The issue from shippers’ and manufacturers’ points of view

By Timothy Brady

As the Cross-Border trucking issue with Mexico heats back up with the DOT recently releasing its Pilot Program on NAFTA Long-Haul Trucking Provisions Proposal for comment, the subject remains very polarized. But for truckers to establish their positions, it’s necessary to look at the “Other Side of the Fence.” In this context, it’s the position of U.S. manufacturers and shippers wanting to have products and freight hauled to and from Mexico that will be explored. 

The U.S. Chamber of Commerce estimates the imposition of tariffs by Mexico in retaliation for canceling the 2009 Cross-Border Pilot Program led to the loss of more than 25,000 American jobs.  

The tariffs levied on 89 U.S. import products are valued at about $2.4 billion per year. While some argue the tariffs were illegal and others that Mexico had every right to impose the retaliatory tariffs, the fact stands that 25,000 working Americans lost their jobs from this action during a time when replacement jobs were nil to none, due to the Great Recession. 

The numbers: January, 2011, Surface Trade with Canada and Mexico Rose 19.5 Percent. 

The breakdown: Value of monthly U.S. surface transportation trade with Canada and Mexico for January 2010 was $56.6 billion. In January, 2011, it exceeded $67.7 Billion.  

U.S. Merchandise Trade with Mexico alone by truck transport in January 2010: imports to the U.S. from Mexico were $10.3 billion. Exports from the U.S. to Mexico were close to $7.9 billion. In January of 2011, with the 89 products having had import tariffs levied on them by Mexico, there was still an increase to $12.4 billion in imports from Mexico and $9.8 billion in exports from the U.S. to Mexico in truck-moved merchandise between the U.S. and Mexico. 

According to a March 3, 2010, press release from the National Association of Manufacturers (NAM), the newest Cross-Border Agreement will help eliminate costly tariffs and create jobs. NAM Senior Vice President for Policy and Government Relations Aric Newhouse said, "Manufacturers are pleased that the United States and Mexico have come to an agreement that will resolve the cross-border trucking dispute. The United States is a global leader in ensuring enforcement of trade laws, and we need to lead by example - by coming into compliance with our NAFTA obligations on Mexican trucks. The NAM has led the effort in urging the Administration to reach an agreement to end these costly tariffs.” 

In a conversation with Director Doug Goudie, also of NAM, concerning the Mexican Cross–Border trucking issue, he indicated a lot of emotion has been driving the issue instead of the facts. He wants to stick to the facts in his comments as reported below. 

Brady: “When the border opens to Mexican carriers, will your members be looking to move their manufacturing operations to Mexico?” 

Goudie: “No. Since the opening of the southern border through NAFTA the United States and Mexico have engaged in a stronger international trade relationship, probably stronger than any two countries on earth other than Canada and the US. Trucking between the two countries isn’t what most people think. Due to U.S. cabotoge laws, Mexican trucks can deliver a load coming from Mexico to the U.S. and turn around and deadhead home, or if it’s an inter-company transfer load returning to Mexico, they can take that inter-company load back to Mexico. They can’t go down to a large distribution center and grab any load headed to Mexico. 

“Right now the inability to do cross-border trucking between the U.S. and Mexico is an added expense to creating an efficient supply chain, because the load is stopped on the border and drayage [engaged], delaying the manufacturing process. Since the opening of the Northern border, we have companies shipping from Canada to the U.S. under the NAFTA agreement which become an art and science in just-in-time-delivery; where the product or part hits the dock and in less than five minutes, it’s installed as part of a car. It’s not that integrated with Mexico making for a less-efficient supply chain.” 

Brady: “So if we open the border between Mexico and the U.S., this will not cost jobs, but create a more efficient supply chain for U.S. manufacturers, actually preserving jobs and possibly creating even more. Is this a fair assessment from your statement?” 

Goudie: “Yes, definitely; or at least keep jobs here. Even on the produce side of things, remember it’s U.S. truckers who will be hauling potatoes and apples to Mexico, not the Mexican truckers coming here to haul them back. No one is going to shift production or jobs to Mexico just because we can finally live up to our obligations in NAFTA and allow cross-border trucking.” 

Brady: “What has the National Association of Manufacturers decided concerning the retaliatory tariffs imposed by Mexico– are they legal?” 

Goudie: “Mexico was entirely within its rights. It took a NAFTA dispute case a number of years ago; I believe 1998, and Mexico won the case and never imposed the tariffs. They didn’t impose the tariffs as long as the U.S. showed good faith in resolving the trucking issue. During George W. Bush’s administration, a pilot program was begun to determine the feasibility of Mexican cross-border trucking. An interim report was generated, but in 2009, Congress stopped the funding on the pilot project. Mexico said they won this case years ago and wanted to be good neighbors. But in 2009, when Congress stopped the funding and President Obama signed the bill, this, in the view of the Mexicans, showed the U.S. wasn’t going to be reasonable and Mexico put the long-postponed tariffs into effect. The actual case back in the late nineties never set an actual amount. I’ve read and studied this case; they could have gone a lot higher then they did. The $2.4 billion was their way of calculating what their loss was from not having the cross-border program all the way back to 1994. " 

I spoke with Goudie at length, covering aspects of the Cross-Border Issue with Mexico and its effects on U.S. manufacturing, in jobs for U.S. workers, productivity and capacity, and how opening the border will impact all three. I’ll continue with this series over the next several weeks to provide you with a view from the other side of the fence.

Timothy Brady   ©2011   To contact Brady go to www.timothybrady.com

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