Monday, September 10, 2007

Keep On Truckin'

At the U.S.-Mexican border, there is usually a lot of shifting cargo from one truck to another. This is because Mexican truck carriers have been prohibited from operating more than 25 miles into the United States. That means that the Mexican carrier often turns the goods over to a domestic carrier who finishes the delivery. This has lead to the development of a lot of distribution center businesses along the southern border.

Back in 1994, the U.S. agreed to eliminate this obvious choke point in the supply chain by giving Mexican trucks the right to make deliveries throughout the U.S. in the same way Canadian trucks do. It's right there is the agreement as part of Chapter 12 which states, at Article 1202:

Each Party shall accord to service providers of another Party treatment no less favorable than that it accords, in like circumstances, to its own service providers.

The treatment accorded by a Party under [the above] paragraph means, with respect to a state or province, treatment no less favorable than the most favorable treatment accorded, in like circumstances, by that state or province to service providers of the Party of which it forms a part.

That means that Mexican truckers who follow essentially the same rules as U.S. truckers, get to provide trucking services in the U.S. Yes, the true standard is "treatment no less favorable than" that accorded U.S. truckers, but as a practical matter that usually means the same.

Funny thing, Mexico, until now, never got access to American roads. The Agreement was the subject of law suits dealing with everything from the environmental impact of the additional trucks to the the relative safety of Mexican versus U.S.-based trucks. An odd assortment of interests from the Teamsters to the Sierra Club tried to stop the Agreement from being implemented. In 2001, a NAFTA Arbitration Panel held that:

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 (reservations for existing measures and liberalization commitments), Article 1202 (national treatment for cross-border services), and Article 1203 (most-favored nation treatment for cross border services) of NAFTA. An exception to these obligations is not authorized by the “in like circumstances” language in Articles 1202 and 1203, or by the exceptions set out in Chapter Nine or under Article 2101.

The Panel unanimously determines that the inadequacies of the Mexican regulatory system provide an insufficient legal basis for the United States to maintain a moratorium on the consideration of applications for U.S. operating authority from Mexican-owned and/or domiciled trucking service providers.

That decision was not enough to get the trucks rolling either. It is not entirely clear whether there was a single factor that got this moving. But, the pilot program is starting and Chicago, apparently, will be one of the first metro areas to see Mexican license plates on cargo trucks. Here is a Tribune story on the topic.

So, what does one do with this information? Assuming you can find a trucking company willing to participate in the pilot program, the question is whether it makes sense to forgo the El Paso, Laredo, San Diego, or other distribution center and drop ship to your big customers in Massachusetts or Oregon (to pick random locations). It might. But, it might also upend long-term contracts with warehouses and other service providers. It is, however, one of those developments that raises questions worthy of consideration by traffic and transportation managers.

UPDATE: North Dakota Senator Byron Dorgan has moved to block appropriations for the Mexico truck pilot program. Here is his press release. Dorgan points to the "spectacular crash" of two trucks in northern Mexico on Monday as evidence that the program will increase the danger to Americans. The apparent implication being that there are no sleepy, over worked, and under trained truckers in the U.S. like here or here.

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