In the days leading up to his visit to Washington, D.C., Mexican President Felipe Calderón expressed increasing frustration with comments made by U.S. diplomats in Mexico (made public by WikiLeaks) noting colorfully that “Embajadores le echan mucha crema a sus tacos.” In other words, the assertions made in U.S. diplomatic cables were exaggerated at best and at worst patently untrue.  A week later, Presidents Calderón and Obama sat down at the White House and Calderón returned home with a trucking deal in his pocket.  This is no small accomplishment since over 70% of cross border trade (valued at about US$400 billion in 2010) is moved by truck.

Mexico and the U.S. have been arguing over implementation of the NAFTA trucking provisions for nearly two decades.  In a nutshell, under NAFTA, the U.S. was to give Mexican long-haul trucks access to four U.S. border states in 1995 and full access throughout the United States in 2000.  Citing safety and environmental concerns, the U.S. refused to implement these provisions.    In an effort to resolve the dispute, in 2007, the Bush Administration launched a pilot project granting Mexican trucks from 100 transport companies access to U.S. highways.  However, in 2009, Congress abruptly terminated the project which led to Mexico imposing retaliatory tariffs on a wide range of U.S. exports to Mexico.

Under the new agreement (perhaps more accurately termed a ‘path to an agreement’), announced March 3, 2011, Mexico will suspend 50% of its retaliatory tariffs when the final agreement is reached and when the first Mexican truck is granted operating authority, it will suspend the remaining 50%.

What concrete impact does this deal have on business?

• Recouping Lost Market Share and Lost Jobs: Since March 2009, over US$2.4 billion worth of U.S. exports to Mexico have faced tariffs ranging from 10% – 45% covering a variety of agricultural products, home appliances, consumer products and paper from 43 U.S. states.  Not only have exports suffered but the dispute has claimed an estimated 25,600 jobs in the United States.  Elimination of the retaliatory tariffs will make U.S. products competitive again allowing companies to recoup market share and jobs lost due to the dispute.
• Lessening the Logistics Burden:  Currently, any product crossing the U.S. – Mexican border is handled by no less than three transport operations – one on the Mexican side, one on the U.S. side and one in the middle (to off-load from one country and move it across the border for subsequent pick up.)  The agreement will allow for door-to-door delivery of goods in both Mexico and the U.S. greatly increasing efficiency and reducing costs for importers and exporters on both sides of the border.
• Decreasing Consumer Costs:  Enhanced border efficiency and the elimination of retaliatory tariffs should translate into lower costs for consumers.  It is estimated that the trucking dispute has increased costs to American consumers by an estimated US$2.2 billion.

Next steps – the “path” agreed to on March 3^rd now must be ironed out and turned into a firm agreement.  Once this is done, Congress gets into the act.  Let’s hope that Congress realizes that Mexico is the United States’ 2^nd largest export market and that U.S. trade with Mexico supports approximately 1 million U.S. jobs.  If not, Mexico is likely to refreshen its list of products for a new round of retaliatory tariffs.