LaHood signed a definitive accord to re-open access to the U.S. for certified Mexican trucks and truckers with his Mexican counterpart Dionisio Arturo Pèrez-Jàcome Friscione.

 

The ceremony in Mexico City began a detailed process to permanently establish bilateral cross-border trucking rights that the U.S. and Mexico had mutually agreed to originally in the Jan. 1, 1994 North American Free Trade Agreement (NAFTA).

 

Bilateral U.S.-Mexico trade hit $390 billion in 2010, up 24% from the recession-wracked 2009 year, and the best single-year gain since the NAFTA accord began in 1994. Mexico is the U.S.' No. 3 trade partner behind Canada and China.

 

In calendar 1993, total U.S.-Mexico trade amounted to $82 billion. More than 70% of all bilateral trade rides on long-haul freight trucks.

 

But Mexico is the No. 2 buyer of U.S. exports - after only Canada. Mexico's purchase of $148 billion in U.S. exports in 2010 easily doubled China's imports from the U.S. last year. even though Chinese imports from the U.S. are growing fast.

 

Frustrated by an inability to exercise its NAFTA rights -- initially intended to open the U.S. border states to Mexico truckers by 1995 and the rest of the U.S. by 2000 -- Mexico used its NAFTA trade dispute rights to impose stiff tariff penalties on 99 U.S. products from 40 U.S. states that prior to 2009 had accounted for $2.4 billion in annual U.S. exports to Mexico.

 

The new agreement ensures that Mexico will provide reciprocal authority for U.S. carriers to engage in cross-border long-haul operations into that country. 

 

The Mexican economic pressure in the 40 U.S. states led to loud cries by producers and exporters to their members of Congress and U.S. Senators to find a solution to end their economic pain.

 

As part of the trucking accord, Mexico agreed to begin to relax half of the tariff penalties it had applied to U.S. export products since March 2009 when U.S. President Barack Obama's signature on an omnibus budget bill also effectively killed a U.S.-Mexico cross-border trucking demonstration project launched in 2007 by the previous Administration of President George W. Bush.

 

Last March, U.S. President Barack Obama and Mexican President Felipe Calderon reached a political accord in Washington to settle the long-standing cross-border trucking issue and ordered their respective governments to work out the details that resulted in the July 6 agreement, LaHood said. 

 

The bilateral agreement reached July 6 enables the U.S. to fulfill its commitments outlined in the NAFTA accord on long haul cross-border trucking services and will directly benefit producers, exporters, consumers and carriers, making trade between the United States and Mexico more efficient and competitive, LaHood said in his statement.

 

Some private estimates indicate that a permanent solution to the long-haul-cross border dispute could slash cross-border trucking costs by as much as $400 million each year.
More than 70% of U.S.-Mexico trade moves on long-haul freight trucks. The first phase of the implementation of the program will take at least 18 months of oversight, certification and supervision, the two governments indicated.

 

In a separate, but related Memorandum of Understanding (MOU) signed by the White House's Office of the U.S. Trade Representative and the Secretaría de Economía (Trade Ministry) of the United Mexican States, Mexico said it will suspend 50% of the retaliatory tariffs within 10 days.

 

Mexico agreed to suspend the remainder of the tariffs on U.S. exports within five days of the first Mexican trucking company receiving its U.S. operating authority.

 

As a result, Mexican punitive tariffs that now stand at 5% to 25% on a diverse set of U.S. agricultural and industrial products, including apples from Washington state, certain pork products from Iowa, and personal care products from across the U.S., would be immediately cut in half and disappear entirely within a few months. 

 

Mexico, however, reserves its rights under NAFTA to reinstall the retaliatory measures in the case of non-compliance with the agreement.

 

 "By opening the door to long-haul trucking between the United States and Mexico, America's third largest trading partner, we will create jobs and opportunity for our people and support economic development in both nations," LaHood said.

 

"I thank President Calderon and Secretary Perez-Jacome for their leadership and for their partnership as we build a safer, more prosperous future for North America and the world," LaHood added.

 

ANALYSIS: The apparent clear solution for this intractable political football - the long-haul, cross-border trucking dispute - carries great political and economic significance.

 

For Mexico, the U.S.' refusal to uphold the terms of its own NAFTA accord bled over to many other key issues. Mexico's strategic economic program is based on being a Top 10 exporting power to the world and a global platform for international trade.

 

This key issue with its biggest bilateral trading partner (almost 70% of total Mexico trade is with the U.S.) was a matter of national principle.

 

Enforcing its free trade rights with the U.S. had implications for Mexico's 12 Free Trade Agreements (FTAs) covering 44 nations, including its North America neighbors, the 27-nation European Union, the Asia Pacific Economic Conference forum (APEC) nations and FTAs covering 9 nations in Central and South America, more than any other nation with that ascending economic region.

 

For the U.S., the nation's inability to uphold its commitments in the NAFTA agreement on cross-border trucking undermined its credibility and authority on U.S.

commitments in other international trade agreements.  

 

The trucking dispute solution comes just days after the Obama Administration reached agreement with Republican leaders in the GOP-controlled U.S. House to bring forth a vote on passage of three important U.S. free trade agreements.

 

The agreements are with Colombia, Latin America's No. 3 economy after Brazil and Mexico; with South Korea, a powerful economy on the rise in Asia; and with Panama, whose Panama Canal Authority is on track to complete the doubling of capacity of the canal by August 2014, dramatically lowering international trade freight costs.

 

As a result of today's signing of the MOU, Mexico will suspend 50% of the tariffs applied to the 99 U.S. products subject to the current retaliatory measures. The other 50% of the tariffs will be suspended as soon as the first Mexican carrier is granted operating authority in the United States.

 

Mexico reserves its rights under the NAFTA to reinstall the retaliatory measures in the case of non-compliance.

 

After the previous cross-border trucking program was terminated in March 2009, Secretary LaHood and other Obama Administration officials met with lawmakers, safety advocates, industry representatives and others to address a broad range of concerns, which the Department took into account as it worked with Mexico to develop a new program.

 

LaHood noted that the final program published in the Federal Register today addresses the recommendations of over 2,000 commenters to the proposal issued by the Federal Motor Carrier Safety Administration in April.

 

As a result of these meetings, and in consultation with Mexico, trucks will be required to comply with all Federal Motor Vehicle Safety Standards and must have electronic monitoring systems to track hours-of-service compliance.

 

In addition, the U.S. Department of Transportation will review the complete driving record of each driver and require all drug testing samples to be analyzed in Department of Health and Human Services-certified laboratories located in the U.S. 

 

The Department will also require drivers to undergo an assessment of their ability to understand the English language and U.S. traffic signs.

 

Mexico said in a statement the July 6 agreement will allow for carriers originating in Mexico and the U.S. to operate permanently in both countries after enrolling in a new program and complying with all of the safety procedures of each country.

 

The new program is composed of three phases:

 

1.    The pre-authority phase which consists of a review of the companies' documentation, vehicles and drivers. Participants must also comply with safety and environmental standards and insurance requirements.

2.    During the provisional authority phase participating carriers will be inspected upon each entry into the other country for the first three months. Before 18 months of operation a final Compliance Review of carriers will be conducted.

3.    In this final phase carriers who passed the Compliance Review will be granted permanent operating authority allowing them to operate throughout both countries.