For The Defense, December 2011 - DRI Today

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Trucking Law Cross-border trucking has been a long time coming. NAFTA contemplated such provisions at its inception, which stalled due to various political and economic considerations. The historical dialogue and economic and political pressures that led to the 2011 MOU extended over three U.S. presidential administrations and, as discussed below, until recently the United The threat of terrorism weighed heavily on many Americans’ minds when it came to border security… and rushing to open the border in any respect became less of a priority. States had avoided dealing with them despite tariffs, litigation, and intense international pressure. How NAFTA Derailed President George H.W. Bush spearheaded NAFTA, a trilateral free-trade agreement between the United States, Canada, and Mexico. Discussions in the early 1990s among the participating countries about eliminating tariffs on products traded between them ultimately led to NAFTA, which the presidents of the countries signed on December 17, 1992. The ambitious agreement took effect on January 1, 1994, and it scheduled full implementation for January 1, 2008. The combined gross domestic product of the three treaty signatories made the area it governed the largest free-trade area in the world. Since its inception, NAFTA has had a real and incontrovertible effect on the member nations’ economies. From 1993 to 2007, trade among the NAFTA nations more than tripled, from $297 billion to $930 billion. Additionally, business investment in the United States rose by 117 percent in that same period, compared with a 45 percent increase between 1979 and 1993. 64 ■ For The Defense ■ December 2011 And U.S. output manufacturing rose by 58 percent between 1993 and 2006 compared with 42 percent between 1980 and 1993. Manufacturing exports reached an all-time high in 2007 with a value of $982 billion. See Office of the U.S. Trade Representative, Exec. Office of the President, NAFTA Facts, NAFTA—Myth vs. Fact (Mar. 29, 2008), http://www.ustr.gov/sites/default/files/ NAFTA-Myth-versus-Fact.pdf. NAFTA was contemplated at a time when the United States’ policy toward Mexican trucking was in flux. The Motor Carrier Act of 1980 was among the first legislative acts to open the door to Mexican trucking companies, offering a relatively pain-free process for gaining permission to engage in cross- border trucking. Under the Motor Carrier Act of 1980, trucking companies, including Mexican carriers, were permitted to engage in cross- border trucking as long as they were “fit, willing, and able to provide the transportation.” See Motor Carrier Act of 1935, 49 U.S.C. §10101. In 1982, however, the United States closed the brief window of opportunity created by the Motor Carrier Act of 1980 for enterprising Mexican trucking companies to engage in cross- border trucking. The United States placed a moratorium on new licenses and permits to Mexican trucking companies as part of the Bus Regulatory Reform Act (BRRA) of 1982. While the BRRA did not single out Mexican trucking companies specifically, it may as well have because it placed a moratorium on issuing permits or certificates to motor carriers domiciled in, or owned or controlled by, a contiguous foreign country, encompassing both Canada and Mexico. The president, however, had the authority to lift the moratorium in whole or in part for any country. See Mem. on Bus Regulatory Reform Act of 1982, Public Papers of Ronald Regan (Sept. 20, 1982), http://www. reagan. utexas.edu/archives/speeches/1982/92082c.htm. After signing the BRRA into law, on September 20, 1982, President Ronald Reagan lifted the moratorium against Canada. Id. Mexico had no such luck, and the moratorium persisted. The BRRA colored the United States- Mexico trade environment, and ultimately the NAFTA discussions that began in earnest in the early 1990s. Upon its implementation on January 1, 1994, NAFTA had sweeping effects on the tariffs applicable to Mexican imports and exports. NAFTA effectively eliminated tariffs on more than one-half of U.S. imports from Mexico and more than one-third of U.S. exports to Mexico, and it set a timetable of 10 years for the full implementation of the agreement and 15 years for certain U.S. agricultural exports. See http:// en.wikipedia.org/wiki/Nafta#Provisions. Limited Cross-Border Trucking Stalls NAFTA also included express cross- border trucking provisions intended to allow each participating nation eventually to ship products across the respective borders of the other participating nations. The agreement adopted the following guidelines to prevent signatories from favoring domestic providers: Article 1202: National Treatment 1. Each Party shall accord to service providers of another Party treatment no less favorable than that it accords, in like circumstances, to its own service providers. North American Free Trade Agreement Arbitral Panel, In the Matter of Cross- Border Trucking Services, Secretariat File No. USA-MEX-98-2008-01, Final Report of Panel, at 64 (Feb. 6, 2001), http://www.worldtradelaw.net/nafta20/ truckingservices.pdf. Article 1203: Most-Favored Nation Treatment Each party shall accord to service providers of another Party treatment no less favorable than it accords, in like circumstances, to service providers of any other Party or of a non- Party. Id. Article 1104: Standard of Treatment Each Party shall accord to investors of another Party… the better of the treatment required by Articles 1202 and 1203. Id. at 75. December 18, 1995, was targeted as the date when the U.S. border would officially open to allow Mexican carriers to conduct limited shipping into California, Arizona, New Mexico, and Texas. Phase two, to begin on January 1, 2000, was intended to abolish state-based restrictions and open the border to Mexican carriers to engage in cross- border trucking anywhere in the United States. See North American Free Trade Agreement, Annex I: Reservations
for Existing Measures and Liberalization Commitments, Schedule of the United States. As these NAFTA deadlines loomed, the United States relied on border security and public safety concerns to support the decision to extend the moratorium under the BRRA, thus delaying implementing agreed upon commitments to liberalize cross- border trucking markets. The United States Violates NAFTA As the first date for border opening under NAFTA approached in 1995, President Bill Clinton extended the BRRA moratorium, which prohibited Mexican truckers from traveling more than 20 miles into U.S. territory. In 1998, in response, Mexico formally requested that a NAFTA arbitration panel investigate and opine on the impact of the U.S. failure to lift its moratorium on the processing of applications by Mexican- owned trucking firms for authority to operate within the United States. On February 6, 2001, the North American Free Trade Agreement Arbitral Panel established under Chapter Twenty of NAFTA issued a final order, finding that the U.S. had breached Article 1202 and 1203, as well as the liberalization guidelines in Annex I of NAFTA. North American Free Trade Agreement Arbitral Panel, supra, at 81. In addition, the panel specifically rejected the United States’ assertion that Mexico’s inadequate trucking regulations warranted withholding permits. Id. Although the ruling opened the door for Mexico to impose new tariffs against the United States, Mexico opted to continue informal and diplomatic discussions with the Bush administration, and it did not take retaliatory actions. Later that year, September 11, 2001, shook the United States to its core, and the United States tightened border security, making liberalizing granting cross- border trucking permits politically undesirable to pursue given the increased focus on securing borders. For years to come, the threat of terrorism weighed heavily on many Americans’ minds when it came to border security, and indeed, it continues to do so today for many, and rushing to open the border in any respect became less of a priority. Mexico remained subject to the moratorium until September 2008, when a pilot program led to as many as 100 Mexican trucking companies hauling cargo across the U.S. border. Following the historic political tug of war that comes part and parcel with cross- border trucking, the United States again quickly shut Mexico’s window when in 2009, a spending bill passed in Congress that cancelled the program. This time, Mexico responded with the retaliatory tariffs that became a focus of the recent talks between President Obama and President Calderon, culminating in the 2011 MOU. See Drajem & Gould, supra. Specifically, Mexico imposed retaliatory tariffs on 89 categories of U.S. exports totaling approximately $2.4 billion in exports from 40 states. Organization of American States, State’s Foreign Trade Information System, Mexico, http://www. sice.oas.org/ctyindex/USA/USTR_Reports/2011/ NTE/MEX_e.pdf. Against the backdrop of all of this history the United States and Mexico once again came to the bargaining table to try to reach some common ground regarding cross- border trucking. Perhaps realizing that such an agreement could be mutually beneficial, the two countries soon executed the 2011 MOU, and the United States renewed its commitment to cross- border shipping. Picking Up Where NAFTA Left Off The inefficiency created by the 1982 moratorium on licensing Mexican trucking companies extended by President Clinton drove the 2011 MOU negotiations. Due to the licensing moratorium a Mexican carrier transported goods to the U.S. border by a Mexican carrier, delivered them to a temporary short-haul provider to cross the border, and then an American trucking company picked them up to haul them to a final destination. Such inefficiency and expense drove the Mexican government to press diplomatically for a new understanding, while U.S. safety concerns ultimately prevailed in the new pilot program created under the 2011 MOU. The 1994 MOU, as drafted by the U.S./ Mexico Joint Working Committee on Transportation Planning, was intended to address many of the most contentious issues facing Mexico- United States cross- border trucking. As stated in Article I of the 1994 MOU, “The Parties intend to cooperate on land transportation planning and to establish methods and procedures to analyze current and future transportation infrastructure needs to facilitate efficient, safe and economical cross- border transportation movements.” See U.S./Mexico Joint Working Comm. on Transp. Planning 1994 Mem. of Understanding, Article 1, http://www.borderplanning.fhwa.dot.gov/ mou1994.asp. The 2011 MOU establishes a pilot program… which would allow Mexican trucking companies to engage in cross- border shipping, provided that they met the stringent requirements of the MOU. Generally, however, the 2011 MOU establishes a pilot program of up to three years, as determined by agreement of the United States and Mexico, which would allow Mexican trucking companies to engage in cross- border shipping, provided that they met the stringent requirements of the MOU. See Mem. of Understanding Between the U.S. Dep’t of Transp. & the Secretaria de Comunicaciones y Transportes of the United Mexican States on Int’l Freight Cross Border Trucking Services, at Article 2, “Scope,” (July 6, 2011), http://www.fmcsa. dot.gov/documents/Mexican_MOU_Eng.pdf. Annex 1 of the 2011 MOU outlines the requirements that a Mexican trucking company must meet to qualify for a permit to engage in cross- border shipping: 1. All Mexican- domiciled motor carriers that wish to participate in international freight cross- border trucking services in the U.S. are to complete the application OP-1 MX. The application, and accompanying application fee, is to be submitted to FMCSA. Motor carriers who partic- Mexico, continued on page 84 For The Defense ■ December 2011 ■ 65
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