North American 'Trusted Traders' Begin Rolling on the NAFTA Super-Corridor

Through a series of acquisitions including Mexican railroads, Kansas City Southern (KCS, NYSE: KSE) has declared itself the nation’s first NAFTA Railroad.

On April 1, 2005, KCS completed the acquisition of Mexican Railroad TFM, S.A. de C.V., an acquisition which gained for KCS all the common stock of Groupo Transportacion Ferrovaria Mexicana, S.A. de C.V., the holding company that owned TFM. In December 2005, KCS changed the name of TFM to Kansas City Southern de Mexico (KCSM). The acquisition of KCSM was a key piece in putting together the “NAFTA railroad,” the marketing brand that KCS uses to market its North American service for both KCSM in Mexico and Kansas City Southern Railroad (KCSR) in the United States.

The KCS website makes clear the importance of Kansas City Southern de Mexico in the KCS NAFTA-focused marketing plan linking into network developing to use Mexican ports for the deliver to North America of goods manufactured in China and shipped across the Pacific Ocean in container ships:

The 2,661-mile KCSM operates the primary rail route in northern and central Mexico, linking Mexico City and Monterrey with Laredo, Texas, where more than 50 percent of the U.S.-Mexico trade crosses the border. The line also connects the major population centers of Mexico City and Monterrey with the heartland of the U.S. and serves the ports of Veracruz, Tampico and Lazaro Cardenas, a primary alternative to West Coast ports for shippers in the route between Asia and North America.

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As the map demonstrates, KCS has put together a “North American” railroad network consisting of three wholly owned operating subsidiaries: the Kansas City Southern Railroad (which operates Texas to Kansas City, along the eastern borders of the states of Oklahoma and Kansas), the Texas Mexican Railway Company (operating from Port Arthur to Laredo, Texas on the Mexcian Border), and the former TFM in Mexico (operating now as KCS de Mexico, extending from Laredo and Brownsville, Texas, through Monterrey, Mexico, down to Mexico City and the Mexican port of Lazaro Cardenas on the Pacific Ocean).

Kansas City SmartPort acknowledges the importance of the NAFTA Railroad in the Kansas City “inland port” concept. A brochure on the Kansas City SmartPort website outlines the marketing plan:

Kansas City offers the opportunity for sealed cargo containers to travel to Mexican port cities such as Lazaro Cardenas with virtually no border delays. It will streamline shipments from Asia and cut the time and labor costs associated with shipping through the congested ports on the West Coast.

In April 2005, Kansas City Southern completed purchase of a controlling interest in Transprotacion Ferroviaria Mexicana (TFM), enabling TFM, The Kansas City Southern Railroad and The Texas Mexican Railway Company to operate under common leadership, creating a seamless transportation system spanning the heart of North America known as “The NAFTA Railway.”

The same brochure emphasizes how extensively KCS is preparing for this cross-border traffic:

Kansas City Southern is installing Spanish language versions of its computer operating system (MCS) in an effort to increase train speeds, reduce waiting times at terminals and enable the free flow of locomotives and rail cars between the United States and Mexico via Kansas City Southern’s railroad bridge at Laredo, Texas.

Tasha Hammes of the Kansas City Area Development Council verified in a June 29, 2006 email to the author that, “The containers that come in through the port of Lazaro Cardenas will enter the U.S. on a U.S. railroad (Kansas City Southern). Yet, in a July 6, 2006 email to the author, Doniele Kane, an AVP for Corporate Communications & Community Affairs for KCS acknowledges that “TFM will remain a Mexican corporation with Mexican leadership,” even though TFM is now a wholly-owned subsidiary of KCS, an U.S. corporation. Moreover, Ms. Kane acknowledges that KCS de Mexico (KCSM) will retain Mexican management and Mexican railroad workers.

Railroad lines are a major design component of the Trans-Texas Corridor (TTC), what we have argued is the prototype NAFTA Super-Highway to be replicated in north-south corridors throughout the country.

As specified according to the 4,000-page Environmental Impact Statement on the Trans-Texas Corridor website maintained by the Texas Department of Transportation (TxDOT), the 4 football fields-wide TTC-35 is planned to have separate lines for railroad cargo lines. Nowhere does the TxDOT website specify that railroads like the KCS NAFTA Railroad will have to pay for the new and improved rail beds being laid by the TxDOT, with funds provided by the Spanish Cintra capital consortium. Even though the TTC rail lines will be available on a toll basis, the plan to parallel I-35 should provide minimum disruption to KCS, whose rail route north roughly parallels the current I-35 route.

KCSM employees are then not represented by the various U.S. rail unions such as the United Transportation Union and the Brotherhood of Locomotive Engineers and Trainmen. Ms. Kane also made clear that “KCSM employees unionized employees in Mexico who are represented by Sindicato de Trabajadores Ferrocarrileros de la Republica Mexicana, the Mexican railroad workers union.” This union is a member of the Confederacion de Trahajadores de Mexico (CTM), a traditionally government-dominated union confederation that has a history of opposing worker efforts to establish independent unions along the U.S. model.

Mexican labor union historian and analyst Dan La Botz has argued that Mexican railroads were privatized as part of a World Bank- imposed settlement in the 1990s. La Botz wrote the following in 1998:

The first big privatization came on December 5, 1996, when the Mexican government sold the Northeast Railway to Mexican Railway Transportation (TFM), a consortium which included Kansas City Southern Industries (KSCI), for $1.4 billion.

With the approval of the Mexican labor authorities, the old state-company and the new TFM railroad management laid off the workers and nullified the old collective bargaining agreement. To keep a job, workers had to accept termination and their severance pay and be re-contracted without their previous seniority, pay or benefits. Many hundreds of the Northeast Railway workers lost their jobs altogether.

Ms. Kane of KCS points out that “No Mexican crews operate in the U.S. and no U.S. crews operate in Mexico.”

Frank N. Wilner, Public Relations Director of the United Transportation Union (UTU) agrees that at present KCS trains switch to UTU crews for all U.S. operations. The UTU strongly objects to any suggestion that Mexican crews would ever be permitted to operate trains in the United States. Mr. Wilner in a June 30, 2006 email to the author still that, “It is criminal that the rail industry, enjoying the highest profitability in its history, would roll the dice on public safety and national security by booting experienced American citizens from the locomotive cabs and replacing them with foreign nationals with limited skills in English and American railroad practices.”

The working groups organized in the U.S. Department of Commerce under the Security and Prosperity Partnership of North America (SPP). The 2005 Report to Leaders found at the first tap to the left on makes clear that a North American “trusted trader” program will be run mostly on electronics “to substantially reduce transit times and border congestion.” NAFTA Railroad trains should be easily identified for immediate border passage, especially with the containers with appropriate “SENTRI” type systems that mark the containers to have originated from “trusted trader” shippers, even if the point of origin is China or the Far East.

We should also note that KCS and the company’s Chairman & Chief Executive Michael R. Haverty have been very prominent in SPP activities.

The 2004 Summit held in Kansas City, Missouri, by the North American International Trade Corridor Partnership (NAITCP), an affiliate organization of the North America’s Super Corridor Coalition, Inc. (NASCO) produced a brochure with a front page photograph of Mr. Haverty, documenting his attendance. Mr. Haverty is photographed at the right of the first row in the photo, with Dr. Robert Pastor of American University at the left of the row.

Dr. Pastor, who spoke at the summit, was the vice chair of the Council on Foreign Relations task force report “Building a North American Community,” which we have argued serves as the blueprint for Dr. Pastor is the author of five books, including “Toward a North American Community,” published in 1991. Dr. Pastor has consistently argued that NAFTA should be transformed by a process of tri-lateral administrative regulations and executive branch negotiated trilateral agreements into a North American Union regional government on the model of the European Union.

According to the Council of the Americas, Warren Erdman, senior vice president of Kansas City Southern Industries (KCSI) attended as one of the 10 business representative council members representing the United States at the first SPP “Ministerial Meeting” held with the newly formed North American Competitiveness Council (NCAA) on June 15, 2006, held at the U.S. Department of Commerce in Washington, D.C. We have previously questioned the Congressional authorization for NACC which has been organized under the auspices of the Security and Prosperity Partnership of North America, a “treaty like” status that the Bush administration executive branch has declared to be a second-stage NAFTA arrangement to be in existence currently between the U.S., Mexico, and Canada.

As KCS evidences, the concept of a NAFTA Railroad is at the heart of the corridor transportation system being designed right now by international corporations and capital managers to bring goods from Asia into the emerging North American Union (NAU) via Mexican ports, to be delivered ultimately throughout North America by cheap transportation labor in which Mexican trucks and Mexican trains will play a key role.

As SPP develops into the NAU, the government executive branch agencies and the cabinet-level “ministers” in Canada, the United States, and Mexico will work very hard behind the scenes to erase our borders with Canada and Mexico. Border crossings for “trusted travelers” and “trusted traders” are intended to involve nothing more under SPP than a speed bump, an inconvenience not dissimilar from using an EZ-pass to go through a toll booth on a limited access highway. Whether moving by car, truck, or rail, government-issued electronics including biometric North American Union border passes will be all that is necessary to allow free passage, provided a toll is charged and collected.