Commentary

House Vote Erects Roadblock to U.S.-Mexican Trade

By Daniel Griswold
August 15, 2001
The U.S. House erected a roadblock to trade recently when it voted by a 2-1 margin to keep Mexican-owned trucks off U.S. highways. The vote was couched in safety concerns. But it was really an effort to protect the Teamsters union from competition and to protect American consumers and producers from lower prices.

Under current rules, neither Mexican-owned nor American-owned trucks can cross the border to deliver goods directly to destinations inside the other country. If a U.S. exporter wants to send a load of widgets from Pittsburgh to Monterey, Mexico, the U.S.-owned truck must stop at the U.S. side of the border within a narrow “commercial zone” and offload its cargo. Then the goods are carried across the border in a short-haul truck called a drayage vehicle only to be reloaded onto a Mexican-owned truck for the long haul to its final destination. Mexican exports headed to the United States must follow the same cumbersome process in reverse.

The North American Free Trade Agreement, enacted almost eight years ago, was supposed to open the border to trucking. But the Clinton administration, under political pressure from the Teamsters union, which represents 120,000 drivers in the freight industry, refused to implement the trucking agreement, citing safety concerns.

In February of this year, a NAFTA arbitration panel ruled unanimously that the United States was in violation of its commitments, and the new Bush administration rightly agreed to open the border to Mexican trucks by the end of this year. But again under union pressure, the U.S. House voted 285-143 on June 26 to deny funds to the Transportation Department to implement the trucking agreement.

Opponents of Mexican trucks cite safety concerns. But the U.S. government remains free under NAFTA to impose the same or even stricter standards on Mexican trucks on U.S. roads as it does on American-owned trucks. The Bush administration is seeking an additional $88 million for border inspection facilities to do just that.

Opponents counter that Mexican trucks that have been inspected at the border fail safety tests at a higher rate than U.S. trucks. But the Mexican trucks inspected so far tend to be the older drayage vehicles rather than the newer, long-haul trucks that would be used to ship goods to cities inside the United States. In California, where inspections have been intensified, the failure rate of Mexican trucks is virtually the same as U.S. trucks. Mexican trucking companies have a powerful incentive to operate safe trucks inside the United States for fear of losing their license to operate.

Mexican-owned vehicles on U.S. highways would be nothing new. Mexican trucks were allowed full access to U.S. roads up until the 1980s, when the U.S. market was closed in retaliation for Mexico’s ban on U.S.-owned trucks. Mexican-owned tour buses and trucks making deliveries to Canada are already allowed into the United States. Safety has simply not been an issue. Concerns that Mexican trucks will swamp U.S. roadways are unfounded. Fewer than 20 Mexican trucking companies are considered ready to enter the U.S. market. This compares to tens of thousands of U.S. trucking companies and 1 million U.S.-owned commercial transport trucks already on the road. Mexican drivers do earn less than American drivers. But Mexican trucking companies are far less efficient and face higher costs for trucks and for borrowing than do American firms.

The ban on cross boarder trucking imposes a real cost on both countries. Shipment by truck accounts for 86 percent of the flow of goods across the U.S.-Mexican border. It is terribly inefficient to require offloading and reloading of all those goods at the border, wasting time and manpower that could better be spent elsewhere. Slower delivery times disrupt business planning and drive up costs for producers and consumers. Delays at the border only add to local pollution and congestion problems. And as long as the dispute remains unresolved, American trucking companies are denied the ability to compete for deliveries within Mexico, reducing their profits and lowering demand for U.S. truck drivers.

Since the passage of NAFTA, Mexico has become America’s second largest trading partner. Under the leadership of its dynamic new President Vicente Fox, the Mexican government is eager to increase its economic ties to the United States, promote development, and raise Mexico’s business, environmental, and labor standards. The roadblock to trade approved by the U.S. House will only make those worthy goals more difficult to achieve.

Daniel T. Griswold is associate director of the Center for Trade Policy Studies at the Cato Institute.