE (CARLOS ARTETA) 
 
E.O. 12958: N/A 
TAGS: ETRD KTEX WTO ELAB MX CH
SUBJECT: MEXICO REVIEWING ANTIDUMPING DUTIES ON CHINA, 
PREPARING FOR POSSIBLE WTO DISPUTE 
 
REF: (A) MEXICO 616 (B) MEXICO 5240 (C) BEIJING 5700 
 
MEXICO 00005323  001.2 OF 003 
 
 
Summary 
------- 
 
¶1. (SBU) Mexican trade officials have begun to review many of 
the anti-dumping (AD) duties currently in place versus 
Chinese imports, with an eye to starting reviews of the rest 
before the December 11 expiration of Mexico's immunity from 
Chinese WTO litigation.  Mexico believes it will be able to 
eliminate many of the duties and put those that will remain 
on stronger legal footing to withstand an expected WTO 
complaint from China.  The review process for the most 
sensitive products (mostly textiles and apparel) will take 
from 12 to 18 months.  Mexico does not intend to link this 
issue to its own pending WTO complaints versus Beijing on 
export subsidies and intellectual property rights (IPR). 
While there is predictable pressure from many Mexican 
manufacturers and labor unions to maintain high tariff 
barriers on PRC imports, there are some who seek cheaper 
legal inputs.  Government officials also recognize that 
eliminating many of the outdated and WTO-inconsistent AD 
duties on Chinese imports will reduce workload on import 
administration and customs officials and remove much of the 
incentive for corruption and contraband.  End summary. 
 
Mexican WTO Immunity Nears Its End 
---------------------------------- 
 
¶2. (U) As reported in REF A, Mexico was the last country to 
conclude a bilateral WTO accession agreement with China, and 
before signing, Mexico extracted from China a pledge to 
refrain from filing WTO suits against Mexican trade remedies 
for six years from the date of its accession, i.e., until 
December 11, 2007.  (Note: REF A incorrectly reported the 
date as January 1, 2008.  End note.)  Mexico had good reason 
for negotiating this concession -- at one point it had 
slapped prohibitively high anti-dumping (AD) duties on 
several thousands of individual tariff lines of Chinese 
imports.  Over the past five years, Mexico has eliminated 
many of these (almost certainly WTO-inconsistent) duties, but 
it still has AD penalties in place on roughly 1,000 tariff 
lines of Chinese imports, some stretching back as far as the 
early 1990s.  Around 800 of these tariff lines are for 
man-made fibers, textile, or apparel products.  These sectors 
in Mexico surged between 1994 and 2000 with the 
implementation of the North American Free Trade Agreement, 
but have shrunk back considerably since the beginning of this 
decade, due in large part to China's 2001 WTO accession and 
its huge export boom, together with the end of the 
Multi-Fiber Agreement and the rise of other Asian 
manufacturing powers (REF B). 
 
¶3. (SBU) Mexico's game plan for making the transition to a 
WTO-consistent approach to AD duties on Chinese products 
starts with initiating reviews of all the cases currently in 
force before December 11.  These are divided into seventeen 
groups of goods, and the Secretariat of the Economy (SE) had 
already started reviews on nine of these groups as of the 
third week of September.  According to an official in SE's 
trade remedies unit, it should take two months to reach 
preliminary determinations, but as long as 12-18 months for 
final resolution of the most sensitive product categories. 
Mexico will almost certainly end up eliminating AD duties on 
a large number of Chinese products, and for those products 
that will remain subject to AD duties, SE is considering 
starting over its AD procedures from scratch on a 
product-by-product basis rather than simply renewing the 
existing cases, almost all of which are on very shaky legal 
standing.  By making a good faith effort to review and 
 
MEXICO 00005323  002.2 OF 003 
 
 
differentiate its treatment of various Chinese imports based 
on international rules, Mexico feels that it will be in a 
strong position to defend itself should Beijing decide to 
initiate a WTO dispute post-December 11, which Mexico 
considers probable. 
 
To Link or Not to Link 
---------------------- 
 
¶4. (SBU) A Chinese embassy official told econoff that Beijing 
would naturally prefer that Mexico simply eliminate its 
duties on PRC imports before December 11, rather than merely 
beginning reviews by that date.  However, the official 
refused to be drawn out on China's likely course of action 
if, as seems will be the case, Mexico is still a year and a 
half away from final resolutions on a number of sensitive 
products come December 11.  REF C reported on the frosty 
reception experienced by a visiting Mexican trade official 
due to Mexico's decision to participate in the U.S.-initiated 
WTO complaint against poor Chinese protection of intellectual 
property rights -- the Mexican press has reported on 
Beijing's official negative reaction to Mexican participation 
in both the IPR case and another U.S.-initiated complaint 
against Beijing related to export subsidies, saying Mexico's 
decisions were founded on ignorance of the facts and domestic 
political factors.  Regarding a potential connection between 
the export subsidy and IPR cases on the one hand and a 
possible PRC case versus Mexican AD duties on the other, our 
SE contact was adamant that SE would not/not allow these 
cases to be linked.  Mexico felt it had strong arguments on 
both export subsidies (for which it has asked to form a WTO 
panel) and IPR (on which it will participate as a 
third-party) and was ready to let the chips fall where the 
may on any complaint the Chinese may lodge against Mexican AD 
duties. 
 
Industry, Union and SE Views on AD Duties 
----------------------------------------- 
 
¶5. (SBU) A number of Mexican industrialists in the textile, 
apparel, and footwear sectors are lobbying the Mexican 
Congress and SE to maintain protective tariffs on PRC goods, 
which they routinely accuse of benefiting from unfair Chinese 
competition.  Likewise, Mexican labor unions in these 
industries unanimously favor maintaining the high AD duties. 
They are concerned, probably with just cause, that the 
500,000 jobs in these industries will be at even greater risk 
if the tariffs are removed.  A number of Mexican legislators 
have adopted this rhetoric in public, saying Mexico should 
not have to compete against those who do not follow the 
rules.  SE claims that is has gained tacit acceptance from 
interested legislators to proceed with its current plan, 
noting that producers with evidence of foul play should 
present it to SE and cooperate in building a WTO-consistent 
case for compensatory measures. 
 
¶6. (SBU) On the other side, there are many Mexican 
manufacturers who would welcome cheaper legal inputs from 
China (thus helping keep down their own costs) and are thus 
pushing for elimination of AD duties.  In many cases, there 
are no remaining Mexican producers of the goods in question, 
making it easy for SE to cease punitive treatment of those 
tariff lines.  In fact, SE has lost a number of domestic 
legal suits filed against it by Mexican producers complaining 
that many of these AD duties are illegal under Mexican law 
and detrimental to Mexican competitiveness.  Apart from 
strictly commercial considerations, SE believes that cleaning 
up the large number of questionable trade remedy cases 
against China will not only put Mexico right with WTO rules, 
but will reduce workload for SE and Customs officials and, 
 
MEXICO 00005323  003.2 OF 003 
 
 
perhaps most importantly, eliminate what is currently a huge 
incentive for contraband trade and official corruption at 
ports of entry.  Our SE contact noted that the illegality 
generated by such prohibitively high tariffs spreads even 
further -- many legitimate Mexican apparel makers produce 
super cheap lines of clothing that they do not report in 
their official books (or pay taxes on) in order to compete 
against the equally cheap Chinese contraband apparel that can 
be found in Mexico's ubiquitous informal markets. 
 
Comment 
------- 
 
¶7. (SBU) We suspect that the pro-free trade Calderon 
administration is happy to finally embark on the path of 
ending a particularly egregious and long-standing case of 
Mexican protectionism, and that it will make a sincere effort 
to construct WTO-consistent arguments to sustain those AD 
cases against China that survive the review process.  Whether 
China will give Mexico until mid-2009 to resolve all the 
outstanding cases before resorting to WTO dispute resolution 
remains to be seen, but such a move would be based more on 
political considerations than commercial ones, since it is 
hard to imagine that Beijing would achieve a satisfactory 
judgment via the WTO much sooner than mid-2009 in any case. 
End comment. 
 
 
Visit Mexico City's Classified Web Site at 
http://www.state.sgov.gov/p/wha/mexicocity and the North American 
Partnership Blog at http://www.intelink.gov/communities/state/nap / 
GARZA