No anniversary party for controversial cross-border trucking program

August 27, 2008

Congress and President Bush appear to be on a collision course over U.S.-Mexico trucking, but most likely trucks will continue to traverse the border, fostering the flow of international commerce, according to an expert at the W. P. Carey School of Business.

Arnold Maltz, professor of supply chain management, says Mexican truckers should be permitted to drive in the United States. To that end, Maltz is beginning a Border Enforcement Grant program to get Mexican drivers better-trained to drive on American roads.

At issue in Washington, D.C. is a small but controversial one-year pilot project that has allowed Mexican trucks to travel throughout the United States, although most of such travel has been in the border states. The pilot project ends September 6, and strong opposition to its continuation has been expressed in Congress by Democrats concerned about American jobs and highway safety, and by Republicans concerned about security and immigration issues.

The Bush administration wants to extend the program two years despite bipartisan criticism. The House Transportation and Infrastructure Committee approved a bipartisan bill in July to bar the program's continuation. The Senate Appropriations Committee approved a similar amendment, aimed at the U.S. Department of Transportation's fiscal 2009 budget, intending to stop the pilot program. Floor votes cannot occur until legislators' summer recess ends in September.

But less than a week after the House and Senate panels' votes, the USDOT said it plans to continue the program -- for two more years -- to allow Mexican truckers into the United States.

Besides trying to curb the pilot program after Sept. 6, the House bill would bar USDOT from granting Mexican trucking companies the authority to operate in the U.S., unless the agency first obtains Congressional authorization.

"American carriers cannot, technically, employ Mexican drivers right now," Maltz notes. "They can work with Mexican carriers, but only on international traffic."

Congress tried in 2007 to stop DOT from spending money to run the pilot program, and the Ninth Circuit U.S. Court of Appeals is reviewing the law. One of the reasons USDOT has cited for seeking a two-year extension is that participation rates fell below the agency's expectations. Maltz describes the first-year participation as "miniscule, with only 155 units authorized."

A Bush veto could occur if Congress passes a bill to shut down the program, Maltz says, noting that it is "interesting politically" that a two-year agreement, instead of a one-year accord, is being discussed in an effort to put the issue to rest for a while. A Bush veto, ironically, would come because he is perhaps more liberal than congressional Democrats on immigration, and more pro-free-trade than many members of his own party.

Maltz says an ounce of indulging parochial concerns (excessive protectionism) now could cost the United States a pound of international prosperity later.

The pilot-program controversy plays out against the much larger backdrop of the multibillion-dollar CANAMEX (Canada-American-Mexico Corridor) project, which links Pacific ports in western Mexico to Canada through Arizona, Utah, Idaho, Nevada and Montana. About $4 billion worth of highway and infrastructure improvements are planned. Many are under way or completed.

Driving down wages

Maltz concedes that trucking companies that employ Mexican truckers do use lower-cost drivers, who view their pay as a bonanza compared to what factory workers can earn in Mexico.

"You are talking about wages being held down, especially in the border states," Maltz says.

"A typical Mexican frontline worker is making considerably less than his/her U.S. counterpart," Maltz said, even with the meals and vacation time mandated in Mexico. Maltz notes, however, that "Mexican [carriers] aren't necessarily interested in operating all over the country." Maltz says that, although driver shortages are widely anticipated as U.S. drivers retire and young Americans show little interest in trucking, he cannot be sure that market forces will be adequate to rule out the kind of special protection Congress seems to have in mind.

"But given the general aging of the population, as well as the fact that we are already using Mexican and other immigrant drivers for many trucking duties (e.g. drayage at the ports of Los Angeles and Long Beach), and the very high turnover still in drivers, I do not see a great reason to protect the jobs. As I have mentioned, the presence of another driver pool is likely to put pressure on salaries, but in the long run we are heading for a driver shortage."

Downward effects on wages are likely to be mostly confined to border states, at least initially. From a Mexican-carrier standpoint, very few signed up for long-haul routes into the United States, Maltz notes. Staying in border states lessens the effect of language problems and also minimizes the inconvenience to Mexican carriers should an accident occur or a problem arise with a customer delivery.

Safety first

And what does the safety record show so far?

"At this point, based on the DOT measurements, on long-haul Mexican trucking, there's not any difference in safety records or any difference in equipment out-of-service rates,' Maltz says.

The issue is still being debated despite the fact it could have been settled when the original North American Free Trade Agreement (NAFTA) went into effect in 1994, Maltz says: "The original agreement had a phase-in clause that Mexican carriers would initially operate only in the border states."

Many suspected that the Teamsters lobbied President Clinton to abrogate that part of the agreement.

"Clinton blamed safety, but it sure looked like politics to a lot of people on the outside," Maltz says. "This particular issue was negotiated under NAFTA, which Clinton championed."

Maltz's Border Enforcement Grant focuses primarily on two issues:

  1. Getting a consistent, supportable test together for the Federal Motor Carrier Safety Administration (FMCSA) inspectors at the Border, so that, if and when many more Mexican carriers participate, it can be ascertained that drivers speak enough English. (FMCSA is an agency of the USDOT.)
  2. Setting up a program of training to make sure Mexican and other Limited English Proficiency drivers can become fluent enough in English to be safe, effective drivers in the United States.

"The other issue for language is the safety of the inspectors," Maltz says. "That is another major motivator of the grant."

Maltz's Border Enforcement Grant application stated: "In April 1995, the NAFTA Land Transportation Standards Subcommittee on Commercial Vehicles agreed that 'it is the responsibility of the driver and the motor carrier to be able to communicate in the country in which the driver/carrier is operating so that safety is not compromised.'"

The view from the border

"The grant activity has actually begun," Maltz says, before one of several recent trips to the Arizona-Mexico border city of Nogales to work on his project, funded by a $500,000 grant from the USDOT. The Nogales fieldwork involves observations of everyday goings on.

"We were talking to the inspectors at the Border Port of Entry about how they inspect Mexican trucks coming across the border into Arizona," Maltz says.

Inspectors see drivers going back and forth all the time and get to know them. Such familiarity is an informal, organic security measure that supplements USDOT's required, formal vetting of Mexican carriers.

"The same set of Mexican drivers crosses most of the trailers," Maltz says. "They know their trucks, and the trucks themselves look very presentable and generally pass inspections."

The downside, Maltz says, "is that there is a transfer on the Mexican side to the specialized crossing drivers and another transfer on the U.S. side from the specialized drivers to the U.S. drivers. Hence, lots of extra cost and delays in the system."

The remedy to such inefficiencies is to train Mexican drivers and to increase their number, which brings the issue back to the friction between Bush and Congress over the extension of the pilot trucking program.

"My best guess is that Congress, if they get anything done, will refuse funding for the program; that may not happen in the Senate," Maltz says. "Bush could veto it, depending on what bill this is attached to."

Maltz expects lots of union and independent truck driver opposition to continuing the program, both because they do not want the cheap competition and because they are skeptical of DOT findings on Mexican safety.

In calling for the survival of the Mexican trucking pilot program, FMCSA chief John Hill said in a statement that: "We intend this extension to reassure trucking companies that they will have sufficient time to realize a return on their investment, and we anticipate additional participation with this extra time. ... The extension will ensure that the demonstration project can be reviewed and evaluated on the basis of a more comprehensive body of data."

That data is what Maltz’s grant program is busy collecting, he hopes, not in vain.

Bottom Line:

  • The year-old pilot program for Mexican trucking in the United States is off to a small and controversial start.
  • Bipartisan criticism in Congress may put legislation ending the program on President Bush's desk, and he may veto it.
  • Researchers, international trade advocates and Mexican carriers say the program needs more time to be evaluated.
  • Washington politicians have a tough call to make as they balance free trade, protection of American jobs, traffic safety and border security.
  • Meanwhile the CANAMEX (Canada-American-Mexico Corridor) project, launched a decade ago to increase North American access to Pacific Ocean steamship lines through western Mexico ports, has continued apace and would be aided by liberalized cross-border trucking.