More Bad Policies Contributing to the “Supply Chain Crisis”

[(David P.)]

More Bad Policies Contributing to the “Supply Chain Crisis”
By Scott Lincicome, 10/20/21, Cato dot org

Over the last few weeks, I & other Cato scholars have
explained how ubiquitous supply chain problems imperiling
the American economic recovery resulted from not only
short‐​term, pandemic‐​related issues, but also longstanding
& misguided trade, labor, & other govt policies that have
decreased system‐​wide flexibility & efficiency that’s today
so badly needed. Now, via the Journal of Commerce, we can
add immigration & Mexican trucking restrictions to the list:
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"Beyond physical infrastructure investment, US & European
govts need to ease migration rules to ensure there’s enough
people to power the cargo to consumers, [DHL CEO Frank]
Appel said. When the drivers aren’t there to haul goods &
commodities, the impact is nearly immediate, as has happened
in the UK, with panic runs on fuel in Sept & stockouts at
grocers & fast‐​food restaurants. When there aren’t enough
warehouse workers to unload trucks at shipper receiving
facilities, as is currently the case in major US import
markets, the slower circulation of chassis & containers
backs up to the ports, creating further congestion....

US long‐​haul truckload & less‐​than‐​truckload (LTL) operators
were struggling to recruit drivers before the pandemic, &
that’s only gotten more difficult. Despite the growth in
volumes, there are 5,900 fewer long‐​haul truckers & 4,100
fewer LTL drivers operating in the US than there were in
July 2018, acc. to Bureau of Labor Stats data as analyzed
by Jason Miller, an associate prof of logistics at Michigan
State U.

The political climate during the Trump admin — & now under
Biden — isn’t favorable to easing visa restrictions to
allow foreign drivers to operate on US highways. Trucking
companies face a steep challenge in making the case that
the potential domestic driver pool is too shallow,
considering higher salaries & better working conditions
could theoretically fill more cabs.

Mexico has the largest & closest supply of potential US
truck drivers, but the number of drivers who have come
north of the border to haul is miniscule. Only 13 Mexican
carriers with a total of 55 trucks were granted authority
to operate in the US as part of a pilot program that ran
from 2011-2014. The pilot has since expired, & tellingly,
the US‐​Mexico‐​Canada Agreement, the successor to NAFTA,
doesn’t include any language to allow more Mexican drivers
to take to the US roads.

Conversely, Canada has national & provincial initiatives
to help foreigners immigrate & haul. Feeling similar driver
recruitment pressures, the Canadian govt is fast‐​tracking
visa applications after overall immigration plunged during
the pandemic. Canada’s openness to foreign drivers is baked
into the country’s broader openness to immigration, whereas
many Western govts are looking to further restrict who
they allow in."
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As my Cato colleague David Bier noted last week, massive
US visa backlogs are contributing to our current domestic
labor shortage, which many port officials, importers, &
logistics experts — echoing Appel above — blame for
bottlenecks at various points in the supply chain. Adding
insult to injury are the NAFTA/USMCA trucking restrictions
(detailed in this 2013 Cato paper), which have long been
supported by the Teamsters union despite Mexican trucks
posing little risk — per the U.S. govt itself — on American
highways. In particular, U.S. restrictions on Mexican
carriers affect the current supply chain situation in two
ways:

First, the total ban on Mexican truckers carrying freight
within the US prevents them from adding to badly‐​needed
US trucking capacity (e.g. hauling containers from West
coast ports to inland warehouses);

Second, the almost‐​total ban on Mexican carriers hauling
freight between Mexico & inland US destinations forces
them to transfer cargo at the border to US truckers (who
then complete the voyage), thus reducing the number of
American trucks available to go to seaports currently
lacking drivers.

A once‐​in‐​a‐​generation pandemic all but ensured that global
supply chain stresses would appear over the last 18 mos,
but these policies — & many others — are undoubtedly &
needlessly making things worse. If Biden really wants to
improve US supply chain resiliency over the long term,
reforming these programs is a great place to start.

https://www.cato.org/blog/more-bad-policies-contributing-supply-chain-crisis