On Monday, President Obama concluded meetings with President Felipe Calderon and Prime Minister Stephen Harper at the Cabanas Cultural Institute in Guadalajara, Mexico during the North American Leaders Summit, leaving unresolved the need to undo the harm created by a policy he helped implement while in the United States Senate – a ban on cross-border trucking.
Under the often vilified 1994 North America Free Trade Agreement, the United States is required to allow Mexican trucks the ability to travel within our borders as long as the vehicles and drivers met identical safety standards applied to U.S.-based truckers. To address this requirement, in September 2007 the U.S. Department of Transportation implemented a one-year demonstration program authorizing a limited number of Mexican trucking companies to perform long-haul operations throughout the United States to test the feasibility and safety of a permanent program. Earlier this year, the program was effectively terminated by the current administration.
Despite a flawless safety record, an international treaty requirement and the positive economic effects, many fought the pilot program as a further assault on American jobs by foreign competitors and another incremental march toward the greatly feared (and utterly imagined) “North American Union.” Currently, goods driven from the interior of Mexico arrive at the border where they are transferred to another truck with driver that crosses the border and clears customs. The cargo is then transferred to a third – U.S. based – shipper and delivered to its final destination. My niece could spot the glaring inefficiencies in this current system. She’s seven.
Under the proposed cross-border trucking program, one driver would be able to take cargo from the interior of Mexico, all the way to any point in the United States without switching rigs or drivers. The increased efficiency for the consumer is obvious to all.
Well, maybe not to everyone. Under increasing pressure from domestic truckers and unions, last year Congress passed legislation prohibiting the creation or operation of any cross-border trucking program. Opponents latched onto concerns with the safety of Mexican trucks as a pretext for killing the program (despite rigorous standards implemented by the Departments of Transportation on both the federal and state levels). At that time, Senator Obama voted with the majority in the Senate to kill the program.
Inevitably- and as is their right under the NAFTA treaty – in March 2009 Mexico instituted devastating tariffs on a range of (mostly agricultural) U.S. goods in the amount of $2.4 billion. Affected industries have howled about these tariffs and it looks like the Obama Administration and the Senate are starting to realize that protectionism – which picks economic winners and losers – is unsound.
Domestic trucking operators fear (somewhat justifiably) the negative impact this trucking program will have on their business. They are concerned that foreign shippers with lower fuel and labor costs will take away jobs that domestic shippers previously handled. They also worry that in this rough economic time, flooding the market with more trucking competitors will harm all companies.
However, these fears don’t take into account the increased business gained with reverse shipments – delivering goods far into Mexico – something that was not allowed previously. Additionally, domestic shippers discount the possibility of increased business as more trade barriers fall and the border becomes a greater economic engine. The U.S. Chamber of Commerce has estimated that these protectionist efforts cost American consumers in excess of $400 million a year. Oh, by the way, U.S. and Canadian trucks have crossed the northern border interchangeably for many years and there is still a robust domestic trucking industry in Michigan, New York, Washington and other northern states.
The Mexican tariffs – ironically characterized by free trade opponents as blackmail – have had an impact. Companies across the country are feeling the heat and demanding a solution, and people are taking note. Late last week, former U.S. Trade Representative Carla Hills, former Commerce Secretaries Norman Mineta and Carlos Gutierrez, and former U.S. Ambassadors to Mexico James Jones, Tony Garza, and Jeffrey Davidow drafted a letter to President Obama imploring him to settle the trade dispute. The Obama Administration has (refreshingly) noted that the current limits are less about safety and more about protectionism, thus undercutting the primary argument for the restrictions. The Senate Appropriations Committee has taken up legislation to address the tariffs and allow more trucking, but likely no legal resolution will be in place until October.
In the current economy, America needs as much business as possible – particularly business with one of our most robust trading partners. Trade barriers, whether in the form of tariffs, regulations, or domestic preferences, hurt businesses in the long run. Efforts to limit trade, particularly those based on pre-textual erroneous safety arguments, are bound to failure.
From reports coming out of the North American Leaders Summit, it does not appear that there will be a quick solution to the issue. Let’s hope that Presidents Obama and Calderon stay on the ball and reach a solution sooner rather than later to help businesses further spur cross-border trade and travel, especially those already damaged by the tariffs and trucking ban.