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The Grumpy Economist: Regulatory capture: trucking edition

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Dominic Pino has a lovely National Review article on Mexican trucks. Watch the sausage in the making. Excerpts with commentary

Congress banned Mexican truckers from entering the U.S. in 1982. NAFTA, which came into effect in 1994, committed the U.S. to removing that restriction by 2000.

1994 was 28 years ago.  

The U.S. left the restriction in place anyway, and was found to be in violation of the agreement in 2001… The Bush administration said it would remove the restriction.

But organized labor and environmental groups…sued to keep the restriction in place. The environmentalists claimed that Mexican trucks did not meet American safety and environmental regulations. The Teamsters and other unions had an obvious motive: keeping out the competition….

In 2004.. the Supreme Court ruled against the environmentalists and unions and said that the Bush administration could remove the restriction and bring the U.S. in line with its obligations under NAFTA. Clarence Thomas wrote for the unanimous court.

Unanimous.

The U.S. continued to drag its feet on approving Mexican carriers…The Bush administration created a pilot program in 2007… The program included safety examinations for every truck and required the Mexican drivers to read and speak English. Congress defunded the pilot program in 2009….

The Obama administration started a new pilot program in 2011.

Liberalizing trucking is bipartisan.  

This program addressed Congress’s purported concerns about safety and regulatory compliance by requiring a more comprehensive inspection of Mexican trucks and requiring GPS and electronic recording devices on every truck to enforce hours-of-service limits and location rules.

The Teamsters and a trade group for U.S. independent truckers sued to block the new pilot program. The D.C. Circuit Court of Appeals in 2013 ruled against them again, with then-Judge Brett Kavanaugh writing the opinion that rejected every argument the petitioners made.

The three-year program ended in 2014. Over the length of the program, the Federal Motor Carrier Safety Administration (FMCSA) performed 5,545 inspections and Mexican trucks crossed the border 28,225 times. They traveled 1,263,630 miles in border states and 255,392 miles in non-border states.

The FMCSA used that huge sample size and reported back to Congress. It found that “Mexico-domiciled motor carriers … had safety records that were equal to or better than the national average for U.S. and Canadian motor carriers operating in the United States.” …

… The Teamsters and other trucking organizations sued again… The Ninth Circuit Court of Appeals dismissed the case in 2017, writing that “the parties do not raise any arguments the merits of which we may review.”

The USMCA, NAFTA’s replacement, keeps just about everything the same for cross-border trucking..

28 years and counting. More great details on how trucking works follow. Bottom line: 

Given that shippers near the southern border complain of driver shortages on both sides, and we know Mexican trucks are fully capable of meeting American safety standards, the federal government should rethink its regulatory approach again.

A little mild critique: It’s not clear that “thinking” about the “regulatory approach” is the problem.  

Contrary to what free-trade opponents might expect, this particular case of trade between two countries at different levels of economic development actually resulted in the less developed country raising its standards to meet the demands of the more developed country. Mexico went above and beyond what was required of it in NAFTA and spent large sums of money to bring its trucking up to American standards.

Trucks are an obvious part of the great supply shock and labor shortage. With inflation raging, cost-increasing protectionism is harder and harder to defend. Yet even a signed international treaty, obvious merits, and legal orders are not enough to get this little bit of sand out of the gears, for 28 years and counting. 

A big question on my mind, just how can we reform our political system so economic reforms can happen — especially clearly sensible reforms that both parties understand. This is a good case to mull in that search.   

(The US deregulated internal trucking in the 1970s, courtesy Ted Kennedy and Jimmy Carter. ) 

 

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