Trucks From Mexico Stir Wage, Tax Debate

The Supreme Court’s ruling on June 7 apparently paves the way for U.S. trucking companies to save money by hiring Mexican truck drivers to travel south of the border.

“I think you’ll see a disproportionate hiring of Mexican drivers because the labor costs will be lower,” said Dan Moore, senior vice president and transportation analyst with Stephens Inc., the Little Rock investment firm. U.S. truck drivers earn about 32 cents per mile, while their Mexican counterparts are paid about half that amount.

But Lane Kidd, president of the Arkansas Trucking Association, doesn’t think U.S. companies will go that route.

“It’s against the law,” he said. “It’s discriminatory. You’re only going to pay them half of what you pay your other drivers? You’ll lose in court on that one.”

“They’ll find ways around that,” Moore countered. “All you have to do is open up an operation down in Mexico and fly a Mexican flag, and all of a sudden it’s not discrimination.”

The debate illustrates the uncertainty among industry experts about what will happen when the border is opened to truckers. The government estimates that 34,000 Mexican trucks will operate in the United States after the border has been open for several months. Moore said Mexican trucks will be rolling into Texas in a month and into Arkansas a few months later. Most of Arkansas’ four public trucking companies run regular routes into Mexico, he said.

“You’re going to see a surge of Mexican trucks entering the United States, particularly the South,” Moore said.

Unanimous Decision

The unanimous Supreme Court ruling gave President Bush the green light to open U.S. highways to Mexican trucks without conducting a extensive environmental study first.

A U.S. government moratorium on Mexican trucks has been in place since 1982, preventing them from traveling throughout the United States. Mexican trucks are allowed to cross the border to drop off cargo to be picked up by U.S. trucks but are limited to a 20-mile wide buffer zone.

The Supreme Court decision put the brakes on a feud that had been festering since the U.S., Mexico and Canada signed the North American Free Trade Agreement in 1994. NAFTA required the U.S. to allow Mexican trucks into border states by 1995 and into the rest of the country by 2000 with unrestricted access to U.S. highways. President Clinton delayed full access, citing safety concerns.

President Bush opened U.S. roads to Mexican trucks in November 2002, but union and environmental groups took the issue to the Ninth Circuit Court of Appeals in California, which in January 2003 ordered a “full environmental-impact statement.” The high court voted 9-0 to overturn that decision saying the president has the power to enforce NAFTA.

As a result of the decision, Mexico will likely lift its retaliatory ban on U.S. trucks entering that country. Mexico is the United States’ second-largest trading partner with $236 billion in goods crossing the border last year, most of it via truck.

Taxing Trucks

Kidd thinks many critics are putting the trailer before the tractor. He’s more concerned about Mexican trucking companies paying their share of taxes to travel in the United States.

U.S. trucking companies pay five different federal taxes and “a myriad of state taxes based on where they operate,” Kidd said. Only a fraction of those taxes are applied to fuel costs at the pump.

“A Mexican carrier, he’s going to go in at Laredo [Texas],” Kidd said. “He’s going to fill up with fuel and fly … He’ll pay a tax at the pump, if you will, and fly through Arkansas.”

Kidd said Arkansas is considering a “trip permit” that Mexican truck drivers will be required to purchase to allow them to drive through the state.

Although the U.S. Department of Transportation said Mexican trucks will be taxed just like American trucks, Kidd said, no “mechanism” has been devised to ensure that the Mexican companies are paying the taxes.

“There are various types of fees Mexican carriers will be able to skirt around,” he said, “and we don’t like that.”

Autonomous Wal-Mex

Proponents said opening the border to trucks would save money on shipping costs for trucking companies and manufacturers.

Although Wal-Mart Stores Inc. of Bentonville has 623 stores in Mexico with annual sales of $10.7 billion in 2003, the company said opening the border will have little effect on its business with Mexico.

“We pretty much operate intra-country,” said Bill Wertz, a spokesman for Wal-Mart’s international division. “We don’t have much stuff that goes across the border. What we do as Wal-Mart, stuff comes into our distribution centers from suppliers. Then it goes out to stores in the immediate area, and that’s it. It works the same in Mexico. Typically, we’re not importing much from Mexico that needs to be trucked a long distance.”

The American Trucking Associations, which represents about 3,000 U.S. trucking companies, has supported opening the borders to allow Mexican trucks to deliver freight to interior U.S. destinations. The trucks can then return to Mexico with a load from that destination or one along the way.

The change will do away with drop yards and drayage companies, which were necessary within a 20-mile zone of the Mexican border to move trailers back and forth between U.S. and Mexican trucking companies. About 4.5 million trucks crossed the border last year to transfer trailers.

“It’ll increase the throughput of freight and eliminate the drop-yard activities in south Texas and north Mexico,” Moore said. “Ultimately, it will result in an increased U.S. investment in Mexico.”

Moore said U.S. companies such as Wal-Mart won’t see a savings on shipments to Mexico until “much later.”

“It’s going to be a coincidental effect instead of leading,” he said.

J.B. Hunt Transport Services Inc. in Lowell and ABF Freight System Inc. of Fort Smith declined to comment.