Lance Fritz, chief executive of Union Pacific, said that movements to and from Mexico in the first quarter grew 6 per cent for the company, which covers much of America west of the Mississippi River with its network.
The traffic now accounts for 12 per cent of all UP’s business. It could be vulnerable to any renegotiation of the North American Free Trade Agreement, signed in 1994, which has encouraged a surge in trade between the US, Canada and Mexico.
Donald Trump, the presumptive Republican presidential nominee, has repeatedly called Nafta “a disaster,” vowing to scrap the deal.
Mr Fritz joked in response to a question about Mr Trump’s proposal to build a wall on the Mexican border: “As long as it has portals for rail traffic”.
He otherwise declined to comment on specific candidates, saying only that UP wanted a president who cared deeply about the issues that were important to the railroad.
None of the remaining potential candidates for the White House — Mr Trump, and the Democratic contenders, Bernie Sanders and Hillary Clinton — currently supports the Trans-Pacific Partnership trade agreement with Asian countries that is the US’s biggest pending trade deal. Mrs Clinton supported it when secretary of state from 2009 until 2013, however.
Mr Fritz rejected suggestions that he was mainly criticising Mr Trump.
“I’m concerned I don’t hear any candidate right now talking about free and open trade,” he said. “I’d like to hear one of them speak to and be more positive about Nafta. From 1994 to today, US trade to Mexico is up fourfold and Mexico trade with the US is up even more.”
Mr Fritz’s criticism of the candidates comes as UP wrestles with a sharp downturn in traffic that has abruptly ended several years of rapid growth following the 2008-09 Great Recession.
Movements of coal, 12 per cent of revenue, were down 34 per cent in the first quarter over the first three months of 2015. Intermodal traffic, as movement of shipping containers and truck trailers is known, was down 3 per cent in the first quarter. Mr Fritz said that this had worsened since the first-quarter report.
Now that it’s June, many of us are enjoying a variety of fresh fruit and vegetables that will be available throughout the summer. During the rest of the year, some of these same fresh fruits and vegetables are available to American consumers thanks to trade agreements with Canada and Mexico.
In the last five years, the value and volume of fresh fruits and vegetables from Canada and Mexico to the United States has grown. In 2015, the U.S. imported more than 2.8 billion pounds of fresh fruits and vegetables from Canada, valued at $1.4 billion. From Mexico, the U.S. imported 17.4 billion pounds of fresh fruits and vegetables for $9.1 billion. U.S. fruit and vegetable growers also have benefited. In 2015, the U.S. exported nearly 7.1 billion pounds of fresh fruits and vegetables to Canada and Mexico, worth $4.2 billion.
With more market integration between the three countries, the potential for disputes can also increase. To address potential issues, the North American Free Trade Agreement created a unified system to enable effective trade dispute resolution. The Fruit and Vegetable Dispute Resolution Corporation (DRC) handles these disputes for the fruit and vegetable industry.
The DRC is a non-profit organization established in February 2000 to smooth the trade of fruits and vegetables between Canada, Mexico and the U.S. It helps its members, including buyers, sellers and brokers of fruits and vegetables, resolve complaints about contract and payment issues as well as about the condition of the fruit and vegetables. This system is modeled on the dispute resolution system in the Perishable Agricultural Commodities Act (PACA), administered by AMS. Today, the DRC has nearly 1,600 members.
Last week, I represented USDA’s Agricultural Marketing Service (AMS) at a meeting of the DRC. The recent meeting included topical discussion regarding Canada’s efforts to establish procedures similar to what the United States has had since 1984 that would give sellers of fruits and vegetables a priority status in the event their buyer becomes insolvent or files for bankruptcy protection. We also discussed ways to expand the number of DRC-licensed members in Mexico. All of this would provide added stability to the market place, and benefits farmers, produce suppliers, buyers, and consumers in all three countries.
Since its inception in 2000, the DRC has successfully resolved thousands of trade disputes worth tens of millions of dollars. No matter the time of year, its members are working to help bring fresh fruits and vegetables to markets and stores throughout the United States, Canada and Mexico.
President Obama signed the bipartisan Trade Facilitation and Trade Enforcement Act of 2015 on February 24 2016. This is the first major customs legislation enacted since the Customs Modernisation Act.(1) The Trade Facilitation and Trade Enforcement Act focuses on facilitating legitimate trade and enforcing existing trade laws, such as those relating to intellectual property and trade remedies.
The Trade Facilitation and Trade Enforcement Act does not go so far as to implement a management-by-account system for customs entries. However, in an effort to streamline and modernise trade, the legislation:
provides support for the Automated Commercial Environment (ACE) and the International Trade Data System (ITDS);
addresses trade partnership programmes;
statutorily authorises the Centres of Excellence and Expertise (CEEs); and
makes significant changes to drawback (simplifying what many consider to be archaic and complicated rules).
ACE and ITDS
In keeping with the administration’s goals of implementing ACE and the ITDS, the act provides further funding for the development of ACE. It requires that the ITDS be implemented no later than ACE is fully implemented; further, no later than December 31 2016, the ITDS must be the primary means for other agencies to receive data and documentation required for entry. In addition, the act requires that US Customs and Border Protection (CBP) work with the participating agencies to ensure that they develop and maintain the infrastructure necessary to support the ITDS and identify and transmit to CBP admissibility criteria and data elements for incorporation into ACE by June 30 2016.
Trade partnership programmes
The act also addresses trade partnership programmes. CBP maintains two primary trade partnership programmes, the security-focused Customs-Trade Partnership Against Terrorism (C-TPAT) and the compliance-focused Importer Self-Assessment programme. The act requires CBP to:
consider consolidating partnership programmes;
ensure a transparent system of benefits and compliance requirements; and
coordinate with other federal agencies for qualified parties to receive immediate clearance for entries, absent information that the transaction poses a threat.
While the act requires CBP to provide participants in partnership programmes with “commercially significant and measurable trade benefits”, the only benefit specifically enumerated is the requirement for CBP to provide pre-clearance of merchandise for those that demonstrate the highest levels of compliance.
Miscellaneous customs provisions
The Trade Facilitation and Trade Enforcement Act addresses a number of miscellaneous customs matters, some of which present duty savings opportunities.
Increased de minimis value
The act raises the de minimis value – the value of goods that may be entered without payment of duty – from $200 to $800.
Amendments to Chapter 98
The act introduces a number of important changes to duty savings provisions in Chapter 98 of the Harmonised Tariff Schedule. First, it authorises the use of inventory management for commingled fungible articles under Subheadings 9802.00.40 and 9802.00.50, concerning articles exported and returned after repair or alteration abroad. The act does not go so far as to authorise the use of inventory management in other Chapter 98 provisions, such as Subheading 9802.00.80. Second, the new law expands the range of articles that may be potentially imported duty-free by amending Subheading 9801.00.10 (previously for US goods returned) to allow the duty-free entry of any article, regardless of origin, that is exported and returned within three years of export, provided that it is not advanced in value or improved in condition while abroad.
Voluntary re-liquidations by CBP
The act makes a technical correction to the pre-existing law which allowed CBP to re-liquidate an entry within 90 days of the date of notice of liquidation. The new law changes the statute to allow CBP to re-liquidate an entry within 90 days of the actual liquidation.
Residue of bulk cargo in instruments of international traffic
The act amends the Harmonised Tariff Schedule to exempt from entry requirements the residue of bulk cargo in instruments of international traffic previously exported from the United States. This supplants a CBP ruling from 2009 requiring the entry of such residue.
Textile and apparel products from Nepal
The act creates a programme to provide duty-free treatment for certain textile and apparel products produced in Nepal. The programme, based on rules established under the Generalised System of Preferences and African Growth and Opportunity Act and authorised until the end of 2025, is limited to about 60 tariff classifications, encompassing bags, carpets and accessory items such as hats and shawls.
With respect to trade enforcement, the Trade Facilitation and Trade Enforcement Act addresses issues with importer-of-record identification, IP rights and anti-dumping and countervailing duty evasion.
Importer-of-record identifying information
In the wake of increased concerns surrounding unscrupulous and ‘fly-by-night’ importers of record, the act authorises three key changes to how CBP manages importers of record.
First, the legislation requires the establishment of an importer-of-record programme. As part of the programme, CBP must:
establish criteria that importers must meet in order to obtain an importer-of-record number;
provide a process by which numbers are assigned; and
maintain a database of importer-of-record numbers and associated information on the importer.
Second, the act requires CBP to establish an importer risk assessment programme to review the risk associated with certain importers – particularly new importers and non-resident importers – to determine whether to adjust an importer’s bond amounts and increase screening for the importer’s entries. Tier 2 and Tier 3 C-TPAT members are excluded from this programme.
Finally, the act requires CBP to prescribe minimum standards for identifying information that brokers must collect and maintain on importers of record, particularly non-resident importers. In addition to collecting and maintaining the information, the law requires that these standards include procedures that a broker must follow to verify the authenticity of the information and provides for monetary penalties and the potential revocation or suspension of a broker’s licence or permit for failure to comply with the standards.
IP rights enforcement
In an effort to combat the import of merchandise that infringes IP rights, the act provides CBP with enhanced enforcement tools and establishes an administrative framework for managing IP issues. Prior laws allowed CBP to share unredacted images and samples with rights holders; however, the act now requires CBP to share information about merchandise that potentially infringes trademarks or copyrights with the rights holder, if CBP believes that this would assist in determining whether a violation has occurred. The act also adds circumvention devices (ie, devices designed to circumvent a technological measure to control access to protected work) to the list of items that CBP is authorised to seize and requires CBP to enforce copyright for which registration is pending. The act also provides statutory authorisation for:
the National IP Rights Coordination Centre;
the dedication of certain CBP and US Immigration and Customs Enforcement employees to IP rights issues; and
enhanced training for CBP employees on IP rights issues, including though coordination with the private sector.
Trade remedies enforcement
Title IV of the act (separately titled the Enforce and Protect Act of 2015) makes significant changes to how CBP enforces anti-dumping and countervailing duty orders. In addition to requiring the creation of a trade remedy enforcement division within CBP’s Office of Trade, the newly enacted legislation establishes a mandatory procedure for CBP to investigate allegations of duty evasion. Title IV borrows heavily from the Senate’s previously proposed Enforcing Orders and Reducing Customs Evasion Act, with some amendments.
Under the newly defined procedures, investigations into allegations of evasion must occur as follows:
Where CBP receives an allegation (or referral from another federal agency) that a person has imported covered merchandise into the United States through evasion, and it determines that the information provided reasonably suggests that evasion has occurred, it must initiate an investigation no later than 15 business days from notification.
Not later than 300 calendar days after CBP initiates an investigation, it must make a determination – based on substantial evidence – regarding whether such covered merchandise entered the United States through evasion. This deadline may be extended by 60 calendar days if CBP determines that the investigation is extraordinarily complicated and additional time is necessary to make a determination.
In making its evasion determination, CBP may collect additional information, including by issuing questionnaires (to the party that filed the allegation, the person alleged to have entered the covered merchandise through evasion and the foreign producer or exporter) or by conducting verifications. If CBP finds that the party alleged to have imported covered merchandise through evasion has failed to act to the best of its ability to comply with a request for information, CBP may use an inference that is adverse to that party’s interests in selecting from the facts otherwise available to determine whether evasion has occurred. An adverse inference may include:
reliance on information derived from the allegation of evasion of the trade remedy laws submitted to CBP;
a determination by CBP in another investigation, proceeding or other action regarding evasion of the unfair trade laws; or
any other available information.
If CBP makes a determination that covered merchandise was imported into the United States through evasion, CBP will:
suspend the liquidation of unliquidated entries of the covered merchandise that enter on or after the date of the investigation’s initiation;
extend the period for liquidating unliquidated entries of the covered merchandise that entered before the date of initiation;
notify the Department of Commerce of the determination and request it to identify the applicable anti-dumping/countervailing duties rates; and
require the posting of cash deposits and assess duties on imports.
The party found to be evading duties may file an administrative appeal of CBP’s determination within 30 business days, which must be decided de novo within 60 days. The appeal is subject to judicial review at the Court of International Trade.
Title IV also eliminates the ability of an importer of a new shipper’s merchandise to post a bond or security instead of a cash deposit for imports of that merchandise while the Department of Commerce is determining the new shipper’s individual weighted average dumping margin or individual countervailing duty rate. This provision is intended to prevent unscrupulous importers from importing large quantities of dumped or subsidised merchandise during the review period and then disappearing or otherwise failing to pay the proper amount due.
We received this email from a driver picking up merchandise at our cold storage. We are glad that we could lend a helping hand in times of need. Esmeralda Hernandez is our receptionist and showed her humanitarian side. It is rare that you receive this type of feedback, but I wanted to share with you.
Name:Brenda Bletscher E-Mail:firstname.lastname@example.org Phone:618-973-2629 Comment:I just wanted to send out special Thank you to Esméralda, who works in the Laredo office. I had a death in my family, my niece was killed in automobile accident. I was so upset, she was so nice and made sure I was loaded and out of there so I could get back home for my family.everybody down at Jo Alverez have always been so nice. Thank you once again for everything.
Thank you Brenda for your kind words, and a big thank you to Esmeralda for giving her a helping hand.
The value of U.S.-NAFTA freight totaled $88.2 billion in November 2015 as all modes of transportation carried a lower total value of freight than a year earlier, according to the TransBorder Freight Data released today by the U.S. Department of Transportation’s Bureau of Transportation Statistics (BTS).
Trucks carried 66.2 percent of U.S.-NAFTA freight and continue to be the most heavily utilized mode for moving goods to and from both U.S.-NAFTA partners Canada and Mexico. Trucks accounted for $30.0 billion of the $46.8 billion of imports (64.1 percent) and $28.3 billion of the $41.3 billion of exports (68.5 percent).
Of note, Canada regained its historical rank as top North America trade partner after falling behind Mexico in total trade value for the first time in October. Large decreases in the value of commodities moved by pipeline and vessel in November were due to the reduced unit price of crude oil.
Year-over-year, the value of U.S.-NAFTA freight flows by all modes declined by 8.4 percent.
In November 2015 compared to November 2014, the value of commodities moving by truck decreased by 0.4 percent, while the value of air freight decreased by 7.3 percent and rail by 9.8 percent. Vessel freight value decreased 42.6 percent and pipeline freight decreased 43.2 percent mainly due to the lower unit price of crude oil, which comprises a large share of the commodities carried by these modes. Average monthly prices for crude petroleum and refined fuel are available from the U.S. Energy Information Administration.
Behind trucks, rail remained the second largest mode by value, moving 15.1 percent of all U.S.-NAFTA freight, followed by vessel, 5.4 percent; pipeline, 4.2 percent; and air, 3.8 percent. The surface transportation modes of truck, rail and pipeline carried 85.5 percent of the total U.S.-NAFTA freight flows.
The value of U.S.-Canada freight totaled $45.1 billion in November 2015, down 13.8 percent from November 2014, as all modes of transportation carried a lower value of U.S.-Canada freight than a year earlier.
Lower crude oil prices contributed to a year-over-year decrease in the value of freight moved between the U.S. and Canada. Crude oil is a large share of freight carried by vessel and pipeline, which were down 46.1 percent and 43.5 percent respectively year-over-year.
Trucks carried 60.4 percent of the $45.1 billion of freight to and from Canada, followed by rail, 16.3 percent; pipeline, 7.7 percent; air, 4.6 percent; and vessel, 3.6 percent. The surface transportation modes of truck, rail and pipeline carried 84.4 percent of the total U.S.-Canada freight flows.
The value of U.S.-Mexico freight totaled $43.0 billion in November 2015, down 1.9 percent from November 2014, as two out of the five transportation modes — air and truck — carried more U.S.-Mexico freight value than in November 2014. Freight carried by truck increased by 4.9 percent, led by shipments of electrical machinery, which were up 10.5 percent. Air freight value rose 2.7 percent while rail freight value declined 4.3 percent. Pipeline freight value decreased by 37.5 percent and vessel freight value decreased by 40.7 percent mainly due to lower crude oil prices.
Trucks carried 72.3 percent of the $43.0 billion of the value of freight transported to and from Mexico, followed by rail, 13.8 percent; vessel, 7.4 percent; air, 2.9 percent; and pipeline, 0.6 percent. The surface transportation modes of truck, rail and pipeline carried 86.7 percent of the total U.S.-Mexico freight flows.
Booming business at Union Pacific Railroad’s intermodal ramp in North Laredo, Texas is spurring a $90 million expansion at the facility tapping U.S.-Mexico cross-border trade.
The first phase of the project, slated for completion in 2016, includes the acquisition of approximately 37 acres, the opening of a new entrance, installation of an automated gate system and the construction of new buildings on the site.
The new entrance and automated gate system will allow for improved traffic in and out of the facility, which handled 47 percent of all UP border crossings last year alone, as well as extend the potential operating hours of the facility all the way to 24/7 as demand warrants, UP Jeffrey Degraff told JOC.com
A second phase, which will double the facility’s size and truckload capacity, has been outlined and will include additional track work and expanded parking for cargo carriers, Degraff added. A timeline has not been set for this second phase, but will be based on volumes and our customer demands, he said.
“Union Pacific is pleased to participate in the economic growth seen in the US (especially Texas) and Mexico,” Degraff said. “Our Port Laredo facility is an excellent example of economic development on both sides of the border.”
UP is the only railroad to serve all six gateways along the U.S.-Mexico border. In 2014, UP handled 65 percent of the north- and southbound rail market share between the U.S. and Mexico — though the railway does not isolate intermodal from carload volumes.
Total Mexico volumes increased 8 percent in 2014 after growing 3 and 5 percent in 2013 and 2012, respectively. One of the primary factors behind the 2014 cross-border volume growth was in the shipment of agricultural products, which increased 29 percent when compared to the drought-impacted comparison of 2013. Southbound grain shipments and northbound U.S. import beer volumes accounted for a majority of the growth. New cross-border intermodal shipments and growing automotive volumes were also primary drivers of increased shipments in 2014.
“As the economies in both countries grow and shift, we look forward to meeting customer needs, whether they be in the energy, automobile, manufacturing or agricultural industries,” Degraff said.
UP’s planned expansion at Laredo follows hot on the heels of the completion of Kansas City Southern Railway’s new Wylie Intermodal Terminal. After 12 months of construction and more than $64 million of investment, the Missouri-based railroad cut the ribbon at the new terminal earlier in July in Wylie, Texas, a city just 30 miles northeast of Dallas.
Wylie’s first phase will offer an annual lift capacity of 342,000 twenty-foot-equivalent units, more than 50 percent the capacity of KCS’s neighboring terminal in Zacha. The Zacha terminal, which has an annual intermodal lift capacity of 168,000 TEUs, will now be used for transloading and automotive operations, the company has said.
To prepare for future intermodal growth on that lane, KCS has also been building and extending sidings at Los Chivos, San Cristobal, Melchor Ocampo, Corondiro and Lazaro Cardenas as well as expanding its existing intermodal terminal in Kendleton, Texas.
The Port Laredo expansion also follows the construction on UP’s own sprawling intermodal terminal and fueling station in Santa Teresa, New Mexico last year. The $400 million facility allows UP to refuel its longer trains more efficiently than it could in El Paso, Texas, the site of its former intermodal ramp about 15 miles to the southeast.
Contact Reynolds Hutchins at email@example.com and follow him on Twitter: @Hutchins_JOC.
The auto industry is looking south for new factories, and the farther south, the better.
Canada is struggling when it comes to retaining auto jobs, the U.S. is a house divided with most of the new automotive investment and jobs headed south of the Mason-Dixon line and Mexico is the auto industry darling.
The three countries are a united trading block under the North American Free Trade Agreement, or NAFTA, but they’re fierce rivals in the boardrooms where auto executives decide where to invest in the latest equipment and additional jobs.
Of the vehicles built in North America last year, Mexico produced about one in five, or double the rate from 2004. WardsAuto, which tracks production data, expects the rate to increase to one in four by 2020.
“The U.S.’ South and Mexico are winning the battle,” said Dennis DesRosiers, president of DesRosiers Automotive Consultants near Toronto. “Over half the capacity and 80% to 90% of investment dollars are going to the U.S. South or Mexico.”
Conversely, he sees the Canadian auto industry dwindling to five automakers with a single assembly plant each over the next decade or two — or about half its current manufacturing footprint.
The United Auto Workers union is keeping a close eye on the flood of automotive investment migrating to Mexico. The issue is especially critical for the UAW this year as it seeks product commitments from the Detroit Big 3 automakers in negotiating a new contract for about 140,000 U.S. autoworkers.
The auto industry is global, but increasingly companies want to build in the region where they sell. Which means chances are your new vehicle will continue to be built in North America but may not be made in the U.S.A.
Back in 2004, 11.6 million vehicles were built in the U.S., or 74% of the 15.8 million industry total. Canada built 2.7 million, or 17% of the capacity; and Mexico contributed only 1.4 million vehicles, or 9%, according to WardsAuto.
In 2014, signs were evident the tide had turned.
Mexico’s production had more than doubled to 3.2 million units, or 19% of the 16.9 million industry total. It came at the expense of the U.S., which dipped to 11.4 million units, or 67%; and Canada, which was down to 2.4 million, or 14%.
And the trend will continue. Wards forecasts new plants will add 1.2 million units of capacity in North America by 2020 and it is not evenly split.
Virtually every automaker is adding capacity in Mexico, including General Motors, Ford, Toyota, Honda, Volkswagen, Audi, BMW, Hyundai and Mazda.
The country is a “massive untapped market” that could grow by another 1 million to 2 million vehicles a year, DesRosiers said.
By 2020, Mexico is expected to build one in four vehicles in a North American industry of 18.6 million units. The U.S. will hold its own at two-thirds of the output, or 12.2 million vehicles. Canada is the big loser, down to 1.6 million vehicles and 9% of the output.
In 2014, automakers announced $18.25 billion in additional investments in North America. The breakdown: almost $10.5 billion for the U.S., $7 billion in new projects for Mexico, and a single $750-million project for Canada, according to the Center for Automotive Research in Ann Arbor.
That is on top of the 18 plants already in Mexico, and there are least five more planned or under construction. Mexico has seen a 40% increase in auto jobs since 2008 to 675,000 last year while the U.S. saw only a 15% increase in the same period to more than 900,000.
The supply base also has improved its quality, said Haig Stoddard, industry analyst for WardsAuto. “The litmus test was when Toyota said it would build there,” a reference to the company’s strict standards.
The domestic market continues to grow, and Mexico’s ports and its trade agreements with 45 counties have helped establish it as a strong export hub to Europe and South America as well as the rest of North America. By contrast, the U.S. has about 20 trade agreements, and Canada also has but a fraction of Mexico’s pacts.
“Mexico bested us on trade agreements,” said Sandra Pupatello, a former Canadian politician who now oversees business development for PwC Canada in Toronto as well as the Windsor-Essex Economic Development Corp. “They quietly have been negotiating trade agreements with the world.”
In the U.S., northern states are gaining third shifts at existing plants while the South is getting investment in new plants and the thousands of jobs that come with them.
By 2019, the U.S. South will have about 5 million units of capacity, almost catching up to the North, where the Midwest is not expected to grow much beyond the more than 6 million now, said Michael Robinet, managing director of IHS Automotive Consulting.
That is astounding given the history of how the auto industry developed.
The U.S. auto industry started in Detroit more than a century ago and the predominance of General Motors, Ford and Chrysler were such that they became known as the “Big Three.”
Production was centered in the Midwest and Michigan in particular — spilling over into neighboring Canada. It wasn’t until foreign automakers decided to build in the U.S. that a new manufacturing base was established in the South. States such as Alabama, Tennessee and Georgia used incentives and a nonunionized workforce to attract automakers seeking a manufacturing toehold in the U.S.
“The U.S. will be fine, at least over the next five years,” said Stoddard. “Production will stay here, especially of larger vehicles. There will be a lot of new capacity in the South, and it is needed. The North will hum along at current levels for the next five years.”
The fate of America’s most important free-trade agreement this century has become caught in a debate over its most important free-trade agreement of the last century. When opponents of the proposed Trans-Pacific Partnership say the deal would be “Nafta on steroids,” it’s fair to say: Yes, and isn’t that the point?
The North American Free Trade Agreement, which took effect in 1994, has helped to raise the living standards of Americans, Canadians and Mexicans. The TPP, which President Barack Obama hopes will serve as the capstone to his second term, can be expected to do the same for the 12 Pacific Rim nations it includes.
After some procedural shenanigans in the Senate — which nearly scuttled an important trade-promotion measure as well as the TPP talks — free-trade skeptics are back to citing Nafta’s supposed failings. Their indictment consists mainly of three charges: that the agreement resulted in bigger trade deficits, greater job losses and lower wages. None of these arguments stands up to scrutiny.
Nafta’s opponents are fond of pointing out that the U.S. now has a $44 billion trade deficit with Mexico, compared with a $5 billion pre-Nafta surplus. That $49 billion swing, however, is due less to Nafta than to the exponential growth in global trade in the 1990s and 2000s. The U.S. trade deficit with India, with which the U.S. has no trade treaty, also ballooned. Moreover, the trade data obscure the fact that goods imported from Mexico have about 40 percent U.S. content.
Nafta adversaries also say that, because of the deal, the U.S. has lost jobs. But the question of exactly how many jobs were lost is essentially unanswerable, even for economists. (Some 850,000 jobless workers have received what is known as “trade adjustment assistance” over the last two decades, but how many others got jobs because of increased exports to Mexico and Canada?) At any rate, it is a minuscule number in a U.S. workforce of 135 million people, 4 million to 6 million of whom lose or leave their jobs each month.
And what about that claim that Nafta suppressed wages? Yes,manufacturing wages have declined, but mainly because manufacturers are choosing automation over humans to make things and opting to move to lower-paying Southern states that eschew trade unions. Overall, in all three countries, real wages have risen since 1994.
What’s missing from the Nafta debate is that trade among the three countries has jumped 300 percent, to $1.2 trillion. Absent, too, is recognition that Nafta has helped to make U.S. companies more efficient, competitive and profitable. Less expensive imports have improved Americans’ purchasing power, resulting in higher living standards. And per-person gross domestic product is up in all three Nafta nations.
Opponents of such agreements like to point out that trade creates losers as well as winners. Of course it does — as does competition, as does technology. The goal should be to help the losers adjust, not prevent these deals altogether. Because for all the problems it creates — and they are real — commerce among nations is one of the greatest forces for peace and prosperity the world has ever known.
To contact the senior editor responsible for Bloomberg View’s editorials: David Shipley at firstname.lastname@example.org.
WASHINGTON — Even if the Teamsters fail to overturn a recent federal decision to allow Mexican motor carriers to haul loads past the border region, the impact of the new program may be negligible anyway.
The majority of U.S.-Mexico cross-border trade is shuttled over the border region, and interest from Mexican trucking companies in hauling goods farther inland and back to Mexico has received scant interest. To date, the Federal Motor Carrier Safety Administration has received just four applications from Mexican trucking firms after the agency announced in January that Mexican drivers could apply to move loads into the U.S. and back to their home country. The move brought the United States into compliance with the North American Free Trade Agreement that’s been in effect for two decades.
The four applications is a paltry sum compared to the number of qualified motor carriers in Mexico that could participate, given the program is open to all interested parties. It’s also considerably less than the 15 motor carriers that previously participated in a FMCSA three-year pilot — a pilot meant to test the stability of the very program now in dispute.
Nevertheless, the Teamsters Union has refused to back down. The International Brotherhood of Teamsters, alongside the Advocates for Highway and Auto Safety and the Truck Safety Coalition, filed a joint suit March 10 against the U.S. Department of Transportation, aiming to keep Mexican trucks out.
The groups contend in the suit that the data gleaned from the three-year FMCSA study used to support the new program “is arbitrary and capricious in light of the admitted lack of significant data.” The suit cites the DOT Inspector General Calvin Scovel’s own assessment of the three-year pilot study, in which he concluded the number of participating carriers was insufficient to “determine with confidence” the potential of a future cross-border program.
FMCSA decided to pursue the program in spite of the evidence on hand, said Teamsters General President Jim Hoffa.
“I am outraged that the Department of Transportation has chosen to ignore the findings of the DOT inspector general and is moving forward with a plan to open the border to Mexican trucks in the coming months,” Hoffa said in a statement shortly after the FMCSA announced the program was open to applicants in January.
Hoffa said the cross-border program not only ignores statutory and regulatory requirements, but also flies in the face of common sense.
“One thing was made clear in the IG’s report – the pilot program was a failure,” Hoffa said. “Allowing untested Mexican trucks to travel our highways is a mistake of the highest order and it’s the driving public that will be put at risk by the DOT’s rash decision.”
The dispute has put the teamsters at odds with the American Trucking Associations, the largest trade association for the U.S. trucking industry.
“We support opening the border,” ATA spokesman Sean McNally told JOC.com. “We support free trade and a seamless, safe, secure border for truck transport.”
McNally said the ATA has declined to “get into the weeds” on the number of current applications or participants in previous pilot studies. Instead, the ATA has emphasized the sheer economic value of the cross-border trucking program.
Not only will the program bring the U.S. into compliance with NAFTA provisions, but the policy change is expected to open trade between the two border countries and lead to the permanent termination of the more than $2 billion in annual retaliatory tariffs on U.S. goods.
“Trucks move more than 65 percent of all transnational trade between the U.S. and Mexico,” the ATA said in a statement. “In order to keep our economies efficient and growing, we continue to support our government’s efforts under NAFTA.”
The latest lawsuit is not the first nor the only dispute between the teamsters and the federal agency, McNally said, and U.S. operating authority for Mexican carriers has long been a controversial matter.
Since NAFTA went into effect in 1994, the U.S. has technically been required to allow cross-border trucking beyond established border areas. However, opposition from organized labor, led by the Teamsters, and safety advocacy groups, kept Mexican trucks from traveling beyond a narrow border commercial zone.
In 2007, the Bush administration opened a pilot project that admitted a limited number of Mexican trucking firms. There wasn’t a single crash involving any of the Mexican participants and violation rates for the Mexican trucks and drivers were less than those based in the U.S., according to online newsletter InsideFMCSA.com.
Two years later, Congress would later de-fund the Bush program at the behest of the Teamsters Union among others. The Mexican government protested and imposed a punitive tariff on all U.S. agricultural and manufactured exports — a tariff that was later sanctioned under a NAFTA arbitration which found the U.S. in violation of the treaty.
Now, InsideFMCSA.com suggests Congress could intervene once again.
Rep. Peter DeFazio, D-Oregon, ranking minority member on the House Transportation and Infrastructure Committee, has been an outspoken critic of the cross-border pilots and program. DeFazio has already said the program may be subject to congressional review as it prepares to renew federal highway funding which expires in May.
During a House committee hearing on transportation highway funding on Feb. 11, DeFazio said Mexico didn’t have much a truck regulatory agency. Mexico’s Federal Motor Transport agency would surely disagree.
You probably eat a lot more avocados than your parents did a few decades ago. Same goes for papayas and bell peppers. It might be because you have a refined palate or because you’ve gone and become a foodie, but really, you also have NAFTA to thank.
It’s easy to think of changing tastes as being just that — ephemeral shifts that just sort of happen. But trade policy has a hand in what’s popular, helping to drive food trends. A new report from the Department of Agriculture (first reported for NPR by author Tracie McMillan) sheds some light on just how much the American diet has changed since NAFTA.
A huge influx of Mexican produce
NAFTA, the trade agreement between the US, Canada, and Mexico implemented in 1994, loosened tariffs and rules on a variety of goods, allowing them to flow more freely across our northern and southern borders. And when that happened, it made some previously tough-to-find foods more available to American eaters year-round.
When it comes to US trade in produce with Canada and Mexico, the pipeline sending fruits and vegetables from Mexico to the US is by far the biggest. Both imports and exports between the US and its two NAFTA trading partners have grown, but US imports of fruits and vegetables from Mexico have soared since the early 1990s.
You can see a few areas where Mexican goods have slowly taken over the US market. Whereas in the early 1990s Mexico accounted for none of the avocados and just 11 percent of the bell peppers eaten in the US, these days it’s nearly half of both. For papayas, it used to be 27 percent. Now it’s 72 percent.
And Americans’ appetites for lots of these foods have only grown. We eat two kilograms of avocado per person per year now, three times what we did prior to NAFTA. We eat twice as many strawberries per person, packing away 3.4 kilos per person each year, and three times as many limes as we did prior to NAFTA. The below chart summarizes a few of the fruits and vegetables that have grown more popular since NAFTA…and whose imports from Mexico and Canada have substantially grown since NAFTA.
Canada accounts for a much smaller share of US imports on many fruits and vegetables than Mexico, but after NAFTA, the US started bringing in a lot more of some Canadian vegetables. Today, the US is a net importer of cucumbers and mushrooms from up north, whereas prior to NAFTA it had been a net exporter.
New technology and new rules came into play as well. More and better greenhouses, for example, allowed Canada to grow more vegetables, the USDA says. Avocados are another example. Until 1993, the US didn’t allow avocado imports from Mexico for fear that the fruits would bring with them the avocado seed weevil. But NAFTA started the process of relaxing that rule.
Fruit from Mexico, corn (and corn syrup) from the US
While NAFTA helped change the US diet, it also sent US foods north and south of the border. One huge area was corn. US exports of corn to Mexico, for example, more than quadrupled between the early 1990s and 2012.
Not that all this new, freer trade made everyone happy. Trade agreements are about trade-offs — the Mexican avocado industry exploded after NAFTA. But many of its corn farmers suffered, as US corn flowed into Mexico. Likewise, sugar trade provisions made both as part of NAFTA and since then have created an ongoing battle between Mexican and US sugar farmers. A country may make overall gains from trade, but it won’t make everyone in that country happy.
And NAFTA’s effects on food supplies are about more than new, exciting foods and higher profits (or losses) for farmers. NAFTA may have helped Americans to eat more fresh fruits and vegetables, but it also may be making Mexicans’ food choices less healthy, as McMillan points out. Along with corn, the US has ratcheted up its exports of high-fructose corn syrup and other processed foods, for example, to Mexico. One 2012 study linked NAFTA to Mexico’s ongoing obesity epidemic.
It’s also true that Americans may have started liking bell peppers or berries a lot more (or that Mexicans may have started eating more corn), even without NAFTA’s help. The USDA report itself attributes the changing US consumption of many of products to “changing diets.” But it also says that the ability to get so many more fruits and vegetables in the off-season helped get Americans to eat more fresh produce. What NAFTA helped do was make many types of food more widely available to a lot more people.