NAFTA-born Trucking Dispute Resolved

We welcome the news of resolution that will eliminate tariffs on US goods that are in high demand by shoppers throughout Mexico, while opening up a new market for US transport providers. I first covered the US-Mexico NAFTA Trucking and Tariffs issue for Hanson Marketing’s blog two years ago, and as recently as this March.

It’s a tangled issue. The US teamsters’ union’s dissenting view brings up valid points about concerns over safety, security and loss of jobs. The accord allows Mexican transport companies to serve only from Mexican origin to single US destination (no point-to-point within the US). The producers of agricultural and manufactured goods hail the decision because onerous tariffs will be lifted within the next quarter, which resulting international sales revenue will strengthen employment numbers and add to the US’ goal to double exports between 2010-2015.

The most pragmatic, level-headed info I’ve read on the topic comes from The Christian Science Monitor, whose report raises a moot-point scenario that lowers the tension in the room.

“No Mexican company will invest money to join the cross-border program if their truck drivers can be denied permits after an 18-month trial period, as the accord indicates”, says Refugio Munoz Lopez, director general of Mexico’s shipping chamber. “I see no future with this program,” Mr. Munoz says of Mexico’s decision Wednesday to remove punitive tariffs on $2.4 billion of US exports in exchange for allowing Mexican trucks to cross the border. “The only thing this accord does is give Mexico an excuse to remove tariffs.”

Munoz informs the Monitor that “the tough new security requirements for truckers wishing to cross into the United States make it prohibitive for all but 115 out of 400,000 Mexican trucks“. Meanwhile, I see no reciprocal requirements will be imposed on US transport companies, who wish to offer transnational service.

I view this as export growth prospect for one of the US’ powerful and efficient transport sector, which enjoys many competitive advantages over their Mexican counterparts; and will study the views of trade associations within the next 18 months.

Nitty Gritty Marketing entries on this issue:

https://tomhanson.wordpress.com/2009/08/26/nafta-wink-and-nudge-stalls-mexican-trucking-rights/

https://tomhanson.wordpress.com/2010/09/06/tariffs-among-nafta-nations-not-dead-yet/

https://tomhanson.wordpress.com/2011/03/10/us-mexico-trucking-deal-agreement-nearing/

Read more: http://www.bbc.co.uk/news/world-latin-america-14059115

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US-Mexico Trucking Deal Agreement Nearing

To study up on the latest development in the US-Mexico cross-border trucking negotiations, I went to the BBC. With diplomatic and speculative tones, the Beeb’s coverage tells me that progress has been made, but the hammering and ironing are still left to be done. (see previous coverage on this topic by Hanson Marketing here and here).

I gathered as much by the tentative choice of words in the opening sentence of the BBC dispatch: “The US and Mexico have reached a proposed deal to open US highways to Mexican trucks, raising hopes of an end to a 20-year dispute”.

Progress is progress. If the logistics companies based along both sides of the US-MX border can pencil out a business case for revenue growth in these lean times, we’ll see expansion from both directions in the coming months. Even though the US holds the upper hand due to its sector size and political influence, this is an equal opportunity for growth in both countries.

Challenges to be faced by both US and Mexican truckers include the rising cost of fuel, the crazy-long delays at the San Diego-Tijuana border crossing, the world’s busiest land crossing. Trucks idling while delayed on both sides burn that costly fuel and create a haze of exhaust fumes, a health hazard for residents and workers in the vicinity.

World's Busiest Land Border Crossing: Expansion Officially Underway in Tijuana-San Diego

Just in time comes news that ground is broken for the border crossing expansion project; read more in the San Diego Union-Tribune.

Tariffs Among NAFTA Nations Not Dead Yet

As previously featured on this blog, trucking rights for Mexican companies in the US has been NAFTA’s most-enduring hot potato issue, since its ratification 15 years ago. This is tied into the US’ non-compliance with NAFTA’s international trucking provisions. While US companies already operate freely in Mexico, the inverse has not yet come to pass.

A recent editorial in Wall Street Journal relates that “The newest USA products on Mexico’s list face tariffs of 5 to 25 percent, up from zero or near zero under NAFTA. The higher tariffs likely will eliminate the Mexican market for the affected U.S. companies that export to Mexico. Washington state apples and California oranges and pistachios, among other things, will now cost 20% more in Mexico than they did last week. Cheeses from California and Wisconsin now face a 25% tariff. In all, the current round will hit products exported to Mexico from 43 states, with Delaware, Mississippi and South Dakota added to the list… Mexico’s revised tariff list adds products and subtracts others from the initial list to keep the affected imports at basically the same level. But the net number of U.S.-made products rose by 10”.

The Bush Administration in 2007 (reluctantly, it appears… NAFTA provisions called for it in 2001) launched a pilot program to allow a limited number of Mexican long-haul trucks into the U.S. and test their safety. The program demonstrated that Mexican trucks are as safe as their U.S. counterparts. However, the pilot program was canceled in 2009.

Credits and read more:
– Nitty Gritty Marketing,“NAFTA Wink-Nudge Stalls Mexico’s Trucking in US”

Houston Chronicle coverage

Wall Street Journal, “The Teamster Tariffs”

Buy America? Bye, American Jobs

Here’s the ultimate irony, one with dramatic consequences to US families: a federal policy to stimulate our flagging economy that actually puts more of our jobs at risk. “Buy American” provisions found within this year’s $788 billion stimulus spending package expose US workers in several manufacturing sectors to job loss. It’s that the stipulations of our national and local governments buying only “all-US-sourced goods” places an undue burden on most manufacturers who’ve sourced raw materials and components from foreign suppliers for decades. So – no competitive bids on public works contracts means loss of revenue… and layoffs.

That, coupled with the current administration lurching toward protectionist duck-n-cover, put the US as a whole at risk of losing ground in its export growth. Whose interests in the US are being served, in the long run? Considering that some 80% of Americans work for small to medium-sized manufacturers — all of whom partake of the international business pie — it’s dicey to start tariff wars. This month has produced a costly tit-for-tat between the US and China, having to do with Tires and Chickens. If other industries besides poultry and tires run for cover, then Sino-US upsmanship could tip the balance of world trade badly against our manufacturers. (I’ve written in an earlier blog post about the administration’s perceived double-talk regarding NAFTA-initiated reciprocal trucking rights for Mexico … to date, no satisfaction on either side of the fence)

I’ll be watching how our administration plays both sides of the crowd at this weekend’s gathering of the G20 (the group of big, rich, and emerging economies) in Pittsburgh.

A voice in the wilderness has been the U.S. Chamber, whose president and CEO Tom Donohue cheers from the bleachers for the US worker, while boosting the association’s goal of doubling US exports by 2014. Speaking recently in East Lansing, Michigan, Donohue reminded guests that “it was our free enterprise system and our values of individual initiative, hard work, and innovation that built our great country—and trade has been central to our success.” Read an excellent synopsis of the talk here.

What would I do if I were running the joint? Let the free market reign … remove obstacles to our successful competition and ratify pending free trade agreements with Korea, Colombia, and others.

Stalemate, or Escalation? American companies have too much at risk right now to get drawn in to this game. Unfettered, they can sustain competitive edge and continue to expand exports… which would make the US Chamber cheer even harder.

NAFTA Wink-Nudge Stalls Mexico’s Trucking in US

The US-Mexican ‘”frontera” is a hot spot for turf rumbles and tariff tussles, on a personal and national scale. At this month’s Leaders Summit in Guadalajara. Presidents Calderon and Obama and Prime Minister Harper classically ducked the thorny subject of NAFTA’s stalled agreement for bi-national trucking reciprocity for Mexico. I suppose Mr. Harper got smart and ducked out to check his voice mail.

As part of the North American Free Trade Agreement (NAFTA), the U.S. agreed to allow Mexican trucks unrestricted access to deliver goods in the U.S., a pledge it has never fully honored because US-based road safety advocates, environmental regulators, and union officials say Mexico’s trucks and drivers have yet to meet U.S. standards. NAFTA rules would also have allowed Mexican trucks to pick up cargo to return to Mexico.

Removing restrictions that prevent Mexican trucks from delivering goods across the border has been a top issue for President Calderon since the U.S. Congress, citing safety concerns, ended a pilot program in March 2009 that, for the first time, had allowed “some” Mexican-registry trucks “some” access to US byways. Upon program’s end, Mexico retaliated by imposing $2.4 billion in tariffs on imported U.S. goods, affecting companies such as Procter & Gamble Co. and Mary Kay Inc. As a result of the inaction and competitive obstacles being faced by its members, Mexico’s National Freight Transportation Chamber (Canacar) representing some 4,500 trucking companies, seeks $6 billion in compensation from the U.S. government because of the trucking conflict, alleging its northern neighbor wasn’t complying with NAFTA.

P&G and Mary Kay, along with CANACAR member truckers, are very large concerns, with orbits of smaller traders, suppliers and vendors relying upon them for their success. All sides are inflicting collateral damage in this turf war, and offer valid and compelling arguments that need to be heard as consensus is reached.

My sense is that this trucking agreement has never been more than lo-cal sweetener thrown onto the NAFTA cake by US negotiators, an overly-optimistic political wink-n-nudge that no US administration has ever cared enough about to cultivate. Somewhere between the US teamster’s claims of poor reliability and safety of Mexican equipment, US environmentalists’ opposition to Mexican truck entry based upon clean air standards, the pro-export, pro-open borders coalition of US exporters; and Mexican trucking enterprises who tire of waiting for the green light to unfettered access to the US transport market … lies the hard truth.

World Trade Week: View from the Border

2009 World Trade Week events in the southern California/US-Mexico border region:

Los Angeles Chamber of Commerce & U.S. Commercial Service co-hosted The Americas Business Forum in Los Angeles May 27-28.

  • Secretary of Commerce Gary Locke reminded guests to tap the US & Foreign Commercial Service’s myriad resources.
  • LA Mayor Antonio Villaraigosa shared his vision of the city as a “21st-century Venice”, a hub of global trade.
  • Bob DeMartini, export manager of Hayward Pools provided a valuable look at winning international sales through hard work and sensible channel relationships. My favorite line: “‘Exclusivity’ means ‘Exclusive Right NOT to Sell'”. Wise advice from a channel veteran.
  • Commercial diplomats from Latin America posts recapped sector growth data and read socio-political gauges. Watch what will happen in Panama in the coming decade: the $5.2 billion Panama Canal expansion project will double the canal’s capacity, and the mammoth Colón Free Trade Zone re-exports $19 billion in goods and services into all Latin American and Caribbean countries and the US, and is set to expand.
  • Orange County Center for International Trade & U.S. Commercial Service co-hosted an excellent Mexico Trade Outlook in Santa Ana May 26.

  • Ann Bacher, Incoming Minister Counselor of Commercial Affairs for the US & Foreign Commercial Service posted impressive statistics: California businesses account for 15% of the US exports to Mexico, valued at about $20 billion. NAFTA is the world’s largest free trade area, home to 440 million people and a GDP of $15.4 trillion.
  • Despite immediate concerns about influenza, sub-standard infrastructure, and narco-violence, US suppliers should keep an eye on such long-term prospects for export growth as aviation-related services and systems, automotive manufacturing systems (GM and Chrysler aren’t the only car makers located in Mexico!), franchising, security and safety systems (more on the Merida Initiative here), and education (online and campus), the latter of which signals a more informed, motivated work force.
  • Carlos Rodriguez y Quesada, spokesman for the Mexican government’s foreign investment agency, PROMÉXICO, reported major infrastructure opportunities: $4 billion to build or upgrade 1400 kilometers of rail, maritime, including the $5 billion Punto Coronet project; highways, energy, telecomm, and manufacturing systems.
  • Have you heard about Cali-Baja Bi-National Mega-Region? The economic development agencies in San Diego and Imperial Counties and the state of Baja California announced this joint venture during World Trade Week, to market the region nationally and internationally.

    At an event near the Otay Mesa Border Crossing in San Diego, I spoke with the new field director of the US Customs and Border Protection Agency, Paul Morris. Paul noted that the Western Hemisphere Travel Initiative (WHTI) quietly went into effect on June 1, and all systems appear to be GO.

    Finally, good news from El Paso. The head of the US-Mexico Border District Export Council, Cecilia Levine, is joining her cross-border colleagues in celebrating the opening of El Paso’s first Department of Commerce office. The new office will collaborate with the DEC as well as promote a Gold Key program tailored to US suppliers who are seeking to preserve trade with manufacturers in Mexico.

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