Stage one: Around April 1, the U.S. will reduce the duty on Mexican cement to $3 per metric ton (Mt) from the current $26 and allow three million Mt of Mexican cement into the U.S. for each of the next three years. Mexico, for its part, must remove import and export barriers.

Stage two, to occur if both sides abide by the agreement for three years, would eliminate the duty and quotas altogether.

U.S. cement consumption exceeded 125 million Mt in 2005, a rise of 2.7 percent. U.S. cement production, however, was flat, necessitating imports of cement and clinker (which is ground into cement) by 18 percent, to a combined total of 31.8 million Mt. Canada was the leading foreign supplier, followed by China, Greece, Thailand, South Korea and Venezuela, with Mexico seventh.

Mexico will likely surpass in short order many of these supplying countries because of its lower delivery costs that reach the U.S. by rail or ship in a few days, compared to several weeks for ships crossing the Pacific or Atlantic. The lower duties should shorten supply lines to many markets and reduce the number or severity of cement shortages, however, the reduction in the duty may not lead to any slowdown in price increases. In 2005, the producer price index (PPI) for cement rose 11.7 percent. The PPI for concrete products went up 9.8 percent, led by an 11.6 percent rise in ready-mixed prices. If construction demand for concrete remains strong, it is unlikely an additional million tons of Mexican cement will cause the price to drop. However, once the duty and quotas are eliminated, Mexico could ship enough cement into the U.S. to force other countries to reduce their prices.