Plaza de Armas: S.A. and the new trade hub-bub

This story originally appeared at http://www.plazadearmastx.com/

Perhaps more than any other city in the country, San Antonio stands to benefit from a new White House transportation gambit – should the hot-button policy manage to overcome mulish congressional resistance.

Nearly two years after the U.S. Congress killed the Bush Administration's pilot program for cross-border trucking, the Obama White House has just revived the issue with a proposal of its own. In the past, efforts to permit Mexican long-haul cargo trucks to ship throughout the U.S. has been fraught with the same kind of knee-jerk politicking and invidious bluster that characterize many bilateral controversies. Indeed, due to opposition from the Teamsters and other pressure groups, the U.S. has flouted its treaty obligations under Nafta to provide full access for more than a decade.

The primary pretext for blocking implementation has been safety concerns: Opponents warn of rattle-trap rigs driven by sleep-deprived, English-ignorant Mexican pilots careening down U.S. Highways, spewing smoke and plowing into family minivans. This same specious argument prevailed during the previous administration despite a rigorous and unprecedented program that would have installed U.S. federal transportation inspectors on Mexico soil to thoroughly pre-screen trucks and their drivers before granting certification to haul beyond the 25-mile border zone once in the U.S.

The facts plow through safety objections like a Hollywood semi breaches a police barricade. It turns out that hundreds of Mexico-domiciled carriers have accumulated many years of highway experience beyond the border zone, grandfathered in by rules dating from the 1990s, and the hard evidence from their history resoundingly refutes the critics. The U.S. Federal Motor Carrier Safety Administration found in a recent study that, between 2003 and 2006, these Mexican carriers with extended U.S. highway access had just 1.2 percent of their drivers removed from service after failing roadside inspections, compared with 7.1 percent of all U.S. truck drivers during the same period. Moreover, during the brief pilot program under the Bush Administration before Congress cut funding, zero accidents were reported.

If alarmist safety claims can be cleared from the road, passage of the current proposal would clearly benefit San Antonio. First and foremost, it could greatly enhance the city's dubious standing as a logistical hub for Nafta trade. The Mexican Economy Ministry estimates that bilateral merchandise commerce amounts to $1 billion per day, 70 percent of which is moved by motor freight. According to 2009 figures from the U.S. Bureau of Transportation Statistics, 38 percent of that moved through Laredo. If you aggregate other ports with proximate highway access to San Antonio, such as Brownsville and Hidalgo, the proportion tops 50 percent.

Currently, Mexican trucks with cargo bound for destinations beyond the border zone must transload to a U.S. carrier after crossing the international boundary, whereupon the imported merchandise departs on domestic wheels to travel throughout the U.S. In the absence of a border zone restriction, however, a more efficient supply-chain strategy could be pursued by shippers, and San Antonio is ideally located on the crossroads of major interstates. Positioning itself as a premier national shipping hub – a first-line distribution nexus for Mexican shippers – could prod Alamo City closer to becoming the vital Nafta node that so far it has been unable to reach.

Dr. Barry Lawrence, director of the Global Supply Chain Laboratory at Texas A&M University, points out that the jaunt between the massive manufacturing clusters in Monterrey and San Antonio might appeal to supply-chain managers as a one-day haul. Warehousing operations and other third-party logistics suppliers in San Antonio, as well as the free trade zone at the Port San Antonio, would all stand to benefit.

Though Lawrence agrees that San Antonio's transportation industries would prosper more if cross-border trucking is approved than it does under current restrictive regulations, he downplays the magnitude of the potential boon, observing, for example, that many transnational supply chains have already dumped hefty investments into staging operations at the border.

Nevertheless, consider that according to a Dallas Federal Reserve study, Laredo’s employment share in transportation services are a whopping 26 times the U.S. average. San Antonio clearly has a much more diversified economy, but still it may surprise some to learn that the tally of transportation, warehousing and distribution managers, logisticians, cargo and freight agents, and heavy and tractor-trailer drivers, exceeds the number of elementary-school teachers in the metropolitan area.

San Antonio exporters could catch a welcome break, too. Because a Nafta panel in 2001 issued a finding against the U.S. for failing to comply with treaty obligations, Mexico has the right to impose punitive tariffs on U.S. imports. It exercised that right in 2009. Nearly 100 products worth a combined $2 billion were hit with retaliatory duties ranging from 5 to 25 percent, and as an added twist of uncertainty, the affected tariff schedules periodically shift across product categories under a “carousel” mechanism. It's difficult to determine to what extent San Antonio-based firms have been hurt by higher duties, or would be hurt in future tariff-schedule rotations. (Mexico has frozen the carousel during negotiations, but will lift the punitive tariffs only if a deal is struck.)

U.S. Trade Representative Ron Kirk predicts a Department of Transportation program to allow Mexican trucks to operate in the U.S. could be up and running in four to six months. That will ultimately depend on appropriations, and whether the new congressional constellation will support it this time around is anyone's guess. Unlike past efforts, though, now an array of business lobby groups whose members have been hit by punitive tariffs are throwing their full support behind the White House's plan.