News-Sentinel.com

Thursday, 03/18/1999

NAFTA

American trucking firms such as Celadon benefit from NAFTA trade

By Jamie Barthell of Southwest Texas State University



News-Sentinel photo by Steve Linsenmayer
Multinational truck Celadon Trucking Services plans to have the tri-country sticker seen here put on all of their new trailers, many being made in Mexico, according to Tom Lambert of Celadon.

The liberalization of trade in North America and the development of better roadways from Mexico to Canada have bred a tremendous surge in the American trucking industry.

The number of long-haul trucks pulling freight to and from north and south borders of the United States has quadrupled.

Before implementation of the North American Free Trade Agreement nearly five years ago, American freight carriers were showing little growth and even less potential. Service areas were hemmed in by international tariffs.

NAFTA prompted a gradual yet dramatic reduction in those barriers. That has offered the trucking industry a new direction and, more importantly, a new foothold for what promises to be an extended period of sustained growth.

With such promise in sight, many freight companies have turned their attention to international trade. Nearly all have capitalized on intensifying international demand and the opportunity to serve a geographic area now stretching from Central America to Montreal, Toronto and the more remote outposts of eastern and western Canada.

Pancho Benavides, international business manager for Memphis-based M.S. Carriers Inc., said NAFTA has created a level playing field for ground transport. It has reduced the dependence of U.S. producers on trade and shipping by air to overseas countries with more favorable tariff structures.

With the majority of trade occurring in distant places, he said, trucking was limited to national transport.

"We just really couldn't compete," Benavides said of the pre-NAFTA trade environment.

Benavides said NAFTA further bolstered the trucking industry by making it feasible and desirable for certain industries to move south in search of cheaper labor. As an example, he points to the apparel industry, which once was dominated by the Asian market.

Even with long-distance shipping, he said, Asian labor costs made the overseas clothing trade favorable. Now, he said, Mexico can offer similar cost savings, thereby creating more freight for U.S. carriers.

"Boat travel from Asia to the United States could take between three and six weeks," Benavides explained, "where transport from Mexico might take three to seven days."

Federal traffic studies show that NAFTA-inspired trade has put heavy pressure on existing highways -- specifically Interstate 35, which links the Texas border region with San Antonio, Austin, Dallas-Fort Worth, Oklahoma City, Kansas City and other points on the way to Canada.

I-35 now carries four times the truck traffic that existed before NAFTA, and highway planners expect that volume to continue to increase dramatically with improved border crossings between Texas and Mexico.

They also have begun the long process of planning construction of a second intracontinental roadway connecting Laredo and Brownsville, Texas, with Houston, Memphis, Evansville, Indianapolis, Fort Wayne, Detroit, Windsor and Montreal.

"There will always be a need for good connectors between serviced areas for trucks," said Martin Rojas, a spokesman for the American Trucking Association. "As for international services, there is a distinct need for a better infrastructure to ensure a consistant ability to provide service."

Mike Archuel, executive vice president of Indianapolis-based Celadon Trucking, said the new highway, a southern extension of the existing Interstate 69 between Canada and Indianapolis, will bring increased productivity with faster deliveries and returns.

"Since drivers are paid by the mile, the more miles they can travel in a day, the more money the drivers and the company will make," Archuel said. "Effective movement will mean a lucrative business for anyone interested in international trade."

During the past four years, Celadon has more than doubled in size, becoming the largest carrier of international goods between Canada, the United States and Mexico. In 1997 alone, the company recorded a 60 percent increase in its Mexican division.

M.S. Carriers also has seen some amazing growth, Benavides said. In 1993 its international division recorded $18 million in revenue. At the end of 1998, Benavides expected the division to reach nearly $100 million.

"It is an opportunity for some extremely lucrative trade," Benavides said, predicting that in 1999 the international division will grow by 35 percent.

Benavides said the I-69 extension will help sustain such phenomenal growth by facilitating transport for the heavy industries, specifically automakers and steelmakers in Indiana and Ohio, where producers constantly seek alternative means of delivery.

Federal transportation studies have noted dramatic increases in imports and exports since NAFTA's inception. In the first six months of 1994, exports to Mexico alone rose 16.4 percent.

Free trade in North America provided the circumstances conducive to a flourishing industry for trucking companies willing to enter the competition. Those who saw the benefits were the ones who recognized the potential for expansion.

"Goods must be moved," Archuel said. "It's just a matter of who gets to do it."