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Issue #591

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Air Cargo Quarterly

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2014 Media Kit

US proposes to open roads to Mexican trucks

By: | at 07:00 PM | Intermodal  

The Obama administration proposed a new inspection and monitoring regime to permit long-haul trucks from Mexico on U.S. highways after years of delays over safety concerns and political wrangling.

The Transportation Department’s compromise seeks to revive efforts to fulfill a key provision of the North American Free Trade Agreement (NAFTA), which is highly unpopular with labor but supported by many businesses as a cost advantage.

U.S. Transportation Secretary Ray LaHood called the plan by his agency a starting point to renew negotiations with Mexico, which has slapped tariffs on U.S. products over the delay.

The Transportation Department said the plan, which would eventually need congressional and Mexican government approval, would prioritize safety and that a formal proposal is due to be announced in coming months.

The countries would negotiate the number of carriers allowed to participate in a first phase. Applicants would be vetted by U.S. law enforcement agencies. Trucking safety programs would be reviewed and each vehicle would be inspected and certified by highway safety and environmental officials.

Prospects for an agreement are uncertain. The plan has failed to move ahead over the past decade regardless of which party controlled the White House or Congress.

But the Obama administration felt more comfortable issuing a proposal with the program’s fiercest critics, labor friendly Democrats in the House of Representatives, voted out of office in November or sidelined to the minority. Republicans took over the chamber on Wednesday.

Mexico said it would review the plan, calling it a positive first step, and said tariffs would be lifted after a trucking agreement is completed.

“In general this is very good news,” said Humberto Trevino, Mexico’s deputy transport minister.

Currently, big rigs from Mexico must offload their goods near the border so U.S. trucks can haul them the rest of the way.

Business Sees Benefits
Allowing cross-border trucking could increase competition, add capacity in the domestic market, and offer other benefits to business.

“We could see a more open Mexican border actually drive more ... freight activity in general, which would benefit the entire trucking industry,” said Todd Fowler of KeyBanc Capital Markets.

Among the potential beneficiaries are farmers and livestock producers affected by the billions of dollars in tariffs on agricultural and other goods shipped to Mexico from the United States.

Mexico is a leading importer of U.S. pork, but currently it has a 5 percent duty on that product. It is widely believed the duty was applied in response to the trucking dispute.

“The pork industry has been eagerly awaiting this moment, which should further facilitate pork trade to Mexico,” said Rich Nelson, analyst with agriculture advisory firm Allendale Inc.

Labor and consumer groups and their allies in Congress for years blocked the trucking initiative from progressing beyond small pilot programs. They were concerned about safety and potential job losses.

James Hoffa, president of the Teamsters union, called the new move disappointing and another opportunity to open the border “to unsafe trucks.” He stressed the the move was ill-timed considering the tough economy.

“Why would DOT propose to threaten U.S. truck drivers’ and warehouse workers’ jobs when unemployment is so high,” Hoffa said.

But Tom Donohue, president of the U.S. Chamber of Commerce, applauded the move. “If we’re going to double exports (globally) within five years, we must hold on to export markets, such as Mexico,” Donohue said in a statement.

U.S. companies represented by the National Association of Manufacturers said a swift deal on trucking was necessary to counter gains by competitors in Canada, China and South American nations that have increased marketshare in Mexico. (Reuters)