President George “W” Bush created a cross border trucking agreement which complied with the North American Free Trade Agreement (NAFTA) and allowed Mexican trucks to operate north of the border. Upon President Obama’s administration taking control the deal was nixed, leaving a foul taste in the mouths of Mexican officials and operators – Mexico cited the abandonment of the cross border deal by the US as a violation of the NAFTA treaty and commenced levying tariffs on 99 imports from the US in retaliation. The pressure has been on the Obama administration to come up with a workable compromise to end the trade dispute, and allow Mexican trucks to deliver to ultimate US destinations instead of operating in the border area with load switching at locations, such as Houston, needed to take materials and goods onto their final destination.
This is going to be a red hot issue with repercussions beyond the trucking industry.
Within the trucking industry, there is a great deal of opposition. The number one issue is trucking jobs and with a Mexican trucker costing around a third (or less) as much as US counterpart, the threat to jobs is obvious. The trucking industry is directly impacted by the state of the economy, and in 2009 alone over 150,000 trucking jobs were shed as manufacturers down shifted gears, retailers made sure they exhausted their stock levels and ordered bare minimums and the demand for truckers and logistical services took a nosedive. 2010 has seen a resurgence in fortunes with over 200,000 jobs being created and there is a shortage of skilled labor and drivers – a further 200,000 jobs are expected to be created in 2011, but with a very fragile economy and 9%+ unemployment figures, is now a good time to be sending trucker jobs to cheaper operators south of the border?
Whatever your take on that, it is going to be fireworks!
A second big issue is truck safety which has many asking some hard questions. The US has a mature road safety regime with stringent checks and compliance standards which contrasts with Mexico. A great deal of trucking equipment which is no longer road safe, or is reaching the end of its useful economic life makes its way south of the border. In addition, it costs money to maintain a safety regime by US operators and the question has to be asked as to whether Mexican operators, themselves struggling with recessionary issues, simply have the capital base to up their own safety efforts to comply with US standards. The US trucking industry has made serious strides in reducing the number of accidents, injuries and fatalities in the last 20 years – including extremely stringent HOS rules and electronic monitoring. Are these standards going to be adopted and adhered to?
The counterpoint is that manufacturers are rubbing their hands together at the thought of tariffs being dropped for sale in Mexico and beyond. The imposition of tariffs has certainly caused a dent in the border area economy, which has also had far-reaching effect throughout the country. In addition, reducing logistical costs for imports of goods and materials from Mexico into the US makes a lot of sense for manufacturers looking to rebuild their customer base.
In Mexico, the government announced it will not be adding any more goods to the tariff list (which includes US pork and cheese) – to add pressure on the US, Mexico has adopted a “rolling tariff” system which means that as some goods are taken off the tariff list, others were added in order to maximize economic disruption to US producers and markets generally. This tactic seems to have paid off, and after discussions between the two countries trade officials both sides seem to be moving towards an agreement. For a Mexican viewpoint check out Mexico Trucker
The US Department of Transportation stresses that the document issued is only a starting point for discussion, and claims it is a “bare bones document”. No matter what the DOT wants to describe it, this is going to have a rough and rocky ride with a lame duck president and a Republican dominated Congress. OOIDA are already mounting a highly visible campaign to highlight the document and proposals, and we can expect more of the same across the board both in and out of the trucking industry.