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Mexican carriers allege ‘billions’ in damages in Notice of Arbitration over terminated pilot program

WASHINGTON — The closure of the U.S. market to Mexican carriers as a result of the termination of the Cross Border Demonstration Project is causing billions of dollars in losses to Mexican motor carriers, CANACAR, a trade association representing individual carriers within the Mexican trucking industry, said in a Notice of Arbitration document filed last week and released today by the State Department.

In the notice, CANACAR alleges that the U.S. Department of Transportation’s restricting Mexican carrier operations in the U.S. and Mexican investment in U.S. carriers to be in violation of NAFTA Article 1102 (national treatment) and Article 1103 (most-favored-nation treatment).

CANACAR also alleges that the United States has failed to comply with a 2001 NAFTA Chapter 20 arbitral decision, in the Matter of Cross-Border Trucking Services, in violation of NAFTA Article 1105 (minimum standard of treatment under international law).

That arbitral decision, issued in 2001, said that the U.S. was in violation of the NAFTA agreement because it had not initiated a program to open the border between the U.S. and Mexico.

The 18-month long Cross Border Demonstration Project ended last month when President Barack Obama signed the FY 2009 omnibus spending bill that included language terminating the pilot project.

Mexico subsequently slapped tariffs on some 90 exports with an estimated cost to the U.S. of $2.4 billion.

Secretary of Transportation Ray LaHood, tasked by Obama to come up with a new program, has been working feverously to develop a set of principles for a new cross border program that Obama can present to the Mexican government during a state visit next week.

A DOT spokesman said the department would have no comment on the arbitration filing at this time.

The United States intends to vigorously defend itself against these claims, according to a notice on the State Department Web site.

“Mexican carriers have a substantial economic advantage over their U.S. counterparts — Mexican drivers make materially less than U.S. drivers — which explains why the International Brotherhood of Teamsters is so against opening of the U.S. market to competition,” CANACAR said in the notice under the section Damage and Other Relief.

If the U.S. complied with its NAFTA obligations, it would open up a “huge” market for Mexican carriers to utilize their competitive advantage, CANACAR said.

“As recognized by the DOT, there are more than 4.5 million northbound truck crossings of the U.S.-Mexico border each year,” the notice said. “Currently, if those trucks are owned by a Mexican investor, they cannot continue beyond the border areas. In addition, if NAFTA were implemented, for a small investment, Mexican carriers could carry international cargo anywhere in the U.S.”

The Mexican government estimates that the U.S.’ breaches of NAFTA cost Mexico more than $2 billion a year, and that’s the reason Mexico has imposed the tariffs.

CANACAR said the Mexico trucking industry had also been damaged by the refusal of the U.S. to comply with the ruling of the arbitration panel in 2001.

“Had the U.S. complied with the previous arbitration ruling, this proceeding would have been unnecessary,” the notice concluded.

CANACAR has nominated Thomas Heather Rodriguez of the White and Case law firm in Mexico City as arbitrator.

Lyndon Finney of The Trucker staff may be reached to comment at [email protected] .