Talk of Renegotiating NAFTA Worries Truckers

Talk of Renegotiating NAFTA Worries Truckers
Sunday, March 30, 2008

Both Hilary Clinton and Barack Obama have made campaign promises to renegotiate the 14-year-old North American Free Trade Agreement (NAFTA). Adopted back in 1994, NAFTA has sparked interest in the U.S. trucking and developed duty and tariff-free open trade among the U.S., Mexico, and Canada. The Democratic candidates are to renegotiate NAFTA in an attempt to make it more favorable on labor and environmental basis. However, for truckers, any talk of renegotiating NAFTA is deeply troubling and may pose a threat to its existence.

ATA President and CEO Bill Graves spoke in favor of NAFTA and other free trade agreements, stating that free trade acts benefit American consumers. Likewise, free trade has been of help to the U.S. trucking industry. Indianapolis-based Celadon attributes 51% of its total revenue to cross-border movements in and out of Canada and Mexico. With the growth of NAFTA trade, Caledon’s growth rate in revenues from its north-south trade in and out of Mexico increased significantly from $399 million in 2005 and $414 million in 2006 to $502.7 million in 2007.

According to the Department of Transportation’s Bureau of Transportation Statistics, surface transportation trade between the United States and its NAFTA partners, Canada and Mexico, saw an increase of 4.9% in 2007 over that of 2006, tallying an annual record of $797 billion. Total truck trade between the U.S. and its NAFTA partners grew significantly from $265 billion in 1994 to $554 billion in 2007, $280 billion of which came from electronics, machinery, nuclear reactors, and motor vehicles. The NAFTA trade is also balanced between imports and exports. This is important to the U.S., which as of 2006, ran a trade imbalance of $763.6 billion, up from the $716.7 billion recorded in 2005.

NAFTA continues to face further challenges. Congress has criticized the Mexico-U.S. cross-border trucking provisions and has voted to stop all funding for a pilot program that has allowed a small number of Mexican truckers to operate in America. Senator Byron Dorgan described the pilot program as being unpopular with safety advocates, the Teamsters Union, and carriers from either country.

The pilot program was supposed to open the door for U.S. and Mexican carriers to operate freely on both sides of the border. Although the pilot program allows up to 100 carriers from Mexico to apply for operating authority in the U.S., only 16 Mexican carriers with 55 trucks have sought such operating authority. Likewise, out of the 1.1 million interstate and intrastate trucking companies registered to operate in the U.S., only five U.S. carriers have applied for and received authority to operate throughout Mexico, and, out of the 8 million trucks registered in the U.S., only 45 trucks are currently operating in Mexico. Such small numbers are attributed to the fact that carriers are well aware that Congress could eliminate this limited one-year demonstration project at any time.

Although the U.S. and Mexican governments have established two supervisory groups to monitor the demonstration project, resolve its problems, and evaluate its results, safety advocates, environmentalists, and labor groups are still nervous over the potentially unsafe Mexican trucks. On the other hand, Mexican carriers feel discriminated against as they recognize that their fleets have to meet a much higher level of safety requirements than those of U.S. carriers.

Any changes to NAFTA now would probably hurt the north-south trade among the three NAFTA nations, as some on-going business in Mexico could move to either Asia or Latin America. Trucking executives, however, prefer not to worry too much about NAFTA’s future; the matter is out of their hands, and, in fact, it remains to be seen whether any talk of renegotiating NAFTA is merely campaign rhetoric or an actual threat to its existence.