Free trade but not free transport? The Mexican stand-off.

• Author: Dempsey, Paul Stephen
• Position: Mexican bus and trucking companies - North American Free Trade Agreement

With ninety-five million inhabitants, Mexico became the United States' second largest trading partner, following only Canada. (1) Nearly $250 billion in trade moves across the border annually, a 191% increase in the decade following the signing of the North American Free Trade Agreement (NAFTA). (2) In NAFTA's first decade, truck traffic across the U.S.-Mexico border increased approximately 400%. (3) By 2000, trucks were responsible for transporting an estimated 75% of the goods moved between the two nations. (4) Five million trucks cross the U.S.-Mexican border each year. (5)

A number of legal and regulatory barriers limit operations by Mexican bus and trucking companies within the United States. With the exception of cross-border transportation of passengers in charter and tour bus service, operations have historically been limited to the commercial zones (defined as a zones extending from three to twenty miles of a community's limits, depending upon population) of U.S. border communities. (6) In the commercial zone, Mexican carriers would deliver trailers to U.S.-based long-haul trucks, which slowed the movement of goods and increased transportation costs. These limitations applied to Mexican common carriers, private carriers and to carriers of both regulated and exempt commodities. Prior to NAFTA, U.S. carriers were completely banned from operating in Mexico, even though Mexican carriers were able to operate within U.S. commercial zones.

As of September 1994, the Interstate Commerce Commission (ICC) issued licenses to 4,666 Mexican motor carriers to operate within the commercial zones along the U.S.-Mexico border. In fiscal year 1993, for example, the ICC obtained twenty-eight injunctions against Mexican carriers performing unauthorized bus or trucking operations in the U.S. The Department of Transportation (DOT) investigates Mexican carriers suspected of operating within the U.S. without the required license and those licensed Mexican carriers that are suspected of operating outside of the commercial zones. (7) The DOT also investigates those carriers that concealed their Mexican ownership or control when they applied for and received a license authorizing them to operate in interstate commerce in the U.S.

Under NAFTA's terms, which became effective in January 1994, most restrictions against Mexican carriers operating in the U.S. were to have been phased out in the 1990s. (8) More specifically, NAFTA laid out a framework under which, beginning December 18, 1995, Mexican trucking companies were to have been allowed to obtain licenses to perform cross-border operations into the four U.S. states bordering Mexico (i.e., California, Arizona, New Mexico and Texas), and U.S. carriers were to have been allowed entry into the six northern border states of Mexico. (9) On January 1, 2000, NAFTA provided cross-border access for Mexican carriers that engage in foreign commerce only, throughout the United States. Reciprocal rights were to be granted to U.S. carriers throughout Mexico. (10) A similar phased-in schedule will eventually allow full access by Mexican passenger carriers to the U.S. market. (11)

NAFTA also contemplated lifting foreign ownership restrictions. (12) NAFTA provided that on December 18, 1995, Mexican investors were to be permitted to invest in 100% of a Mexican carrier providing international service, while U.S. investors were allowed to invest up to 49% in U.S. carriers providing international service. (13) On January 1, 2001, that percentage increased to 51%; complete ownership is to be permitted in 2004...