You can find the entire story at the New York Times (free registration required).
You might have noticed that Mexican trucks have been in the news lately. Who wins and who loses when Mexican trucks are allowed to carry cargo into the United States?
DOES NAFTA THREATEN U.S. SOVEREIGNTY? When NAFTA and the World Trade Organization (WTO) were being debated, opponents charged that the United States was giving up sovereignty to faceless international tribunals. Was it true? Sort of, but not really. Now that the NAFTA dispute resolution panel has ruled against the United States on this Mexican truck issue, are we forced to let in dangerous Mexican trucks? The answer is a sovereignty-reassuring "No." We have two choices. We can keep out unsafe Mexican trucks as long as we impose the same standards on U.S. trucks that cross the border. We are also free to do absolutely nothing and continue to keep out all Mexican trucks. Mexico could then impose tariffs on American products or ban U.S. trucks from entering Mexico and still be in compliance with NAFTA.
The New York Times reports that a NAFTA dispute resolution panel has ruled that NAFTA requires the U.S. to let Mexican trucks into the United States. President Bush has said that the U.S. will comply with the ruling. Mexican trucks have been excluded from freely traveling throughout the U.S. since 1995 when President Clinton decided to keep them out on safety grounds.
According to the Times, "Union officials voice fears that Mexican truckers, who often earn one-fourth as much as unionized American truckers, will take American jobs. And consumer groups, noting that 41 percent of Mexican trucks failed American inspections at the border, argue that the trucks will endanger Americans."
From this press account and others, you would think that the key issue at stake here is the right of the Mexican truckers to get access to the lucrative U.S. market vs. the right of Americans to use their highway system free from careening, brake-less Mexican trucks that could explode at any minute. And the result will be lost American jobs and gains by the Mexicans.
What's really going on?
There's someone missing from this picture. We have the Mexican truckers. We have the U.S. truckers who have to compete with the lower-wage Mexicans. And we have the Americans who are concerned about safety. We have the seen. But some of the participants are unseen.
Let's look at the economics. Under the 1995 order issued by President Clinton, Mexican trucks were allowed to cross the border but had to stay within designated commercial zones. These zones were within 20 miles north of the border. After that, the Mexican trucks had to transfer their goods to American trucking firms. (You might wonder how you enforce a law like that, but more on that later. For now, let's assume that the Mexicans complied with the law.) So up until now, Mexican goods had to make their way across America on American trucks. Now, Mexican trucks can continue to St. Louis and San Francisco and Houston with their Mexican-produced goods. What are the effects of this change?
MORE ON THE SEEN AND THE UNSEEN. Bastiat makes the distinction between the seen and the unseen: (What Is Seen and What Is Not Seen). Bastiat uses the metaphor of a broken window. We see the expansion of work for the glazier. Unseen is the work that will not take place now that the owner of the broken window has to fix the window. It is often the case that many of the impacts of economic change are indirect and hard to identify.
A whole series of changes occur. If Mexican truck drivers are cheaper, then
So American consumers have a stake in the dispute. These lower prices for goods imported from Mexico and goods manufactured in America using Mexican parts delivered by truck also affect American and Mexican workers. There will be:
Allowing Mexican trucks more freedom means more jobs for Mexican truck drivers and fewer jobs for American truck drivers. More jobs for Mexican and American factory workers. Consumers in America benefit and workers in Mexico benefit. Some American workers (the truck drivers) are worse off and some (the factory workers) are better off. So the real struggle here is between American truck drivers who will be hurt vs. American workers and consumers and Mexican workers who benefit.
The skinny on safety
What about safety? The Times mentions unnamed "consumer groups" and cites a 41% failure rate. The Times doesn't tell us what those numbers mean or provide a source. Could the safety issue just be a smokescreen to dim the glare of self-interest? Why would Mexican truck drivers get into such dangerous trucks? On average, they're poorer than the American truck drivers. They might be willing to take more risks. But 41% of the trucks are sufficiently dangerous to be removed from the road. Sounds horrifying. What's really going on? Let's look around the web.
Want to read the text of the NAFTA agreement? You can find it here: Organization of American States.
Just enter "Mexican truck safety" into your favorite search engine and you'll find plenty of info. You can find anti-NAFTA sites that tell you how dangerous Mexican trucks are. You can find pro-NAFTA sites that tell you how it's a non-issue. (There are a lot more of the former than the latter. Why is that? Do the antis have a better case than the pros? Or do the antis have a large vested interest in spreading the word while the pros have a smaller stake?) Most of it's pretty self-interested. So take it with a grain of salt, just as you should take any dose of policy analysis.
You can find "Motor Carrier Safety Program For Commercial Trucks at U.S. Borders" here: Department of Transportation: Motor Carrier Safety Program
It turns out that everything you hear about Mexican truck safety is taken from two Department of Transportation (DOT) studies done in 1998 and 1999. The first one, the riveting "Motor Carrier Safety Program For Commercial Trucks at U.S. Borders" looks at inspections at the border. In 1997, roughly 3.5 million trucks entered the U.S from Mexico. Of those, roughly 17,000 were inspected. "Of those Mexican trucks inspected, about 44 percent were placed out of service (percentage of trucks removed from service because of serious safety violations.) This contrasts with a 25 percent out-of-service rate for U.S. trucks and a 17 percent out-of-service rate for Canadian trucks."
So far, pretty scary. I'd like to know how serious those violations were, but 44% seems like a high number. Making me feel a lot more comfortable is the 3.49 million trucks that weren't inspected. I presume that the 17,000+ that were inspected were the most ragged looking of the lot. So 44% is probably a terribly inaccurate measure of how dangerous the average truck is.
Some more interesting info can be found in the page-turner, "Mexico-Domiciled Motor Carriers," another, DOT study. It reports in passing on the 1998 border inspections and notes: "Of the 23,300 Mexican commercial vehicles inspected at the border, 41 percent failed to meet U.S. safety requirements and were placed out of service for serious safety violations."
AHA! 41%. So that's probably where the 41% number quoted by the New York Times comes from. As in 1997, this is only a miniscule fraction of all trucks crossing the border. So it probably means that the average rate of dangerousness among all Mexican trucks is dramatically lower.
Of greater interest is the report's focus on Mexican truckers who violate the law and operate beyond the 20-mile area north of the border. The DOT distinguished between those that are beyond the 20-mile border but still operating within one of the four border states of California, Arizona, New Mexico and Texas, vs. those who are roaming freely beyond those border states.
Of the Mexican trucks stopped north of the border but within the four border states, 32% of the trucks were found to have serious safety violations and were taken out of service. But outside the border states, the rate fell to a mere 19%. This is lower than the U.S. failure rate of 25% found among trucks stopped within the U.S. for road-side inspections.
So here's a summary of Mexican truck safety:
Perhaps not surprisingly, the farther the trucks have to go, the safer they are. A nice confirmation of the hypothesis that even Mexican truck drivers like safety after all. And they pursue it rationally. Safety is more important on a long trip than a short one.
The other interesting aspect of the study is that it highlights two examples where trucks had to be removed from service. I'm ready for "steering wheel fell off in inspectors hands." Or "brake pedal plunged through floor when pressure applied." But here are the two cases the report highlights in the executive summary:
What a letdown! If this is the worst they can report about the 19% of Mexican vehicles that were taken out of service, maybe the safety issue isn't as frightening as it appears.
The Seen and the Unseen
So now we have a more complete story of the seen and the unseen. By allowing Mexican trucks to enter the United States, American consumers benefit, some jobs will be created and some will be lost. The safety issue appears to have been exaggerated.
There is one more point to be made about the seen and the unseen. Consider an American who buys a car manufactured in St. Louis. Some of the parts for the car come from Mexico. The car maker is in competition with other car makers and is trying to keep the cost and the price of the car as low as possible. Should the maker of the car be free to buy parts and have them delivered to the assembly plant as cheaply as possible? Should I as a consumer have the freedom to have the car I buy assembled as cheaply and effectively as possible? Open borders let me have that freedom and give that same freedom to Mexican consumers. Is that a good or a bad thing? You can let me know what you think at email@example.com.
* Russell Roberts is the John M. Olin Senior Fellow at the Weidenbaum Center on the Economy, Government, and Public Policy at Washington University in St. Louis. He is the author of The Choice: A Fable of Free Trade and Protectionism. His newest book is The Invisible Heart: An Economic Romance (MIT Press).