Arizona’s Emerging and Multidimensional Commercial Relationship with Mexico

We are about to get underway here in Rio Rico for our second U.S.-Mexico Regional Economic Competitiveness Forum. As we head into summer, we have been reflecting upon how 2014 is shaping up to be an extremely interesting year in Arizona on the issue of international trade. It is remarkable to see a number of developments around the state coming together at more or less the same time. They include the following:

  • The City of Phoenix issued a request for proposals earlier this year for a trade development specialist to be based in Mexico City.
  • The state of Arizona also plans to open an office in Mexico City.
  • Tucson Mayor Jonathan Rothschild was just awarded the Ohtli award by the Government of Mexico.
  • The state’s associations of government are beginning discussions with mayors in northern Sonora on creating a “megaregion” modeled on the CaliBaja megaregion comprising San Diego, Tijuana, the Imperial Valley and the Mexicali area.
  • The Joint Planning and Advisory Council of the state of Arizona’s associations of government is promoting an idea to make the entire state of Arizona accessible to Mexican Border Crossing Card holders, rather than just area between the border and Tucson.
  • Discussions continue with ProMéxico (the trade and investment promotion agency for the Government of Mexico) on a potential presence in Arizona for the agency.

Taken together this is really quite a remarkable turn of events, when you consider where the state was in 2010 in the wake of the highly controversial SB1070.

Beyond its diplomatic challenges with Mexico, Arizona’s current round of engagement with Mexico is linked to a realignment of the state’s economic priorities following the Great Recession. Much of this engagement proceeds from the assumption that increased international trade has the potential to drive future high-value added economic activity and create more high-paying jobs for the state’s citizens.

Activity around trade in the state takes place largely on four distinct yet related planes. The first plane is with our neighbors, Sonora and Sinaloa, which Southern Arizona economic stakeholders in particular continue to cultivate as vital, go-to customers in terms of crossborder trade (shopping, fruit and vegetable distribution, real estate).

The second plane of trade engagement is currently developing, is more long-distance in nature and comprises a type of trade diplomacy with political leaders and federal agencies in Mexico City (which makes sense, as Mexico’s tendency toward centralization is strong in all matters, including economic matters).

The third plane of engagement is in its infancy and has to do with linking existing Arizona companies as suppliers to the rapidly developing automotive and aerospace clusters in Mexico’s Bajío region.

The fourth plane of engagement is almost fully conceptual at this point but consists in cultivating Mexican foreign direct investment (FDI) in Arizona as Texas has successfully done. Currently, Mexican FDI in Arizona is utterly minimal but real movement on that plane would be an indicator that the state has moved into a new era.

All of Arizona’s rethinking and repositioning on trade with Mexico–its leading commercial partner–is taking place as a host of other U.S. states and cities as well as other nations intensify their presence in Mexico as that country enters an amazing and really unprecedented phase in its history of rapid and far-reaching economic reforms and international engagement.

What this means is that Arizona can no longer rely on geography as a natural advantage and instead must move toward diversifying its trading and diplomatic approach with Mexico, one of the world’s most important economies. Arizona leaders also need to understand that their discourse and policies on immigration are and will continue to be fundamentally tied to issues of economic development and particularly trade diplomacy, by Mexican partners. The state needs a safe and efficient border with Mexico but that approach in and of itself will need to be contemplated with a broader vision of all that it means to be fully pursuing a deep and sustainable commercial relationship with one of the planet’s most important emerging economies.