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“The Perfect Storm”

After one of the most contentious elections in the nation’s history, we now have a totally new administration in place in Washington. And at least at this early stage, there also seems to be a new sense of excitement and optimism. The previous administration has left the building (and apparently so has some of our silverware and furniture). It’s now time to reflect back a bit, but only to the degree necessary to move forward a little wiser into the future.

Regardless of who deserves the credit, it’s an obvious fact that the previous administration presided over one of the longest periods of sustained economic growth on record. Another obvious fact is that few in the trucking industry, particularly small-business truckers and professional drivers, were able to share in the benefits of that economic prosperity.

The past year and a half has been particularly devastating to the industry, described by some as “The Perfect Storm,” where several different factors came together all at the same time and place to create an overwhelming force. Escalating fuel prices and the inability to recoup those increased costs because of unrestrained competition; an oversupply of trucks on the market that has resulted in plummeting equipment values; and now a downturn in the economy that is resulting in less freight available and further downward pressure on the rates. A pretty gloomy picture if you look at it from a short-term view.

On the other hand, if you step back and look past the short-term problems, you can see that like any other storm, this one will soon pass by. Those who were prepared in advance for the storm never lost control of their direction. Those who weren’t prepared and survived will have the opportunity to regain control and hopefully set a new and better direction for the future. Contrary to some views, the trucking industry is not on an irreversible, downhill slide. It is changing though, and it’s important to be involved to influence those changes where possible, and to adapt to those changes that can’t be influenced.

In assessing OOIDA’s agenda for the future, it is as important to recognize the positives and negatives in the political philosophy of the current administration, as it was with the previous administration, and to adjust our focus accordingly. For example, the Clinton administration had no national energy policy in place, and its environmental policies combined to leave it with no way of countering the adverse actions of OPEC. This left us with no option but to use our resources over the past year to push for a mandatory fuel surcharge. If Gore had won the election, the most important item on our agenda for this year would have been to renew these efforts.

At this time at least, it appears as though an expected additional wave of fuel price increases fortunately has not occurred. The Bush administration has promised that one of their priorities will be establishment of a national energy policy in order to lessen our dependence on foreign oil. Given the background of many of the top officials in the Bush administration, it is very likely that they will in fact, follow through on this issue. If they succeed, the result will likely be stable fuel prices, making the need for a fuel surcharge far less important. This situation could of course change if shortages develop before an effective energy policy is in place, and we will be prepared to adjust our focus accordingly.

An even more important and potentially devastating problem now looms on the horizon, and that’s the issue of opening the border to Mexican trucks. In the plus column for the Clinton administration, even though they signed the original North American Free Trade Agreement (NAFTA), which among many other things allowed open access for Mexican trucks to U.S. destinations, they refused at the last minute (in 1995) to allow this portion of the agreement to be implemented.

Contrary to some views, the
trucking industry is not on an
irreversible, downhill slide

The Bush administration has now indicated they will honor this part of the agreement and open the border to Mexican trucks. When the border opens, Mexican drivers will begin to deliver shipments from Mexico to anywhere in the U.S. Those drivers will find themselves running alongside an unregulated U.S. trucking industry so competitive, with wages so low that many U.S. carriers suffer driver turnover rates in excess of 100 percent a year. Allowing Mexican drivers who earn far less into the mainstream of U.S. domestic commerce under these circumstances will have profound results. U.S. trucking economics will provide an irresistible magnet for Mexican truckers.

Under U.S. law and the terms of NAFTA, only U.S. carriers can pick up and deliver freight within the U.S. A Mexican trucker who brings a load to say, New York, is authorized to pick up return freight for Mexico only. If a load to Mexico is not available, he must return empty. But that’s statutory law. The laws of economics say otherwise. There will be little freight headed to Mexico, yet it is highly unlikely a Mexican truck in New York will drive all the way home empty. Instead, he will find freight to deliver to major cities throughout the U.S. There are freight brokers and motor carriers calling on U.S. shippers every day that would happily arrange for such loads, pocketing a handsome markup for themselves.

As a result, many Mexican trucks bringing freight into the U.S. will not go home right away. Why should they? With no credible efforts to deter them, they will be able to pick up and deliver loads all over the United States, earning far more than they can in their own country. Networks of profiteering carriers and freight brokers will provide plenty of business. The issue of guarding against this type of unfair and illegal competition will be a primary focus of our attention and resources over the next few years. It’s also important that you contact your elected representatives to express your concerns on this issue.

Another important issue carried over from the previous administration is changes to the DOT hours-of-service regulations. Those changes proposed under the Clinton administration would have been devastating to the entire industry. It appears, at this stage, that we will have a much better chance of resolving this issue equitably under the Bush administration and gaining a fair hearing of industry concerns.

The bottom line is that regardless of your political preference or which party is in power, there are positives and negatives to both. We can’t just elect the person or party we prefer to office then sit back and assume they will always do the right thing. Involvement in the legislative and regulatory process will always be essential to moving our issues forward and correcting the many negativities in this industry. As certain as it is that each storm will pass, it is just as certain that another will be coming.

March/April
Digital Edition