Latest NAFTA Challenge Includes HazMat Ban on New Laredo Bridge

Nov. 1, 1998
Federal officials may have violated procedures when they decided to ban hazardous materials from a new border-crossing bridge in Laredo, Texas. Apparently,

Federal officials may have violated procedures when they decided to ban hazardous materials from a new border-crossing bridge in Laredo, Texas. Apparently, the decision was made without a public hearing.

Hazardous materials traffic will remain restricted to the Colombia border-crossing bridge about 10 miles north of Laredo. Tanker rigs must continue to use heavily congested Mines Road before and after the crossing at the Colombia bridge. Also known as state highway 1472, the road runs through a heavily industrialized part of Laredo.

The new bridge will bring to four the number of border crossing points in the Laredo area, and it will be a badly needed addition to the city's infrastructure. The bridge will be dedicated to commercial traffic and will be linked to I-35 by a limited-access, multilane highway. Construction should start before the end of the year.

"The new bridge with its limited-access highway would be much safer for hazardous materials shipments," said James Giermanski, a professor at the Graduate School of International Trade and Business Administration at Texas A&M International University. "Hazardous materials safety has become a major concern in Laredo."

Busiest Crossing Giermanski stressed that Laredo is the busiest US-Mexico border crossing point in the United States, and traffic levels are only going to increase in the future. He was part of an impressive lineup of speakers at the North American Trucking Conference that was held September 9-11 in Laredo. The conference was hosted by the North American Transportation Alliance, which is under the direction of the American Trucking Associations (ATA), Canadian Trucking Alliance (CTA), and Camara Nacional del Autotransporte de Carga (CANACAR).

"The Port of Laredo is one of the largest inland ports in the United States," he said. "Since 1994, slightly less than one-third of total trade between the United States and Mexico physically passed through Laredo. The Port of Laredo handles more trade with Mexico than all of the inland ports of Arizona, California, and New Mexico combined.

"Last year, 1,227,433 loaded trucks crossed the Laredo bridges. If these trucks were lined up bumper to bumper, they would form a line 15,808 miles long and could go from Laredo to the Canadian border 91/2 times."

Trade between the United States and Mexico has increased by almost 57% during the last three years. This includes a significant number of chemical shipments. Giermanski predicted that US-Mexico trade will continue to grow, though at a slower pace.

Further, the Port of Laredo will remain a focal point. He predicts that it will continue to handle in excess of 25% of the shipments moving between the United States and Mexico.

Improvements Needed

That said, Giermanski has some definite ideas about steps that need to be taken to wring the most out of the North American Free Trade Agreement (NAFTA). First and foremost, the border needs to be opened as was called for in the trade treaty. At the very least, it should be opened incrementally to accommodate the North American Trade Automated Prototype (NATAP) program developed by US Customs.

Government officials need to open a formal dialogue to permit direct land transportation access in Mexico without having to stop on the US side of the border. Increased staff levels of Customs, Agriculture Department, and Food and Drug Administration personnel are needed at major land-port crossings.

NAFTA super highway funding should be conditioned on Mexico's adoption of unimpaired land cross-border delivery into Mexico as already exists with air and vessel traffic. More federal funding should be provided to defray state expenses in providing NAFTA-related infrastructure and inspections. Future infrastructure spending should be conditioned on the willingness of state and local governments to improve current crossing practices.

Tom Wade, president of the Laredo Transportation Association, called for a number of changes in customs clearance procedures. "In every other transport mode, shipments clear on arrival in the destination country," he said. "Howeve r, truck shipments come to an abrupt halt at the bridges linking the United States and Mexico."

Wade added that the arrangement is to the economic advantage of the customs brokers who are located along the border. "Laredo seems to be the worst location," he said. "Problems don't seem as significant at other gateways. The main point is that we shouldn't be forced to use brokers at the border."

Maria Reba, director of the South Texas Customs Management Center, said that NATAP should significantly improve the flow of cargo across the US-Mexico border. NATAP is a technology-based system that is designed to ensure the seamless movement of cargo from origin, across the border, and to the final destination. Besides the United States, customs officials from Canada and Mexico have been involved in development of the system.

Drug Smuggling Even with better electronic systems, some delays can't be avoided, though. Smuggling is a problem that can't be ignored. Trucks play a big role in smuggling, especially for illegal drugs.

"We don't search every vehicle, but we've still had 14 cargo seizures in Laredo since January," Reba said. "We confiscated 7,000 pounds of cocaine and 7,000 pounds of marijuana so far this year. Currency seizures are up significantly.

"To reduce the delays that result from cargo inspection, we need mobile and fixed-position X-ray machines. We need better intelligence that will enable us to target suspicious shipments. We are dependent of congressional appropriations for much of this."

Drug smuggling was one of the excuses the Clinton Administration used in 1995 to block provisions of NAFTA that would have allowed unrestricted land transport movements into the states on both sides of the US-Mexico border.

"We've made a little progress in resolving some of the issues, but it hasn't been spectacular," said Emile di Sanza, assistant director of the Motor Carrier Policy Branch at Transport Canada. "There is a lot of uncertainty over the border impass.

"Canada is very disappointed that the border opening has been delayed. We can't achieve full trade efficiency until that happens. The necessary mechanisms are in place for full integration of transport operations in all three countries."

US and Mexican government officials expressed support for the delayed NAFTA provisions but avoided suggesting a timetable. Instead, they discussed all of the changes that are still needed.

Greater Harmonization "We're working toward greater harmonization, and we've made great strides," said Tom Kozlowski, Office of Motor Carriers, Federal Highway Administration, DOT. "We're finalizing an agreement on driver license issues. The minimum age for truck drivers will be 21. Medical certification will be incorporated into the commercial driver license."

Vehicle licensing differences still need to be resolved. The United States and Canada are part of the International Registration Plan (IRP), but Mexico isn't. "We haven't seen much progress on this yet," Kozlowski said.

Jose Aguilar Alcerreca, director general of Autotransporte Federal at the Secretaria de Comunicaciones y Transporte, countered that Mexico already has a national vehicle registration program. It shouldn't be hard to link the programs.

"We were ready for the border opening on December 18, 1995," Aguilar said. "Over 200 Mexican companies have asked for cross-border permits. Most of these companies are based along the US-Mexico border. They employ English-speaking drivers, and they understand the US transportation rules."

He said that Mexico has worked hard to implement standards and systems that bring it into line with Canada and the United States. A drug and alcohol memorandum has been signed, and Mexico is cooperating with the Commercial Vehicle Safety Alliance (CVSA) on truck inspection programs. Additional training has been provided for 4,000 federal highway patrolmen, and patrol cars are being equipped with computers. Minimum safety requirements were adopted this year.

While acknowledging that progress has been made, Aguilar stressed that serious problems remain. "We've been hurt by peso devaluations, and interest rates are going back up to 60%," he said. "We faced a lot of trucking companies failures during the last financial crisis in 1994-95. The UPS (United Parcel Service) fleet in the United States is larger than the entire commercial vehicle population in Mexico. We're still trying to determine which Mexican highways can safely handle the longer US trailers. We do not have a developed country, but we are still very concerned about highway safety."

Although NAFTA land transportation provisions aren't likely to be implemented anytime soon, the freight traffic between the United States and Mexico continues to grow. Despite the political waffling, the trade treaty has been an overwhelming success for all three NAFTA countries.

NAFTA growth exceeds the rest of the world's trade, according to Martin Labbe, president of Martin Labbe & Associates. A strong industrial base is in place within NAFTA, making it a relatively self-sufficient trading bloc. The three underlying economies are strong and should continue to be so.

The transportation industry, especially trucking, has been and will continue to be a key beneficiary of the trade explosion due to NAFTA. In 1997, revenues for truck shipments from the United States to Canada generated $111.2 billion. To the south, $55.6 billion came from truck movements into Mexico. Significant revenues also were generated by truck cargoes transported into the United States from Canada and Mexico.

Labbe predicts that the trucking activity between the NAFTA countries will grow significantly in coming years, and that will pose a number of challenges. "By 2006, there will be nearly 4.7 million trucks (Classes 3-8) operating on US highways," he said. "Average annual miles per truck will increase to more than 74,000. Some fleets are already running 250,000 miles or more a year per tractor."

Two key concerns are highway congestion and the driver supply. Labbe said that highway weights in the United States need to be raised to help alleviate the coming congestion, and he suggested 95,000 pounds as the target. Mexico's labor pool offers a partial solution to the US driver shortage.

"They have plenty of potential truck drivers in Mexico," he said. "Demographics work against pulling more drivers from the US population. Even higher pay will not solve the problem. US truck driver pay rose by about six percent industrywide in the past year, and we see another six percent increase during the coming year."

He said that Mexican trucking companies will enjoy some of the biggest gains once the NAFTA land transportation provisions are enacted. Those provisions permit qualified trucking fleets to operate freely throughout the states on either side of the US-Mexico border.

Trade Growth The truck fleets should have plenty to do, according to Mauricio Gonzalez, director general of Grupo de Economistas y Asociados (GEA). The size of trade between Canada, Mexico, and the United States just prior to passage of NAFTA was about $300 billion. The total should be in excess of $600 billion by 2001, just three years from now.

The main goal of NAFTA was to reduce trade barriers among the three countries, and it has been very successful in that respect. By the end of 1998, almost two-thirds of US and Canadian exports to Mexico will be tariff-free, as will 87% to 92% of Canadian and US imports from Mexico.

By 2003, almost all trade between the three countries will be tariff-free. High technology and capital intensive goods flow mostly from the United States and Canada, while Mexico is a source of primary goods and capital intensive goods with a large import content. Industries making the biggest overall gains were textiles, automobiles, and agriculture. "Some US producers may have been displaced by Mexican imports, but those imports have added to the supply of goods available to US consumers and provided opportunities for those involved in distribution," Gonzalez said. "NAFTA should beconsidered a general success for all of the involved parties."

NAFTA faces a number of challenges in coming years. Fears of a worldwide recession and a slowdown in the US economy could raise new criticisms against the trade agreement. US, Canadian, and Mexican legislators continue to look for ways to resurrect protectionist economic policies from the past. Several potential presidential candidates in the US and Mexico could raise anti-NAFTA issues during upcoming campaigns.