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On June 7, 2004, the U.S. Supreme Court ruling in thecase of the
U.S. Department of Transportation v. PublicCitizen
cleared the way for Mexican and American truckers tooperate in each other’s home markets. The ruling upheld theauthority of Congress and the Bush administration to imple-ment a freedom that had supposedly been granted a decadeearlier under the North American Free Trade Agreement.To eliminate the last legal barrier to giving Mexicantrucks full access to American highways and vice versa, theCourt overturned a 2003 ruling from the Ninth Circuit Courtof Appeals in California, which had found that the federalgovernment violated environmental law when it announcedplans to open highways to Mexican trucks without conduct-ing air-quality impact studies. The administration had arguedthat the appeals court was incorrect because its ruling inter-fered with the ability of the executive branch to comply withNAFTA. Cutting to the central issue, Justice ClarenceThomas (writing for the majority) said that U.S. regulatoryagencies were under no obligation to do a full review of thepotential environmental impact, the requirement that had leftMexican trucks stalled at the border for a decade.The final wrangle over the opening of the U.S.-Mexicanborder to international trucking stemmed from a much earliercontest over the deregulation of transportation in particularand free trade in general. Beginning in the late 1970s, theU.S. federal government enacted a wave of deregulatory leg-islation aimed at transportation. The airlines were deregulat-ed in 1978, leading to dramatic reductions in the price of tickets. The deregulation of interstate trucking, begun in1980, culminated with the abolition of the InterstateCommerce Commission in 1994. Intrastate trucking fol-lowed, also in 1994. In each case the freer flow of traderesulted in an upswing in commercial activity and lowerprices for the consumer as such innovations as “just in time”deliveries lowered substantially the cost of producing anddelivering goods throughout the United States.The border between Mexico and the United Statesproved a bottleneck. Protectionist pressures kept Mexicantrucks from crossing more than a few miles into the UnitedStates and made the crossing time-consuming and expensive;American trucks operated under similar restrictions whencrossing into Mexico. The vision of free-flowing trade fromCanada to Central America remained just that, a vision,while the perception that the United States might be promot-ing free trade in theory but undermining it in practice tar-nished our reputation internationally and gave rise to resent-ments south of the border.
NAFTA and Cross-border Trucking
How did that happen? The Bus Regulatory Reform Actof 1982 imposed a moratorium on the granting of authorityto Mexican and Canadian motor carriers to operate in theUnited States beyond a limited zone along the respectiveborders. The moratorium with respect to Canada was liftedthe same year, giving U.S. carriers access to Canadian mar-kets; but the restrictions on Mexican-domiciled trucks andregular-route buses remained. They could operate only inborder commercial zones, generally 3 to 20 miles past a U.S.municipality’s corporate limits. Beyond that limit Mexicantrucks had to offload their cargo onto American trailers.When American truckers crossed the border into Mexico,they were required to do the reverse. In other words, aninternational shipment traveling from Mexico to the UnitedStates or vice versa demanded at least two drivers and twotrailers to perform a single freight movement. The processwas inefficient and therefore costly in terms of time andmanpower.NAFTA, designed to promote free trade among theUnited States, Mexico, and Canada, was ratified by the U.S.Congress in late 1993 and implemented on January 1, 1994.No. 13 • July 8, 2004
U.S. Supreme Court Finally RemovesDecade-long Roadblock to U.S.-Mexican Trucking
by Cassandra Chrones Moore
Cassandra Chrones Moore, an adjunct scholar with theCompetitive Enterprise Institute, is an expert on trucking, trusts,and the environment.
 
It was to have ended that inefficient procedure by liberaliz-ing access for cross-border bus and truck services.The agreement laid out sweeping modifications in trans-portation provisions:
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Three years after the signing of the agreement, byDecember 1995, Mexican and U.S. carriers were to beallowed to serve the adjoining border states of theother country. However, there were no provisions fordomestic transportation within each country by a for-eign-owned carrier, that is, cabotage.
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Six years after ratification, cross-border service forinternational commerce was to be available to anypoint within the United States, Canada, or Mexico.Again there were no provisions for cabotage.
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Seven years after ratification, U.S. companies mightown 51 percent of Mexican trucking companies; afterten years, 100 percent ownership would be allowed.Again, there were no provisions for cabotage.Left unresolved were such issues as labor law, localdriving restrictions, cargo security, and customer service.Primary political concerns still being debated included thesafety of Mexican carriers, to say nothing of insurancerequirements and cargo liability for Mexican drivers operat-ing on U.S. roads.
NAFTA Promises Delayed
Under pressure from the International Brotherhood of Teamsters, as well as environmental and consumer safetygroups, the Clinton administration changed course, announc-ing in December 1995 that it would delay implementation of the cross-border liberalization provisions. The shift was aparticular embarrassment for Federico Peña, then U.S. secre-tary of transportation and a strong supporter of the accord,who had traveled to San Antonio, Texas, to announceprogress in opening the border to international trucking, onlyto find that the border was still closed.The Mexican government, stung by the affront, broughtan action before an international arbitration panel that ruled,in February 2001, that the United States could not impose ablanket ban on Mexican trucking, despite its often-voicedsafety concerns. Those concerns could, however, justifytreating Mexican carriers differently than domestic andCanadian carriers when processing applications.President George W. Bush had asserted during his 2000campaign that the United States should honor its NAFTAcommitments and assured Mexican president Vicente Fox thatthe border would be fully opened to international trucking andto regular-route bus services. In keeping with the new spirit of openness, the Federal Motor Carrier Safety Administration, inMarch 2002, proposed three regulations to allow Mexicantrucks to operate beyond the commercial zones, setting forthsafety-monitoring procedures for all Mexican-domiciled carri-ers operating anywhere in the United States.
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Before rules were issued, an FMCSA assessment foundthat the rules would have no significant environmentalimpact. The agency therefore concluded that a fullEnvironmental Impact Statement was not necessary. It thenissued a finding of no significant impact, followed by theinterim final rules. On November 27, 2002, President Bushmodified the1982 moratorium to clear the way for expandedtruck and bus operations.Claiming to be deeply concerned about the safety of theMexican trucking stock and about the prospect of a declinein air quality, critics of NAFTA had already mounted anattack. Joan Claybrook, president of Public Citizen, inalliance with the Environmental Law Foundation and otherenvironmental groups as well as the Teamsters, filed suit infederal court, claiming that the government had violated theNational Environmental Policy Act and the Clean Air Act byopening the door to Mexican trucking, which would alleged-ly pollute the U.S. atmosphere. The Teamsters, it is reason-able to suggest, were less concerned with the putative envi-ronmental harm than with the threat posed by Mexican driv-ers competing for jobs.The Supreme Court’s unanimous ruling of June 7 finallyclosed the door to their legal challenges and opened the gatefor cross-border trucking—more than a decade after enactmentof NAFTA.
Backup at the Border
As a result of those concerns and of legal questions,crossing the border has remained a time-consuming processladen with administrative and legal requirements. Those whohave been dealing with Mexico for many years have learnedto maneuver through the maze with some degree of ease;novices would do well to follow their advice.Much criticism and concern has focused on drayage orcartage, the step-by-step procedure according to which cargocoming from Mexico is transferred to another carrier legallyable to operate in the United States. Drayage, it is said,results in air pollution as carriers park in line, belchingexhaust as they wait to cross the border. In fact, thedrayage/cartage requirement is unique to the Port of Laredo,where the trailers are transported across the border by acartage or drayage company employed by the freight for-warder or customs broker to ensure delivery to a crossingfacility from which cargo can be picked up and delivered toits final destination in the United States. The process addsseriously to costs and slows deliveries.Laredo, the largest and busiest of the border ports, shipsmore than the port of New York. It has invested heavily in itsinfrastructure and has two relatively new commercial border-crossing facilities. The standard picture of trucks fouling theair is thus unfair to Laredo. The city has tried to keep waitingtime and thus pollution to a minimum and prides itself onhaving some of the cleanest air in the country. State andlocal regulations cull out trucks with bald tires and rigsbelching smoke, making it impossible for them to continueto cross at Laredo. The Columbia and World Trade bridges,restricted to commercial traffic, carry a steady stream of trac-tor-trailers. The first has 6 lanes; the second offers theimpressive spectacle of 12 lanes of big rigs.All other border ports, of which there are more than 20,allow the Mexican carrier to pick up the southbound cargo at
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the location of the U.S. freight forwarder and move the trail-er cargo through customs to execute delivery at the appropri-ate customer locations. Northbound cargo is handled in simi-lar fashion: the Mexican carrier picks up the trailer with itscargo from the shipper and moves it through customs inspec-tion before making delivery to a U.S. freight forwarder loca-tion or directly to a U.S. carrier terminal facility.Because import duties are still applicable on some items,administrative requirements still exist to support NAFTAcompliance. To complicate matters, Mexican law requiresthat almost all duties be collected and submitted to theMexican government prior to physical entry of cargo intoMexico. U.S. customs brokers, in contrast, are not requiredto collect applicable import duties at the time of entry sincethe law has provisions for delayed payment.There has long been talk of streamlining this cumber-some process, but so important is trade between Mexico andthe United States that shippers have been willing to copewith the problems. Eighty percent of the trade between theUnited States and Mexico now moves by truck, and the vol-ume of shipments has grown steadily, especially since theadvent of NAFTA. From 1993 to 2000, there was a fourfoldincrease in two-way trade between the United States andMexico, with four million border crossings annually.The standard horror story had unsafe and polluting rigsmassed at the border, waiting to cross once the Court decidedon deregulation. The reality is radically different. Perhaps 90percent of Mexican truck owners have one truck, little insur-ance, and no desire to travel north to a land whose languagethey do not know. Thus the shortage of drivers north of theborder is balanced by an equally serious dearth of driverswilling to go north. Opening the border is unlikely to resultin a flood tide in either direction.
Progress in Mexico
NAFTA encouraged sweeping changes south of the bor-der as well. In 1989 the Mexican trucking industry wasderegulated, allowing the number of carriers to balloon fromabout 350 servicing monopolistic routes to 50,000 carrierswith Mexico-wide authority. The most significant differencebetween Mexican carrier deregulation and deregulation inthe United States and Canada in the l980s lies in the admin-istrative control of tariffs and transportation contracts stillexerted south of the border.At the same time, the Mexican government moved toimprove its highway infrastructure. The Toll HighwayDevelopment Program, initiated in 1989, led to the construc-tion and operation of more than 5,000 miles of highway.Unfortunately, the high fees assessed by toll road operatorshave led many Mexican carriers to continue utilizing thenon-toll federal highway system. Many issuers of bondshave, in fact, defaulted on their construction bonds. As aresult, the infrastructure, although showing great improve-ment, is still far from the levels to which most U.S. andCanadian carriers are accustomed. Despite these difficulties,there has been a significant investment in Mexico’s logisticsinfrastructure, including motor carrier terminals, roads,bridges, and carrier-support services.In addition to its high cost, fuel poses another problem:sulfur content of Mexican diesel fuel is higher than the maxi-mum levels allowed by the U.S. Department of Transportationfor the domestic U.S. market. Truckers have feared that thehigh-sulfur diesel would reduce the efficiency of U.S.-basedcarrier equipment, and the low-sulfur diesel of the UnitedStates could have a similar effect on Mexican equipment if either crossed the border under the terms of NAFTA.Critics of trucking liberalization continually raise safetyissues. They paint a picture of decrepit rigs in the last stagesof decay and unsafe at any speed. In fact, the older trucks inthe Mexican fleet are concentrated in the drayage corridoroutside Laredo; they never penetrate farther north. Long-haulMexican trucks have become more modern, hence safer,over the past few years. The inspector general (IG) of theU.S. Department of Transportation has noted that the failurerate for Mexican trucks in California during 2000 was 27percent, close to the U.S. national failure rate of 24 percent.The IG also reported that the failure rate for Mexican truckshad decreased from that of the preceding year.In preparation for the Supreme Court’s decision, the U.S.Department of Transportation recently announced that it wasprepared to begin immediately inspecting Mexican buses andtrucks to allow them to provide services between Mexicoand the United States. There is nothing in NAFTA that willprevent inspectors from fully enforcing U.S. air quality andhighway safety standards.
Conclusion
The preceding survey of the issues related to truckingthat have been plaguing the Mexican border for so manyyears suggests once again the folly of protectionism. Theongoing vendetta against Mexican trucking has raised pricesin the United States while discouraging the trucking industrysouth of the border. The efforts to prohibit Mexican driversmay have shielded American Teamsters, but they have cer-tainly raised Mexican hackles. Given the current problems inforeign policy, it seems especially unwise to unnecessarilyalienate an important neighbor to the south.At the same time, when considering the difficulties alongthe border, it is worth noting the assiduity with which thetrucking industries on both sides have managed to ameliorateproblems and to forge ahead, despite the obstacles. A clearpathway from Canada through Mexico to Latin Americanmay still be only a rosy vision of the future, but that vision isalive and well.The Supreme Court has given greater substance to thatvision by upholding NAFTA and allowing Mexican trucks tooperate freely in the United States if they are in compliancewith our regulatory structure. In deciding for the Departmentof Transportation, the Court has removed the remnants of trucking regulation and opened the doors to market solutions.It has clarified in no uncertain terms this country’s supportfor free trade and the benefits that such trade confers.
1. The first regulation would establish an application process forMexican truckers seeking permission to travel outside U.S. cities3
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