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US-MEXICO BORDER CORRIDOR
From Site Selection magazine, July 2015
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The US-Mexico Border Economy In Transition

US-MEXICO BORDER CORRIDOR
by ERIK LEE and CHRISTOPHER WILSON
T

hroughout 2014, our coalition of organizations held a series of four U.S.-Mexico Regional Economic Competitiveness Forums in order to engage border region stakeholders in a process to collectively generate a shared vision and policy recommendations to strengthen economic competitiveness. The effort involved the partnership of several organizations—the Border Legislative Conference (BLC), the Council of State Governments West (CSG West), the Woodrow Wilson International Center for Scholars’ Mexico Institute, the North American Research Partnership, several members of the Congressional Border Caucus, and USAID-Mexico—and took us to San Diego/Tijuana, Nogales/Nogales, El Paso/Ciudad Juárez, and Laredo/Nuevo Laredo. 

“When we fail to define the border, we allow [others] to define the border for us,” Congressman Beto O’Rourke told nearly 600 policymakers, businesspeople, and community members at the fourth and final Forum in El Paso. Defining a region as diverse and complex as the U.S.-Mexico border, however, is no easy task. From the Pacific Ocean to the Gulf of Mexico, from small rural agricultural and ranching communities to large urban centers of innovation and advanced manufacturing, the border is based in both tradition and the crossing of boundaries. It is both Mexico and the United States; yet it is something more. It is in this “something more,” the fusion of cultures, geographies, and economies, that the common voice of the region is found.

Transitions and Opportunities

Interdependence is a natural state of affairs along the border. From public health to natural resource management and public security, what happens on one side of the border has a major impact on the other. In no area is this clearer than in the economic development and competitiveness of the region.

Through the development of systems of co-production, the United States and Mexico do not simply buy and sell goods from one another, but rather manufacture them together. As a result the productivity and competitiveness of communities on both sides of the border are tightly linked. Based in such deep economic integration, new economic development initiatives have emerged in recent years — from the CaliBaja Mega Region in Tijuana and San Diego to the Binational Economic Development Zone project in Brownsville and Matamoros — to promote border communities as the unified economic regions that they are. Through these new projects and many well-established networks and organizations, the level of cross-border partnership is stronger than ever, presenting a tremendous opportunity.

Since the election of Enrique Peña Nieto in 2012, issues of economic cooperation now sit atop the bilateral agenda. The launching of the U.S.-Mexico High Level Economic Dialogue (HLED) is the most important expression of this development, and it has begun to accelerate bilateral progress on issues of trade facilitation, regional transportation planning, energy cooperation, educational exchange, and cooperation in the negotiation of regional trade agreements, most notably the Trans-Pacific Partnership (TPP). At the same time, Mexico has undertaken an economic reform effort, adopting constitutional and major legislative changes with the goal of strengthening competition policy, energy markets, the educational system and access to financing, among others. This confluence of factors creates a window of opportunity for the border region. The United States and Mexico are increasingly understood at the highest levels of government and business to primarily be partners rather than competitors in the fiercely competitive global economy. The border region manifests this partnership more clearly than anywhere else.

This makes the border the natural location to begin many of the binational projects being considered through the HLED process.

Four Regions, Four Economic Anchors

The series of forums examined four sub-regions of the U.S.-Mexico border: California-Baja California, Arizona-Sonora, West Texas-New Mexico-Chihuahua, and South Texas- Tamaulipas-Nuevo Leon-Coahuila. All four share major challenges and opportunities while simultaneously exhibiting distinctive cross-border economic traits, which require tailored economic development strategies.

The California-Baja California sub-region is notable for its population size and density, with more than 5 million inhabitants. With significant human capital on both sides of the border, the region is home to important high-value-added advanced manufacturing clusters, including world-class medical devices, audio-visual equipment and electronics manufacturing centers.

The area is home to what is almost certainly the busiest land border crossing in the world, San Ysidro, and innovative new ports of entry that feature a public-public partnership (Otay Mesa East) and a remarkable binational airport terminal. A strong desire in the region to increase cross-border economic activity has resulted in the formation of several relatively new organizations, including the CaliBaja Binational Mega region, the San Diego-Tijuana Smart Border Coalition, and the Imperial Valley Binational Alliance, in addition to the more established economic development corporations in San Diego and Tijuana and the San Diego Association of Governments (SANDAG).

Each day, 465,000 people enter the United States through the ports of entry at the southern border, accounting for nearly 1 million total crossings. That’s enough people to fill El Paso’s Sun Bowl Stadium nine times.

The Arizona-Sonora region, on the other hand, is notable for its smaller Arizona border cities that neighbor much larger Mexican cities. In addition, the Nogales-Mariposa port of entry is unique due to the enormous volume of winter fruit and vegetables imported into the United States. The region has an unusually long and highly institutionalized state-to-state relationship through the Arizona-Mexico Commission/Comisión Sonora-Arizona.

Following a difficult diplomatic period beginning in 2010, Arizona has recently redoubled engagement with Mexico, which is linked to a realignment of the state’s economic priorities following the Great Recession and a belief that increased international trade has the potential to create more high-paying jobs for the state’s citizens. Indeed, the state’s Transportation and Trade Corridor Alliance — convened by the Arizona Department of Transportation and comprising public- and private-sector economic stakeholder groups — has recommended that the state should aim to double its trade with Mexico by 2025 to $28 billion in two-way trade.

Toward this end, potential highway and rail projects could bring significant additional commerce through the area and should be prioritized. Stronger efforts are needed to capitalize on potential cross-border synergies in regional industries such as aerospace, agriculture and automobile production.

The region comprising El Paso, Texas, Ciudad Juárez, Chihuahua, and Las Cruces/Santa Teresa, New Mexico (also known as the Paso del Norte region) is noteworthy for its enormous size and importance as a manufacturing platform. Indeed, Ciudad Juárez was the site of the first maquiladoras, which are foreign-owned factories at which imported parts are assembled for export purposes. Ciudad Juárez boomed with the arrival of these factories, first doing simple tasks like sewing jeans and sorting coupons, but now thriving in much more advanced industries like aerospace, electronics, and autos.

El Paso and southern New Mexico also benefit from this growth, sometimes as suppliers but more often as service providers offering legal, financial, and logistical support to industry. Defense, healthcare, education and tourism have all grown to become key sectors in the regional economy, particularly with the recent expansion of the Fort Bliss Army installation and major investments in the biomedical science and healthcare industries. The University of Texas at El Paso has a particularly close relationship with Mexico and currently has approximately 10 percent of the total number of Mexican students studying at US universities.

Engine for Growth

With public security vastly improved in Ciudad Juarez, a new baseball stadium and Triple-A team recently arriving in downtown El Paso, and a deep commitment from the residents of both cities to bring their region together and grow the economy, the ground appears more fertile than ever for ambitious binational initiatives. Indeed, the success of the City of El Paso’s participation in Customs and Border Protection’s Section 560 pilot project, which allows city revenue from border crossing fees to help fund additional port of entry staff, shows that such efforts are already underway.

How to Strengthen Border Competitiveness
Christopher Wilson is senior associate at the Mexico Institute of the Woodrow Wilson International Center for Scholars.

Below are some of the 27 ways the US-Mexico border economy can be even stronger, according to input gathered by Erik Lee and Christopher Wilson through four regional forums held across the region in 2014. For a full exploration of all their recommendations, visit naresearchpartnership.org.

  • Expand and promote the trusted traveler and shipper programs with the cooperation of federal and regional actors.
  • Place customs officials at pre-inspection sites away from the border to reduce the work done at congested ports of entry.
  • Speed up movement of traffic with increased risk segmentation and better targeting systems.
  • Support and develop inclusive binational Mega Regions and other regional economic development efforts throughout the U.S.-Mexico border region to enhance collaboration between border communities and economic stakeholders and build economic growth and quality of life.
  • Identify and promote cross-border manufacturing assets.
  • To increase educational exchange between the United States and Mexico, establish a binational education task force that focuses on the border region and the development of a stronger binational workforce.
  • Create and expand pilot programs being developed along the border, such as the proposed manufacturing innovation institute.

The South Texas-Tamaulipas-Nuevo León-Coahuila area has at least three separate and important economic engines. First, Laredo/Nuevo Laredo is by far the busiest commercial port of entry on the U.S.-Mexico border, serving as the gateway for the Midwest and eastern United States’ trade with Mexico. It is located midway between the important industrial city of Monterrey, Nuevo Leon, and San Antonio, Texas. The massive flow of manufactured goods and parts through the region offers significant opportunities for backward integration developing the local supplier base that, because of its location on an existing logistics corridor, has the advantage of greatly reducing shipping costs in the relevant industries. This opportunity exists both along the I-35 corridor and also further down the Rio Grande Valley, where there are already numerous medium sized sister-city pairs with important manufacturing clusters that could be built upon.

Recently, the boom in shale gas and oil production from the Eagle Ford formation has propelled growth in South Texas at a new velocity. With Mexico’s recently passed energy reform there is great interest in the energy industry to develop something similar on the Mexican side of the formation. The growth that comes with such rapid energy development has major benefits for the local economy, but it is not without its challenges. It is imperative for educational institutions in Texas, Tamaulipas, Nuevo Leon, and Coahuila, in partnership with the private sector, to quickly upgrade and scale training programs for energy industry jobs and the infrastructure development that accompanies an energy boom so that job growth truly benefits the region. Additionally, population increases and industrial development place pressures on regional natural resource management that must be carefully studied and addressed with community involvement.

The U.S.-Mexico border — one of the most remarkable stories in the global economy — finds itself in a period of significant transition. In order to continue to enhance the competitive position of the border region, as well as the economic well-being of its inhabitants, policymakers and stakeholders at the local, state, and federal levels will need to better understand and establish policies that help the border region better adapt to global realities and strengthen its role as an engine of growth for the regional economy. In addition, these same actors will need to work together to build more durable regional political coalitions and institutions that can “set the table” for future prosperity.

Erik Lee is executive director of the North American Research Partnership. Christopher Wilson is the senior associate at the Mexico Institute of the Woodrow Wilson International Center for Scholars, where he leads the Institute’s research and programming on regional economic integration and U.S.-Mexico border affairs. This article is an excerpt of their recently published report, which can be found in its entirety at naresearchpartnership.org.


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