RELATED ARTICLES "Beating Border Barriers in the U.S.–Mexico Trade," Southwest Economy, Sept./Oct. 2001 (Text or PDF) "Transportation Infrastructure and the Border Economy", The Border Economy, June 2001 (Text or PDF) "Border Bottlenecks Hamper Trade," Southwest Economy, Issue 5, 1998 (Text or PDF)

Global Economy
Beating Border Barriers in U.S.–Mexico Trade

Pia Orrenius, Keith Phillips and Benjamin Blackburn take a brief look at cross-border trucking, the problems associated with it and measures that could improve border trade efficiency.

Over the past 15 years, U.S. trade with Mexico has increased 400 percent—from $48 billion to $239 billion—yet neither Mexico nor the United States has made the adjustments necessary to handle the growing traffic. Unlike U.S. commerce with any other nation but Canada, U.S.–Mexico trade is mostly truck trade. And whether truckers use busy Texas, California or Arizona crossings, they face congestion and long waits, usually associated with government inspections and customs processing.

Cross-Border Trucking Restrictions
Restrictions on cross-border trucking add to the problems. Because the United States refuses to open its border to Mexican long-haul trucks—despite commitments it made under NAFTA—shippers have to rely on short-haul trucks to shuttle cargo across the border. The short-haul trucks haul in one direction only, clogging bridges, roads and inspection stations with empty trucks. A March 2000 U.S. General Accounting Office (GAO) study notes that 47 percent of the 3.6 million containers that crossed the border from Mexico in fiscal year 1998 were empty.[1] The GAO study also points out that government officials must process empty trucks as they do full ones to ensure compliance with U.S. laws and regulations.

Transactions Costs and the Direction of Trade
On the Southwest border, the extent of transactions costs depends on the direction of trade. In general, northbound trade faces more costs in the form of various U.S. government inspections. Southbound trade is most encumbered by Mexican customs broker practices—the warehousing, extensive paperwork, payment of duties and transfer of goods onto short-haul carriers. In both north- and southbound trade, clearing international freight implies many steps. Total shipping costs are the sum of duties, broker and customs user fees, freight forwarding and short- and long-haul service costs, bridge tolls and wait times for inspections.

Inspection Process Inefficiencies
The sheer volume of commercial trucks has overwhelmed government agencies charged with inspections and exacerbated inefficiencies in the inspection processes. The lack of coordination among agencies within countries, as well as across countries, stands in the way of reducing transactions costs shippers face. Agencies in both the United States and Mexico generally do not share facilities, but operate at different locations and keep different hours. Depending on the type of load, trucks pass through customs, agriculture, drug, immigration and safety inspections. Faced with 50 to 100 percent increases in commercial vehicle traffic since 1994, government funding for additional staff and facilities has fallen behind. Processing is still paper based, as agencies have been slow to adopt new "intelligent transportation" technologies that could drastically reduce inspection times.

Cooperation and Technology Offer a Partial Solution
The cumbersome processing of northbound shipments could be improved by better cooperation among U.S. governmental agencies and greater use of available technology. As a partial solution, several transportation research institutes have recommended a prototype border facility that would provide electronic preclearing of northbound trucks and their cargo and improve coordination among U.S. agencies at the border.

Solving the Empty Truck Problem
Then there’s the empty truck problem. The requirement that Mexican customs brokers must preclear trucks coming into Mexico—and the fact that they do so on the U.S. side of the border—is an important cause of short-haul trucking (drayage) on the border. The NAFTA trucking agreement—allowing Mexican trucks to transport goods directly into the United States (direct lining) and likewise for U.S. trucks into Mexico—would be an important improvement. It would increase the incidence of direct lining and reduce the demand for drayage, storage and warehousing. The reduction in short-haul carriers would cut costs to shippers and, since they normally do not backhaul, would reduce traffic and congestion on the border by lowering the number of empty trucks.

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