Nov 21, 2011
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Mexico, eyeing end of China duties, wary on trade

Nov 21, 2011

MEXICO CITY - Mexico is due to drop trade barriers against China in a long-promised move but officials in Latin America's second-largest economy still complain about unfair practices in what could presage a fresh trade fight.

Mexico was the last country to bless China's World Trade Organization (WTO) membership in 2001, having won years of additional protections against Chinese imports.

Those safeguards for local products are set to expire next month as Chinese apparel, shoes and other goods compete directly with local products on Mexico's retail shelves.

Officials, though, may still challenge China's overall trade posture with Mexico.

Economy Minister Bruno Ferrari told Reuters he had sent a letter to Chinese officials claiming unfair trade practices by some companies and was still awaiting a response.

Mexico can seek a range of remedies from the WTO in any dispute with China, Ferrari said. "And we will not hesitate to do that," Ferrari said last week on the sidelines of the Asia-Pacific Economic Cooperation summit in Honolulu.

Anti-dumping duties that protect Mexican industries have been winding down over the last few years and, as agreed, are set to end Dec. 11. But industrialists in Mexico complain that China easily sidestepped those obstacles by sending goods through third countries.

Ninety percent of the 111 million garments that entered Mexico from Malaysia last year originated in China, said Marcos Cherem, president of Mexico's apparel industry trade group.

"The time has come, I think, when we will be sleeping with the elephant," Cherem said of the end of trade restrictions and how Mexico will fare against China's industrial heft.

Meanwhile, Mexico has been benefiting from a trend in currency values that has seen the Chinese yuan appreciate while the Mexican peso has lost value against the dollar.

That currency gap makes it relatively cheaper for factories to assemble goods in Mexico and gives some Mexican exports a competitive advantage.

This may not be seen favorably by other Latin American countries. Brazil has imposed new tariffs on imported cars as its currency, which strengthened to a 12-year high in July, made imports cheaper.

The move to increase taxes on imported cars by 30 percentage points, aimed at stopping a flood of imports from China, may hit Mexico too.

Nissan-Renault (7201.T) (RENA.PA), which plans to spend $1.4 billion on new factories in Brazil, will use some of its new capacity in Latin America's largest economy to build models for the domestic market and rely less on Mexican imports, the company's chief executive Carlos Ghosn said on Oct. 1.

By Luis Rojas Mena

(With additional reporting by Pablo Garibian in Honolulu and Jeb Blount in Sao Paulo; editing by Patrick Rucker)

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