NAFTA and the Mexican Trucking Industry

NAFTA was officially sign in December of 1993 and went into effect at the beginning of 1994. The agreement included the three largest nations in North America, the United States, Canada, and Mexico. Originally thought of by Ronald Reagan in the early 1980s he proposed for a common market in North America, where many of the neighboring countries did the majority of their trading. Negotiations originally started in 1986 and an original agreement was signed in 1992 by United States President George H. W. Bush, Mexican President Carlos Salinas, and Canadian Prime Minister Brian Mulroney leading the talks for a trilateral trade bloc between the countries. After the signing each countries legislatures ratified the bill and it was officially signed in 1993, a year after Bush left office, by Bill Clinton. The agreement stated that tariffs would be originally reduced with the goal of eliminating tariffs on most goods, Canadian dairy products the exception, over the span of 10 years some goods 15 years. Due to the various concerns and dangers of eliminating the barriers for trade the three countries had to pass two separate parts of the bill for labor laws, the North American Agreement on Labor Cooperation (NAALC), and for environmental laws, the North American Agreement on Environment Cooperation (NAAEC).

Under NAFTA trade increased, investment between the three countries has gone up making North America the largest market in the world. By lowering tariffs involved in importing and exporting goods NAFTA made it easier and cheaper to do business between countries and generated millions of dollars for the countries involved. Canada and Mexico became the top buyers of US exports and are the second and third largest suppliers of imports to the United States. Although NAFTA increased trade there were consequences for signing NAFTA. People in all three countries involved protested to the signing of the bill. Farmers in Mexico argued that the passing of the bill would not only lower the price of their crops but foreign crops would saturate the market at prices local farmers cannot compete with.

The dumping of crops hit the corn farmers of Mexico the hardest as corn from American can be produced much cheaper than in Mexico, therefore sold at a much cheaper price. In the United States and Canada people protested that low wage jobs would soon be sent to Mexican factories, decreasing the number of jobs available. NAFTA was made to make North America the largest unified global marketplace in the world, surpassing the European Union. There have been issues with the agreement and at times nations have had disagreements on the nature and wording of the bill, most notably the Mexican trucking companies not being able to enter the United States when Canadian trucks were.

Since NAFTA went into effect the United States did not allow Mexican trucking companies to have their trucks and drivers deliver supplies directly to the US, while letting Canadian truck drivers to deliver within the US since 1982. Instead Mexican trucks had to unload their cargo six to 25 miles from the border in “commercial zones” and have an American trucking company finish the transportation of the goods. The United States concluded that the large amount of illegal immigration that entered the country, potential environmental issues regarding Mexican trucks and a drug war that the Mexican government was unable to properly control made it a security risk to allow Mexican trucks access to American streets. Also limiting Mexican trucking companies to travel within the United States created more jobs for US trucking companies. Allowing the Mexican trucker’s access to America was deemed too risky at the time and the United States banned Mexican trucks from carry supplies into the country.

This issue will be debated and delayed for the over 15 years before any resolution. When the three countries signed the agreement it was agreed to that the countries would gradually phase out restriction on vehicles that could enter each country and eventually allow Mexican operators onto US streets and Mexican companies to invest in American trucking companies and vice visa, among other restrictions that were viewed as barriers of trade. Mexican trucks were suppose to be allowed to travel through the states that border Mexico in December of 1995 but the United States delayed the opening of their borders citing safety concerns. Mexico accused the US of breaching the articles of their agreement and launched a formal dispute with the Arbitral Panel. They argued that the United States was showing Canada economic favoritism by allowing Canada trucks to travel on American roads and the ability to openly invest in US trucking companies. The United States refuted this claim saying that because Mexico didn’t maintain the same regulatory standards as the United States and Canada that the “in like circumstances”, language of Article 1202 meant that Mexican service providers could be treated differently to obtain the same objectives. Canada was viewed as having equal standards as the US and was in like circumstances, therefore not violating the most favored nation treatment under Article 1203.

This dispute would go on for years unresolved with Mexico sending the issue to the NAFTA panel ruling in 1998 claiming the United States violated terms of the NAFTA agreement. The Mexican government argued that the US was treating the Mexican trucking companies in a discriminatory manner, and in 2001 the NAFTA panel unanimously agreed with them. The panel ruled that the US government didn’t have to open it streets to all Mexican trucks but they had to make a system of rules and regulations to find qualified cases rather than assuming all Mexican trucks and drivers are unsafe. By 2002 the United States had made 22 safety requirements that were to be met before trucks could be allowed past “commercial zones”. These laws included drug and alcohol tests, Mexican workers complying with American labor laws like hours on service limitations, and every truck and driver must be properly insured. The idea was proposed to in Congress and the House of Representatives and approved and was not vetoed by then president George W. Bush. While the United States passed these set of laws they made it increasingly difficult for Mexican trucks to gain access into the US. From 2002-2006 Congress passed various laws that made it virtually impossible for Mexican trucks to be able to enter the country.

In 2007 a pilot program temporarily allowed Mexican trucking company’s access to the bordering states of the US, but this program was canceled in 2009 by the Obama administration. Mexico retaliated by placing tariffs on US goods that were imported into the country. An estimated over $2 billion were placed on almost one hundred US products including onions, oranges, apples, deodorant, Christmas trees, and sunglasses among others. In 2010 the Mexican government announced a list of new products banned from around the country that would cost the United States and estimate of over $2.5 billion Mexico would change which tariffs would be taxed the higher, making it impossible to make the properly make business plans or investments, costing the US more than just the cost of tariffs. In 2011 President Obama and Mexican President Felipe Calderon made a deal do resolve the trucking dispute under heavy criticism from Congress about the increasing costs of doing business in Mexico. This agreement allowed access to the US border states by Mexican trucking companies and ended a 15 year dispute.