BUSINESS SECTION

Mexico, U.S. in Talks on Cement Tax

By Marla Dickerson, Times Staff Writer

MEXICO CITY — Sep 14, 2005 - Hurricane Katrina may help end a 15-year trade dispute between the U.S. and Mexico over cement, as the massive rebuilding effort in the Gulf Coast could put pressure on U.S. officials to allow more imports into a market beset with shortages and high prices.

U.S. and Mexican officials met Tuesday in Washington to discuss lowering or dismantling punitive tariffs on Mexican cement, which currently run as high as 62%. The U.S. Commerce Department imposed the penalties in 1990 after a group of 31 U.S.-based cement makers brought a successful anti-dumping case against Mexican producers that were selling their products at prices far below what they were charging in Mexico.

Trade negotiators from both nations were unavailable to comment on Tuesday's proceedings, which a Commerce Department spokeswoman said were planned before Hurricane Katrina. The talks have dragged on for years, and more are scheduled for later this month. But construction industry experts say the hurricane's aftermath could bring urgency to the negotiations.

Cement was pricey and in short supply throughout much of the United States before the Category 4 hurricane blasted the Gulf Coast. With U.S. cement plants already running at full tilt, analysts say more imports will be needed to satisfy the anticipated jump in demand.

Stung by criticism of its slow response to the worst natural disaster in U.S. history, the Bush administration may be motivated to remove or lower the tariffs to help prevent any bottlenecks in the rebuilding phase, experts say.

"I suspect that the administration is looking at all avenues to make sure that enough building materials can flow into the area," said Ed Sullivan, chief economist of the Skokie, Ill.-based Portland Cement Assn. "You are not going to start any significant construction until the second quarter of next year. But you've got to get your ducks in order…. The market is incredibly tight."

Largely because of a sizzling housing market, the U.S. last year consumed a record 122 million metric tons of cement, about 25% of which was imported from nations as far away as China and South Korea. But fast-growing Asian economies also are competing with U.S. builders for the same material. Not only are nations such as China consuming huge amounts of cement, they are tying up cargo ships needed to transport the commodity to U.S. ports. The result is higher cement prices and costly job delays for many U.S. contractors.

A recent survey by the Associated General Contractors of America showed that 32 states, including California, had been hit by shortages. In August, cement prices were up 12.7% compared with the same month a year ago, according to the Department of Labor's producer price index. That's more than double the increase for the overall basket of so-called "intermediate goods," which includes products such as lumber and paint.

Those increases have added as much as $1,000 to the price of new homes in some regions, according to Michael Carliner, an economist for the National Assn. of Home Builders in Washington.

With their construction industries threatened, some elected officials are pressuring the Bush administration to ease trade restrictions on Mexican imports. Last month, Republican Govs. Jon Huntsman Jr. of Utah, Michael Rounds of South Dakota and Kenny Guinn of Nevada, along with Bill Richardson, the Democratic governor of New Mexico, sent a letter to Commerce Secretary Carlos M. Gutierrez, urging him to resolve the long-running spat.

"We are importing cement from as far as Asia when there is significant supply right across our southern border," the letter said. The situation "threatens to force layoffs, slow economic growth and pose lasting damage to the construction industry in the Western states."

Hurricane Katrina has further complicated logistics. The Port of New Orleans was a major hub for incoming shipments of foreign cement that could be sent by barge up the Mississippi River.

The crippling of that port has importers scrambling for alternatives, which some believe could lead to further shortages and higher prices.

Mexican cement makers say they are ready to help out with additional stocks that could be shipped by rail, but only if the U.S. drops the costly tariffs that make their product uncompetitive in the United States.

"Mexico could deliver meaningful additional supplies of cement into the United States if the dumping order were revoked," said Rick Shapiro, a spokesman for the U.S. subsidiary of Mexico's largest cement maker, Cemex.

But some domestic firms say Mexican firms are exploiting a U.S. disaster for their own gain.

Mexico's domestic cement market is highly concentrated, with just a handful of companies controlling the trade and virtually no import competition. That gives it a huge cost advantage over U.S. producers, according to Joe Dorn, a Washington attorney who represents the U.S. firms whose complaints sparked the punitive tariffs.

"The root cause of the dumping has not changed," Dorn said. "The root cause is that Mexico has a closed cement market."

Sullivan of the Portland Cement Assn. estimates that Mexico has as much as 8 million tons of excess capacity to supply the United States. But he said rail lines linking the two countries were already congested.

"The problem is how do you get it here?" he said. "A lot of people are looking at that 8 million tons and saying, 'The shortage is cured.' And I'm telling you: 'No way.' "

Los Angeles Times article at: http://www.latimes.com/business/la-fi-mexcement14sep14,0,6941121.story?track=tottext
 

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