Bloomberg News

Mexican Truckers Avoiding Border After Presidential Deal

May 24, 2012

A cross-border trucking pact that ended a 17-year trade dispute between the U.S. and Mexico last year may unravel unless more Mexican big rigs start crossing the border under a U.S. Transportation Department pilot program.

U.S. and Mexican leaders will try to avoid a repeat of the trade war that has erupted before over trucking, said Ed Gerwin, a trade analyst at Third Way, a Washington-based research group. Industries that have nothing to do with trucking would bear the brunt should the border remain closed, he said.

“If Mexican trucks effectively can’t get into the United States, I’m sure the Mexicans would be tempted to go back to the same retaliation they had under the Nafta rules,” Gerwin said.

The initiative grew from negotiations between U.S. President Barack Obama and President Felipe Calderon of Mexico that ended with an agreement signed last July. The two countries have discussed opening the border to truck traffic for more than 17 years under the North American Free Trade Agreement.

A U.S. Transportation Department official said yesterday that only 33 Mexican trucks have crossed since the U.S. opened its southern border to long-haul trucks in October.

“Participation is not where we want it or need it to be to make it a viable program,” said William Quade, the Federal Motor Carrier Safety Administration’s associate administrator for enforcement and program delivery. “The agency is extremely concerned about not having sufficient data.”

The U.S. must evaluate the pilot program to determine whether it would be safe to open the border to all truck traffic. So few Mexican trucks are participating that it may not be possible to have a statistically valid sample for the analysis, Quade said yesterday at a meeting of the agency’s Motor Carrier Safety Advisory Committee in Alexandria, Virginia.

Rigorous Vetting

“The cross-border trucking agreement we signed with Mexico last year ended crippling tariffs on American farmers, and we are fully confident that over the next 2 1/2 years, we will gather the data needed to make the program permanent,” Justin Nisly, a Transportation Department spokesman, said in an e-mail.

The U.S. is rigorously vetting Mexican trucking companies to ensure safety, Nisly said. That includes asking the public for comment on the next three Mexican firms that have passed safety audits, Nisly said. More companies have applications pending, and the U.S. and Mexico are trying to get others to apply, he said.

U.S. companies such as Celadon Group Inc. (CGI:US) want to run more long-haul trucks across the border as transit gets easier. Swift Transportation Co. (SWFT:US) operates a fully owned Mexican subsidiary (SWFT:US) that drives trucks up to the border before handing trailers off to U.S. drivers.

Previous Failure

If the pilot program were to fail, it wouldn’t be the first time. The FMCSA ran an earlier trial for two years starting in 2007, and Mexican carriers in that program had better records than their U.S. counterparts. Nevertheless, the program was criticized for not having enough participants. Congress cut off funding in 2009.

Mexico later collected tariffs on $2.4 billion of American imports, citing violations of Nafta. The tariffs were suspended after the U.S. began allowing Mexican trucks back in last year over the objections of the International Brotherhood of Teamsters union.

Three Mexican trucking firms are entering the U.S. under the FMCSA pilot program. Three drivers and three trucks account for all the crossings to date, Quade said.

Thirty companies have applied to be in the pilot program, which will operate for up to three years according to the agency’s April 2011 Federal Register notice. Eight of the applications were dismissed or withdrawn, Quade said.

Insurance Costs

The largest Mexican trucking firms aren’t participating, Quade said. Mexican operators cite insurance costs and uncertainty over whether the border will stay open as reasons for not wanting to participate, Quade said.

In contrast, three U.S. companies have made more than 2,000 trips into Mexico since October, he said.

“It’s a normal startup problem that should lead to some tweaking of the system and not an entirely new approach,” said William Reinsch, president of the National Foreign Trade Council in Washington. “The administration is probably too far down the current road to start over.”

About 45 companies are needed for a sufficient sample to make the pilot program work, Guillermo Malpica, Mexico’s director general of services negotiations at the economy ministry in Mexico City, said in an interview. The ministry is trying to make the process easier so companies aren’t turned off, he said.

It would be hard to justify retaliatory measures if the border doesn’t open because of a lack of participation, Malpica said.

“At all costs, we have to prevent such a negative scenario from happening,” Malpica said. “It’s a situation that we are legally permitted to do, but it would complicate our relationship” with the U.S.

To contact the reporters on this story: Jeff Plungis in Washington at jplungis@bloomberg.net; Eric Martin in Washington at emartin21@bloomberg.net

To contact the editor responsible for this story: Bernard Kohn at bkohn2@bloomberg.net


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Companies Mentioned

  • CGI
    (Celadon Group Inc)
    • $23.64 USD
    • 0.55
    • 2.33%
  • SWFT
    (Swift Transportation Co)
    • $24.71 USD
    • 0.62
    • 2.51%
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