An 18-Wheeled Victory for Mexican and American Free Trade: View
Last week’s resolution of a long-simmering dispute between the U.S. and Mexico over long-haul, cross-border trucking represents a milestone in the economic integration of North America.
By itself, the trucking deal, a three-year pilot program, is a modest gain for free trade. But it brings the North American Free Trade Agreement to a satisfying, if tardy, conclusion at a time when ratification of other trade deals with Colombia, Panama and South Korea is .
Although NAFTA came into effect 17 years ago, the trucking deal was bogged down by concerns over border security and by opposition from the Teamsters Union and independent truckers who fear their jobs will be jeopardized by low-wage Mexican competition. Neither point is irrational -- the cross-border drug trade is thriving and Mexican long-haul truckers commonly earn about half the wages of their U.S. counterparts. Perhaps in deference to such fears, the Obama administration announced the agreement with little fanfare.
The tentativeness was unwarranted. In the long run, the trucking agreement will help to knit together the countries of North America. It will reduce friction in the movement of goods, increasing trade and economic activity on both sides of the border. Since Mexico joined the U.S. and Canada in NAFTA in 1994, merchandise trade among the three partners has more than tripled to almost $1 trillion annually. U.S. potato farmers, along with producers of pork, cheese and other goods, are now looking forward to reduced Mexican tariffs with the resolution of the trucking deal.
Higher wages and wider prosperity in Mexico are very much in the U.S. national interest. Canada has only one-third the population of Mexico, yet because of its relative affluence, it is the U.S.’s top trading partner. The easiest way to ease thorny issues like illegal immigration from Mexico -- and even, to some degree, drug violence -- is for Mexico to grow its way out of them.
The end of the trucking dispute will help. Transporting goods across the Mexican border is a complicated business, involving customs brokers, warehouses and lengthy inspections for drugs and illegal immigrants. Under the current system, Mexican truckers haul their merchandise to the border, where a transfer truck takes it across. A U.S. truck picks it up on the American side. In time it will be possible for a Mexican driver to haul goods directly from any Mexican city straight through to Phoenix or even all the way to Boston. (They will be prohibited from handling shipping within the U.S.) Such efficiencies will yield savings to U.S. businesses and consumers.
American trucking companies have already begun partnering with Mexican companies in anticipation of the change. For the program to be successful, and engender support for future trade deals, provisions requiring Mexican truckers to meet U.S. safety standards regarding hours on the road, licensing, drug testing and vehicle safety must be enforced.
As this system evolves, it may also yield surprises. To qualify for service on U.S. roads, for example, Mexican drivers will have to learn rudimentary English and the laws of U.S. highways, which may drive up their wages. Critics of the deal point out that while Mexican truckers will benefit, U.S. truckers are loath to travel into Mexico. The country lacks the smooth roads, fueling stations and accommodations available in the U.S., and has the added disincentive of violent drug gangs. Trade agreements inevitably disrupt some segment of workers or industry. But cross-border trucking will gradually evolve over many years, providing time for the small number of U.S. truckers hurt by the deal to adapt.
NAFTA has not been a painless process. But it has laid the foundation for improved living standards among its members. The trade deals with Colombia, Panama and South Korea will do the same, and deserve congressional ratification, now that the trucks are hitting the road.
To contact the senior editor responsible for Bloomberg View’s editorials: David Shipley at email@example.com.