The Journal of Commerce Magazine
By John Gallagher
April 20, 2009

www.joc.com

Controversy over Mexican cross-border trucking isn’t keeping freight from crossing the border

The simmering trade war between the United States and Mexico hasn’t proved a roadblock to U.S. carriers that want to move more freight across the border.

U.S. less-than-truckload companies UPS Freight and Estes Express launched new expansion drives into Mexico even as the presidents of both countries were preparing to meet over the dispute. They truckers did it the way they’ve always done it — without the kind of cross-border trucking demonstration project Congress killed last month and the Obama administration promised to restore.

UPS Freight and Estes are working with Mexican partners and customs brokers rather than offering direct, point-to-point service with one truck, one driver. The process has moved freight across the border for decades, despite the promise of an open border in the North American Free Trade Agreement of 1994.

The truckers are targeting the traffic because the trade has proved resilient in the face of regulatory battles and a recession, especially as manufacturers have pulled back from Asia-focused offshoring strategies.

Although the recession depressed traffic in late 2008, cross-border truck and rail trade with Mexico grew 2.3 percent last year to $293 billion. That also was a 7.2 increase over the $272 billion in freight that flowed across the border in 2006.

UPS Freight this month increased its border-crossing options from two to five, through partnerships with Mexican carriers to allow for one- or two-day delivery throughout the country. “We’ve effectively combined UPS’s global trade experience with local market expertise to deliver the fast, reliable service customers are demanding throughout North America,” said Kevin Hartman, UPS Freight vice president of strategy.

Shippers want the border restrictions lifted to meet growing demand for faster, reliable service. John Engler, president of the National Association of Manufacturers, said freight transfer between trucks at the border causes delays and drives up the cost of U.S. manufactured goods. The Bush administration said an open border for truckers could save consumers $400 million a year.

For others, fully opening the borders is foremost about fulfilling the requirements of NAFTA. They claim addressing the safety concerns of groups such as the Teamsters union and the Owner-Operator Independent Drivers Association should not be difficult.

“The program we did in 2007, in terms of safety, I felt we really nailed it,” said Jeffrey N. Shane, a former deputy transportation secretary who helped negotiate the details of program with Mexico and who is now a partner with the law firm Hogan and Hartson. Shane said he was frustrated by poor participation in the program. Only 118 of a projected 540 trucks participated in the project. A Federal Motor Carrier Safety Administration Inspector General’s report listed this as a flaw in the project, saying the numbers were too low to provide valid safety performance data.

Shane said, was trucking companies were aware of the political controversy surrounding the program — and that wasn’t good for business.
“It’s not the easiest thing in the world to launch a trucking service into another country,” Shane said. “It requires marketing, finding customers, and a lot of effort. Why undertake any big program if you felt it would be shut down? There was a disincentive to take trucks out of their domestic service and send them to the U.S. in an effort to tap a market if there would be no opportunity to grow.”

But trucking executives in both countries have said commercial opportunity remains a high barrier to broader operations, and U.S. companies say there are bigger hurdle than regulations.

“To have true reciprocity, (Mexico) would need road infrastructure and security infrastructure that matches ours in order not to disadvantage the U.S. and displace U.S.-based jobs,” said Herb Schmidt, president of Con-way Truckload. “It’s the biggest issue and would take decades to do.”
Shippers want a quick resolution, and last week were hoping President Obama would deliver it when he met with Mexican President Felipe Calderón.

“We need to get this trucking issue resolved, because, although U.S. pork products were not included on the retaliation list, they could be in the future, and, more importantly, our trading partners need assurance that the United States will live up its trade obligations” said Don Butler, president of the National Pork Producers Council.

Contact John Gallagher at jgallagher@joc.com.

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