When President Obama and the Democrat-controlled Congress used
the Fiscal Year 2009 "omnibus" spending bill to deliver on a
campaign promise to Big Labor and kill a pilot program that
permitted a handful of trucks from Mexico access to U.S. highways,
they set in motion a head-on collision with one of America's
closest trading partners, the ramifications of which will cause
tremendous damage to the U.S. economy.
Protectionism under the Fig Leaf of Safety
Notwithstanding fierce opposition by the Teamsters and other
U.S. organized labor groups, in 2007 the U.S. Department of
Transportation (USDOT) approved a NAFTA-consistent "Cross Border
Demonstration Project" that gave "27 Mexican carriers with 107
trucks" full access to the U.S. road network. Until
then, USDOT regulations issued during the Clinton Administration to
appease the Teamsters had required all Mexican trucks to unload
their cargoes at warehouses close to the border, where they were
re-loaded into U.S. trucks for onward shipment throughout the
country. Mexico obtained a NAFTA ruling against those regulations
in 2001 but withheld the imposition of retaliatory tariffs because
of the pilot program.
According to USDOT, the superfluous warehousing and
loading/unloading added $400 million per year to the price of
Mexican imports, which has been passed on to American consumers. Under
the USDOT pilot program, an equal number of American-owned trucks
are also permitted to operate freely in Mexico, thereby creating
U.S. jobs and increasing the profits of both U.S. companies
shipping products to Mexico and the American trucking companies
hauling them there.
The Bush Administration extended the program twice, resisting
efforts of pro-Teamster Members of Congress led by Senator Byron
Dorgan (D-ND), a senior member of the powerful Senate
Appropriations Committee, who inserted language into the Fiscal
Year 2008 omnibus spending bill that would have killed the pilot
project. Although protectionist critics have alleged
safety problems with Mexican trucks, the Federal Motor Carrier
Safety Administration--the relevant oversight agency in the
Department of Transportation--"recently issued a report showing
there had been no accidents involving trucks participating in the
program." The Mexican trucks are constantly monitored
while in the U.S. and must meet rigorous USDOT safety
requirements. In fact, "Mexican trucks in the program
have a better safety record than their American counterparts."
A Trade War with Mexico: Just What the
U.S. Economy Does Not Need
Hidden among thousands of earmarks, Senator Dorgan again
inserted a provision into the recently passed FY 2009 omnibus
spending bill (Div. I, Title I, Section 136)that
de-funded and killed the pilot project. President Obama, who had
campaigned against earmarks and claimed to oppose protectionist
measures such as this one, signed the bill behind closed doors on
On March 18, the government of Mexico retaliated by slapping
tariffs ranging from 10 to 45 percent on 89 U.S. agricultural
and industrial products--including "toilet paper, Christmas trees,
fruit juices, pet food, shampoo, sunflower seeds, soy sauce,
pencils, beer and deodorant" exported to Mexico from 40 states.
Those exports bring in over $2.4 billion in annual sales for U.S.
companies. Mexican Economy Minister Gerardo Ruiz
said, "We consider this action [canceling the pilot truck program]
by the United States to be mistaken, protectionist and clearly in
violation of [NAFTA]."
In Oregon alone, the tariffs are expected to cost companies
"tens of millions of dollars." For example, "Bill Brewer,
executive director of the Oregon Potato Commission, told The
Oregonian newspaper that the United States could lose its entire
$80 million in annual french-fry exports to Mexico because
competitors in Canada won't have to pay $16 million in tariffs."
Ironically, one Member of Congress from Oregon (Representative
Peter DeFazio) is one of the strongest opponents of the pilot truck
Restore Pilot Truck Program
The U.S. and Mexican economies are deeply intertwined, and both
face serious problems. Increasing efficiency in trade between the
two countries will benefit both sides and strengthen Mexican
President Felipe Calderon's pro-market, democratic policies.
Improving the safety of both the U.S. and Mexican long-haul truck
fleet will also contribute to improved national security in both
Then-candidate Obama pledged to "upgrade" and "retool"
NAFTA, but his approval of the Congressional action to kill the
pilot truck program was a direct attack on NAFTA.
In mid-April, en route to the Summit of the Americas in
Trinidad, President Obama will make his first visit to
Mexico and meet with President Calderon. In preparation for that
meeting, Transportation Secretary Ray LaHood and others in his
Administration should take immediate steps to restore funding to
the pilot truck program and then expand it and make it
Roberts is Research Fellow for Economic Freedom and Growth in
the Center for International Trade and Economics (CITE) at The