Mexican trucking, tariffs, security and safety

James Giermanski looks at escalating tariffs on goods exported to Mexico, and argues that good security measures should help keep the doors of commerce open

By Dr. James Giermanski, Powers International

August 25, 2010 —

In response to the negative consequences of the Mexican tariff barrier on the many U.S. exporters, on March 1, 2010, a bipartisan group of 56 Congressional Representatives sent a letter to the President Obama's Administration urging action to address the Mexican tariff issue and its deleterious effect on many U.S. exports. In effect, this Congressional request to the Administration suggested the need for a swift solution to the tariff issue -- allow Mexican trucking to be reinstated while insuring both trucking safety and normalized trade relationships. A little history explains how we got to this point.

Also in March, Secretary of Transportation Ray LaHood said that the Department of Transportation was almost ready with a proposal for a program to replace the Cross Border Demonstration Project killed by Congress one year ago.

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The North American Free Trade Agreement (NAFTA) was signed in 1992 and went into effect in 1994. Three years after it was signed Mexican trucks were to be given access to California, Arizona, New Mexico, and Texas in December of 1995. In 1997 Mexican carriers were to be given access to the entire territory of the United States. At the onset of the first staging period in December of 1995, that of access to the U.S. border states, President Clintons administration changed its mind and did not let Mexican carriers to enter because of the concerns for safety. Here's the chronology in DOT's own words (Release dated February 27, 2007):

• ...The trucking provisions of NAFTA were put on hold in 1995. In 2001, a NAFTA dispute resolution panel ruled that the United States was violating its NAFTA obligations by adopting a blanket ban on trucks from Mexico.
• In 2001, Congress approved and President George W. bush signed legislation detailing 22 safety requirements that must be met before allowing trucks from Mexico to drive beyond the U.S. commercial zones.
• In 2002, U.S. Transportation Secretary Norman Y. Mineta certified that DOT had met each of the 22 requirements set by Congress. The last three audits by the U.S. DOT Inspector General confirm it as well.
Litigation stymied the DOT program; a 2002 U.S. Ninth Circuit Court of Appeals ruling that barred implementation of the treatys trucking provisions. The U.S. Supreme Court unanimously reversed the decision in 2004.

Further attempts to restrict access followed. At every level of challenge, political challenge, Teamsters' challenge, environmentalist challenge, and legal challenge including the dispute mechanism process and federal litigation, Mexico prevailed and was backed by a U.S. Supreme Court decision that reversed the lower courts and ruled that the President could open the border to Mexican trucks. Finally, in 2007, twelve years after they were supposed to enter, that the United States decided to live up to its obligations and allow Mexican trucks access to all of the 48 contiguous states through a special program for 100 selected Mexican-domiciled carriers. However, two years later, language in the 2009 U.S. appropriations bill essentially cut off the funding for the Mexican demonstration-safety program. In retaliation, Mexico announced, effective March 19, 2009, tariff increases ranging between 10% and 45% on 90 products whose imports from the U.S. Senator Maria Cantwell noted that the U.S. Chamber of Commerce estimated the dispute has cost the U.S. economy some $2.6 billion and 25,000 American jobs.

Given that the United States has still not addressed the grievance, Mexico announced on August 16, 2010 that it will release a revised list of U.S. goods subject to tariffs. According to Mexico's Economic Secretary Bruno Ferrari, the new list will reflect the removal of 16 U.S. products but will contain an additional of 26 new products, making a net gain of 10 more U.S. products which will be subject to a punitive tariff designed to increase the pressure on the U.S. to admit Mexican trucks as NAFTA requires.

U.S. objections to Mexican truck access are ostensibly based on two fundamental issues: safety and security. Neither has been supported by facts, and the objections seem related to politics and votes. A closer look at Mexican access demonstrates more advantages than disadvantages.

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