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NAFTA at 20: A Look at U.S.-Mexico Trade

Observing its 20th birthday, NAFTA continues to play a key role in developing trade between the U.S. and Mexico. Troy Ryley, managing director of Mexico with Transplace, outlines the issues that shippers doing business in Mexico face today.

NAFTA at 20: A Look at U.S.-Mexico Trade

Twenty years ago, Mexico was not a “business-friendly” environment, says Ryley. “There were a lot of closed barriers.” In the two decades since implementation of the North American Free Trade Agreement, he has seen a dramatic change in attitude. Today, Mexico plays a vital role in U.S. trade, serving as both a source of production and a growing market for American merchandisers.

In addition, Mexico appears to be regaining favor as a location for low-cost manufacturing, as companies that had outsourced operations to China and other parts of Asia look for locations closer to U.S. markets.

Mexican transportation infrastructure “has come a long way in a very short period of time,” Ryley says. A number of road networks have been privatized, with expansion outside Mexico City in line with changing population demographics. The flow of goods within the country is far more dispersed than in the pre-NAFTA days.

Double-stack container trains are once again becoming a popular option for moving items such as consumer goods and automotive parts between the U.S. and Mexico. There remain some limitations, however, in the form of low bridges and tunnels, but the rail infrastructure has greatly improved, says Ryley.

Security is always a concern, but Ryley believes that many people are confusing drug cartel activity with freight theft. The latter focuses on merchandise, and affects but a small fraction of the total freight moving in Mexico, he says.

The larger issue of concern to shippers today is a lack of adequate liability coverage for lost or damaged goods. It’s much more limited than in the U.S., and is not available directly from carriers. Shippers need to obtain global insurance policies to shore up the gaps in coverage.

Despite the existence of NAFTA, there remain a number of trade barriers to be overcome. Some of those obstacles can be surmounted through participation in the Customs-Trade Partnership Against Terrorism (C-TPAT) and the use of “fast lanes” for trusted shippers crossing the border.

“If you’re a secure company that does things right, and are willing to show that you have custody of freight from point to point, you get access to programs that help,” says Ryley.

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