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March 30, 2009 5:35 AM, EDT
U.S. to Resolve Truck Dispute, Clinton Tells Mexican Officials
By Sean McNally, Senior Reporter

This story appears in the March 30 print edition of Transport Topics.

Secretary of State Hillary Clinton said the United States is “working very hard to achieve a resolution” to a trade dispute that led to Mexico imposing tariffs on U.S. goods valued at more than $2 billion after President Obama signed a law ending a cross-border trucking plan.

Clinton spoke at a press conference during her visit last week to Mexico, where she met with Mexican President Felipe Calderon and Foreign Secretary Patricia Espinosa, ahead of President Obama’s trip there planned for April.

After meeting with Clinton, Espinosa said, “Both governments have expressed a clear political will to work together to find a solution that will benefit both countries and that will allow us to comply with the obligations that we have accepted” under the North American Free Trade Agreement.

Also last week, in Washington, U.S. Transportation Secretary Ray LaHood said the administration “soon” would have a proposal to reopen the border to Mexican trucks.

The Obama administration considers these issues as truckers and shippers begin to feel the effects of retaliatory tariffs Mexico slapped on nearly 90 U.S. products ranging from frozen potatoes to Christmas trees and cell phones.

LaHood said the administration would “seek Congress’ approval” for a new program, but that recent meetings with lawmakers were “a mixed bag.” Congress included a provision in its 2009 appropriations bill that prevented the Department of Transportation from operating the cross-border trucking program or creating a new one.

In 2001, an arbitration panel ruled that Mexico was entitled to damages in the form of sanctions or tariffs under the North American Free Trade Agreement because of a 1995 moratorium on Mexican truck deliveries to U.S. destinations imposed by President Clinton.

Mexico’s new 20% tariff on frozen processed potatoes was one of the products that hit trucking especially hard. According to the Department of Agriculture, the U.S. exported roughly $78 million worth of frozen potatoes last year, making it among the most heavily traded commodities subject to the new tariff.

John Keeling, executive vice president of the National Potato Council, said “virtually all” exports of frozen potatoes to Mexico travel by truck, and those U.S. exports are imperiled by the tariff.

Keeling said the United States holds about 75% of the frozen potato market in Mexico, while Canada, the second-largest exporter, holds 20%, competing on “an even keel” where prices are concerned.

“So we figure that within 12 to 14 months we’ll lose somewhere between 40% and 60% of that export market” because of the tariff, he said.

Dan England, chairman of C.R. England Inc., told Transport Topics that, because of the tariff, “we’ve had six loads canceled so far from one of our shippers.”

“I would suspect that we’re just seeing the tip of the iceberg on this thing, and it’s going to have a significant impact on us,” England said.

England said freight bound for Mexico “only amounts to 15% of our total revenue, but it is a part of our business that is quite profitable.”

C.R. England hauls 250 to 300 loads of commodities a week to Mexico, including potatoes. England said that while fresh and frozen potatoes may be the company’s biggest commodity, it “may only be 5% of our business.”

England said the tariff would either reduce shipments to Mexico, or lead customers to pass on the higher cost, “and either scenario is obviously very negative for us.”

Ed Schneider, owner of Schneider Farms in Pasco, Wash., said he was not sure exactly how much the tariff would hurt his farm, but that it was likely to significantly hurt sales.

“I haven’t crunched the numbers, but it’s a lot of French fries,” he said. “If we lose those sales, we’re all going to have to cut back. We’ll have to cut acreage and . . . when we cut volume as a grower, we aren’t going to use those carriers. There’s only so much to carry.”

Schneider said his 1,000-acre farm also was likely to trim its orders for seed and other supplies, further reducing truck volumes.

Opponents of DOT’s defunct trucking program said Mexican trucks do not live up to U.S. standards for safety and driver pay.

Rep. Peter DeFazio (D-Ore.), chairman of the House subcommittee on highways and transit called the tariffs “illegal,” in a March 20 letter, which again cited his concerns about the safety of Mexican trucks.

“Even if Mexican carriers meet all U.S. safety requirements,” he wrote, “the low wages of Mexican drivers will still drive U.S trucking companies out of business.”