Arizona needs to be ready to capitalize on the border economy, one expert says.
The promise of a more advanced border economy
Over the past five years, Arizona’s political leaders have changed course and have begun talking about the economic opportunity that the border and Mexico more generally represent for Arizona.
Our state’s slow economic recovery and global economic realities have helped to clear our minds of our more over-the-top obsessions on border security. And that’s highly fortunate for all of us, as this complex and misunderstood region is in a period of extensive economic transition that will play a key role in the economic future of Arizona and the rest of the United States.
To understand the border’s importance to Arizona it helps to grasp the big picture on U.S. trade with Mexico in terms of its size (well over a half-trillion dollars annually supporting over six million jobs in the U.S.) and extent (touches all 50 states and dozens of key industries).
But the truly amazing statistic is that on average for each Mexican manufacturing import that comes into the United States, U.S. content comprises 40 percent of its value, with Canada coming in second at 25 percent and China a paltry 4 percent, according to a 2011 paper published by the National Bureau of Economic Research.
Trade with Mexico is clearly in a different category and is of strategic importance to the U.S. The border’s role in this trade is critically important, as well over 70 percent of this trade happens via truck.
Even less understood is the fact that the increasing demands of the global economy have slowly but surely attracted a sizeable pool of highly sophisticated engineering, manufacturing and other technical talent to both sides of the border.
What this means is that the region is in the midst of a transition to a more advanced economy based on high-value added industries.
The process is uneven across the border, and Arizona has much to learn from our neighbors, particularly to the west in California, who currently have or are quickly building a truly impressive arsenal of political alignment, workforce development, and next-generation infrastructure to reach this economic stage first.
Boosting the border
To try to better articulate this transition, last year the North American Research Partnership joined forces with the Mexico Institute in Washington, D.C., and the Congressional Border Caucus to organize a series of four regional competitiveness forums in the key border cities of San Diego, Nogales, Laredo and El Paso.
The result was our recent report, The U.S.-Mexico Border Economy in Transition, which laid out 27 recommendations from over 1,000 border stakeholders for improving the border economy. The recommendations range from the relatively straightforward (creating binational internship programs) to those requiring large amounts of logistics, political will, diplomacy and budget (such as crossborder light rail or bus rapid transit). Some of the most important recommendations break down into three areas: institutions, infrastructure and human capital.
One of the most important recommendations has to do with how the border communities organize and present themselves institutionally.
One promising trend in the largest crossborder regions is multi-community collaborations on trade matters. The CaliBaja Mega Region (southern California and northern Baja California) and the BorderPlex Alliance (El Paso, Las Cruces and Ciudad Juárez) are two promising initiatives in which communities that have been historic rivals have joined forces on cross-border economic development matters, including research, business attraction and attracting for- eign direct investment.
The relatively new AriSon Mega Region initiative is on hold but is the right idea for the Arizona-Sonora border region, around three hours driving distance and therefore politically isolated from both state capitals.
If SB 1070 should have taught Arizona’s border region stakeholders anything, it’s that they need to be more proactive about their collective economic future and that political types in Phoenix need a lot of continuing education on border economic issues.
Upgrading our border trade infrastructure (land ports of entry, connector roads, corridors) is a topic of fundamental importance in Arizona’s border region and beyond.
All aspects of this federal infrastructure are critically important to local economies, and the difficulty in funding these projects is a subset of larger national issues with infrastructure investment in both the United States and Mexico.
As it turns out, Arizona has been able to find creative ways to fund construction or upgrades of key ports of entry at San Luis and Nogales, although we are hundreds of millions short of where we need to be in the state.
With new taxes politically off the table in the United States and low oil prices pummeling the Mexican treasury, the conversation in the border region has turned to public-private partnerships.
Because this infrastructure is so critical, planning for it needs to involve as broad a set of stakeholders as possible at nearly every stage of the process, not just government agencies and commer- cial users of ports of entry.
Border crossers in the passenger vehicle and pedestrian environments at ports are not currently organized, but should have a much more significant voice in these matters for a number of reasons, including their outsized economic impact on border region communities.
One of the heavier lifts to complete this transition is in the area of human capital.
The border region needs to continue to attract and build the right types of human capital to be able to effectively compete in the global economy.
So far, academic exchange between the United States and Mexico is notable for how small it is. The good news here is that the United States and Mexican federal governments have realized how low the bar for academic exchange is and are marshalling efforts to boost it.
We recommend that they focus their efforts in the border region, where the costs for interaction are relatively low.
All of this activity taken together amounts to a significant shift in how we see and interact with our neighbor and top trading partner.
Arizona’s political leaders are on the right track in sensing this transition, and it will take sustained diplomatic and policy work for many years to capitalize on these opportunities and position Arizona for future economic success.
Erik Lee is executive director of the North American Research Partnership, a think tank located in Arizona and California.