TEXAS REAPING BENEFIT FROM MEXICO TRADE

INSPECTION OF MEXICAN TRUCKS

By DAVID HENDRICKS
SAN ANTONIO EXPRESS-NEWS

May 31, 2011, 11:12PM

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Editor’s note: This is the third in an occasional series examining U.S.-Mexico trade and the economy along the Texas-Mexico border.

As the United States and Mexico edge toward a new cross-border trucking arrangement, the volume of U.S.-Mexico freight passing through Texas is setting records as U.S. economic activity recovers from the severe 2007-09 recession.

Texas leads the nation in freight volumes with Mexico and has for at least 15 years. Even during the height of the recession, when freight volumes dipped overall, Texas still ranked first. In August 2010, Texas became the first state to record more than $10 billion in surface trade with Mexico in one month.

U.S.-Mexico freight volumes bounced nicely in 2010, but they would have rebounded even stronger if the violence from warring drug cartels and organized crime gangs on Mexico’s side of the border was not happening, border trade advocates say.

Nelson Balido, president of the San Antonio-based Border Trade Alliance, estimated that U.S.-Mexico trade volumes might have been 5 to 10 percent higher in 2010 were it not for the drug cartel violence in Mexico.

“But it wasn’t as big an issue last year as it was the year before,” Balido said. “Violence is a factor, scaring off folks that don’t understand the border and those who are thinking about investing in Mexico.”

U.S.-Mexico truck trade also will face a boost with the new cross-border trucking truce that would put the U.S. in compliance with the North American Free Trade Agreement for the first time since it was enacted in 1994.

The U.S.-Mexico truce over cross-border trucking should spur the U.S. economy further, because Mexico says it will back away from its trade sanctions against about 100 U.S. products, giving U.S. companies making those products the opportunity to win back their Mexican markets and perhaps expand employment.

As truck, rail and pipeline freight continues to flow more freely between the two countries, Texas will be in the middle of it all.

Surpassing $100 billion

Manufactured components, raw materials or finished goods that cross the U.S.-Mexico border almost always are hauled by truck.

In 2010, Texas led all states in surface trade with Mexico, comprised of trucking, rail and pipelines. Texas also was the first state with more than $100 billion in surface trade with Mexico in a calendar year.

In all, Texas-Mexico surface trade totaled some $114.5 billion worth of goods, up 33.07 percent from $86 billion in 2009, according to the U.S. Bureau of Transportation Statistics. California was a distant second in 2010 with Mexico surface trade at $47.6 billion.

The percent increase for Texas-Mexico surface trade was higher than the U.S.-Mexico increase of 27.6 percent in 2010 over the previous year.

Of the $320.26 billion in 2010 surface trade between the U.S. and Mexico, 81 percent traveled by truck.

Of the top U.S. ports, Laredo ranks No. 1 in North American trade volumes in all modes, including ship and air, crossing 13.2 percent in 2010, according to the U.S. Department of Transportation.

Detroit was second with 12.2 percent. Six Texas ports rank among the top 17 U.S. ports for North American trade. After Laredo, they are, in order, El Paso (No. 5), Hidalgo (No. 7), Houston (No. 10), Eagle Pass (No. 12) and Brownsville (No. 17).

The higher freight volumes in 2010 were due to a recovering U.S. economy, observers said.

“Manufacturing was stepping up last year,” Balido said. “The U.S. economy is still on pins and needles, but it’s a good indicator that people are buying and consuming more.”

The speed bumps

U.S.-Mexico trade volumes could have been more. A cross-border trucking dispute along with ongoing drug cartel and organized crime violence in Mexico were barriers.

In 2009, Mexico imposed prohibitive tariffs on $2.4 billion worth of goods imported into Mexico from the United States because Congress defunded a pilot cross-border trucking program that had started in 2007, a dozen years after drivers in both countries were supposed to begin making international deliveries under NAFTA.

Mexico revised and expanded the list in 2010, but negotiations were revived in March 2011 between the U.S. and Mexican governments to begin a permanent cross-border trucking program.

But on April 8, the U.S. Department of Transportation proposed a three-year program that would give Mexican carriers permanent operating authority to make U.S. deliveries after 18 months of inspections. Provisional authorities could start at any time since the 30-day comment period on the three-year program expired in early May.

Fighting the violence

Mexico has agreed to back away from its sanctions as part of the new program.

Unfortunately, no such truce seems near in the drug war that continues to ravage the border region.

To counter threats of violence, trucking companies are using more technology to protect freight. Mexican shippers are placing more integrated camera monitors, global positioning systems and sensors, including devices that can detect container tampering, Balido said.

“Violence is not directed at the maquiladoras,” or twin plants, Balido said. “The supply chains have gotten smarter in the way they combat these acts. The drug cartels have moved to other ways of smuggling drugs. We’re starting to win the fight, and not just with the U.S. economy.”

Robert Barnett, partner at Cacheaux, Cavazos & Newton, a San Antonio-based law firm with U.S. and Mexican offices, said Mexico’s security problems affect mainly the flow of new foreign industrial investments in Mexico.

“The security concerns have no significant effect on the surface trade we are talking about,” he said.

dhendricks@express-news.com

Read more: http://www.chron.com/disp/story.mpl/business/7585224.html#ixzz1O4Mv0pw7

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