Interetsing article. Is this a good thing? What doe it mean for safety and CSA 2010?
End to Mexico truck dispute: a boost to logistics sector? Infrastructure investments designed to allow Mexico to compete
By Peter A. Buxbaum, AJOT
Earlier this month, Mexican President Felipe Calderon and U.S. President Barack Obama announced, after a meeting in Washington, the terms of a new deal that would open up the border between the two countries to commercial trucks. The transportation agreement, which would also resolve a long-standing trade dispute that involves hefty Mexican tariffs on U.S. goods shipped over the border, is expected to lower transportation costs between the two countries and enhance exports.
The agreement could also boost Mexico's ambitions to become a North American logistics center, to match its growing manufacturing sector. The government of Mexico has embarked on a multi-billion dollar program of investments in logistics infrastructure, including roads, rail, and the Lazaro Cardenas seaport, which it aims to transform into the second largest on North America's Pacific coast.
The dispute over cross-border trucking between Mexico and the United States dates back to the North American Free Trade Agreement of 1995. Under NAFTA's terms, U.S. and Mexican trucks were to be allowed to transport goods back and forth across the border at the agreement's outset, but security concerns and union pressures caused the U.S. to prohibit Mexican trucks from having full access to U.S. roads.
The ban on Mexican vehicles sparked a 15-year-long trade standoff. A pilot program was launched in 2007 to monitor the safety of Mexican trucks and gradually introduce them onto U.S. highways, but funding for the program was eventually cut. In response, Mexico imposed $2.4 billion in tariffs on U.S. goods in 2009. A year later, an additional round of tariffs ranging from 5 percent to 25 percent was introduced on a variety of American food products.
The U.S.-Mexico cross-border truck trade is growing. U.S. imports from Mexico by truck totaled $12 billion in December 2010, a 16.3 percent increase from December 2009. U.S. exports to Mexico by truck exceeded $9 billion during the same month, up 18.7 percent from December 2009. The two countries have a nearly $400 billion annual trading relationship.
The government of Mexico says that it will lift 50 percent of the tariffs as soon as the new deal to open access is signed, and will suspend the remaining 50 percent when the first Mexican carrier is granted operating authority under the program.
The program agreed to by the two governments will proceed in three stages: the first requires Mexican truck operators to file applications and receive inspections in order to become accredited; the second requires a three-month period of inspections for every vehicle crossing the border for a company to earn certification; and the final stage involves issuing permanent authorizations to Mexican trucking firms after 18 months of successful operation.
Despite the strict requirements for gaining access to U.S. roadways, labor unions, which have long backed the ban on Mexican trucking, remain opposed to the agreement, while trucking interests and manufacturers and back the agreement.
"This deal puts Americans at risk," said Jim Hoffa, president of the International Brotherhood of Teamsters. "This agreement caves in to business interests at the expense of the traveling public and American workers. Why agree to a deal that threatens the jobs of U.S. truck drivers and warehouse workers when unemployment is so high?"
As for Mexico's imposition of tariffs on U.S. goods, Hoffa asserted that "the administration should have brought a challenge against Mexico for imposing excessive tariffs on U.S. goods instead of agreeing to open the border to unsafe trucks."
Hoffa also claimed that the trade agreement benefits Mexico but not the United States. "Given the drug violence, there's no way a U.S. company would want to haul valuable goods into the Mexican interior," he said. "Trade agreements are supposed to benefit both parties, but this is a one-way street.
"We continue to have serious reservations about the Department of Transportation's ability to guarantee the safety of Mexican trucks," he added. "Mexican trucks simply don't meet the same standards as U.S. trucks. Medical and physical standards for Mexican trucking firms are lower than for U.S. companies."
The American Trucking Associations supports the announced agreement. "We hope this agreement will be a first step to increasing trade between our two countries, more than 70 percent of which crosses the border by truck," said Bill Graves, the organization's president. "When properly implemented, NAFTA's trucking provisions should evolve to allow for a more efficient, safe and secure environment for cross-border operations between the U.S. and Mexico. Ensuring a level playing field requires that both countries establish permitting and regulatory processes that are clear and transparent to ensure that carriers from both countries are treated equitably."
The National Association of Manufacturers also weighed in in favor. "Manufacturers are pleased that the United States and Mexico have come to an agreement that will resolve the cross-border trucking dispute," said Aric Newhouse, senior vice president for policy and government relations at the National Association of Manufacturers. "The United States is a global leader in ensuring enforcement of trade laws. We need to lead by example, by coming into compliance with our NAFTA obligations on Mexican trucks."
Newhouse added that the retaliatory tariffs have caused American manufacturers to lose market share to international competitors and drained billions of dollars worth of U.S. exports. Moreover, he said, "tens of thousands of manufacturing jobs have been negatively impacted" by the trade dispute. "Over the last two years, exports of U.S. manufactured goods to Mexico have been hit by retaliatory tariffs. As a result, American manufacturers have lost market share to other nations, and billions of dollars of U.S. exports to Mexico and tens of thousands of manufacturing jobs have been negatively impacted."
Announcements made by the U.S. and Mexican governments said the new initiative is designed to avoid the problems that characterized the 2007 pilot program, which lacked long-term provisions. This time the authorizations will be permanent. "Unlike the failed pilot program," said the Mexican government announcement, "under the new plan there will be no limit to the number of companies who can participate and the trucks they can register for cross-border transport."
"The new requirements for Mexican trucks are tougher than those established in NAFTA and somewhat tougher than those currently in force for American truckers," reported the Wall Street Journal. "Specifically, Mexican trucks will have to carry electronic recorders to ensure they do only cross-border, not domestic, runs and to track compliance with U.S. hours-of-service laws."
"I do appreciate that the administration is attempting to raise the bar on safety for Mexican trucks," said Hoffa of the Teamsters. "But the stricter standards aren't enough, and they could cost the U.S. taxpayer."
But ATA's Graves is hopeful that "the lifting of the retaliatory tariffs will help the two countries resume more normal trading patterns and increase the flow of commerce between the two countries."
Mexico's Secretariat of Communications and Transport (SCT) is preparing for just such an eventuality with a recent announcement of investments in the modernization and expansion of the Mexico's transportation and logistics infrastructure. Agency head Juan Francisco Molinar Horcasitas said in an announcement that he plans to turn Mexico into "the main logistical platform of North America."
"Due its geographic location, Mexico can act as a platform for all continents," noted Luis Calette, a trade and investment advisor in Tijuana. "The northern frontier is adjacent to the U.S., with routes through to Canada. The southern border allows access to the Central and Latin American markets. The east coast provides links to the European and African markets and on the West Coast the Pacific Ocean opens the door to the Asian market."
Mexico's transportation and logistics infrastructure includes 224,000 miles of roads, 16,000 miles of railroads, 59 international airports and 26 national airports, 541 industrial parks, and 16 maritime ports.
Mexico's road sector will benefit from over $3 billion in government investment for new construction, modernization, and repair of land routes and bridges. An additional $2 billion will go toward a highway projects called the South Arc corridor which will traverse the states of Mexico, Puebla, Oaxaca and Hidalgo.
The SCT is also planning investments in the Matamoros Railroad beltway, a project which is expected to stimulate the economy of the Tamaulipas border region and provide access to the international bridges from Reynosa and Matamoros.
Perhaps most dramatically, the Mexican port of Lazaro Cardenas, on the Pacific coast, has plans to compete with the U.S. ports of Los Angeles and Long Beach, according to Molinar.
The port of Lazaro Cardenas handled around 600,000 teu in 2010, an increase of 5 percent over 2009 and a 275 percent increase over its volume in 2005 when it handled 160,000 teu. The port is now in the process of expanding its capacity to 2.2 million teu per year. With 6,000 acres at its disposal, the port could eventually develop the capacity to handle over six million containers.
"It is of utmost importance that Mexican ports receive Asian containers before they arrive at American ports," said Molinar. "Lazaro Cardenas will be the second largest port in the American Pacific."