The Mexican Truckers' Dispute--a Backgrounder

You have probably read something (or more than something) already about the ongoing dispute between the US and Mexico over our broken promises to lift a ban on Mexican trucks coming into this country. Recently there has been one more lawsuit filed by Mexico against the U.S. over it. Here is a bit of background about the dispute that can put the issue in context.

The dispute actually goes back to 1982 when the U.S. Congress passed a law banning the entry of foreign trucks. Actually the official language was that foreign trucks would not be allowed to operate within the U.S., which effectively meant a block at all of the borders to their entry. The stated reason was that foreign trucks were not as clean or safe as our trucks. The unstated reason was that our truckers wanted in on the business. Eventually Canada lobbied and got the ban lifted from their trucks, leaving Mexico to be the only dirty, unsafe country on the list. For the next thirty years, no matter what Mexico might do to clean up its trucks or professionalize its drivers, the ban stuck. Eventually having little to do with the first reason and a lot to do with the second.

What they have to do is, when a Mexican truck full of, say, corn or televisions or cars, comes to the border, it has to stop, be emptied out, reloaded on a U.S. truck with a U.S. driver and off it goes. It is a lengthy, expensive way to do business. For Mexican trucking companies, the difference in costs between the Mexican drivers they hire on their side of the border and the U.S. drivers they have to hire on our side is significant and Mexico has been complaining about it from the start. In the suit filed this year they note that it adds an additional U.S. $2 billion each year to their costs.

In the late 1980s and early 1990s, when NAFTA was being negotiated, Mexico insisted that a cancellation of the trucking ban be written into the treaty. The U.S. reluctantly agreed and in 1994, when it came to operation, the the U.S. promised to phase out the ban.

Except that the very next year, 1995, the U.S. Congress passed another law extending the ban on Mexican trucks indefinitely.

Later that same year the Mexican government sued the U.S. under NAFTA’s Chapter 20 party-to-party dispute resolution mechanism. They won the dispute, but the U.S. politely did not comply.

In 2001, the NAFTA dispute tribunal unanimously found against the U.S. again saying that, the ban violated NAFTA’s provisions on national treatment and most favored nation obligations. The U.S. then lifted a ban a bit, but only on Mexican citizens owning American trucking companies, which did not really get at the heart of the dispute, because Mexican-owned companies were still not granted the necessary permits to operate in the U.S.

Following that, the Mexican trucking federation, CANACAR began what turned out to be years of negotiations with people in the Bush Administration to get them to obey the law. The administration argued that even if the federation could win over members of the Bush Whitehouse, Congress would never vote to obey the provisions of the treaty or the tribunal’s ruling. What they offered to do instead was to set up a pilot program in 2007 which would allow certain inscribed Mexican trucking companies to operate in the United States.

Yet even then, with a Democratic majority in both houses, the U.S. Congress refused to fund the project. And when President Obama’s budget was unveiled this year, money for the limited pilot project was not in it. In April, the trucking federation responded by once again filing Chapter 11 arbitration suit against the U.S., claiming this time that the U.S. was violating its NAFTA commitments by blocking the entry of Mexican trucks.

Although there are no damages demanded in the arbitration suit, as I noted above, the suit does mention that presently it costs the Mexican trucking companies over US $2 billion each year for the higher priced U.S. truckers and trucks. So, however it will be resolved (if ever) it will be worth a significant fortune to one side or the other of the border.

Obama Doesn’t Plan to Reopen Nafta Talks

After you have read about Obama backing away from his campaign pledge to revisit and re-vision NAFTA, click here and go to an earlier post about the upcoming United Church of Christ General Synod resolution encouraging him to not back away from his campaign pledge to revisit and re-vision NAFTA.

New York Times

April 21, 2009

WASHINGTON — The administration has no present plans to reopen negotiations on the North American Free Trade Agreement to add labor and environmental protections, as President Obama vowed to do during his campaign, the top trade official said on Monday.

“The president has said we will look at all of our options, but I think they can be addressed without having to reopen the agreement,” said the official, Ronald Kirk, the United States trade representative. It was perhaps the clearest indication yet of the administration’s thinking on whether to reopen the core agreement to add labor and environmental rules.

Mr. Kirk spoke in a conference call with reporters after returning from a regional summit meeting that Mr. Obama attended over the weekend in Trinidad. He said that Mr. Obama had conferred with the leaders of Mexico and Canada — the other parties to the trade agreement — and that “they are all of the mind we should look for opportunities to strengthen Nafta.”

But while he said that a formal review of the 1992 pact had yet to be completed, Mr. Kirk noted that both Mr. Obama and President Felipe Calderon of Mexico had said that “they don’t believe we have to reopen the agreement now.”

Mexico in particular, whose exports have exploded under Nafta, has little interest in such a renegotiation.

Not only Mr. Obama but also one of his rivals for the presidency, Hillary Rodham Clinton, had promised during their campaigns to renegotiate the accord — a politically popular position in some electorally important Midwestern states that have lost thousands of manufacturing jobs.

Thea Lee, the A.F.L.-C.I.O. policy director, said that the workers federation would have preferred “more definitive” language on addressing key labor concerns, but that it was understandable for a new administration to start its review with a less confrontational approach.

“We were obviously very encouraged by what Obama the candidate was saying on the campaign trail in terms of needing to recognize the deficiencies of Nafta and to strengthen it,” said Margrete Strand Rangnes, a labor and trade specialist with the Sierra Club.

Her group opposed Nafta from the start as lacking adequate environmental provisions, and contends that the side agreements added later have proved inadequate. “You have an environmental side agreement that doesn’t have as many teeth as the commercial provisions of the agreement,” she said. “You have an investment chapter that allows companies to basically file suit against common-sense environmental and public health measures.”

But she said the Sierra Club recognized that change would not come easily, and added, “We’re eager to work with the administration in having that conversation.”

Since the election, neither the president nor Mrs. Clinton, now secretary of state, has said much about trying to move side agreements on labor and the environment — which are subject to limited enforcement — into the main part of the trade pact, a potentially tangled and protracted process. As candidates in the Democratic presidential primaries last year, both said they would renegotiate or even opt out of Nafta, citing flaws in its labor and environmental provisions, while trading accusations over past support for the agreement.

Mr. Kirk, who as mayor of Dallas was known as a strong advocate of free trade, also said the administration planned expeditious reviews of pending trade agreements with Colombia and Panama.

He said that Colombia had made “remarkable progress” in reducing violence — attacks against labor activists have been a key sticking point — but that other issues remained, and he vowed intensive consultation with Congress on the matter.

The Bush administration signed the agreement with Colombia in November 2006. But Congressional Democrats and United States labor groups have said the Uribe government must do more to stop the antilabor violence and hold perpetrators accountable, a position Mr. Obama supported during his campaign.

Regarding Panama, Mr. Kirk said that differences on labor standards, and the question of the country “possibly being a tax haven,” needed resolution.

Mr. Obama and Mr. Kirk met with leaders of both countries during the Trinidad meeting.

Dangers of Inflation with the Fed

The Federal Reserve right now has a huge balance sheet. It has just given or loaned out or allowed cheap credit for, trillions of trillions of dollars. Far more than the TARP or the Obama stimulus package combined. If it works, it means that the demand (read: “value”) for money will eventually start going down because there will be a lot more of it flushing around in the system. The Fed will eventually have to get rid of all of the debt or else we’ll have a big rise in inflation. If it does that by selling bonds (hundreds of billions of them), and does it too quickly, it could cause bond prices to fall and yields to rise. If that caused (and it probably would) interest rates to go up, it would hit the mortgage loans again and corporate lending markets and could kick off a new recession.

Elizabeth Warren update on TARP Expenditures

Elizabeth Warren is the chair of the Congressional Oversight Panel and since January has been issuing monthly reports on how the Fed and the US government are doing (and what they are doing) in spending the bank and finance rescue monies known as the TARP. This is her April report.

Two Economists on the Bailout and theRecovery

Nassim Taleb (author of the best seller, The Black Swan), on how the bailout/recovery plan is insufficient:

Nouriel Roubini, of RGE Monitor, on how the recovery is going to be a long slow slog, and not quick as forcast by most economists: