Supreme Court Ruling Paves the Way for NAFTA

By | June 21, 2004

The U.S. Supreme Court unanimously agreed to overturn a lower court ruling that had required the U.S. Department of Transportation to undertake an environmental impact study under the Clean Air Act before opening the U.S.-Mexico border under the North American Free Trade Agreement (NAFTA).

The high court’s decision in Department of Transportation v. Public Citizen “opens the way for the U.S. Department of Transportation to continue working with Mexican authorities to move forward with long-haul bus and truck operations,” said U.S. Secretary of Transportation Norman Y. Mineta in a statement. “Truly opening the market between Mexico and the United States for trucks and buses means more opportunities for American companies, more jobs for American drivers and better deals for American consumers.”

Under NAFTA, the United States and Mexico agreed to grant mutual trucking access on a limited basis beginning in 1995. This access was to be expanded from border zones to all states by Jan. 1, 2000. However, the U.S. has kept its borders closed to Mexican trucks—and Mexico, in turn, has kept its border closed to U.S. trucks—because of concerns that Mexican trucks would harm the environment through increased air pollution and impact road safety, a major concern for the insurance industry.

The Federal Motor Carrier Safety Administration (FMCSA), “has developed over several years operating rules and structures that hold Mexican trucks to the same standards as ours,” said David Golden, director of commercial lines for the Property and Casualty Insurers Association of America. “Now it’s up to FMCSA to follow through with the safety compliance.”

Insurers have also expressed their concerns over the lack of mutual recognition of insurance policies between Mexico and the U.S.

“Mexican federal law requires that bodily injury insurance must be written with an insurer domiciled in Mexico,” Golden said. “Right now you still have to have at least two insurance policies if you want to carry goods in all three countries. The ultimate goal is that the countries will mutually recognize policies.”

The Supreme Court decision paves the way for the Bush Administration to end a 1982 moratorium that says Mexican trucks can only operate in small commercial border zones, where goods must be transferred to U.S. trucks for transport across the country. Ending the moratorium would allow Mexican trucks on roads nationwide, which would bring the U.S. into compliance with a key provision of NAFTA.

The ruling was hailed by the U.S. Chamber of Commerce, which claims trucking is “vital to this trade partnership since trucks move more than 80 percent of the value of our trade with Mexico. Because NAFTA has already eliminated most tariffs and other barriers to trade with Mexico, resolving the transportation dispute is important in keeping the partnership on track.”

According to Thomas Donohue, U.S. Chamber president and CEO, the decision to open the borders was long overdue. “Charges that Mexican trucks would undermine the environment or impact road safety are unfounded,” Donohue said. “The U.S. government has the full authority to inspect—and reject—trucks that do not meet our standards.”

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Insurance Journal West June 21, 2004
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