It’s been more than a decade in the making, but Mexico is finally taking action against the United States for violating the terms of NAFTA.  Specifically, the U.S. was supposed to allow Mexican trucks to travel on border-state roads in 1995, and to drive anywhere in the country by January 2000.  Citing safety concerns, the U.S. has kept this NAFTA provision stuck in 1995, restricting Mexican truckers to a 20-mile buffer zone along the southern border.  An 18-month-old pilot program that allowed a few Mexican trucks beyond the buffer zone was effectively terminated last week when the $410 billion government spending bill eliminated funding for the program.

And so on Monday, according to a front page article in yesterday’s Wall Street Journal, the Mexican government announced that it would implement tariffs on 90 U.S. industrial and agricultural products.  Details of which products will be subjected to the tariffs will be published later this week, but the total value of the products was $2.4 billion in 2007 and originated in 40 states.

NAFTA was a big issue during the U.S. presidential campaign, with then-candidate Obama taking the position that “NAFTA and its potential were oversold to the American people” (see “Does NAFTA Need Fixing?“).  The issue came up again last month, when Obama met with Stephen Harper, the Canadian prime minister.  While Obama proposed revisiting NAFTA during their meeting, he also stated, “Now is a time where we have to be very careful about any signals of protectionism” and promised that the U.S. will meet its international trade obligations (except, apparently, for this NAFTA provision).

Around the same time, however, a clear “signal of protectionism” was sent to our trading partners when the president signed the $787 billion “stimulus” bill that contained the controversial “Buy American” provision (see “A ‘Buy American’ Supply Chain“).   Not surprising, when British Prime Minister Gordon Brown addressed Congress earlier this month, he explicitly warned the gathered politicians against adopting protectionist laws and practices.  Brazilian President Luiz Inacio Lula da Silva issued a similar warning last week when he met with Obama.

In short, this “neighborhood fight” between the U.S. and Mexico will be watched carefully by our other trading partners around the world.  It’s a litmus test on free trade, on whether the actions the president and Congress take on this matter will support or negate the rhetoric of not sending signals of protectionism.

Are Mexican trucks unsafe?  Like all controversial issues, it depends on who you ask.  According to information on the U.S. Department of Transportation’s Cross Border Truck Safety Inspection Program website, Mexican carriers that have participated in the pilot program actually have a better safety record than U.S. carriers.  Mexican carriers also face tougher standards than U.S. carriers.  But if you ask the Teamsters, you’ll get a much different take on the topic.

Source: U.S. Department of Transportation

Source: U.S. Department of Transportation

Personally, when it comes to road safety, I’m more concerned about teenage drivers (who account for $26 billion of the total costs of motor vehicle injuries) and deteriorating bridges and tunnels due to neglect or shoddy construction (see The Big Dig for a great example of our tax dollars at work, and what may lie ahead with some of these “shovel ready” construction projects).

In many ways, this trade dispute is an extension of what’s happening with the Employee Free Choice Act-i.e., the growing role and influence of unions in Washington.  In my opinion, if this dispute with Mexico was simply about truck safety, it would have been solved years ago.

The bottom line: Back in December, I predicted that 2009 will mark the beginning of a new era of regulation, and I highlighted NAFTA and the Employee Free Choice Act as examples (see “Logistics Predictions That Will Come True in 2009, or Maybe Never“).  “Regulations will have a greater impact on logistics operations in the years ahead than in the recent past”, is what I said then.  I still believe this is the case, with one slight modification: instead of the years ahead, you’ll likely see the impact in the weeks and months ahead.  This backyard fight over “truck safety” could ultimately spark a greater trade war that affects all industries and economies.  I hope I’m wrong.