The Pilot Program on NAFTA Long-Haul Trucking Provisions

My name is Daniel Griswold. I’m director of the Herbert A. Stiefel Center for Trade Policy Studies at the Cato Institute in Washington. Cato is a non-profit, non-partisan educational institution supported by voluntary donations from individuals and foundations who share our core values of individual liberty, free markets, limited government, and peace.

The suspension of the cross-border pilot trucking program by Congress in 2009 has been a breach of our international commitments, an embarrassment to our nation, and a barrier to two-way U.S. trade with the people of Mexico. The time is long overdue to correct this injustice and economic distortion by fully implementing the trucking provisions of NAFTA.

Under the 1994 agreement, the United States and Mexico were to allow trucks from each country to deliver goods to destinations inside the other country, provided the trucks and their drivers met all safety regulations mandated by the host government. According to Annex I of the agreement, licensed and qualified Mexican trucks were to be allowed to make deliveries in U.S. border states by 1995, a year after the agreement went into effect, and throughout the U.S. by 2000. U.S. trucking firms were to be granted the same access to Mexico. But under pressure from the Teamsters union, President Clinton unilaterally suspended implementation of the provisions in 1995, citing safety concerns.

President George W. Bush, to his credit, tried to fulfill the U.S. obligation under NAFTA. His administration launched a pilot program in 2007, which allowed a limited number of Mexican trucking companies to deliver goods to U.S. destinations beyond the 25-mile commercial zone along the U.S.-Mexican border. Citing unsubstantiated safety concerns, and in the face of ongoing union pressure, a bipartisan majority in Congress voted to cut off funding for the program in 2009.

The Obama administration has sought to reinstate the program under the “concept document” released in January 2011. The document and the attending regulations would go a significant way toward implementing the original NAFTA obligations and should be adopted as soon as possible.

Suspension of the pilot program in 2009 was based on protectionism and prejudice, not legitimate safety concerns. Although Teamsters union leaders talk about safety, their real agenda is not to promote safer roads but to protect themselves from increased competition. The broader agenda of their congressional allies is to thwart full implementation of a successful trade agreement with Mexico, our third-largest trading partner. The real objection they have to Mexican trucks making deliveries to U.S. cities is not that they are unsafe but that those trucks are driven by Mexicans. In the eyes of too many members of Congress, “driving while Mexican” remains an unacceptable public hazard.

In contrast to those stereotypes, experience from the pilot program has demonstrated that Mexican trucks and their drivers are fully capable of complying with all U.S. safety requirements. An August 2009 report from the Department of Transportation’s Inspector General found that only 1.2 percent of Mexican drivers that were inspected were placed out of service for violations, compared to nearly 7 percent of U.S. drivers who were inspected. The “out of service” rate for Mexican trucks was slightly lower than the rate for U.S. trucks, even though Mexican trucks were inspected six times more often than the U.S. trucks.

The Congressional Research Service confirmed the superior safety record of Mexican trucks and drivers in a February 2010 report to Congress:

The failure of Congress to allow implementation of the NAFTA trucking provisions has proven costly to the United States in three important ways.

First, U.S. failure to comply has deprived our economy of the efficiencies of moving goods across our mutual border at lower cost. With the ban in place, trucks approaching the border are required to unload their cargo into warehouses in so-called commercial zones within 25 miles of the border, only to have that cargo reloaded onto short-haul vehicles and then onto domestic trucks for final delivery. This inefficient system causes delays, increased pollution and added costs at busy border crossings such as Calexico East; San Ysidro; Nogales, Ariz.; and Laredo, Texas. Because more than 70 percent of U.S. trade with Mexico travels by truck, the ban on cross-border trucking imposes an additional $200 million to $400 million in transportation costs each year, according to the U.S. Department of Transportation.

Second, failure to comply has exposed U.S. exporters to perfectly legal sanctions imposed by the Mexican government. Under the provisions of NAFTA, and after waiting patiently for more than a decade, the Mexican government imposed sanctions in 2009 on more than $2.4 billion in U.S. exports affect 100 products, from Washington apples to Iowa pork. The sanctions would be lifted in two stages as the U.S. government implements the proposed program to comply with Annex I.

Third, failure to comply has compromised the U.S. government’s reputation as a good citizen of the global trading system. Simply put, the U.S. government has failed to keep its word to our Mexican neighbors. Our government has been in flagrant violation of a major trade agreement for more than 15 years. This breach of trust has undermined the U.S. government’s standing to challenge other governments, from Mexico to China to the European Union, who may also be in violation of various trade agreements. The Obama administration’s promise to more vigorously “enforce” our rights in the World Trade Organization and other agreements will lack credibility as long as the U.S. government fails to comply with such clear commitments as the trucking provisions of NAFTA.

For all these reasons, the U.S. government should act as quickly and as thoroughly as possible to implement the proposed regulations to bring our nation into compliance with our mutually beneficial agreement with our Mexican neighbors on cross-border trucking.