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Cross-Border
Economic Bulletin - August 2001 Are Connecticut's trucks safe? Or consider the following: It is conventional wisdom that Mexican trucks are unsafe, but how safe are Connecticut's trucks? Each year, the Federal Highway Administration and the Commercial Vehicle Safety Alliance (a NAFTA standards setting body) jointly sponsor an event called the International Highway Transportation Safety Week. Activities include safety inspections of commercial trucks in all fifty states and parts of Canada. In the year with the most recent available data, 1998, the best state was Arkansas, with only 16.9% of its trucks placed out of service. Connecticut was the worst state, with a 44% out-of-service rate, which was actually an improvement over its 1997 rate of 53%. Mexican trucks are not allowed free range across the U.S., ostensibly because of their 45% out-of-service rate in 1996 - a rate that everyone agrees is much less today. Connecticut's trucks can go anywhere. Nothing is as it seems in the topsy-turvy political fight over NAFTA trucking. This issue of the Cross Border Economic Bulletin tries to make sense out of the political fight over Mexican truck access to the U.S. Its main points are:
NAFTA reciprocally opens the U.S. and Mexican markets to each other's trucks in two steps. By 1995 U.S. and Mexican trucks were to be allowed access to the ten border states in both countries, followed by complete nation-wide access in 2000. After the U.S. blocked implementation of the 1995 provision, Mexico filed a complaint under the terms of the NAFTA dispute resolution process. In February 2001, after the NAFTA arbitration panel ruled in favor of Mexico, the Bush Administration stated that it would open the U.S. market to Mexican trucks no later than January 2002. Meanwhile, in late June of 2001, the U.S. Congress passed an amendment to a transportation bill denying funding for processing applications by Mexican trucking companies for licenses to operate in the U.S. For the time being, this effectively kills implementation of the NAFTA trucking provisions. Currently, Mexican trucks have access to commercial zones and metropolitan areas on the border. The role of trucking in NAFTA trade Trucks are the dominant mode of North American freight transportation, carrying over two-thirds of the trade between the U.S. and Mexico and Canada. Trucks entering the U.S. from Mexico come through only a handful of ports, as shown in Table 1. Laredo is the busiest port, followed by El Paso. Otay Mesa is third and Calexico is the 6th busiest crossing. Table 1: Number of truck crossings into the U.S. from Mexico, 1999
The data in
Table 1 are the absolute number of truck crossings, not the number of unique
trucks, since many trucks cross more than once a day. This is an important
point, given the nature of the dispute described below. Currently, an unknown
share of cross border trade in both directions is handled by drayage (short
haul) tractors that pick up the trailers dropped off by the long haul vehicles
coming from the interior of the country. Drayage tractors haul the trailer
across the border and drop it off, where it is picked up by a long haul
vehicle and transported to its final destination. Long border
waits and the lack of access to the interior puts an economic penalty
on companies that use their best, most expensive, equipment to actually
cross the border. Hence, another irony of the current system is that it
increases the economic incentive to use less safe trucks in the cross border
trade.
If U.S. and Mexican trucks are eventually granted reciprocal access to each other's markets, the impact on local roads is likely to come through local ports of entry since most (80%) of California's imports from Mexico arrive through Calexico, Tecate, or Tijuana. The remainder comes through Texas (16%) and Arizona (4%), which will primarily impact Interstate 10. Since Mexican trucks already have access to San Diego and other parts of Southern California, changes are likely to be minimal. The safety issue Safety concerns were the original reason given by the Clinton Administration for the delay in liberalizing trucking. Soon after the delay was announced, the General Accounting Office (GAO) studied the safety of Mexican trucks. The GAO gathered data from state and federal inspections of Mexican trucks in the three border states of California, Texas, and Arizona. About 45% of Mexican trucks were deemed unsafe and placed out of service, which the GAO compared to the 28% out-of-service rate for U.S. trucks in the previous year, 1995. These results formed the basis for the claim that Mexican trucks are less safe than U.S. trucks, and are the numbers cited by the Teamsters and other opponents of the NAFTA rules on trucking. There are a number of problems with using these numbers as accurate indicators of safety. First, as cited in the introduction, trucks in the worst performing U.S. state (Connecticut) have fared as bad or even worse in recent years, and several other states are not far behind. (The Connecticut number is directly comparable since it is based on "Level 1" inspections which is a standardized type of inspection throughout the NAFTA countries.) Second, inspectors select trucks that they think might fail, hence the number failing is not a random sample of Mexican or U.S. trucks. Third, several types of problems-inadequate brake adjustment, broken tail light, etc.- lead to a failure, yet some are more serious than others. Fourth, many of the inspected Mexican trucks were the short haul, drayage vehicles that are used to cross the border. These are older, less modern trucks since Mexican trucking companies are understandably reluctant to commit their best long-haul vehicles to short trips across the border. Current data is hard to come by, but through the 1990s, there were large differences in the safety defect rates of Mexican trucks entering Texas and those entering California. According to a GAO follow-up investigation, defect rates for Mexican trucks in California are the same as they are for U.S.- owned trucks in California. California's superior ability in limiting the entrance of unsafe trucks stems from the fact that the state spent $25 million on two inspection stations at Otay Mesa and Calexico, and has been aggressive in enforcing truck safety rules. Texas, on the other hand, fought with the federal government over enforcement of truck safety in Mexican trucks. It refused to pay for permanent inspection stations and has refused to hire an adequate number of inspectors, seeing both as federal responsibilities. A comparison of the Texas and California experiences seems to offer a clear lesson: Mexican - or U.S. - trucks can be as safe as the political system requires. Even if the border opens The Teamsters Union has about 1.4 million members in Canada and the United States, and NAFTA and the Canada - US Free Trade Agreement, signed in 1988, has been good for business. It has increased the volume of truck cargo several times over, and led to a rapid expansion in trucking and warehousing jobs. In San Diego, while overall employment grew 26% between 1992 and 2000, trucking and warehousing jobs grew 34%. According to the Department of Transportation, the national average wage for full-time truck drivers is $527 per week, not counting benefits. Mexican truck drivers are younger, work longer hours, and long-haul drivers are probably lucky to make $300. By all accounts, medium and large - sized trucking firms in Mexico have invested in modern, long-haul fleets. In addition, international firms such as J.B.Hunt are preparing to open along U.S. - Mexico routes. While it may seem only a matter of time before the border opens, the irony is that a number of barriers will remain. First, it is not likely to shorten the length of time it takes to cross the border, since it will not change customs inspections. Mexican procedures are intentionally redundant and burdensome, since Mexican law imposes large fines on customs brokers that make mistakes. Furthermore, freight forwarders have economic incentives to keep the current process and are likely to try to block procedural streamlining, while U.S. law enforcement procedures will be unchanged. Second, in the U.S., the size of trucks and their weight limits are regulated by states, not the federal government. Trucks that are legal in one state are often illegal in another because they exceed the weight limit or the maximum height or length. Third, the sulfur content of Mexican diesel fuel is different from the U.S., affecting ignition systems, maintenance, engine performance, and selection of motor oil. And fourth, there are disparate legal processes for traffic violations and accidents. These are mostly commercial problems, however, which means that they will eventually be solved. In the long run, the U.S. trucking industry (workers and firms) cannot afford to ignore the opportunities and challenges of an integrated North American market. Mexico and Canada have restructured and revitalized their railroad networks - and formed joint ventures with U.S. firms. Rail offers pre-clearance customs inspection, environmentally friendlier services, and the opportunity for intermodal freight haulage. Rails in Canada and Mexico are gaining market share away from trucking, and one can only wonder when U.S. truck drivers will begin to see that their long-term interests are in adapting to the integrated market. The Cross-Border Economic Bulletin is prepared monthly by Dr. Jim Gerber, professor of economics at San Diego State University. It is underwritten by Concert, a global venture of AT&T and BT. |