Access to U.S Highways

By: Magdolna Kornis

     A 6-year-old dispute between the United States and Mexico has apparently ended. The United States agreed that as soon as possible it would grant access to U.S. highways for Mexican trucks, provided that U.S. safety standards are met. This decision was accompanied by measures for significant improvements in the U.S. inspection process.

     On Feb. 6, 2001 , the United States lost its first major case under a North American Free Trade Agreement arbitration panel, which ruled that the United States must open its borders to Mexican trucks. In the words of the panel: “the U.S. blanket refusal to review and consider for approval any Mexican-owned carrier applications for authority to provide cross-border trucking services was and remains a breach of the U.S. obligations.” The panel recognized the right of the U.S. Government to require Mexican trucks to comply with U.S. safety standards, but recommended that it review applications from Mexican truckers for access on a case-by-case basis.

     President Bush signed into law a transportation spending bill on Dec. 18, 2001 , which allows Mexican trucks to operate in the United States , and spells out the requirements Mexican trucks need to meet before they are granted access.

Background

     The dispute over access of Mexican trucks to U.S. highways began at the end of 1995, when the United States delayed permission for Mexican-domiciled cargo and passenger services to operate in California , Texas , Arizona , and New Mexico , as agreed earlier in the context of NAFTA. While under NAFTA, Mexican trucks would have access to the entire United States on the first day of 2000, the accord also provided for an interim phase of cross-border trucking that would open up these four states to Mexican trucks in December 1995.  NAFTA further specified that, in order to operate in the United States , Mexican trucks and truck drivers must meet U.S. safety standards. To adapt Mexico to meet this requirement, transportation officials of both countries had engaged in extensive preparations to harmonize motor vehicle safety processes between the two countries.

     However, shortly before the December 1995 due date of the interim (transitional) phase, President Clinton postponed the opening of the border states to Mexican trucks, citing unmet safety conditions. This action followed intense lobbying by the International Brotherhood of Teamsters (Teamsters) against opening the border to Mexican trucks. The Teamsters and others claimed that Mexican trucks have been involved in countless accidents, that they heavily pollute the air, and that the flow of illicit drugs into the United States increases when Mexican trucks are allowed across the border. The most frequently cited causes of accidents were that Mexican trucks are old, unsafe, and operate without weight limits, and that drivers lack adequate training, work long shifts, and engage in inappropriate behavior on the road.

     A 1997 study of the General Accounting Office titled “Safety Concerns About Mexican Trucks Remain Even as Inspection Activity Increases,” underscored the Teamster’s position on safety. The “status quo,” i.e. restriction of Mexican trucks to a narrow commercial zone, 20 miles wide or less north of the border, remained unchanged. As before, goods had to be transferred from Mexican trucks to U.S. trucks for being hauled past the border zone into the United States .

     Bilateral consultations on adapting Mexican trucks and drivers to U.S. safety requirements continued after 1995, but no agreement was reached. Mexican officials insisted that their country’s safety inspection system was already consistent with that of the United States . In 1998, Mexico formally protested under NAFTA dispute-settlement procedures the U.S. postponement of the interim trucking provisions’ implementation.

     Interest in the issue intensified in 1999, as the Jan. 1, 2000 deadline for Mexican trucking access to the entire United States came into view. U.S. authorities found that, restrictions notwithstanding, a number of Mexican trucks that were not in compliance with U.S. standards had already found ways to haul cargo beyond the commercial zone into U.S. territory.

     Hence, in December 1999, President Clinton signed the “Motor Carrier Safety Improvement Act of 1999,” part of which provided for “Foreign Motor Vehicle Penalties and Disqualifications.”

     In addition, since inadequate U.S. border inspection was blamed in part for unsafe Mexican trucks circulating on U.S. roads, the Department of Transportation (DOT) embarked on a program of improving the inspection process. Most important, the opening of the border to Mexican trucks did not take place on Jan. 1, 2000 , as mandated by NAFTA. Mexican trucks continued to be restricted to the border zone.

The dispute during 2001

     In 2001, cross-border trucking continued to be a major unresolved issue in U.S.-Mexican trade relations. Since NAFTA became effective in January 1994, trade between the United States and Mexico has grown significantly, increasing the importance of cross-border trucking services. Over four-fifths of bilateral trade is transported over highways. The NAFTA ruling in February that the United States is in violation of its treaty obligations, coupled with the advent of new administrations in both countries, gave added urgency to this issue.

     Once again, the safety problem had to be addressed. Testifying before the House Subcommittee on Transportation, the Inspector General of the DOT said on March 2, 2001 , that since 39 percent of Mexican trucks inspected at the border failed to meet U.S. safety standards, a greater border inspection presence was needed to accommodate a large flow of trucks. Ready to comply with the verdict of the NAFTA arbitration panel, DOT proposed in May 2001 that, beginning Jan. 1, 2002 it would allow Mexican trucking companies to apply for permission to operate in the United States . When in the United States , Mexican trucks would have to adhere to the same rules as do U.S. trucks. DOT also proposed rules for Mexican service providers on how to submit trucks for inspection, and on other aspects of safety compliance.

     However, the DOT proposal and the pertaining budget request on expanded inspection met with opposition in the congressional debate of the 2002 transportation spending bill. A House bill of June 26, 2001 (HR 2299) would prohibit any funding for processing Mexican truckers’ applications for access, in effect postponing again the opening of the border on Jan. 1, 2002 .  The Senate version of Aug. 1, 2001 (S 1178) proposed to subject Mexican trucks to an array of safety regulations, and required that the trucks should be certified in Mexico even before they apply to U.S. authorities for permission to operate in the United States . The Bush Administration and other advocates of opening the border found these requirements restrictive and discriminatory against Mexico .

Arguments for and against

     The proponents for free access into the United States for Mexican trucks include President Bush, President Fox, U.S. trucking associations, and the Mexican Association of Private Transport. Voices opposed to implementing the NAFTA trucking provisions, which would keep Mexican trucks off U.S. roads, include the U.S. Teamsters Union and the Mexican National Cargo Chamber (CANACAR), the latter representing some four-fifths of Mexican commercial trucks.

U.S. arguments

     U.S. advocates for free access argued that the U.S. government should avoid reneging on NAFTA obligations. President Bush, the most notable U.S. advocate of opening the border, stated on July 25, 2001 , “ Mexico is our close friend and ally and we must treat it with respect and uphold NAFTA and the spirit of NAFTA.” The president has vowed to veto any legislation that prevents the United States from meeting its NAFTA obligations.

     The American Trucking Associations (ATA) were also firmly opposed to further delay of implementation, emphasizing the efficiency aspect of cross-border trucking. In his testimony in July 2001 at a hearing in the U.S. Senate, the Chairman of ATA described the present system as cumbersome and costly, claiming that it “requires no less than three drivers and three tractors to perform a single international freight movement.” He was referring to the frequent current practice of using separate long-haul truckers on either side of the border, plus a so-called drayage truck in between. The drayage truck is a short-haul truck, whose only function is to ferry the load across the border through the maze of customs officials and brokers. ATA’s chairman argued that with the implementation of NAFTA a less costly and more efficient one could replace this system.

     U.S. trucking companies favored NAFTA in part because they were interested in opportunities provided by the Mexican market, which were expected to be jeopardized by U.S. restrictions of Mexican trucks in the United States . Yet, reportedly, U.S. fleet-owners’ interest in providing actual trucking services in Mexico was limited, due to the perception that their employees would be handicapped by the poor condition of Mexican roads, fear of crime, and language differences. For U.S. interests, more important than being able to provide trucking services might be the investment opportunities in Mexican trucking that would open up following the implementation of NAFTA.

     On the other side of the U.S. dispute, Jim Hoffa, the Teamsters’ president, continued to argue against the implementation of NAFTA. He testified in the Senate that U.S. inspection facilities are “still inadequate to evaluate and monitor the safety of Mexican trucks as they cross the border,” and that “there is real evidence that trucks from Mexico cannot meet all the U.S. safety standards.” In addition, Hoffa disputed that the United States is obligated under the terms of NAFTA to act on the panel’s recommendation to begin accepting applications on a case-by-case basis; he advocated instead, to keep the border closed for as long as needed and let Mexico take reciprocal action.

     Meanwhile, not everyone in the United States agreed with the Teamsters’ concern about safety. A New York Times editorial wrote in August “The Teamsters Union and some of its Congressional allies have grossly overblown the threat on American highway safety from an open border. Mexico ’s long-haul trucking fleet is a lot more modern and its drivers are a lot more professional than the union’s scare tactics would suggest.” Advocates of free access generally claimed that safety concerns were based solely on the poor records of the drayage trucks. The owners of these trucks had no incentive to maintain them, since they provided short-haul service. With free access – these sources allege – the well-maintained long haul trucks would drive out the drayage trucks, thus the safety problem would diminish.

     Analysts also considered other important possible consequences of free access; they speculated for example on how large the volume of Mexican trucks on U.S. roads would become, and how U.S. truck drivers’ wages would be affected by the presence of Mexican drivers on U.S. roads. Antagonists of free access were concerned that opening the border would attract an invasion of Mexican trucks to the United States . Others doubted this outcome, arguing that Mexican truckers would need years to build a network of U.S. customers to keep their trucks loaded in both directions, i.e. minimize dead-heading (empty trucks) on the way back. As to the effect of free access on wage levels, from the beginning of the dispute, advocates of free access have charged that the Teamsters’ position on safety actually masked another concern, i.e. that competition by the low wages of Mexican truck drivers would depress U.S. wages in the trucking industry.

Mexican arguments

     As in the United States , Mexican views differ sharply on the issue of free trucking access to the United States . Not all Mexicans agree that free cross-border trucking would be in their interest. The administration of Mexican President Vicente Fox, convinced that competition with the United States would be the best avenue to make Mexican trucking more efficient, is determined to see NAFTA’s trucking provisions implemented. On Aug. 2, 2001 , President Fox announced that, in case the restrictive U.S. bills of August 2001 become law, he might consider barring U.S. trucks from his country in retaliation against the United States . Mexican officials have been deliberating other forms of retaliation as well, such as curtailing agricultural imports from the United States or imports of U.S.-made fructose from the United States .

     The Fox Administration’s position that implementation of NAFTA would improve the efficiency of Mexican trucking services is shared by a minority of Mexican truckers, those whose operations are already state-of-the-art. The associations representing advanced truckers, including the Mexican Association of Private Transport, also favor unrestricted cross-border trucking. These advanced fleets, generally owned or contracted out by big companies, including Coca-Cola and Cemex ( Mexico ’s large cement manufacturer), are believed to be fully competitive with U.S. truckers.

     However, some four fifths of the commercial truckers in Mexico , represented by the Confederation of Mexican Transporters (CANACAR), are not competitive with their U.S. counterparts either in the U.S. or the Mexican market. Even though labor costs are lower in Mexico , the cost of parts, fuel, financing, and insurance is significantly higher. Concerned about the challenges of free competition with U.S. trucks, these Mexican fleet-owners prefer to maintain the status quo of being restricted to the border zone. CANACAR, presumably relieved by the reluctance of the U.S. Congress to admit trucks from Mexico into the United States , requested the Mexican Government not to insist on implementing NAFTA, but to aim instead at the suspension of the NAFTA provision on trucking.

     After the long-sought access of trucks to the United States had been finally granted at the end of 2001, a Mexican Congressman and president of the Confederation of Mexican Transporters said that “... any U.S. company can now destabilize the Mexican trucking industry, because it is not a competition between equals.”

Agreement

     General concern about foreign access to the United States increased sharply in the wake of terrorist attacks of Sept. 11, 2001 , threatening further delays in the resolution of the trucking issue. Yet, before the end of the year, the House and the Senate reached a bipartisan compromise for the purposes of the 2002 transportation appropriations bill, allowing Mexican trucks to enter the United States, provided they met specified old and newly added safety requirements. This is the bill President Bush signed into law on Dec. 18.

     U.S. and Mexican transportation and trade officials began to negotiate operating regulations to be imposed on access by U.S. and Mexican trucks to one another’s country. A report issued by the General Accounting Office at the end 2001 praised Mexican efforts to improve truck safety and air emission regimes. The same report urged DOT to reach agreements with the border states and the other federal agencies involved, regarding the development of extended truck inspections. DOT reportedly expects to open the border to Mexican trucks sometime in the second quarter of 2002.

Magdolina Kornis is an economic analyst with the United States International Trade Commission.