The U.S. and Mexico are about to sign a major trucking agreement to open up cross-border transport. What will the deal mean for trucking, manufacturing and the economy?

Earlier this month, the United States and Mexican governments announced the terms of a new deal that would open up the border between the two countries to commercial trucks and increase cross-border trade. The transportation agreement, which would also resolve a long-standing trade dispute that involves hefty tariffs on U.S. goods shipped over the border, is expected to lower transportation costs between the two countries and provide a major boost to exports.

“Mexican President Felipe Calderon and U.S. President Barack Obama announced an end to the truck ban after a meeting in Washington,” Bloomberg News reports. “The dispute between the nations, which have a $393 billion trading relationship annually, dates to the North American Free Trade Agreement in 1995. U.S. officials have promised on multiple occasions to resolve the standoff.”

Under the original terms of the North American Free Trade Agreement (NAFTA), U.S. and Mexican tractor-trailers were to be allowed to transport goods back and forth across the border starting in 1995, but security concerns and union pressures caused the U.S. to prohibit Mexican trucks from having full access to U.S. roads.

The ban on Mexican vehicles sparked a 15-year-long trade standoff. A pilot program was launched in 2007 to monitor the safety of Mexican trucks and gradually introduce them onto U.S. highways, but funding for the program was eventually cut. In response, Mexico imposed $2.4 billion in tariffs on U.S. goods in 2009. A year later, an additional round of tariffs ranging from 5 percent to 25 percent was introduced on a variety of American food products.

As soon as the new deal to open access is signed, Mexico says it will lift 50 percent of the tariffs and will suspend the remaining 50 percent when the first Mexican carrier is granted operating authority under the program.

“This path will allow for the establishment of a reciprocal, phased-in program built on the highest safety standards that will authorize both Mexican and United States long-haul carriers to engage in cross-border operations under NAFTA,” the White House said in early March. “Mexico will terminate all current tariffs once the program is normalized. The agreed schedule will not affect the rights and obligations of Mexico or the United States under the NAFTA, including Mexico’s right to apply its retaliatory measures.”

The officials behind the new initiative intend to avoid the problems that characterized the first pilot-program in 2007, which suffered from a lack of long-term provisions.

“This time, Mexican officials said, in details that began to emerge over the weekend, the authorizations will be permanent,” CNN.com explains. “Unlike the failed pilot program, under the new plan there will be no limit to the number of companies who can participate and the trucks they can register for cross-border transport, said Dionisio Perez-Jacome, Mexico’s Communications and Transportation Minister.”

The program will have three key stages: the first requires Mexican truck operators to file applications and receive inspections in order to become accredited; the second requires a three-month period of thorough inspections for every vehicle crossing the border for a company to earn certification; and the final stage involves issuing permanent authorizations to Mexican trucking firms after 18 months of successful operation.

“The new requirements for Mexican trucks are tougher than those established in NAFTA and somewhat tougher than those currently in force for American truckers,” the Wall Street Journal says. “Specifically, Mexican trucks will have to carry electronic recorders to ensure they do only cross-border, not domestic, runs and to track compliance with U.S. hours-of-service laws.”

Despite the strict requirements for gaining access to U.S. roadways, labor unions (which have historically backed the ban on Mexican trucking) remain opposed to the proposal, while unionized truck drivers claim the cross-border agreement will threaten U.S. jobs.

“This deal puts Americans at risk. This agreement caves in to business interests at the expense of the traveling public and American workers,” International Brotherhood of Teamsters General President Jim Hoffa said in a response to the deal. “Why agree to a deal that threatens the jobs of U.S. truck drivers and warehouse workers when unemployment is so high?”

Nonetheless, the American Trucking Associations has said it supports the announced agreement, and manufacturers remain generally supportive of the measure.

“Manufacturers are pleased that the United States and Mexico have come to an agreement that will resolve the cross-border trucking dispute,” the National Association of Manufacturers (NAM) said in a press release earlier this month. “The United States is a global leader in ensuring enforcement of trade laws, and we need to lead by example — by coming into compliance with our NAFTA obligations on Mexican trucks.”

NAM added that the retaliatory tariffs have caused American manufacturers to lose market share to international competitors and drained billions of dollars worth of U.S. exports. Moreover, “tens of thousands of manufacturing jobs have been negatively impacted” by the trade dispute, according to the industry group.

The U.S. Department of Transportation plans to have the agreement available to public notice and comments by late March or early April, and expects to confer with interested members of Congress. The U.S. hopes to finalize the deal after responding to public queries.

Earlier

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Resources

Mexico to Cut 50% of Tariffs on U.S. Goods as Truck Border Dispute Ends
by Jose Enrique Arrioja
Bloomberg News, March 6, 2011

Fact Sheet: Enhancing U.S.-Mexico Cooperation
The White House, March 3, 2011

Mexico Outlines Details of Cross-Border Trucking Plan
CNN.com, March 8, 2011

U.S., Mexico Agree to Settle Truck Feud
by Elizabeth Williamson
The Wall Street Journal, March 4, 2011

U.S. and Mexico Announce Progress on Trucking
by Ginger Thompson
The New York Times, March 3, 2011

Mexican Truck Deal Fails to Protect U.S. Highways, Communities
International Brotherhood of Teamsters, March 3, 2011

ATA Pleased With Announcement of New U.S.-Mexico Trucking Agreement
American Trucking Associations, March 3, 2011

Manufacturers: Mexican Trucking Deal Will Boost Exports
National Association of Manufacturers, March 3, 2011