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:

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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”

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.

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