NAFTA cross-border trucking: Mexico retaliates after Congress stops Mexican trucks at the border.

AuthorMacDonald, Chad

ABSTRACT

The North American Free Trade Agreement (NAFTA) entitles Mexican tractor-trailers to enter the U.S. to deliver cargo from Mexico. In spite of NAFTA, the U.S. has only allowed Mexican trucks to operate in the U.S. during a controversial demonstration project that granted U.S. operating licenses to a select number of Mexican trucks during the Bush administration. The dispute over NAFTA's cross-border trucking provisions climaxed on March 16, 2009, when Mexico imposed $2.4 billion in retaliatory tariffs on U.S. imports in response to U.S. noncompliance.

This Note chronicles the U.S.-Mexico cross-border trucking dispute and argues that the U.S. should re-start a cross-border trucking demonstration project in exchange for Mexico ceasing its retaliatory tariffs. A demonstration project would inform a U.S. policy that fully complies with NAFTA regarding crossborder trucking's challenges and safety issues. In addition, this Note addresses the risks associated with allowing Mexican trucks to operate in the U.S. and offers the U.S. some practical suggestions for addressing these risks while complying with NAFTA.

TABLE OF CONTENTS I. INTRODUCTION II. BACKGROUND A. Events Preceding NAFTA B. Creation of NAFTA and Cross-Border Trucking Obligations C. Congressional Acts to Stop Cross-Border Trucking D. The True Meaning of the Dorgan Amendment E. The Bush Administration's Demonstration Project III. DEFINING U.S. OBLIGATIONS UNDER NAFTA A. Looking at the Text of NAFTA B. NAFTA Arbitration Panel Holds U.S. in Violation of NAFTA C. Stopping the Demonstration Project Violated NAFTA IV. PROPOSAL A. Generic Concerns B. Particularized Concerns V. CONCLUSION I. INTRODUCTION

On March 16, 2009, Mexico announced its intention to impose $2.4 billion in tariffs on United States (U.S.) imports in response to the termination of a cross-border trucking Demonstration Project by the U.S. (1) The Demonstration Project, which licensed a select number of Mexican tractor-trailers (motor carriers) to operate in the U.S., was created by the Bush administration after a North American Free Trade Agreement (NAFTA) arbitration panel held that the U.S. was in violation of NAFTA's cross-border trucking provisions. (2) Although the Demonstration Project did not technically satisfy the NAFTA cross-border trucking provisions, which basically entitled all Mexican trucks to operate within the U.S., it served as an armistice in the growing controversy between the U.S. and Mexico. (3) However, Congress broke the truce on March 11, 2009, when it removed funding from the Demonstration Project, and Mexico immediately struck back with tariffs on a variety of agricultural and industrial products. (4) The dispute over cross-border trucking has incited a "trade war" (5) that threatens tens of thousands of U.S. jobs (6) and seriously undermines U.S.-Mexico relations. (7) The U.S. must take swift action in order to restore trade relations with Mexico and preempt further weakening of the U.S. economy. (8)

The Mexican retaliatory tariffs instantly elevated the subject of an inconsequential thirteen-year debate to front-page news and White House press statements. (9) The White House indicated that resolving the trade dispute with Mexico was an "important priority," and stated that "exports create jobs here in this country and we don't want to find ourselves, in time of economic slowdown, creating or erecting a barrier to [Mexico]." (10) Only five days after President Obama approved a law terminating the Demonstration Project, (11) Press Secretary Robert Gibbs reported that "It]he President has tasked the Department of Transportation to work with the U.S. Trade Representative and the Department of State ... to propose legislation creating a new trucking project that will meet the legitimate concerns of Congress and our NAFTA commitments." (12)

This press statement is somewhat surprising considering the President's campaign statements. During his campaign for the presidency, then-Senator Obama opposed granting access to Mexican motor carriers and argued that the U.S. needed to re-negotiate NAFTA. (13) Nevertheless, the Obama administration announced that Ray LaHood, the Secretary of Transportation, will soon meet with members of Congress and propose guidelines in an effort to resolve the dispute. (14) The administration seems to be slowly moving towards compliance with NAFTA, but strong political forces continue to impede significant reforms. (15) The administration may have some difficulty in convincing Congress such reform is desirable, considering that Congress has thus far overwhelmingly opposed licensing Mexican motor carriers to operate in the U.S. (16)

Nevertheless, situations have changed and Congress may be forced to re-evaluate its views on cross-border trucking with Mexico, just as President Obama appears to be reconsidering his position on the issue. (17) Mexico strategically devised the retaliatory tariffs to have the greatest impact by "[choosing] products that originate in forty U.S. states so U.S. lawmakers would receive the maximum political pressure from constituents." (18) As a result, constituents in many areas are clamoring for an international solution as the tariffs threaten to snuff out their businesses. (19) Lawmakers are listening (20) and will likely be more receptive to seeking compliance with NAFTA in order to economically benefit many of their constituents. Moreover, if President Obama seeks to bring the U.S. into compliance with NAFTA, he can probably compel congressional acquiescence as he continues to enjoy a relatively high approval rating and Democratic control of Congress. (21) Therefore, the critical question is not whether President Obama can create a new cross-border trucking program but instead goes to what kind of program the Obama administration plans to create.

The details of the Obama administration's objectives remain unclear, (22) but Press Secretary Gibbs stated that President Obama wanted to create a new trucking project that would meet the United States' NAFTA obligations. (23) Although a compromise or other temporary diplomatic solution with Mexico, such as the Demonstration Project created by the Bush administration, would be easier to achieve, Gibbs's statement implies that the current administration has chosen to finally bring the U.S. into full compliance with its NAFTA obligations. Complying with NAFTA will undoubtedly be a challenging and unpopular task, but this Note argues that the U.S. should prioritize compliance with international law over domestic convenience. (24) Since entering office, President Obama has continually proclaimed that the U.S. is looking to reestablish relationships with other countries. (25) During one of his recent visits to Mexico he spoke of the need to "launch a new era of cooperation and partnership between" the U.S. and Mexico. (26) Now is the time to act on these principles and demonstrate that the U.S. honors its international agreements.

Part II of this Note provides a comprehensive chronology of cross-border trucking between the U.S. and Mexico. This Part describes the legal status of cross-border trucking prior to NAFTA, as well as how NAFTA and other preceding legislation impacted the flow of Mexican trucks into the U.S. Although the U.S., Mexico, and Canada agreed to cross-border trucking provisions in NAFTA, this Part will discuss how and why these obligations have not been met between the U.S. and Mexico. Finally, this Part will cover the multitude of congressional actions dealing with cross-border trucking, as well as the Bush administration's recently terminated Demonstration Project.

Part III will seek to establish the scope of the United States' international cross-border trucking obligations under NAFTA. A detailed review of the text of NAFTA and the 2001 NAFTA arbitration panel's findings and recommendations will help provide a framework for understanding these international obligations. (27) This Part will review the NAFTA treaty and the arbitration panel's report in order to provide legal guidelines for how the U.S. can treat Mexican motor carriers differently than U.S. motor carriers but remain in compliance with NAFTA. This treatment is an essential pre-requisite for the proposal offered in Part IV. Part III will confirm that the U.S. policy currently violates NAFTA and that the Mexican retaliatory tariffs are legal under NAFTA.

Part IV will lay out a two-part solution that seeks to bring the U.S. into compliance with NAFTA while also addressing the safety concerns associated with allowing Mexican motor carriers into the U.S. As it would be naive to expect the U.S. to hastily reform its trucking policies to comply with NAFTA cross-border trucking provisions, this Part recommends that the Obama administration first seek to re-establish a trucking pilot program with Mexico, similar to the Demonstration Project in effect under the Bush administration, in exchange for Mexico's elimination of retaliatory tariffs. Once the pilot program is operational, the Obama administration should cautiously reform U.S. trucking policies to bring the U.S. into full compliance with NAFTA. In addition, this Part discusses the risks associated with allowing Mexican motor carriers onto U.S. roads and proposes practical restrictions and regulations that will minimize safety concerns.

  1. BACKGROUND

    1. Events Preceding NAFTA

      On July 1, 1980, President Carter declared that he had signed the Motor Carrier Act of 1980, which "remove[d] 45 years of excessive and inflationary Government restrictions and redtape" on the trucking industry. (28) This deregulatory Act allowed new trucking companies to become licensed by the Interstate Commerce Commission (ICC) by showing that they were "fit, willing, and able to provide the transportation," and that "the service proposed will serve a useful public purpose." (29) This standard was substantially easier to meet than the standard set in...

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