doble_remolqueSince we reported in February that the Mexican trucking association known as Camara Nacional del Autotransporte de Carga (CANACAR) had brought back to the negotiating table, its 2009 demand for arbitration, various media outlets have made the claim that no such demand exists. They are incorrect.

OVERDRIVEONLINE has a provocative headline that say “US says no suit from Mex Association” but goes on to say in the article,

Contrary to reports from earlier this year, the U.S. Department of State says Canacar has not filed for arbitration since the Mexican trucking trade association served notice in 2009, but officials did not provide further information.

The state department, which represents the United States in North American Free Trade Agreement arbitrations, verified it had not received a Notice of Arbitration since the association filed in 2009.

However, it would not say if action has occurred on that notice since it was filed or verify if the DOS is or anticipates negotiating with Canacar to avoid arbitration. “Since we do not comment on whether we are or are not engaged in non-public negotiations, we will not have anything further to share on it,” a DOS official said.

Arbitration is conducted behind closed doors, whether it be in the private or public sector.

Background

In March 2009, President Barack Obama, bowing to pressure from union and other special interests, signed legislation suspending a pilot program that allowed a limited number of Mexican trucking firms to operate within designated areas on U.S. soil. The defunding language was contained within the “must sign” FY 2009 Omnibus Spending Bill.

One month later as Mexico was preparing to place its legal $2.4 billion in retaliatory tariffs, CANACAR filed a Notice of Arbitration with the US State Department seeking $30 billion dollars in compensation for the United States refusal to comply with it’s obligations under the NAFTA accords.

OOIDA, the Teamsters and others ridiculed this move as being ridiculous and illegal stating CANACAR had no legal standing to demand arbitration. As they have been so many times in the past, they were wrong.

Pursuant to Mexican law, CANACAR has the authority to represent the interests of its individual constituent members, which comprise the independent trucking companies of Mexico. In fact, the only Mexican trucking companies that are not included as Claimants are captive trucking divisions of companies that transport their own goods, such as trucks owned and operated by Coca Cola® transporting Coca Cola® products.

In addition, individual members of CANACAR have independently ratified CANACAR’s representative capacity in this matter. Combined, this gives CANACAR legal standing to file the complaint

The tariffs imposed against the United States pursuant to Article 2019(2) (b) of the NAFTA agreement were effective as was the Notice of Arbitration filed by CANACAR.

Theory and Purpose of Retaliation

Since the end of World War II, the retaliation remedy has proved to be one  of the more successful tools to promote state compliance with international trade  rules. Retaliation involves the authorized suspension of concessions or other obligations by one party against another in a trade dispute; usually in the form of a complaining party imposing, or threatening to impose, higher tariff rates on a list of exports from the offending party to induce the latter to remove an illegal measure. The theory behind retaliation is rooted in the principle of reciprocity and self-interest, whereby an injured party is permitted to seize the offensive in a trade dispute by imposing countermeasures against the offending state.

The goal is to compel compliance with trade rules by imposing costs on export groups who can bring maximum pressure to bear upon political leaders to remedy the violation.

Faced with higher tariffs, exporters are forced to lobby their government for the removal of the offending measure that led to theretaliation in the first place.

CANACAR action in 2009 was a wake up call to the US government in this matter and got all parties back to the table which eventually led to the current pilot program. As such, the demand for arbitration was held in abeyance.

In February, with the supposed end of the current pilot program seven months away, Canacar director Jose Refugio Muñoz Lopez brought the issue of arbitration up once more.

In an interview we reported on in February, Munoz stated that the US government, in the wake of the announcement, had expressed interest in reaching a negotiated solution before the case goes to arbitration. 

So again, the mere mention of bringing this before a NAFTA arbitration panel has the US State Department expressing a willingness to attempt to come to a permanent resolution to this longstanding issue.

 

This post is part of the thread: Mexico Cross Border Pilot Program – an ongoing story on this site. View the thread timeline for more context on this post.

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