March 21, 2003

Cross-Border Trucking: The sharpening crisis

By: Mariana Martinez

This past Thursday, March 13 Mr. León Flores González visited Tijuana. He is the only registered candidate for the presidency of CANACAR (The National Trucking Chamber Union). CANACAR has more than eight thousand affiliated businesses all over the country, with well over four million people benefiting from the profits of trucking all over the country, so his visit was vital to this border, sunken in a trucking crisis.

Baja California has a severe trucking crisis, where, from an average of five hundred trucks carrying products every day to the United States, the number has gone down to a hundred in the last two years, mainly because of huge maquiladoras closing their factories in Tijuana, leaving for other countries such as China.

According to Mr. Rogelio Vadillo, State Representative of CANACAR “The situation is critical, especially this past year, since September 11th we have seen a down fall in production here in Tijuana, in consequence, a down fall in transportation services, and it is getting worse with the war threats. The high cost of Diesel and the low production has generated a crisis, so we have to stick together in order to stay in business and survive.”

90% of all products exchanged between México and the US travel by land.

86% of the products that come in to México are delivered to their destination by trucking services. That’s why one of the main themes in the meetings with Flores González has to do with the controversy about the Cross-Border Trucking agreement in NAFTA.

The debate.

January 1, 1996, was the date by NAFTA to open up the US/México border for Mexican businesses to operate in to neighboring US states (CA, TX, AZ, and NM), it was to be the first step to open access for Mexican trucking in 2000.

But, in December 1995 the Clinton administration announced a delay in the implementation of this Chapter of the NAFTA, and until today, Mexican trucks cannot work in the US, with the exception of a restricted area called “the Border corridor”.

The reasons for this delay, according to the US, had to do with the lack of safety regulations in México, and the old, run down trucks most companies work with not complying with the safety measures established by DOT (Department of Transportation). Cross-border trucking has been rejected because of safety issues.

The opening of the border for Mexican trucks is also, strongly rejected by powerful groups, including the Teamsters Union, one of the strongest labor unions in the US. Teamsters are perceived by many, as being afraid of an open market, and hiding behind DOT’s safety concerns to protect their interests.

In September 1998, México sued the US and the US filed a counter suit. It wasn’t until February 6, 2001, that the NAFTA Secretariat, which is comprised of the Canadian, U.S. and Mexican Sections, established by the Free Trade Commission, for the administration of the dispute settlement provisions of the Agreement, published his resolution. In Chapter VII, number 295:

CROSS-BORDER TRUCKING SERVICES AND INVESTMENT

295. On the basis of the analysis set out above, the Panel unanimously determines that 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 under Annex I, article 1202,1203 of NAFTA. An exception of these obligations is not authorized by the “in-like-circumstances” language in articles 1202 and 1203 or by exceptions set out in Chapter Nine or under article 2101.

Two years after the resolution nothing has changed.

Safety records along the “Border corridor” have yet to prove the alleged unsafe trucking practices by Mexican companies.

But that is not the only conflict the Mexican trucking business have to face: the US argues that Mexican trucks are old and unsafe so, why not buy new ones?

Mr. León Flores González claims, there are 400,000 trucks which were built 17 or even 19 years ago still in use, but there are thousands of other units not nearly as old, and comply with the DOT safety standards, and thousands more, that, with some investment could also comply with the safety measures.

The possibility of open borders for truckers was a great incentive for Mexican Companies, to invest in new trucks, but the Union claims there are no tax cuts or credit for them to invest.

“We have many new trucks, but for most of us it is hard to buy them, there is no proper credit or fair interest rates, so in the end, we end up paying to much for trying to give better service, its impossible to keep up…

“Here’s a fact: When we buy a truck here in México, we pay about 100,000 dlls. We are paying $25,000 in taxes, besides having to pay for license plates and car registry: we are taxed for everything…” said González.

With high fuel prices; delays in border crossing after Sept. 11; War treats on Iraq and recession in both sides of the border, this crisis is not likely to go away.

So as González sees it, the problem is not just with NAFTA but there are some domestic problems in México too. After the 1994 depreciation of the peso, Mexicans are not longer willing -or able- to ask for credit, and the banks are not interested in building a “lending and leasing culture” for fear of yet another strike on the economy.

This is not only fatal to the trucking industry, it is also having an impact on international car companies that would greatly benefit from easier payment plans and tax cuts for truck buyers.

México is home of very large truck distributors but all so builders, pressuring the Mexican government to sue the US for losses on the NAFTA agreement delays.

Since 1996, international transportation has worked like this: Mexican truckers drive the goods as far in to the US as they are allowed, US trucks met them there, and unload and load the goods into their trucks the rest of the way. This was seen as a temporary solution to the conflict, but it is now is the only way to be efficient with the borders closed; more trucks, more money, more time transporting, and of course, the buyers of the products end up paying for the extra costs.

In recent years, Mexican legislation has seen change: smog check, drug and alcohol testing, higher maintenance standards and safety laws have been put in to effect, and to many people, this has shown México’s good will.

But no change in the Mexican legislation, no new trucks or pressure from car companies seem to have an effect on US policy, still not allowing Mexican trucks to apply for inspection for cross-border trucking.

What’s left to do?

The Mexican Finance Department is currently working with banks, in order to create a better credit climate for truck buyers; tougher laws are being approved; and pressure from other business also affected by the closed borders is on the raise.

But for Flores González something else can be done. “What has worked for both countries is for each to do their own trucking, in their own territory. We ask Mr. Fernando Canales Clarión, to not let American truck companies in to México.”

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