ANALYSIS: Mexican trucking association flip-flops on cross-border issue

| 4/6/2009

After nearly two years of resisting the opening of the U.S.-Mexico border to long-haul trucking operations, the Mexican motor carrier association now is taking the U.S. to “NAFTA court.”

Canacar filed a Notice of Arbitration on Thursday, April 2, claiming the shutdown of the cross-border trucking demonstration program is a violation of the North American Free Trade Agreement.

The filing seems to indicate that Canacar, the association representing both Mexican motor carriers and drivers, has done a 180 and now seems to advocate an opening of the border.

The resistance
From the onset of the now-defunct long-haul cross-border trucking program between the U.S. and Mexico, Canacar fought to end the program.

“Canacar has formally requested not to open the borders for trans-border services and to have the pilot program suspended until conditions for a fair competitive environment are existing and that the Mexican trucking industry has the guarantee of not being subject to unfair inequitable and discretional treatment by U.S. authorities,” Canacar National President Tirso Martinez Angheben wrote in a press release in March 2007.

Angheben appeared before the Communication and Transportation Committee of the Mexican Senate at that time to explain why the transportation industry opposes the opening of trans-border services and the pilot program between the U.S. and Mexico, according to a press release issued by Canacar.

The group’s resistance continued with the group highlighting many problems in Mexico that hampered enforcement efforts on the program.

Media in late 2007 reported that Canacar feared, among other things, that American truckers will violate “cabotage” rules while in Mexico. Cabotage laws forbid hauling point-to-point within a country instead of just dropping off a load and picking up another one for the return trip.

The group also said that Mexico does not have the ability to conduct complete audits on American trucks.

Now, all of a sudden since the program has ended, Canacar is crying foul and has filed a Notice of Arbitration claiming the U.S. has violated the North American Free Trade Agreement when it closed the cross-border “demonstration” program.

In the notice the group claims that shutting down the program could cost Mexico $2 billion a year.

Curious timing
The filing of the Notice of Arbitration could be considered curious in itself.

The Notice was filed April 2, less than two weeks after Canacar officials called off a strike after reaching an 11th-hour deal with the Mexican government.

Canacar called for all trucking companies in Mexico to strike on the major roads in the country because of concerns revolving around fiscal subjects such as diesel costs and tolls.

The trucking association and Mexico’s equivalent of the secretary of transportation struck a deal on a number of Canacar’s key concerns, prompting the association to call off the strike. The statement was posted on Canacar’s Web site.

According to the statement, the agreement included items such as tax breaks for motor carriers, a debt-restructuring program, better security on various highways, and improved response on reports of stolen trucks and trailers.

Canacar’s announcement did not include specific details on any of the agreements.

The filing also follows Mexico’s implementation of tariffs on some 90 U.S. goods – tariffs carrying a price tag of nearly $2.4 billion.

Canacar’s filing states the Mexican government imposed those tariffs because of the $2 billion potentially lost because of ending the program.

Those tariffs have also been called into question as a violation of NAFTA by Rep. Peter DeFazio, D-OR, one of the lawmakers who was very outspoken about the shortcomings of the cross-border demonstration program.

In a press release issued by his office on March 20, DeFazio pointed out that several of the tariffs are aimed at products produced in DeFazio’s home state and the home states of various other lawmakers who actively sought to shut down the program.

“These tariffs are illegal and should be treated as nothing more than political gamesmanship. Mexico has no legal grounds to implement any of these tariffs. Even if there was a legal basis for the tariffs, the $2.4 billion price tag is a disproportionate response, and the 90 U.S. products targeted for tariffs were illegally selected,” DeFazio wrote in his letter to Obama.

And both the Notice of Arbitration and the tariffs happened in the days leading up to President Barack Obama’s first meeting with Mexico’s President Felipe Calderón.

What’s next?
The arbitration process is clearly outlined in the NAFTA agreement.

The agreement has a provision that keeps decisions like that from going unchecked. The agreement’s Chapter 11 lists two international arbitration bodies in which NAFTA investor-state disputes can be heard.

Back in 2000, the NAFTA Dispute Resolution Panel, which is composed of U.S. and Mexican trade officials, said that the U.S. or Mexico could be liable for damages resulting from one side or the other not meeting its treaty requirements.

NAFTA’s Chapter 11 lists two international groups designated to hear NAFTA investor-state disputes. These groups operate with similar rules and procedures that exclude the public.

These groups, or tribunals as they are often called, are designed to actually handle contract disputes between investors and governments.

When a problem crops up and a challenge is filed, both sides pick an arbitrator. Those arbitrators then pick a final “impartial” arbitrator. This tribunal of arbitrators is then charged with sorting out the problem and issuing a final decision, which can include sanctions against one side.

The tricky thing is though – they meet in secret, behind closed doors.

One group, the International Center for the Settlement of Investment that operates under the World Bank, at least publishes its decisions. The other group, United Nations Commission on International Trade Law, does not.

Any decision handed down by a tribunal is the end of the situation. There are no appeals.

– By Jami Jones, senior editor