23 October 2018
On October 1, after more than a year of intense negotiations, the United States, Mexico and Canada officially unveiled the United States-Mexico-Canada Agreement (USMCA). Among other important changes, NAFTA’s replacement gives the United States the authority to limit access for long-haul truck drivers from Mexico. While U.S. and Mexican trucking officials have expressed support for these new restrictions, companies on both sides of the U.S.-Mexico border have expressed concerns about possible negative impact on trucking capacity in the region, as trucks move nearly 60 percent of goods between United States and Mexico.
The original NAFTA, signed in 1994, called for a program for Mexican truckers to obtain authorization to operate in the U.S. and to haul cross-border loads beyond the designated commercial border zone. Since the beginning of the trade agreement, one of the concerns has been that Mexican trucking firms do not operate with the same standards as those in the U.S. and Canada, particularly in regard to driver training, testing and vehicle inspection. However, in January 2015, after a three-year pilot program, the U.S. Federal Motor Carrier Safety Administration finally began allowing Mexican-domiciled carriers to apply for U.S. authorization. Since then, 41 Mexican carriers have obtained licenses to operate outside of the commercial border zone within the U.S., with 33 of them currently offering cross-border trucking services.
Under the USMCA, however, Mexican truckers will have to meet much higher standards to operate in the neighboring country, allowing the U.S. Department of Transportation to reevaluate all Mexican-based carriers who already have U.S. authorization to operate. The USMCA also gives the U.S. government authority to limit the number of new Mexican-based carriers, if foreign competition harms or threatens to harm U.S. suppliers, operators, or drivers in the long-haul, cross-border trucking sector. Under the provision, “harm” means a significant loss in the share of the U.S. market for U.S.-owned long-haul truck companies caused by or attributable to Mexico-domiciliated companies.
In a recent statement, Mexico’s National Chamber of Cargo Transportation (CANACAR) described the restrictions to cargo transportation included in USMCA as an anti-trade move from the US government, which puts at risk millions of dollars of new investments into Mexico’s cargo transportation industry. However, Mexico’s Secretary of Economy and Industry confirmed in a recent interview that the restrictions to cargo transportation included in USMCA will only apply if there is a sudden and substantial increase in the Mexican offer.
While the long-term implications of the new USMCA’s cross-border services provisions remain uncertain, most industry analysts agree that the current norm of switching cargo near the borders between the U.S. and Mexico for trucking transportation will remain in place for the foreseeable future. Similarly, several research firms have pointed out that the USMCA’s restrictions on cross-border trucking are not expected to have a large effect on the price of trucking services because of the low number of Mexican truckers that currently operate in U.S.