Why the U.S. Needs Mexico
Trump insists there’s a crisis at the border. But in McAllen, Texas, there’s an economic boom, fueled by close ties with Mexico
Trump insists there’s a crisis at the border. But in Texas, there’s an economic boom, fueled by close ties with Mexico.
People say the American mall is dying — but if so, someone forgot to tell La Plaza Mall. La Plaza is the largest shopping center in McAllen, Texas, a midsize city on the U.S.-Mexico border. It’s the sort of establishment you’d find in any city or suburb — Foot Locker, Bath & Body Works, Baby Gap — the kind of brick-andmortar retail dinosaur that’s been hemorrhaging money for years. But not La Plaza. This mall recently underwent a $100 million expansion, and on a recent weekday — in the middle of the school year, in the middle of the week — its parking lot was full of cars. Most of them sported Mexican plates.
McAllen is the biggest city in Hidalgo County, the most populous border county in Texas, not far from where the Rio Grande meets the Gulf of Mexico. Owing to its location as one of the most accessible U.S. ports of entry for migrants fleeing Central America — hundreds of miles closer than El Paso or San Diego — the city is at the epicenter of some of the most divisive issues of the Trump administration’s ongoing anti-immigration campaign: family separations, deportation trials, military deployments, the Wall. The Border Patrol’s Ursula detention center, which became infamous last summer for housing children in chain-link cages, is in McAllen. And the Border Patrol’s Rio Grande Valley sector, headquartered up the highway, is the busiest such sector in the country by far, making five times as many immigrant apprehensions as any other region — 63,000 families and 23,000 unaccompanied children last year alone.
It’s little wonder that when Trump flew to the border to drum up support for his $5.7 billion demand to fund the wall, he chose to stage his photo op in McAllen. “A wall works,” Trump said at a Bor- der Patrol station, wearing a white MAGA hat.
Yet somewhat lost in all the sensational immigration news is the fact that McAllen is also a prime example of how American border cities reap great economic benefits from a strong relationship with Mexico. For most of the past century, McAllen was a relatively poor agricultural center, largely dependent on cotton fields and citrus groves. But since the introduction of NAFTA in 1994 — and the resulting boom in maquiladoras, or manufacturing plants, across the river in the city of Reynosa — the region’s economy has been one of the fastest-growing in America, thanks largely to retail and international trade. Trump often says Mexico is leeching off America. But to Americans here in the Rio
Grande Valley, as to millions of Americans on the border, Mexico is a boon, not a drag.
The mall is just one example. Because of high import costs and comparably high sales tax, millions of Mexican shoppers cross the border (legally) to the U.S. every month, to buy everything from groceries to computers. All told, Mexican consumers pump an estimated $3 billion into the Valley’s economy each year. Coming to McAllen to shop is so common, in fact, that there’s even a Spanish word for it: macalenear, or literally “to do McAllen.” Mayor Jim Darling says the city is one of the top sales-tax collectors in the state of Texas per capita — and a whopping 40 percent of that money comes from Mexican citizens.
Matt Ruszczak, director of the Rio South Texas Economic Council, says annual household spending in the region outpaces annual income by about $20,000 — meaning hundreds of millions more dollars are being spent here than being earned. “And that’s not because we’re all running up our credit cards,” Ruszczak jokes. “It’s because of Mexico.”
The same is true in cities all along the border, from Texas to Arizona to California. As David Deanda, president of McAllen’s Lone Star National Bank, has said of Mexico, “We depend on them more than they depend on us.”
Yet this highly beneficial relationship is currently under existential threat. In December, one week into the longest government shutdown in history, President Trump made an ominous vow: If “Obstructionist Democrats” didn’t agree to fund his border wall, he wrote on Twitter, “We will be forced to close the Southern Border entirely.” He went on to add that because the U.S. “looses [sic] soooo much money on Trade with Mexico,” shutting down the border would, he thought, be a “profit making operation.”
But you don’t have to spend long at the border to see that the truth is exactly the opposite.
‘When do we beat Mexico at the border? They’re laughing at us. . . . Now they’re beating us economically. They are not our friend, believe me.”
That’s how then-candidate Trump kicked off his presidential campaign, in June 2015, in a speech at the foot of a Trump Tower escalator. Since then, Mexico has been his go-to political bogeyman, more so than Iran or even ISIS. “Mexico has taken advantage of the U.S. for long enough,” he announced one week after taking office. “Our Southern Border is under siege,” he said last year. “Mexico, which has a massive crime problem, is doing little to help!” Trump’s antipathy toward our southern neighbor even predates his presidency. “They’re selling drugs all over the place and they’re killing people all over the place. We’re not doing anything about it,” he told Fox News’ Bill O’Reilly back in 2011. Three years later, he tweeted, “When will the U.S. stop sending $’s to our enemies, i.e. Mexico” — thus characterizing as an “enemy” one of our largest trading partners and longest-standing friends.
Trump has two main problems with Mexico. The first, obviously, is immigration. This despite the fact that illegal immigration has been steeply declining for years, down from its peak some 20 years ago. In 2017, the Border Patrol, with more agents and resources than it’s had in history, reported apprehending 303,000 undocumented immigrants — the fewest since 1971. What’s more, economists and business leaders agree that the skills gap in our workforce means even undocumented, low-skill immigrants are a net positive for the U.S. economy.
Trump’s second, less discussed, yet arguably more consequential complaint is about trade. In his mind, Mexico is swindling us. “We have such a bad deal with Mexico,” he said at a rally last May — one of dozens of times he’s leveled such criticism. “We lose with Mexico over $100 billion a year with this crazy NAFTA deal.”
In reality, according to the U.S. Census Bureau, our trade deficit with Mexico is closer to $67 billion, or roughly about 10 percent of the $600 billion we trade with them each year. (Contrast this with our total trade with China, which is about $700 billion, but with whom our trade deficit is a massive $344 billion — more than five times as much.) In fact, Mexico is the second-largest market for American goods, buying nearly a quarter of a trillion dollars in American products every year. In other words, our trade with Mexico is imbalanced, but not wildly so.
Moreover, when we buy things from Mexico, Americans get a good deal. Because of deep supply-chain integration, about 70 percent of our imports from Mexico are so-called intermediate goods, meaning they’re made with parts originating on this side of the border. (As an example, imagine an American LED manufacturer that sells to a factory in Mexico, which uses the LEDs to assemble TVs and then sells them back.) Because of this relationship, every dollar we spend in Mexico brings about 40 cents back to the U.S. Contrast this again with China, from whom 75 percent of our imports are socalled final goods, meaning produced entirely in China. For every dollar we spend there, America gets only about four cents back.
“Mexico is strategically important to our country,” Robert S. Kaplan, the president of the Dallas Federal Reserve, said in 2017. If we didn’t have that trade relationship with Mexico, “it’s our best judgment that . . . we would lose some of those jobs . . . most likely to Asia.”
And yet, Trump has spent much of his presidency railing against that same trade relationship, and particularly NAFTA, which he has variously called “catastrophic,” “a total disaster,” “one of the worst things to ever happen to the manufacturing industry” and “the worst trade deal in the history of the country.” For much of last year, Trump threatened to cancel NAFTA, while Republicans who understood the agreement’s benefits tried to talk him out of it. Texas Gov. Greg Ab-
bott even wrote a letter to the Trump administration supporting our trade deals and explaining NAFTA’s many benefits to the U.S., in which he specifically highlighted McAllen and the Valley. “While NAFTA has been an incredible boon for all of Texas,” Abbott wrote, “perhaps nowhere else in the country encapsulates the success . . . as the Rio Grande Valley” — which, since NAFTA’s introduction, the governor added, has seen unemployment decrease by three-quarters and its per-capita income more than double.
Yet the president didn’t seem to get the message. Last May, Trump blindsided Mexico with highly punitive steel and aluminum tariffs. Mexico reciprocated by levying $3 billion in tariffs on American exports, mostly agricultural staples like corn, soybeans and cheese. In October, after more than a year of negotiations, the administration finally brokered a new deal to replace NAFTA, the so-called United States-Mexico-Canada Agreement. And in the end, USMCA looked . . . a lot like NAFTA. Higher pay requirements for auto workers could bring some jobs back from Mexico to the United States — or they could raise prices for consumers so much that car manufacturers will relocate to even lower-paying countries, like China. In any case, Democrats in the House, whose approval is necessary to ratify the new pact, have insisted they won’t vote for it without substantially beefed-up protections for workers and the environment. “Right now, it’s a work in progress,” Speaker Nancy Pelosi has said.
Like most border cities, McAllen occupies an in-between space. It was founded at the turn of the 20th century on land that used to belong to Mexico. Eightyfive percent of the population is Hispanic; everyday conversations are conducted in Spanish as well as English; and the radio plays ads for Mexican political campaigns between songs by Ariana Grande. But it’s also a deeply patriotic region, home to many veterans and disproportionately high numbers of law-enforcement personnel, where uniforms and American flags are a common sight.
One afternoon, I visit Keith Patridge at his office in the McAllen Free Trade Zone, a few miles from the border. Patridge is CEO of the McAllen Economic Development Corporation, a chamber-of-commerce-style group that promotes investment. Silver-haired with a Southern twang and the demeanor of a Big 12 football coach, Patridge is in no way a member of the resistance. He supports the GOP’s $3 trillion tax cuts, and all in all he thinks the president “has done a hell of a job.” But even he believes Trump’s stance toward Mexico is counterproductive.
“Down here, we see the border as an artificial boundary,” Patridge tells me. “We think of ourselves as one city that happens to have a river running through it.”
When Patridge’s organization started, in 1988, the Valley’s economy was in rough shape. Consecutive hard freezes had decimated the local crops, and unemployment was soaring toward 30 percent. Plummeting oil prices, meanwhile, had sent Mexico’s economy into a free-fall, which in turn crippled McAllen’s consumer sector. “People in Mexico couldn’t afford to buy anything,” Patridge recalls. “Retail-wholesale trade just died.” His organization was charged with turning the economy around.
“My background is in manufacturing,” Patridge says. “So I said, ‘Why would anyone want to invest in McAllen, Texas?’ ” At the time, U.S. companies were struggling to compete with cheap labor overseas, especially in Asian countries like Singapore and Taiwan. Meanwhile, according to Patridge, the average wage in the maquiladoras just across the border in Reynosa was about 80 cents an hour — and because of the rapid devaluation of the peso, in a few months it was headed down toward 35 cents. “So I said, ‘I know what will attract companies here,’ ” Patridge recalls. “It’s not McAllen — it’s that 35-cents-anhour labor rate, right across the river from the largest market in the world.”
So Patridge and his organization did something unusual. For the first three years of its existence, the McAllen Economic Development Corporation didn’t promote McAllen at all. Instead, says Patridge, “We spent all our time promoting Reynosa, Mexico.”
In the end, the plan worked. American manufacturers like GM, Ford and Zenith opened big plants in Reynosa. Most of the managers lived on the U.S. side, because it offered better housing and educational opportunities for their kids, and thereby pumped money into McAllen’s economy. What’s more, many American parts suppliers also moved to the border to be closer to the factories. “For 15 years, McAllen was consistently ranked one of the fastest-grow- ing cities in the U.S.,” Patridge says. “It’s all because of this relationship we established across the border.”
These days, McAllen’s unemployment rate hovers around a mere five percent — and on the other side of the river, Reynosa is booming as well. The city currently houses about 120 manufacturing plants, servicing U.S.-based Fortune 500 companies like Stanley Black & Decker and Caterpillar. (It’s also home to smaller yet crucial companies like ARC Automotive, which manufactures airbag inflators for automobiles. “Literally, if Reynosa were shut down, there could not be a single car produced in North America,” Patridge says.)
All told, Reynosa’s maquiladoras generate an estimated $3 billion of economic activity in McAllen per year — and as its economy grows, so does the one on this
“Down here, we see the border as an artificial boundary,” one of McAllen’s business leaders tells me. “We think of ourselves as one city that happens to have a river running through it.”
side of the border. Roughly 2,500 plant managers and 1,600 other skilled workers (e.g., engineers) work in Reynosa but live in Texas, thus injecting millions of dollars into the American economy. And a study by the Dallas Fed found that for every 10 percent increase in output at Reynosa’s maquiladoras, there’s a 6.6 percent increase in jobs in and around McAllen. “We succeeded,” says Patridge, “because Reynosa succeeded.”
There’s also the example of agriculture. In Texas alone, farmers and ranchers export about $800 million of agricultural products to Mexico each year — mainly staples like beef, poultry, cotton and corn. That’s more than three-quarters of a billion dollars coming directly from Mexico into the pockets of blue-collar Americans. A few miles east of McAllen, the Pharr-Reynosa International Bridge is the number-one port of entry for produce entering the United States, with 13 billion pounds (6o percent of the nation’s total produce) of fruits and vegetables trucked across the bridge a year. “That means that you or your neighbors can go to any grocery store across the U.S. and find any vegetable or fresh fruit you want, whatever time of year, and it’s reasonably priced,” Patridge says. “That couldn’t be done if we didn’t have Mexico.”
This is not to say Reynosa doesn’t have problems. In January 2018, the State Department instituted a Level 4 travel warning for the region, the same level as Syria, Afghanistan and Somalia. Indeed, convoys of state police trucks zooming down the highway with masked officers in the back are a not-uncommon sight. Nevertheless, the vast majority of the violence has been confined to warring cartel factions, and thousands of American workers commute from the U.S. to Reynosa every day without incident.
Of course, it’s true that thousands of U.S. autoworkers likely lost their jobs to Mexico in NAFTA’s wake. However, many experts also believe that had automakers not been able to move some lower-wage jobs to Mexico while keeping the majority of production in the U.S., the entire domestic auto industry might have been lost. “When you look at it, it’s really a microcosm of what can happen if you start cooperating across international boundaries,” Patridge says. “How do we make manufacturing more competitive in the U.S.? How do we preserve jobs in Detroit, Cleveland, Chicago? The answer is, we use Mexico. I’m not saying you can do this with Europe or China,” he adds. “But when it’s your neighbor next door, it really makes sense.”
One afternoon, I go on a ride-along with Sgt. Rolando “Rollie” Garcia, a veteran officer with the San Juan Police Department, a smaller border city a few miles from McAllen. Garcia was born in the Valley; he lives in the same neighborhood he grew up in as a kid. He’s been with the department for 19 years, working his way up from patrol cop to narcotics investigator to gang-unit supervisor. Now, nearing retirement age, he’s back working patrol, preferring the regular hours so he can spend evenings with his kids and attend school to finish his degree.
We drive down to the border in Garcia’s black Expedition, listening to traffic on his scanner. We pass several Border Patrol trucks and Texas state troopers, but get nary a glimpse of a cartel mule or MS-13 killer. “It’s been pretty quiet,” Garcia says.
Contrary to the picture painted by many national politicians, the American side of the border is profoundly safe. “Last year we had zero murders — none,” Chief Jeff Adickes, the recently retired chief of police in nearby Harlingen, tells me. Several cops told me they were more afraid to visit big American cities like Boston or Chicago than they were to work on the border. “I feel comfortable here,” Sgt. Jesse Sanchez, the head of Harlingen’s anti-organized-crime unit, says. “But I’m kind of scared to go to New York, because I might get mugged.”
Last April, Trump authorized the deployment of up to 4,000 National Guard troops to help defend the southern border against an imaginary invasion. The head of the national Border Patrol union — otherwise a very proTrump organization — called it “a colossal waste of resources.” Then last fall, in an election-season response to the so-called “migrant caravan,” Trump authorized sending thousands more. As of this writing, there are approximately 2,300 active-duty military personnel and 2,100 National Guard troops deployed all across the southern border — at least a few of whom were staying at my hotel in McAllen, enjoying corn flakes and watery orange juice at the free breakfast buffet. They didn’t seem to be on a war footing.
In the meantime, Trump is still insisting — despite all evidence to the contrary — that he’s going to build a wall and make Mexico pay for it. He also now claims Mexico already paid for the wall via the USMCA — even though the trade pact hasn’t taken effect yet, and it’s unclear how lower tariffs would bring in money.
Meanwhile, here in the Valley, most cities have passed formal resolutions strongly opposing a wall. The reasons are myriad: profound logistical challenges, lawsuits from property owners over eminent domain, the fact that it’s wildly expensive. But also: It’s bad for business. “We have ties that reach across the river going back generations — ties that promote success and prosperity on both sides,” Matt Ruszczak says. “To have a structure with the connotation of ‘We don’t want you here’ is not conducive.”
“I think it’s a waste of money,” Patridge adds. “Most people here say if you want to build a wall, build a wall — but it’s not gonna do any good.”
L aw- enforcement officials agree. “It’s worthless,” says Juan Gonzalez, the chief of police in San Juan. “Give us [local agencies] a couple million each for enforcement, and we can do better.” Gonzalez says the only thing a wall would do is drive up prices for illegal drugs: “All you’re doing is putting money in the cartels’ pockets.” Moreover, the Valley already has its version of a wall, an 18-foot steel border fence built in 2010. But as Michael Kester, the assistant chief in Harlingen, tells me, the only thing that fence changed was “the shape of the bundles.”
As Sgt. Garcia and I turn back from the border, he tells me that his wife actually works in Mexico, as a supply-chain manager at a fiber-optics plant in Reynosa. She commutes across the river every day; her company even got her a SENTRI card, so she could cross the bridge in the fast lane. She earns a six-figure salary — far more than he does as a cop — and her company paid for her to get her master’s degree. The couple have two kids and a house they’ve almost paid off; now she’s up for a promotion to her company’s global division, which would mean a big raise and a move up north. In other words, they’ve built a nice, upwardly mobile middle-class American life for themselves. And they’ve done it, in large part, thanks to Mexico.
For every 10 percent increase in output at Reynosa’s factories, there’s a six percent increase in jobs in McAllen. “We succeeded,” says the business leader, “because Reynosa succeeded.”