NAFTA at 20: Time to open the internal borders of North American to cabotage

The deeply integrated North American economy depends on efficient freight transport systems. This essay examines cabotage in Canada, the U.S. and Mexico from an economic and policy perspective. Cabotage is restricted by a web of regulations in North America that remain pervasive and continue to impose significant restraints on freight transportation. Liberalizing cabotage could improve efficiency/productivity, increase trade opportunities and regional economic integration. Open cabotage could also reduce greenhouse gas emissions. However, reform is difficult because these regulations are linked to tax, immigration and other customs issues and because they protect the interests of domestic transport industries.The creation of a North American trading bloc is a work in progress. While various initiatives since the North American Free Trade Agreement (NAFTA) have failed to advance cabotage, the authors of this report remain optimistic that freer trade in transportation is inevitable.