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Transportation impact of U.S.-Mexico free trade.

The free trade agreement will undoubtedly mean an increase in the flow of goods between the United States and Mexico. The impact of the increase, however, may not be immediately apparent because, even without the agreement, trade between the neighbors has grown rapidly in recent years. Between 1986 and 1990 the value of U.S. exports to Mexico increased from $15.1 billion to $28.4 billion, while imports increased from $12.6 billion to $30.2 billion.

Mexico ranks third, behind Canada and Japan, among U.S. trading partners, representing 7 percent of U. S. exports and 6 percent of imports. On the other side of the border, the United States dominates Mexico's trade, claiming about 73 percent of Mexican exports and 68 percent of Mexican imports. Much of the trade is associated with the in-bond manufacturing (maquiladora) industry. More than 90 percent of the total in-bond employment is concentrated in the border states of Chihuahua, Baja California Norte, Tamaulipas, Sonora, and Coahuila.

Tariff barriers have been dropping in recent years. The average U.S. tariff on Mexican goods is now less than 4 percent, while the average Mexican tariff on U.S. goods is about 10 percent. For those items on which tariffs remain as high as 70 percent or more, trade volumes are almost certain to increase as a result of the free trade agreement.

The most noticeable impact of the agreement, however, will be on the transportation system between the two nations, particularly at the border and to the south. The volume of traffic is already high, with most commercial traffic concentrated at a handful of points along the 2,000-mile border. From east to west, the major commercial crossings are located at Brownsville, Hidalgo, Laredo, Eagle Pass, El Paso, Nogales, Calexico, and San Ysidro. The interstate highway system reaches the border at Laredo, El Paso, Nogales, and San Ysidro, and active rail gateways with connections to the interior of Mexico can be found at the major commercial crossings (except Hidalgo and San Ysidro) and at Presidio and Douglas.

Two of the biggest obstacles to increased trade are likely to be the border crossings and transportation conditions within Mexico. Although adequate traffic capacity exists on the U.S. side, border formalities have proven a barrier to the flow of goods. Delays can be serious-waits of more than an hour are not uncommon-and most are caused by U.S. efforts to reduce contraband traffic, such as drugs and undocumented workers.

Efforts to alleviate problems at the border are not always successful. The major commercial crossing between El Paso and Juarez is the Bridge of the Americas. New customs facilities at the bridge were intended to expedite truck traffic. Unfortunately, just as the new facilities were nearing completion, it was discovered that structural deterioration of the bridge would necessitate restricting its use to smaller, lighter trucks. Large commercial trucks are to be diverted to the Zaragosa bridge, but customs facilities at the newly rebuilt bridge are not yet finished.

Transportation conditions within Mexico are another source of frustration. For example, traffic is especially heavy at the San YsidroTijuana crossing, and a number of maquiladora plants are located in the Tijuana area, but the commercial importance of the crossing is limited by the absence of direct rail and highway connections to the interior of Mexico. Curiously, the only highway in northern Mexico extends from Tijuana to the resort community of Ensenada-a boon to tourists but of limited commercial significance.)

While rail service is at least comparable to that available in the United States, highway conditions in Mexico are in need of improvement. With the exception of the Ensenada toll road and the highway between Nogales and Hermosillo, two-lane roads between the border and interior points are the rule. Highway routes through cities and towns are usually slow and congested. Northern Mexico is definitely not a trucker's paradise.

Some relief is on the way. One answer to border delays has been the run-through container train with special customs inspection arrangements. Recent improvements on several Mexican rail lines have enabled the new double-stack container cars to operate across the border at Laredo, Eagle Pass, El Paso, and Nogales. Double-stack container cars carry standard freight containers stacked two high, but cannot operate on all rail lines because of vertical clearance limitations. (The Ford facility in Hermosillo, a General Motors plant at Ramos Arizpe near Saltillo, and Chrysler plants near Mexico City are among the automobile plants that have used the double-stack rail service.) Finally, two new crossings are planned in New Mexico just west of El Paso and other locations are undergoing continuing improvements.

Such measures, however, may provide only temporary solutions. Despite the obstacles, international traffic along the border has been increasing. If the free trade agreement materializes, the traffic will only increase further, and with it, the need for more long-term solutions to the transportation problems.
COPYRIGHT 1991 University of Texas at Austin, Bureau of Business Research
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Author:Zlatkovich, Charles
Publication:Texas Business Review
Date:Aug 1, 1991
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