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May 26, 2014

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76 THE JOURNAL OF COMMERCE MAY 26.2014 TOP 100 IMPORTERS AND EXPORTERS By Mark Szakonyi A KEY REPORT from the Federal Motor Car- rier Safety Administration this fall will go a long way toward determining how com- mitted politicians and business leaders are to taking the North American Free Trade Agreement to the next level. The FMCSA, the Department of Trans- portation agency responsible for regulating safety on U.S. roads, in October is expected to report to Congress on the results of a pilot program tracking 13 Mexican trucking com- panies hauling goods across the border to the U.S. and back. How Congress responds to the political hot potato — one the Team- sters union reheats with near-constant complaints — will demonstrate just how much of an appetite there is for a so-called NAFTA 2.0. Twenty years after the landmark free trade deal took effect, NAFTA trade is ris- ing steadily, particularly between the U.S. and Mexico. Still, legislators have yet to resolve some major hurdles to NAFTA trade, namely streamlining cargo processing. Considering manufacturers from all three countries source components heav- ily from each other, reducing trade friction would increase the global competitiveness of North American manufacturing, free trade proponents argue. The rising cost of Chinese labor and transportation, along with shippers' drive to shorten their supply chains to avoid disruptions, gives NAFTA members a rare opportunity to tap the so- called regionalization of trade. But all three countries have work to do, and one of the first tests will come when Congress receives a report detailing how well 13 Mexican trucking companies' 63 drivers and 55 rigs measure up in terms of safety, said Federico Dominguez, director general of Mexico's Federal Motor Trans- port. The report will reveal the results of more than 4,100 FMCSA inspections over three years. NAFTA opponents likely will criticize the study for not having enough Mexican motor carriers involved. The pilot originally called for at least 46 carrier participants, but the majority of the inspections have come from two larger trucking companies, said Fred McLuckie, director of the Teamsters' depart- ment of federal legislation and regulation. If Congress expands the long-haul pilot to all Mexican drivers, Dominguez doesn't expect a f lood of drivers hauling goods past the 25-mile border zone. The Mexican trucking industry is highly fragmented and few carriers want to haul goods any farther than the cross-docks in U.S. border towns, he said, in part because it's difficult for car- riers to find loads to haul back across the border. For Mexican truckers, that means the deeper they travel into the U.S., the more empty miles they likely face on the return trip. Under NAFTA, the Mexican drivers can't move freight from one U.S. destina - tion to another, and the same rules hem in U.S. drivers when operating in Mexico and Canada. There isn't a lot of interest from U.S. trucking companies in hauling goods into Mexico past the border region, either. As of mid-April, the pilot program involved only 41 U.S. drivers and 67 vehicles. With this in mind, the pilot is more a symbol of com- mitment to the free trade pact, Dominguez said at April's NAFTANEXT conference in Chicago. That commitment has wavered. Congress in 2009 defunded a pilot pro- gram that began in 2007 during the George W. Bush administration, and it took another two years before the Obama administration launched another pilot program. Opponents of the pilot program have painted Mexican drivers as unsafe operators of faulty equipment, but that picture doesn't hold up when inspections of pilot drivers are compared to the inspection records of U.S. drivers, according to a con- gressional report released in Januar y. In fact, the rate of Mexican trucking companies placed "out-of- service" in the pilot was lower than the U.S. aver - age, said John Frittelli, a specialist in transportation policy. Border ports of entry, clogged for years amid the growing northbound traf- fic, will remain congested even if Congress expands the pilot to allow all Mexican drivers to drive past the border region and into U.S. markets. Canadian and U.S. trucking com- panies, for example, have been able to cross their shared border for years, but trucks still can pile up for miles on either side. "The land ports of entry are bottlenecks," Juan Carlos Villa, regional manager of Latin America at the Texas A&M Transportation Institute, said at NAFTANEXT. "There are two ways to improve them: Build more infra- structure and change the processes." Signs are emerging that Congress real- izes it needs to invest not only to police the borders for immigrants but also to speed up trade. A House-Senate spending deal NAFTA 2.0 — or Not An upcoming safety report on Mexican trucks is just one obstacle to taking the trade pact up a notch "The land ports of entry are bottlenecks. There are two ways to improve them: Build more infrastructure and change the processes."

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