Mexican President Calderon’s trip to Washington in early March seems to have produced significant progress regarding the ongoing dispute between Mexico and the U.S. over cross-border trucking. The refusal of the U.S. to enact the southern cross-border trucking provisions of NAFTA due to safety concerns with Mexican carriers has been a sore point with Mexico since the trilateral free-trade agreement took effect in 1994.
The current U.S. position on cross-border trucking with Mexico did not begin with NAFTA however. In fact, the origins of the present-day standoff date back more than twenty-five years. President Reagan voiced similar concerns when he signed the U.S. Bus Regulatory Reform Act (BRRA) in 1982. Section 6 of the BRRA imposed a moratorium on the issuance of licenses to Canadian and Mexican trucking firms seeking access to U.S. markets, not because of safety concerns, but rather the alleged failure of Canada and Mexico to extend the same degree of reciprocal market access to U.S. carriers. In other words, the U.S. claimed its carriers faced restrictions entering Canadian and Mexican markets that carriers from those countries did not encounter entering the U.S.
The 1982 legislation also authorized the President to lift the moratorium however, which President Reagan immediately did in the case of Canada, stating that U.S. carriers were not, in fact, precluded from entering the Canadian market, and declaring open and fair competition between U.S. and Canadian trucking companies as being in the U.S. national interest. Not so in the case of Mexico however; President Reagan refused to lift the moratorium on Mexican trucking firms, pointing to the limited market-access afforded U.S. carriers trying to enter Mexico.
President G.H. Bush renewed the moratorium on cross-border trucking with Mexico, notwithstanding his signing of the NAFTA Agreement in 1992. NAFTA addressed the U.S./Mexico cross-border trucking issue in two phases: first, each country was to allow carrier-access to each other’s border states within one year, by 1995, and, second, both countries were to allow complete cross-border trucking by the year 2000.
President Clinton, however, was not inclined to overturn the moratorium during his term in office either, as evidenced by the U.S. Department of Transportation (DOT) announcement in December 1995 that scheduled access to U.S. border states by Mexican carriers would be postponed, this time due to safety concerns. Mexico subsequently filed a NAFTA challenge, claiming the U.S. was in breach of its obligations under NAFTA and, in 2001, a NAFTA Arbitration Panel agreed, ruling in Mexico’s favour. Nonetheless, the U.S. maintained the moratorium, with continued support from the Teamsters Union and special interest groups who alleged that safety concerns trumped U.S. NAFTA obligations.
In an attempt to comply with the NAFTA Arbitration Panels’ ruling, President G.W. Bush, a supporter of cross-border trucking, launched a pilot project in 2007 that would allow 100 Mexican carriers to deliver shipments throughout the U.S. Congress disagreed however and moved to prohibit any government spending on the project. Citing renewed safety concerns, President Obama officially ended the proposition on March 11, 2009 when he signed the Omnibus Appropriations Act containing a provision that prevented any funding of the pilot program by the U.S. DOT.
One week later, on March 18, 2009, clearly frustrated after fifteen years without a resolution to the cross-border trucking dispute, Mexico retaliated by imposing approximately $2.4 billion in import tariffs on ninety industrial and agricultural American products, affecting exports from more than thirty-five U.S. states. With that single move, Mexico accomplished more than it had in the previous fifteen years of negotiation. The impact on U.S. exporters was guaranteed to get the Administration’s attention, succeeding in focusing attention on the need to negotiate a resolution to the long-standing dispute.
Of particular interest to NAFTA-watchers was the process Mexico utilized in reaching its objective this time around. Stepping outside of the NAFTA dispute-resolution process altogether, Mexico employed a strategy similar to that used by the U.S. in its dispute with Canada when the U.S. imposed tariffs on imports of Canadian softwood lumber. In effect, Mexico astutely leveraged its position on cross-border trucking against the current economic climate in the U.S. and its focus on domestic jobs.
On March 3, 2011, President Obama and President Calderon announced they had agreed, in principle, to finally implement the cross-border trucking provisions of NAFTA. Mexico agreed to drop 50% of its tariffs on U.S. imports once Mexican truckers begin U.S. safety and driver training, and the remaining tariffs will terminate when the first Mexican trucking company receives its U.S. operating authority.
The U.S. DOT has issued a “concept document” as the first step in illustrating the renewed commitment to achieve open-border access, although at this stage it is little more than a statement of expression. Consisting of only two pages, it outlines the general direction DOT will take in certifying Mexican carriers. The main difference this time around however is the depth of the Administration’s commitment – the authorizations granted to Mexican carriers will be permanent. Nonetheless, in a move presumably designed to appease critics of the program for safety reasons, the requirements that Mexican carriers will have to meet are fairly stringent, reportedly exceeding those already contained in the original NAFTA Agreement.
Although this latest initiative seems promising to those in favour of cross-border trucking, its future is by no means guaranteed. There is still much opposition to the program from the Teamsters Union, claiming the move will result in lost jobs for the American trucking industry, and final legislation still has to be drafted which will then have to to be passed by the U.S. Congress.
The road ahead will undoubtedly contain more twists and turns, and the odd speed bump, but at least its running in the right direction.
Posted by: Laurie Turnbull, CITT, P.MM – Supply Chain Consultant, Cole International