Sunday, March 6, 2011

Here come the Mexican trucks

The US has finally decided to live up to its NAFTA obligations and allow Mexican trucks to operate in the US.  They will soon be allowed to make cross-border runs, but not domestic (US) runs.  Electronic recorders will be used to make sure they are used for import-export activity only.  Safety and driver experience requirements will be at least as rigid as those for US trucking companies. 

This has been a very emotional issue for US labor unions, and I must admit I am somewhat surprised that the current White House took a step that previous administrations were unwilling to take.  Part of the explanation may be that another round of punative Mexican retaliatory tariffs were on the way.  But it also may be a hard political calculation -- Obama is unlikely to face a primary threat next year and no one in the current set of GOP candidates looks like a working man's hero.  The unions may be unhappy but Obama is unlikely to lose their support over this move. 

In terms of the economics, this is good news for most.  The retaliatory tariffs will soon fade away, thus opening up greater export opportunities for American firms.  Importers will save transportation costs, given the wage differentials between the US and Mexico for truck drivers.  Obviously this is not good news for the American trucking companies and their drivers who were getting extra business because of the ban on Mexican trucks. 

It will be interesting to see if the Obama administration will take the next logical step for an export-job-creating, free-trade agenda:  trade agreements with Colombia, S. Korea and Panama. 

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