The impact of the recent United States-Mexico-Canada Agreement (USMCA) on the energy trade between the United States and Mexico—especially as it relates to transportation and logistics at border crossings—has not yet been fully measured. With so much at stake, understanding the potential impacts of this new agreement is crucial to both countries’ economies.
Bahar Dadashova.
Serving as the gateway to U.S.-Mexico energy trade, the 2,000-mile border these countries share is one of the most frequently crossed borders in the world. Mexico, for example, is currently the largest importer of refined petroleum products from the United States in the world.
How did this trade relationship develop?
The North American Free Trade Agreement (NAFTA) between the United States, Canada and Mexico took effect in 1994. Its intent was to eliminate barriers to trade and investment between North American countries. Between 1994 and 2020, the agreement helped facilitate economic growth and trade in all three countries.
NAFTA was replaced by USMCA July 1, 2020. Policymakers and government officials describe the new agreement as a modernized NAFTA that will support mutually beneficial trade. Early prognostics on USMCA are largely optimistic, but the expected impact on transportation and logistics at border crossings is not yet completely understood. This is increasingly problematic since Mexico’s oil and gas imports are expected to increase, which could lead to expanded trade.
I and my team at the Texas A&M Transportation Institute’s (TTI’s) Center for International Intelligent Transportation Research (CIITR) are currently studying the potential impacts of this relatively new agreement at border crossings. We designed a two-phase study to assess the USMCA’s expected effects on energy trade between the United States and Mexico to estimate the predicted changes at border crossings. Identifying and assessing these effects can help improve interactions between energy and transportation, two strongly related sectors important in legislation and decision-making.
The first phase of the project is complete, including a literature review and assembly of logistics data at border crossings. We identified four influencing areas through which the USMCA may impact the energy trade at border crossings:
- Policy changes;
- U.S. and Mexico energy production;
- Energy trade and transport at border crossings; and
- Economic indicators.
In the second phase, our team is currently conducting a quantitative analysis of potential changes at border crossings. We’re developing future scenarios of expected implications of the USMCA on these four influencing factors and their combined effect on energy trade. The analysis is based on subject matter experts’ projections of future impacts solicited through a specialized survey. The study findings are intended to better inform policymakers and USMCA officials on energy trade and border crossings.
Bahar Dadashova is an assistant research scientist in TTI’s Traffic Operations and Roadway Safety Division.