The U.S./Mexico Truck Deal - - a Winner for American Business/a Loser for American Truckers

Beginning the week of July 5, Mexican trucks are being allowed to operate in U.S. territory under a new deal between the two countries. The deal was a result of an agreement between Mexican President Felipe Calderon and U.S. President Barrack Obama, putting an end to a decade-long trade dispute between the two countries. The original transportation chapter in the North American Free Trade Agreement between Mexico, the U.S. and Canada, allowed Mexican trucks to travel on U.S. highways starting in 1995. But the U.S. refused to allow this provision to take effect, citing security concerns over the Mexican trucks and drivers.

The agreement will provide several benefits to American business. U.S. exporters have pushed for a new agreement since Mexico imposed $2.4 billion in tariffs on U.S. goods after a Bush-era trucking project was shut down.Mexico will suspend 50 percent of its punitive tariffs within 10 days, and suspend the rest when the first Mexican carrier in the program receives operating authority. Mexican tariffs currently range from 5% to 25% on certain U.S. agricultural and industrial products.

The deal is expected to "significantly" improve the competitiveness of Mexico's transportation and export sectors, which target the U.S. as its main market. About 70 percent of Mexican exports are shipped by road. This will allow for much more options in transport that will make Mexico more competitive and at the same time reduce the transportation costs significantly. The expectation is that this should improve the flow of Mexican goods into the United States by making them more cost effective.

The first trucks enrolled in the program could operate within the U.S. as early as the end of August according to Federal Motor Carrier Safety Administration officials. U.S. Transportation Secretary Ray LaHood signed the agreements in Mexico City, infuriating opponents of an agreement that independent truckers and labour groups believe will bring lower-cost and poorly supervised Mexican operators into competition with American drivers.

The agreement will operate similar to the current U.S. arrangement with Canada. Mexican drivers will only be allowed to deliver into America and pick up loads going back to Mexico. They cannot pickup and deliver loads that are not international shipments for their own country.

American truckers see several problems with this arrangement. Many U.S. truckers may not want to go into Mexico as a result of the danger posed by the drug cartels. This could make this a Win for Mexican trucking companies and a Loser for American truckers. If, and when, American truckers decline the hauls going to Mexico, that pretty much gives the entire market to Mexican trucking firms.

The deal raises a number of questions.

1. Will Mexican trucks and truckers meet American safety standards?

2. Will the deal fall under DOC rules and regulations?

3. How many Mexican companies will operate in the U. S?

4. How many trucks will actually come in and out of the U.S?

5. Will they be able to comply with CSA requirements?

6. What happens if they hit 100 points?

7. Will they comply with hours of service regulations?

8. Will their driver logs be correct?

One question nobody is asking is how does the program affect the other NAFTA partner, Canada? Back in 2007, the last time the Mexican truck program was in effect, Canadian officials were not clear on how they would react when a Mexican truck showed up at the Canadian border. Then again, maybe it's not a major issue, since the Canadian market is one tenth the size of the U.S. market and is much more geographically dispersed. Still, it's an issue worth keeping an eye on and if Mexican trucks start showing up at the border. Will Canadian fleets want reciprocity in the spirit of NAFTA or will they be reluctant to take the risks of entering a dangerous market that is so far from home?