NAFTA delays, competition issues dominate Canacar transport meeting

CONTINUED failure by the United States to live up to treaty obligations in granting US access to Mexican truckers drew strong criticism during Mexico Transporta 2002. Mexican truckers remain limited to a 12-mile commercial zone along the US-Mexico border.

Mexican President Vicente Fox Quesada vowed to continue pressuring the US government to let Mexican trucks have access to all of the United States. Fox spoke at a luncheon held on the first day of the conference, which ran from June 11 to 13. Mexico Transporta was sponsored by Canacar, the Mexican trucking association.

“We will not give in until they (the United States government) eliminate the protectionist and discriminatory barriers,” Fox said. “Trucking companies in all three countries (Mexico, Canada, and the United States) are guaranteed equal treatment under NAFTA (the North American Free Trade Agreement).”

Addressing safety and insurance requirements that the United States recently adopted for Mexican carriers, Fox said that his administration reserved the right to take retaliatory action against US trucking companies planning to operate in Mexico. It should be noted that Mexico remains closed to US truck fleets, and Fox said nothing to clarify that issue.

Missed deadlines

So far, every US deadline for opening the border to Mexican trucks has been broken. The most recent setback came this year when a suggested mid-July deadline slipped by. Under NAFTA, truck fleets in the United States, Mexico, and Canada were to have gained the right to operate freely throughout the three countries starting in 1998.

Many in the Mexican trucking community are fed up to the point that they no longer support NAFTA. Speaking for the trucking industry as a whole, Canacar president Manuel Gómez Garcia said that Mexicans have given up on NAFTA and the United States.

“Why should we harmonize with the United States at this point?” he asked. “Why shouldn't we just leave all of our borders closed? The new US rules announced for Mexican carriers are more restrictive than those covering US and Canadian carriers.”

Guillermo Berriochoa, president of Transportes Inter-Mex, said he moved his first cross-border shipment 20 years ago. More barriers are in place today than there were at that time.

“I've become very discouraged,” he said. “US actions are wrong and are designed simply to keep Mexican truckers out of the US market. We in Mexico have to defend our interests. To that end, Transportes Inter-Mex filed suit against the United States last year for failing to meet the requirements of NAFTA.”

Despite the lawsuit, Berriochoa said he is tired of fighting for open access to the United States. “We've pulled back and sold off our US trucking assets,” he said. “We're skirting the US discrimination by opening a rail transloading facility north of Mexico City. We'll use the railroads to avoid US truck restrictions.”

Speakers from the United States agreed that the Mexican complaints have justification. However, NAFTA has benefited all three North American countries, and progress is being made.

“I believe we will overcome the barriers that have prevented the United States from being opened to Mexican carriers,” said Clifford Harvison, president of National Tank Truck Carriers. “Too much money is involved in NAFTA trade today for us to go backward.

“The seven-year delay in opening the US to Mexican trucks as called for in NAFTA was prompted by political skirmishing initiated by groups such as the Teamsters, which has donated a lot of money to the US political system. Unfair stereotypes were used to keep the border closed, and many of us find these stereotypes offensive. We urge our Mexican colleagues not to take it personally. We do the same sort of thing to ourselves.”

Mexican truckers do have support in the United States, according to William Canary, ATA president. “The American Trucking Associations (ATA) will be a strong ally to Canacar,” he said. “ATA advocates equitable treatment of carriers across North America. NAFTA's full potential has been denied to trucking.

“In today's economy, we need a seamless North American trucking environment. Trucking drives the economy of this continent. Our futures (truck fleets in the United States, Mexico, and Canada) have never been so closely tied together.”

Brian McLaughlin, Federal Motor Carrier Safety Administration (FMCSA), confirmed that the Bush Administration and the US Department of Transportation remain committed to opening the border to Mexican trucks, but highway safety cannot be compromised. DOT officials continue to meet with their Mexican counterparts to resolve confusing issues.

“Much of the NAFTA discussion in the United States has revolved around safety, and that's as it should be,” he said. “The safety factors are being addressed. For instance, we have improved vehicle inspection capabilities along the US-Mexico border by hiring more inspectors and increasing training.”

Standardized safety

Harmonized transportation safety standards are needed to ensure a balance among all three North American countries, according to Carlos González Narváez, director general of highway transport at the Secretariat de Communicaciones y Transportes (SCT). Within Mexico, SCT plans greater regulatory supervision and higher fines. SCT will target high-accident-frequency carriers.

Even with the current difficulties, Mexican carriers are benefiting from NAFTA, according to Ángel Villalobos, sub secretary of international business negotiations at Mexico's Secretariat of Economy. International transportation has generated $150 billion for Mexico's trucking industry over the past 10 years.

“More than 50% of the jobs in Mexico are now generated by export activities,” Villalobos said. “Mexico is positioned to become a country of logistics services, and being close to the United States is an advantage on which we must capitalize. The future success of Mexican industry depends on the ability of the trucking industry to provide JIT (just-in-time) services.

“We need a first-class transportation system in Mexico. This includes updating infrastructure. Statistics show that 39% of our road transport corridors need to be modernized.”

Even with $3 billion a year being invested in new transport equipment, the country's truck fleets need help in their modernization efforts. Gómez called on Mexico's federal government to initiate a new financial program for the renovation and modernization of Mexican truck fleets. The age of Mexico's commercial truck fleets ranges from seven to 16 years. Money for fleet renewal is hard to obtain, which puts Mexican carriers at a competitive disadvantage.

Overcapacity also has created a disadvantage. A carrier in the audience said he is concerned that more excess capacity is coming once the border with the United States is opened. The overcapacity is holding down rates.

“How can we buy better equipment without higher rates?” he asked. “We need a way to pay for our fleet improvements.”

Berriochoa asked why Mexican fleets involved in NAFTA shipments are paid less than their US partners. “Why aren't Mexican rates the same as US rates?” he asked. “We need equal rates to pay for the equipment and technology that are required to be competitive in the international market.”

Gómez said excess capacity is part of the rate problem in Mexico, but shippers need to be more discriminating in carrier selection. Preference should be given to carriers that are in compliance with the federal regulations, and the regulations need to be enforced more rigorously.

Gómez conceded that Mexican carriers aren't alone in being hurt by overcapacity and low rates. “I hear the same complaints from trucking companies in other parts of North and South America,” he said.

Balanced cost

Shippers at the conference defended the low rates. “We still believe that there is a lot of inefficiency in transportation,” said Ángel De la Puente, logistics director at Colgate Palmolive in Mexico. “We don't want to pay the highest or cheapest rates. We want a balanced transportation cost.”

De la Puente continued by saying that the trucking industry creates many of its own rate problems. “Your colleagues are giving us unrealistic rates, because they don't know what their pricing should be,” he said. “In addition, we pay lower rates because Mexican fleets are older. Carriers in the United States get higher rates because they run newer equipment. We can help you (Mexican carriers) in obtaining financing for new equipment, but you must develop realistic pricing for your services.”

Transport quality is becoming more of a concern for Mexican carriers, and that should bring changes in rate structures, according to Alfredo Romero, director of distribution and operations services at Grupo Celanese. There is growing realization that transportation quality must improve to make Mexican products more competitive in international markets.

Central America

The same realization is dawning on motor carriers in the countries to the south of Mexico. As markets open up in Central America, many of the trucking companies in that region are struggling to overcome significant competitive challenges. Topping the list is increased interaction with Mexican carriers.

“We have serious overcapacity,” said Julio Artemio Juárez Morán, president of the Association of International Transporters in Guatemala. “In Guatemala alone, we have 10 trucks for every load. New operators start up overnight. There are no regulations anywhere in Central America to combat unfair competition.

“Central American truckers had a protected marketplace in the past, but the region has been deregulated through international treaties. Trade and transport globalization now represent a serious threat to the region. We now have a chaotic marketplace with very low rates. At the same time, we face increased competition and higher operating costs. Investment capital for new equipment is in short supply.”

While many things are in doubt for the future, the one certainty is that international transportation in the region will continue to grow. The only questions are how much and how fast?

“In this region, trucking competes with maritime shipping to and from the United States,” Juárez said. “At least 90% of the freight shipments in the region are over land. International transportation between Mexico and Guatemala is growing by 25% a year. By 2003, we expect that there will be 3.3 million commercial vehicles operating in Central America.”