The North America Free Trade Agreement, signed 20 years ago,
is an agreement to eliminate barriers to trade and investment between the US,
Canada and Mexico. How successful has it been? Based on September 2012 data (Check out Ti's Dashboard service for monthly NAFTA data),
the value of US surface transportation trade with Canada and Mexico has
increased almost 70% compared to September 2002 with imports up 57.4% and
exports up almost 86%. As such, as trade continues to increase among the three
countries, border-crossings continue to be cumbersome with congestion being the
common complaint. Attempts to ease not only congestion but also increase
security and standardize customs processes have been ongoing throughout the
life of the agreement.
There have been plenty of bumps in the agreement through the
years. Perhaps the bumpiest is the issue to allow Mexican truck carriers to
enter the US. Although Canadian truck drivers have been allowed the right to enter
the US market since the signing of the agreement, Mexican carriers have not.
Mexico responded by placing high tariffs on various US imports. As such, after
one unsuccessful pilot program, a second one began in 2011. However, after
completing its first year, it is hardly a success, as only a total of nine
Mexican carriers have been given clearance and have made a total of only 221
crossings into the US. According to the September 13th Ti brief, “Cross-Border Pilot Program in Jeopardy” the lengthy
qualification process and union officials appear to be holding the program
back.
However, in a possible move to demonstrate its good
intentions to make the program a success, the Mexican Ambassador reportedly
stated that an announcement would be forthcoming regarding the allowance of
cargo on some Mexican trucks headed to the US be inspected by American
officials before the trucks reach the US-Mexican border – thus allowing these
carriers to not have to wait at the congested port of entries along the border.
Whether this pilot program will succeed remains questionable.
Meanwhile, the US-Canada border presents a different set of
issues. The Beyond the Border initiative agreement (See Dec. 8 2011 Ti brief, “Canada and the US announce new measures to improve security and trade") was signed in
2011 and is to strengthen trade while reducing border costs. Goals to achieve
this include the harmonization of border pre-screening and inspection programs;
harmonization of regulations to speed customs clearance of goods in transit;
and improving border-crossing infrastructure to support the flow of commercial
traffic. In fact, implementation of this goal is set to begin for 2014.
However, according to the Canadian International Freight
Forwarders Association, this harmonization will demand a good bit of
negotiation between governments, associations and industry to get those
standardized practices implemented. In
fact, not only will it be difficult to get either side willing to amend systems
and processes, but the expertise required to manage cross-border requirements
will likely increase costs for those involved in the transfer of goods.
As NAFTA trade increases, NAFTA members continue to look for
ways to simplify trade between the three countries. Although the two
initiatives that are discussed in this brief may have been developed to simplify
trade, the supply chain costs of each should be studied to determine the true
benefits of each.
