Border Disputes, Culture Wars and Supply Chain Security

By Leigh Bailey, Freelance Journalist

Ensuring the security of your supply chain can be an exercise in complexity, requiring a solid grasp of international law, regional politics, national legislation and even cultural attitudes.

Take the recent controversy surrounding the decision by the U.S. Congress on whether to continue to fund the “Cross Border Demonstration Program,” a pilot program that allowed both U.S. and Mexican truckers the ability to cross the U.S.-Mexican border on long-haul shipping runs.

Enacted under the Bush administration, the pilot program sought to address unfulfilled U.S. obligations to Mexico as outlined in the North American Free Trade Agreement (NAFTA).

Begin in 2007, the program “was designed to simplify a process that currently requires Mexican truckers to stop and wait for U.S. trucks to arrive and transfer cargo,” according to then U.S. Transportation Secretary Mary Peters, who went on to describe the existing process—which prohibited Mexican truckers from travelling beyond a 25-mile buffer zone along the Southwest border of the United States—as one that “wastes money, drives up the cost of goods, and leaves trucks loaded with cargo idling inside the U.S. borders.”

Citing differing safety standards between the two countries, under the terms of the pilot program, Mexican truckers who wanted access had to undergo a rigorous inspection of their vehicles to ensure their safe operation, and required Mexican truck drivers to hold a valid commercial drivers license, carry proof they are medically fit, comply with all U.S. hours-of-service rules and be able to understand questions and directions in English.

But in March 2009, Congress voted to defund the program, effectively shutting it down.

Proponents of the decision, such as the U.S. Teamsters Union, applaud the cancellation, arguing that the programs endanger American drivers and eliminate American jobs.

Critics, including Frank Vargo, vice president for international economic affairs at the National Association of Manufacturers, say the move will hurt trade for U.S. manufacturers doing business in Mexico.

Politics, Supply Chain, and the Bottom Line

In response to Congress’ cancellation, the Mexican government recently announced it was considering raising tariffs on 90 U.S. industrial and agricultural goods.

“Because Congress has terminated the pilot program in violation of our NAFTA obligations, Mexico has announced that it will retaliate against us, as it is entitled to do, by increasing duties on $2.4 billion of U.S. exports of key commodities like wheat, beans, beef, and rice," Representative Kevin Brady, a Texas Republican, said in statement.

But it’s exactly this kind of uncertainty that a good supply chain risk management system is designed to address, according to Erin Thomasson, Senior Vice President, Risk Management & Insurance, Expeditors International, who believes active monitoring of emerging legislation is critical to corporate risk management planning.

“Watching the outcome of a NAFTA program has not traditionally been a part of supply chain risk management programs,” she explains. “However, emerging regulations are having an impact on the supply chain in much more direct ways than ever before. Just like in this instance, where a change in the implementation of this regulation could directly affect the availability of transportation resources for companies with manufacturing in Mexico, if you are not watching and planning for the impacts of government regulation globally, you are likely to be taken off guard and encounter a supply chain interruption in unexpected ways.”

Leigh Bailey is a Freelance Journalist for the SCRLC Newsletter