Market Overview

Trucking Leaders And Customs Brokers Wonder What's Next With The USMCA?

Trucking Leaders And Customs Brokers Wonder What's Next With The USMCA?

The United States-Mexico-Canada Agreement (USMCA) was the hot topic at the most recent meeting of the Laredo Motor Carriers Association (LMCA).

Trucking industry leaders, customs brokers, freight forwarders and trade professionals from both sides of the United States-Mexico border gathered August 15 in Laredo for a presentation entitled "Modernization of Cross-Border Trade." 

Speaking at the event in Laredo, Kenneth Smith Ramos, a former Mexican official who was the country's chief trade negotiator on the new USMCA, said the United States needs to ratify the agreement as soon as possible.

"I think that you may have a scenario, where if you don't get [USMCA] approved in 2019, normally it will go into next year, but you already have the presidential electoral primaries beginning in February," Ramos said. "And these votes are usually so polarizing in society and in the U.S. Congress, that it's likely that the Congress won't take up the [USMCA] vote. So we may have a situation that it doesn't get approved this year. But next year, you may have a USMCA in limbo. So essentially, nothing happens."

Ramos worked for the Mexican government on Mexico's North American Free Trade Agreement (NAFTA) negotiating team back in the 1990s. Ramos also worked as a USMCA negotiator for former Mexican President Enrique Peña Nieto, who left office in 2018. Ramos now works an international trade consultant at Mexico City-based AGON.

Ramos added that if the USMCA doesn't get ratified soon, it's likely it could get pushed all the way to 2021.

"Then the decisive factor will be who wins the presidency. If President Trump is reelected, then it depends on Congress – who has the majority in the House and in the Senate," Ramos said. "But if a Democrat wins the White House, there is a pretty good likelihood that he/she might come to the negotiating table with Mexico and Canada and say, ‘This was Trump's deal.'"

Ernesto Gaytan Jr., LMCA president, said the ratification of the USMCA would not have a large impact on cross-border truck freight, since the agreement has kept a lot of NAFTA in place.  

"Border crossings are still strong right now, although we are seeing a lot more trucks coming north from Mexico, than heading south into Mexico," Gaytan said. "There are 14,000 trucks that are crossing the border every single day, and that number is going up."

Trucks carried 70.7 percent of all freight being transported between between the U.S. and Mexico during the month of May, according to the latest data from the U.S. Bureau of Transportation Statistics. 

Truck freight between Mexico and the U.S. was up 4.3 percent compared to the same time last year for a total of $38.6 billion. 

Truck freight between Canada and the U.S. was $30.4 billion (54.9 percent of all northern border freight) for the month of May.

The three busiest truck border ports – accounting for 46 percent of total trans-border truck freight – were Laredo, Texas ($16.3 billion); Detroit, Michigan ($9.3 billion); and El Paso, Texas, ($5.9 billion).

"Overall, the USMCA will be a benefit to trade. The bigger impact would be if the U.S. did not pass USMCA and left NAFTA – that would not be good for business," Gaytan said.

The United States is Mexico's biggest export market, topping $372 billion of goods and services in 2018. Mexico recently became the U.S.'s top trading partner, replacing China.

Mexico became the first of the three countries to ratify the USMCA, on June 19. The USMCA would update country of origin rules, labor provisions, U.S. farmers receiving access to Canadian dairy markets, intellectual property and digital trade laws.

Ramos said he believes the USMCA is a good deal for Mexico, Canada and the U.S.

"The USMCA was a needed modernization of NAFTA, because so much has changed since 25 years ago when NAFTA was created," Ramos said. "We have digitalization of everything, we have information technology which has changed the way we do business, we have a true global economy – the USMCA has taken all this and is an agreement that works for all countries."

Ramos said they key elements of what they did with the USMCA was to try and reduce the costs of trade and to reduce the risks of cross-border trade.

"We wanted an agreement that was more inclusive, to spur investment and have mechanisms that resolve issues," Ramos said. "One way to take the risk out of cross-border trade is to change the insurance freight laws in Mexico."

The "Modernization of Cross-Border Trade" was hosted by LMCA and sponsored by Mark Vickers, chief executive officer of Borderless Coverage, which automates the process of acquiring Mexican cargo insurance and reduces the cost.

"At Borderless Coverage our aim is to reduce the cost and friction associated with cross-border trade, very similar to what the USMCA is doing," Vickers said. "We're doing that in a variety of ways. But most importantly, we've eliminated the middleman associated with obtaining cross- border cargo insurance."

Image Sourced from Pixabay


Related Articles

View Comments and Join the Discussion!

Posted-In: Freight Freightwaves trucking USMCAGovernment News Markets General