December 2001

The Open Road for Mexico’s Flowers? By Beth Meneghini

How many trucks does it take to deliver a rose? If that roseis from Mexico, it could take quite a few.

Mexican carriers, of flowers, fruit and any other cargocoming into the States, were scheduled to have full access to U.S. highways asof January 2000 under terms of the North American Free Trade Agreement(NAFTA).

However, Mexican trucks are still currently confined toborder zones in which freight must be transferred to U.S. haulers for statesidedelivery.

Under existing provisions, Mexican trucks are allowed tobring goods just 20 miles into the United States. Material is then transferredto a U.S. carrier to reach its final destination.

“We currently get floral product from Mexico,”said Bob Echter of Dramm and Echter, a cut flower grower in Encinitas, Calif.”And the system in place now seems to be working just fine for us. Idon’t know how NAFTA compliance would immediately affect our business.But I’m guessing it would impact floral transportation, which wouldultimately mean change for the floriculture industry.”

Echter sums up the feeling of many growers — they areaware of the issue, but aren’t quite sure how it will affect theirbusiness.

Even industry groups like the Society of American Florists(SAF) and the American Nursery and Landscape Association (ANLA) don’thave a clear position statement on the issue.

“We’re definitely keeping tabs on what ishappening,” said Drew Gruenburg, senior vice president of SAF.”Growers we represent could very well be affected by a change from thecurrent status of trade with Mexico, but we’re just not sure yet. Ithasn’t really bubbled to the surface.”

A Little History

Despite the trucking provisions originally outlined inNAFTA, President Bill Clinton instituted a moratorium in 1995 prohibitingMexican truckers from traveling more than 20 miles into U.S. territory. But inFebruary 2001, a NAFTA arbitration panel ruled that the United States must endits current moratorium on considering Mexican applications for cross-bordertrucking privileges.

The NAFTA panel ruled that the United States is violatingthe trade pact and could be forced to pay compensation to Mexico in the form ofhigher tariffs on goods or services going south of the border. Or, the UnitedStates could simply be fined for its violation of the agreement, a lump sumestimated at $2 billion a year.

The possibly hefty fines haven’t swayed the House ofRepresentatives, which recently voted against opening the domestic market toMexican truckers because of safety concerns. As U.S. Rep. David Obey ofWisconsin put it, “NAFTA is a trade pact. It is not a suicidepact.”

The Heart of the Issue

With relatively low-cost cut flowers coming from Mexico, why the heated opposition to opening the border-and-beyond to Mexican truckers? The number one reason: safety.

“I can’t really say if opening the border toMexican trucking would hurt our business,” said John Yamashiro, presidentof Wilsey-Bennett, one of the leading floral trucking firms in the UnitedStates. “The real concern is security. As a U.S. company, we are forcedto comply with stringent safety standards. It is a constant question as towhether Mexican trucks could meet those same standards.”

According to studies conducted by the U.S. Department ofTransportation’s (DOT) Inspector General and the U.S. General Accounting Office, far too manysafety hazards exist with cross-border transportation from Mexico, and theUnited States is ill-prepared to handle the massive influx of foreign trafficthat would result from opening the border.

The DOT further reported that Mexico currently does not havein place:

• governingregulations and practices regarding hours of service;

• adrug and alcohol testing program;

• aprogram to conduct roadside safety inspections of commercial vehicles;

• acarrier/driver database with economic and vehicle licensing information;

• a driver’s licensing module with driverlicensing data; and

• a safety module with accident, infraction andinspection data.

U.S. union leaders also contend that “whateversanctions the United States may face as a result (of violating NAFTA) will be asmall cost to protect American lives on our highways.”

U.S. growers and industry groups are understandablyapprehensive with the safety record of Mexican commercial carriers, and manyfear increased floral prices as a result of uninsured carriers or increases inthe number of accidents on U.S. highways.

“Clearly, the safety concerns should be addressed in aholistic way,” said Craig Regelbrugge, senior director of governmentrelations for the ANLA. “The important thing is to ensure that U.S.growers, nurserymen and floral transporters do not suffer any kind of backlashbecause of lowered standards for Mexican carriers.”

Mexican Potential

Mexican commercial flower production is a relatively neweconomic activity for the country that has grown explosively over the past fewyears. Flowers are now one of Mexico’s largest exports into the UnitedStates. Mexico produces flowers on more than 12,000 acres of mostly openfields, and after The Netherlands, has the world’s second-highest yieldin millions of stems per acre.

The United States imported more than $25 million in flowersfrom Mexico last year, which accounted for more than 90 percent ofMexico’s flower exports. Roses and carnations make up the bulk of exports,although modest amounts of anthurium, dendrobium and other orchid types arealso exported. With its suitable climate and geography, and a large andlow-cost labor force, Mexico is only beginning to realize its potential as aflower exporter.

However, Mexican floriculture is not yet in directcompetition with U.S. floriculture.

“Because of the stringent phytosanitary and quarantinelaws currently in place, much of Mexico’s floral product is restrictedfrom moving into the United States because of the potential of importing pestsin the soil,” said Regelbrugge.

Although Mexico does not compete in the bedding plant arena,the potential for cut flower competition does exist. As Mexico’s fieldsare Á planted with more flowers and less corn, more than just roses andcarnations may begin making their way across the border.

The Other Side of the Story

“We fully support the trucking provisions ofNAFTA,” said Mike Russell, a spokesman for the American TruckingAssociations. “The only thing we do insist on is that the trucks anddrivers coming into the United States meet the U.S. safety standards. Mexicantrucks will have to meet U.S. standards to operate in this country. It is assimple as that.”

According to Mexico’s Office of the Undersecretary forInternational Trade Negotiations, the safety of Mexican trucks is actuallyimproving. More than half of Mexican trucks failed inspection six years ago. In2000, only one in three didn’t make the grade. Many analysts believe thatthe failure rate of Mexican trucks will shortly fall to one in four.

Mexico is also in the process of developing more stringentsafety and inspection standards, as well as regulations on truck size andweight, emissions, and drug and alcohol testing — although no time framefor implementing these changes has been communicated to the United States.

Mexican officials also point out that skewed statistics andfears are focused on short-haul Mexican trucks, which is the wrong place tolook. Currently, Mexican long-haul trucks bring goods to the Mexican borderdepot.

Goods are then transferred to a Mexican short-haul truck(since Mexican trucks are only allowed to travel 20 miles into the States).Goods are again transferred once inside the United States onto U.S. long-haultrucks. And that’s the best-case scenario. Depending on the companiesinvolved, flowers and other goods crossing the border may make up to fivetransfers to reach their destination.

If Mexican trucks were allowed to travel inside the UnitedStates, Mexican trucking companies would utilize long-haul trucks, which areconsidered to be newer and more road-worthy.

The Road Goes Both Ways

What many in this debate fail to realize is that if U.S.roads are opened to Mexican trucks, the opposite also becomes true for U.S.trucks. Under current law, U.S. trucks are restricted from full access toMexican highways. U.S. trucking companies stand to gain substantially from fullaccess to Mexican highways. In fact, some Mexican trucking companies opposelifting the restriction for fear that U.S. trucking will end up dominating theMexican long-haul business.

“If the NAFTA trucking provisions are implemented, Idon’t think our economy or trucking competition will suffer,” said Russell.”Most Mexican carriers don’t have the size or financialcapabilities to fully operate in the United States. If anything, U.S. carriersand exporters will benefit. We have more than 2.5 million trucks in America.Mexico has 200,000 trucks. Other than a few instances, most Mexican carrierswill not haul in the United States.”

The Long Road for Roses

Cross-border trucking may turn out to have a positive impacton U.S. growers and floral transporters. Unloading and reloading every truck atthe border raises retail prices of Mexican-imported flowers and createsparalyzing congestion at border crossings. Implementing NAFTA may mean lowerprices on Mexican flowers and more reliable delivery in the just-in-time flowerchain.

On the other hand, safety is still a concern. AlthoughMexican officials have promised to meet U.S. standards, many American growersand floral trucking companies “will believe it when they see it.”

As the debate over cross-border trucking continues tounfold, the best growers can do is to remain alert and active.

“The key right now with this issue is to remain awareof what’s going on. If we keep this on the radar screen, we’ll beable to deal with any potential effects as they happen,” said Gruenberg.