The U.S. Dairy Exporter Blog: Market Analysis, Research & News

  • Truck Dispute with Mexico Needs Resolution

    By Jaime Castaneda October 11, 2010

    The United States justifiably calls for other nations to live up to the terms of negotiated free trade agreements. Those calls ring hollow when we refuse to live up to our own freely negotiated trade commitments, specifically, in this case, the cross-border trucking requirements mandated in the North American Free Trade Agreement (NAFTA).

    In the NAFTA, the United States and Mexico agreed to allow trucks from each country to cross the border to deliver cargo, provided trucks and drivers adhered to each country’s regulations when they did so.

    NAFTA entered into force Jan. 1, 1994. Trucks involved in trade were supposed to freely cross to all states bordering Mexico by Dec. 18, 1995, and to the entire United States by Jan. 1, 2000. But nearly 15 years later, the United States continues a moratorium on Mexican deliveries, ostensibly over safety concerns.

    Mexico has shown patience. The country filed a complaint with a NAFTA dispute settlement panel in 2000. In February 2001, that panel (which included U.S. representatives) unanimously ruled that a blanket exclusion of Mexican trucks violated U.S. obligations, authorizing Mexico to apply retaliatory tariffs on U.S. goods.

    The Mexican government held off for eight years, preferring diplomatic engagement to unilateral sanctions. In 2007, the Bush administration created a pilot program that appeared likely to lead to a resolution, but Congress voted to defund it in early 2009, again claiming safety concerns.

    Finally in March 2009, the Mexican government said “enough” and implemented retaliatory tariffs, including one dairy tariff line of minor trade value. More than a year later, with no evident progress toward resolution, Mexican authorities revised the retaliatory product list to be more punitive and thereby put additional pressure on the U.S. government.

    Mexico added, among other products, four cheese tariff lines, assessing 20-25 percent tariffs effective Aug. 19—a far cry from the zero duties of NAFTA.

    Total U.S. exports under the four cheese tariff lines from January-June 2010 were nearly 20,000 tons worth an estimated $59 million. In 2008 and 2009, U.S. shipments to Mexico under the four tariff lines averaged about 35,000 tons and $104 million.

    In addition to spawning retaliatory tariffs, the failure of the United States to live up to its NAFTA commitments is a poke in the eye of the country’s top dairy trading partner and a key factor in the health of the U.S. dairy industry as a whole. U.S. dairy shipments to Mexico averaged $807 million annually from 2007-2009, representing more than a quarter of total U.S. dairy export value over that time.

    The longer the cross-border trucking issue remains unresolved, the greater negative impact on the U.S. dairy industry. And one thing is certain: The biggest obstacle toward resolution is the lack of engagement currently taking place between the administration and the Mexican government to address any concern and find a way to move forward. Yet, it is imperative that once the administration implements a new program, Congress must endorse the effort to finally end this dispute.

    Two 2009 U.S. Department of Transportation (DOT) reports found that Mexican trucks and drivers were as safe or safer than U.S. trucks and drivers. An August 2009 DOT study noted that the Federal Motor Carrier Safety Administration performed more than 220,000 inspections on Mexican trucks in fiscal 2008. Only 1.2 percent of Mexican drivers were placed out of service for a violation, as compared to nearly 7 percent of U.S. drivers inspected during that time. And slightly fewer Mexican trucks than U.S. trucks were placed out of service for safety reasons or because they violated other regulations.

    Given consistent positive findings regarding the good safety track record of Mexican trucks that participated in the pilot program and the existing requirements that hold Mexican trucks to an even higher safety standard than those the United States must meet, there really is no reason why we should not be complying with NAFTA stipulations. So the question again must be asked: How can we expect other nations to live up to their free trade commitments with the United States when we do not do the same?

    For our part, USDEC is fully engaged with the administration, Congress and the Mexican government to seek a quick resolution to this issue. Additional involvement from producers, processors and any other company that trades with Mexico—or any other country for that matter—would help solve this issue of importance to our largest market and of significance for U.S. trade compliance credibility in all markets. (If you would like to be involved, please contact the USDEC office at 703-528-3049 for additional guidance.)

    It is also important to recognize that dairy alone cannot turn the tide on an issue of this magnitude. Doing so requires hard work by a lot of other business sectors throughout the United States. USDEC is working with a coalition of other impacted and interested organizations, including NMPF and IDFA, and active involvement by these other industries is absolutely critical. We can do our part, but affecting this type of change requires a broad-based outcry.

    Editor’s note: If you have questions or input on the cross-border trucking issue, please contact Jaime Castaneda at jcastaneda@usdec.org or 703-528-3049.

    (This article first appeared in Cheese Market News in October 2010.) 

    The U.S. Dairy Export Council represents dairy farmers, proprietary processors, cooperatives, ingredient suppliers and export traders. Its mission is to enhance U.S. competitiveness and increase global sales of U.S. dairy ingredients and products.

     

    Trade Policy Mexico
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