For Contract Freighters Inc., a large truckload carrier that moves a good deal of freight across the U.S.-Mexican border, the recent Supreme Court ruling opening U.S. roads to Mexican trucks has not nudged the carrier’s logistics horizons beyond “business as usual.”
“The ruling is not like a light switch. As long as we’re financially stable and are able to leverage the assets necessary to compete, why worry?” CFI president Herb Schmidt told Fleet Owner, indicating that he sees a level playing field between Mexican and U.S. carriers. “I don’t think I see anything from NAFTA that interferes with our ability to compete.”
The International Brotherhood of Teamsters (IBT) had lobbied against the NAFTA condition opening U.S.-Mexican truck routes, signed over ten years ago. IBT warned that the low wages of Mexican drivers would run U.S. carriers out of business. Under the Clinton administration, a moratorium blocking the entry of Mexican trucks was issued, asserting that they are unsafe.
Although Mexican carriers do have an competitive edge in lower wages, they face many hurdles when competing directly with U.S. carriers, namely higher fuel prices, “astronomical” interest rates that drive up equipment costs, and the sheer number of U.S. carriers, according to Schmidt.
“There are some [Mexican carriers] that are excited in concept, but they are also intimidated by the U.S. and the size of the competition,” Schmidt said. “None of them think they will take over the four states along the border, that much I’m certain of.”
U.S. carriers had long been able move freight across the Mexican border, but are generally deterred by barriers such as a less-accommodating road and electronic account infrastructure. CFI has formed partnerships with Mexican carriers for cross-border transports as a result— a tidy arrangement that both Mexican and American carriers are generally satisfied with.
Although Mexican fleets won’t face the same challenges crossing the U.S. border, they will have plenty of their own. This levels the playing field, Schmidt said.
“I don’t see a flood of Mexican competition coming— I see more of a trickle that may eventually become a steady stream because of the application, insurance constraints and the cost of capital in Mexico,” Schmidt said.
But in the end, CFI is a company that has thrived as a result of free trade along the U.S. borders, the economy is bustling, and the trucking industry is no stranger to competition, Schmidt said.
“If the economy continues to grow, I certainly think there is room for all of us,” Schmidt said.