Hundreds of government, education and business leaders met September 23-25, 2012 in Tempe, Arizona to discuss ways to develop and enhance the already massive amount of trade that crosses the U.S.-Mexico border every year. Rather than focus on negative media reports, the attendees of the conference “Realizing the Economic Strength of Our 21st Century Border: Trade, Education and Jobs” assembled to discuss the current state of trade among the U.S.-Mexico border states and how to best further develop that important trading relationship. The conference, organized by Arizona State University’s North American Border for Transborder Studies, included among its attendees Michael Camuñez, U.S. Assistant Secretary of Commerce for Market Access & Compliance; Susana Martinez, governor of New Mexico; Laura Dogu, Deputy Chief of Mission; U.S. Embassy in Mexico; Michael Crow, president of Arizona State University; several members of the U.S. House of Representatives; several members of the U.S. Commercial Service, several members of the U.S. Department of State; the mayors of Phoenix, Mesa, San Diego, Tijuana, El Paso, Nogales; and members from the Mexican president-elect’s delegation, in addition to many other business, education and civic leaders.
Several executives from companies that already have a presence in Mexico spoke about the interconnectedness of the U.S.-Mexico trade relationship and the importance of making the border more efficient and user-friendly. Delays at border crossings cost U.S. and Mexican companies several millions of dollars each year. Crow stated that we need to defeat “purposeful ignorance” about Mexico and its status as the United States’ second largest export market and third largest trading partner. Crow indicated that U.S. trade with Mexico surpasses all of the developing “BRIC” countries (Brazil, Russia, India and China) combined.
In 2011, U.S.-Mexico goods and services trade reached a half trillion dollars. That’s “trillion, with a T.” Eighty percent of that trade originates within the border zone. Since the North American Free Trade Agreement was passed in 1994, U.S. trade with Mexico has increased five-fold. The U.S. Department of Commerce estimates that for every $45,000 in export sales, one job is created, more than double the rate of jobs created by domestic sales. Needless to say, the United States and Mexico are inextricably linked economically, geographically and, increasingly, demographically. Increasing exports to Mexico will create jobs in the United States and lower the U.S. trade deficit.
David Hester of Kyocera Mexicana, a $15 billion electronics company that has been in the Mexico market since 1959 stated, “Our region is in competition with the rest of the world. We have products crossing the border up to four times during the manufacturing process. We need an efficient border. Creating jobs on one side of the border will create jobs on the other side.” Hester said, “There is a huge trend to move manufacturing from Asia to Mexico—it has the same time zone, the same culture. Mexico’s economy is actually larger than South Korea’s.”
The border region comprising the states of California, Arizona, New Mexico and Texas and the Mexican states of Baja, Sonora, Chihuahua, Coahuila, Nuevo Leon and Tamaulipas is, in aggregate, the world’s sixth largest economy. In just a few years, it is expected to become the world’s fourth largest economy, surpassing the U.S.-Canada border in trade and economic power. Ben Stein of Ferris Bueller’s Day Off infamy and a noted economic commentator stated that “Mexico is the new China.” John Barela of the State of New Mexico Economic Development Department estimated that by 2015, China’s manufacturing costs will surpass Mexico’s, due to increased transportation and labor costs and lower quality products coming from China.
Guillermo Gutierrez of the Mexican Council of the Maquiladora Industry indicated that in the first six months of 2012, Cuidad Juarez added 21,000 manufacturing jobs. He continued, “For every five manufacturing jobs created in Mexico, one job is created in the U.S.” Economic development in one nation will positively impact the other.
However, the border’s current infrastructure is a major hindrance to cross-border trade. David Mayagoitia, president of the Tijuana Economic Development Corporation quoted Rachel Poynter, U.S.-Mexico border coordinator at the U.S. Department of State, who said, “The border shouldn’t just be a filter for what shouldn’t cross, but a funnel for what should.” At the end of the day, the roads on both sides of the border need to match up. One obvious example where this has not occurred is at the San Isidro border crossing near San Diego/Tijuana, where the infrastructure was completed on the Mexican side of the border, but only phase one of the border was completed on the U.S. side. U.S. Congress still needs to appropriate $300 million for the construction of phases two and three on the U.S. side to complete the infrastructure. That will equate to three more years of delays before the border improvements will be functioning and reducing wait times on both sides.
Scott Smith, mayor of Mesa, Arizona, believes that necessity will eventually outweigh politics with regard to border development. He stated, “We need each other, because we are neighbors.” Smith continued, “All we focus on is illegal immigrants and drugs—the relationship is much broader than that . . . We need to focus on commerce . . . We need to put these issues in the context of the national economy to get the attention of policy makers . . . Commerce is not a sidebar—it is the meat of the issue—if we focus on commerce, the other issues will resolve themselves.”
After interacting with and listening to the major players of the U.S.-Mexico border region for three days, it was readily apparent that leaders on both sides of the U.S.-Mexico border view economic development as the single most important issue. Mexico could have the world’s seventh largest economy by 2020. As stated previously, the value of economic trade has already reached a half trillion dollars in 2011. Imagine what that number could be if the public’s perception and policy makers’ perception about Mexico and its role in the global economy changed?
Snell & Wilmer’s footprint is located directly on over half of the border region. Carlos Sugich, Richard Katz, Brett Johnson, Curt Reimann, Ray Jones and numerous other Snell & Wilmer attorneys currently represent U.S. and Mexican companies in the border region. Snell & Wilmer is nicely positioned to take advantage of the development in the border region.