Mexican truckers group launches NAFTA Chapter 11 dispute against the U.S. over trucking ban

By Fernando Cabrera Diaz
28 April 2009

The Mexican trucking industry group CANACAR has initiated Chapter 11 arbitration against the United States, alleging that the U.S. has violated its NAFTA commitments by barring Mexican trucking companies from operating freely within its borders.

The cross-border trucking services dispute between Mexico and the United States originated in 1982 when the U.S. passed legislation establishing a moratorium on issuing permits for foreign trucking companies to operate in the U.S.  Although the initial moratorium applied to both Canadian and Mexican firms, it was subsequently amended to include only Mexican firms.

When NAFTA came into force in 1994, the U.S. made assurances that the moratorium would be phased-out. However, the U.S. reneged on that commitment, instead passing legislation indefinitely extending the moratorium in 1995.

While Mexican-owned carriers are allowed to operate between Mexico and U.S. Border States or in transit through the U.S. on their way to Canada, they are not authorized to transport international cargo within the United States.

In 1995 the government of Mexico challenged the United States’ continued moratorium under NAFTA’s Chapter 20 party-to-party dispute resolution mechanism (In the Matter of Cross-Border Trucking Services).

In 2001, a five-member panel unanimously concluded that, among other things, the U.S. was in violation of Chapter 11’s national treatment and most favoured nation obligations.  After the ruling, the U.S. lifted a ban on Mexican citizens owning American trucking companies, a move that did not resolve the dispute as Mexican-owned companies were still not granted the necessary permits to operate in the U.S.

ITN spoke to Pedro M. Ojeda Cárdenas, council for CANACAR, who says that the U.S. has failed to implement the tribunal’s 2001 decision. According to Mr. Ojeda, after years of negotiations the Bush administration sought to implement the tribunal’s ruling but could not gain approval from Congress.  Instead, the administration set up a pilot program in 2007 which allowed inscribed Mexican trucking companies to operate in the United States.

Yet the U.S. Congress refused to fund the project, allegedly bowing to pressure from the Teamsters Union. In March of this year, President Obama’s budget scrapped the project, prompting the claimants to commence their arbitration.

ITN contacted the U.S. State Department who said they could not comment on the case, although according to their website they intend to defend the claim vigorously.

In their notice of arbitration sent to the United States government on 2 April 2009, legal counsel for CANACAR charges the U.S. with violating Chapter 11’s most favoured nation obligation, on the grounds that its restrictive policy towards Mexico does not apply to other nations, including Canada. CANACAR also alleges violation of the national treatment obligation, given that Mexican carriers are discriminated against vis-à-vis their American counterparts.

The claimants argue that the U.S. policy is a protectionist measure designed to shield American carriers from competition from Mexican firms whose drivers command significantly lower wages.  The U.S., on the other hand, has cited safety concerns as the reason behind its policy.

Although their notice of arbitration does not specify the damages being sought, the claimants point to the over US$ 2 billion per year estimated cost of the U.S. policy toward Mexican-owned trucking companies.