To Update NAFTA, Why Not Start at the Border?

This op-ed originally appeared in the San Diego Business Journal on August 24, 2017.

To Update NAFTA, Why Not Start at the Border?

By Erik Lee and Flavio Olivieri*

Now that the NAFTA renegotiations have begun, a lot of us that look at the U.S.-Mexico border economy are wondering how this will play out for the border region. Interestingly enough, so is U.S. Trade Representative Robert Lighthizer, who made reference to border communities’ “particular equity in the agreement” in his opening statement. Indeed, there is much at stake for border communities, whose economies are based to a significant degree on the idea of a broader North American economy and free trade.

Yet, at first glance, the U.S. Trade Representative’s 17-page document, “Summary of Objectives for the NAFTA Renegotiation,” does not appear to have much of a connection with the U.S-Mexico border…or any region or community in the United States or Mexico, for that matter. The word “border” only shows up as part of the phrase “cross-border data flows.” This is strange, as President Trump’s 2016 campaign was really all about the U.S.-Mexico border, and it would be reasonable to expect the document to connect the NAFTA renegotiation effort to at least some type of border management policy. Perhaps this is because the U.S.-Mexico border has facilitated trillions of dollars in North American trade over the last two decades, which makes it look like an economic success story that this administration simply does not want to admit.

But once you start looking at the document long enough, some interesting ideas begin to emerge. In fact, the document contains a number of elements that, if they come to fruition, have the potential to positively impact economic development along the U.S.-Mexico border region. And this really should be an important objective of these negotiations, as NAFTA 1.0 laid some of the groundwork for a more prosperous border region but left a number of areas wholly undeveloped, including urban planning, transportation planning and the development of cross-border industry clusters, among others. NAFTA 2.0 should help transform border communities from their current status as “pass-through” economies into far more connected, economically sustainable and technologically oriented local economies.

Though not specifically mentioned in the document, the future of the North American Development Bank may be the key piece of the NAFTA 2.0 puzzle for border communities. The NAD Bank—once derisively called the “NADA Bank” by an exasperated George W. Bush for its (then) inability to get key funding to border communities—has evolved into a key player in what continues to be an investment-poor region. Though recapitalization for the NAD Bank has been held up in Congress, the hope is that the NAFTA renegotiations might provide the impetus to re-fund the bank. If the two governments decided to expand the Bank’s mandate, funds might be used to fund basic improvements to border communities beyond wastewater treatment, storm water management and the like and expand into other areas that would boost economic development such as ports of entry funding, transportation systems, expanding local telecom networks, education, research or even health care.

The document also has some long-overdue language on boosting small- and medium-sized enterprises, an emphasis that is borrowed from the Trans-Pacific Partnership that President Trump pulled the United States out of upon entering office. While NAFTA worked well for major multinational corporations, one of the major criticisms of global trade agreements is that small- and medium-sized enterprises have largely been left out of global supply chains. This emphasis on SMEs is important to the border region because a number of the border states are very much small-business states. Arizona is a prime example of this, with its dearth of corporate headquarters.

Yet another area of opportunity that could emerge from the negotiations is services trade. While goods trade has—with some exceptions—continued to grow, services trade lags far behind in volume. This is an area with tremendous room to grow in North America and which could be extremely helpful from an economic development standpoint in border communities. As Erik Lee and Chris Wilson pointed out in Competitive Border Communities, what stands out for many sister city pairs is the lack of cross-border economic connectivity (advanced manufacturing in Mexican border communities which often does not have a local supplier or services base on either the U.S. or Mexican side, for example).

A final point on the importance of place. We mentioned the lack of a focus on the border region itself. All of the above points—financing, SMEs and services—might make more sense as a package if they were brought together at a specific place. Why not the border itself? Specifically, as we have argued elsewhere, a focus on border commercial areas—which could be upgraded through policy, infrastructure and other investments to border economic micro- or even nano-zones—could bring all of this together in one place. The current border commercial areas are responsible for much of the crossborder commerce yet also the negative image of the border itself (lots of congestion, chaotic transportation networks, a lack of public attractions and amenities, and public safety challenges). More cross border interaction between small- and medium-sized companies can be facilitated through a cross-border smart growth urban development program in commercial areas adjacent to land points of entry that in turn will help integrate complementary capabilities, as the large manufacturing companies do.   Sectors such as medical services, software development, video games, film, arts and culture in general could thrive in a more integrated, efficient and pedestrian-focused border environment.

The upcoming NAFTA renegotiation, then, is an opportunity to grow North America if the negotiators can ground the conversation at the community level, and in this case, the cross-border community level. The pieces are there in USTR’s document, but they need further integration.

Erik Lee is executive director of the North American Research Partnership. 

*Flavio Olivieri is executive director of Cali-Baja Bi-National Mega Region, Inc.

U.S.-Mexico Border Mayors: Close Neighbors Dealing with Distant Capitals

This week’s meeting of the U.S.-Mexico Border Mayors Association in San Diego comes at an auspicious time for the United States and Mexico. With the Trump Administration pushing forward on augmenting the already existing border wall and dragging Mexico and Canada to a renegotiation of the North American Free Trade Agreement, border mayors have a lot to talk about.

Decisions made at distant conference rooms in Washington and Mexico City tend to have an outsized effect on border communities, which have not really had a permanent seat at the table in these discussions. So with or without a Trump Administration, being a mayor on the border is a challenge. One of the principal and most challenging characteristics of the U.S.-Mexico border region simply has to do with distance, which manifests itself in a number of ways.

Border communities are first and foremost amazingly distant from the national capitals. San Diego and Tijuana are over 2600 miles from Washington and 1700 miles from Mexico City. But even Brownsville, Texas, the easternmost U.S. border community, is still over 1,700 miles from Washington, DC. That translates to an epic 26-hour drive or an inconvenient five-hour, one-stop flight. Brownsville’s sister city, Matamoros, Tamaulipas, is by comparison somewhat closer to Mexico City (via an 11.5-hour drive or a four-hour, one-stop flight).

In addition, with the exception of Mexicali, border communities are also remarkably distant from state capitals. On the U.S. side, Sacramento, Phoenix, Santa Fe, and Austin each are hours from the border and usually a long ways from understanding the unique dynamics of these communities.

And finally, border communities are often far from each other. In the United States, Interstate 10 is the closest thing we have to a highway that links communities along the almost 2000 miles of border, while in Mexico, east-west freeway infrastructure runs counter to both the country’s mountainous geography and basic north-south orientation.

The point is this: physical distance translates into psychological and political distance in which obsessions about the border in Washington, the interior of the United States and Mexico City can and do easily fester. Washington’s long-standing obsession with border security and Mexico City’s complicated relationship with the border wall, outmigration and its own border communities are products of this mutual isolation.

This is essentially why organizations such as the Border Mayors Association are so important. These diverse and dispersed communities have needed to come together and present a collective “ask” of the two federal governments basically since forever. In the absence of a functioning Border Governors Conference, this is more important than ever. The challenge will be to mesh the concerns, projects and programs of enormous binational urban complexes such as San Diego/Tijuana region and the El Paso/Las Cruces/Ciudad Juarez region with much smaller cities such as Somerton, Arizona; Ojinaga, Chihuahua; and Alpine, Texas among many others.

If the organization is able to accomplish this, interesting things could happen. These binational urban areas could start to get some long-overdue attention in terms of urban planning and federal project funding, infrastructure could get built, local economies could flourish and cross-border business clusters could be created, expanded and in the process providing much-needed employment. As these outcomes can’t possibly be engineered from meetings in Washington and Mexico City, the key catalysts going forward are mayors, who are uniquely positioned to articulate the specific needs of their complex, crossborder economies to the two federal governments.

KJZZ interview transcript – The Role of States in International Trade

KJZZ Radio’s “The Show”terviewed Executive Director Erik Lee about the role of states in international trade. Below is the transcription of the interview by KJZZ’s Mark Brodie. You can find a link to the audio of this interview at: http://kjzz.org/sites/default/files/07-13-17s-lee.mp3

KJZZ: Governor Doug Ducey is in Providence, Rhode Island today. It is the first day of the National Governors Association Summer Meeting. Ducey will be taking part in a panel called “States’ Role in Attracting International Investment with the governors of Nevada, Virginia, and Rhode Island. So we wanted to look at how states are looking to boost their foreign trade. And for that we turn to Erik Lee, Executive Director of the North American Research Partnership. And Erik what strategies are states using when it comes to working more with foreign countries?

Erik Lee: I think the first strategy is to talk a good game on trade. I think you hear this from a number of governors around the country who are very aware that global trade, not just NAFTA trade, but global trade can bring benefits. It brings drawbacks as well but it can bring big benefits, particularly to large metro areas in terms of an increased number of jobs in the export sector, and these jobs tend to pay more. And those folks, with those jobs, tend to pay more taxes into local and state coffers.

KJZZ: For how long has this been going on? For how long have states really been looking to boost foreign trade?

Lee: Well, just here in Arizona, the Arizona-Mexico Commission has that kind of economic exchange at the heart of what it is trying to do, and that organization is over fifty years old. So governors have been aware of the importance of trade for quite a while. Now they also have to work with mayors of large and medium sized metro areas in their states, and trade has to land somewhere. So at the end of the day, it’s really mayors and local economic development people who really have to land this economic activity, to really make it happen.

KJZZ: You mentioned governors looking to mayors and other city officials, but I’m wondering if there are instances of states, not necessarily running afoul of federal trade laws or rules or anything like that, but maybe there is some level of conflict between what the federal government is trying to do on trade and what the states are trying to do on trade.

Lee: The irony of the Trump Administration’s pushing of an aggressive renegotiation of NAFTA, with their thinking being that Mexico and Canada are somehow taking advantage of the US, is that I would say for the vast majority of state governors the thinking is completely, 180 degrees the opposite. At this point, I think that state agencies, city governments, economic development professionals, are sufficiently up to date on what the statistics are, how important this trade is for their communities, and they talk to state governors on an ongoing basis. So I think there is that to keep in mind.

KJZZ: How important is geography in a state being able to foster trade and maybe with whom a state fosters trade with? Obviously Arizona and Mexico have a very strong trade relationship, they share a border, but does it work the same way with Washington state and Canada or some of the other northern states and Canada?

Lee: Absolutely. These states do think of themselves as containing megaregions that are important to the economic development of not just the United States, but Canada as well. Geography is really important. The other way geography is important is in terms of where industries tend to locate. Arizona, ironically, has quite a challenge even as a border state. Its geography is in some ways a blessing and in some ways a curse. It’s a blessing in terms of being next door to Mexico and for having a long term familiarity with Mexico. It’s tough being next door to California, where so many Mexican businesspeople are focused on entering the US market, and being close to Texas.

KJZZ: I wanted to ask you about the competition factor between states within a single country. And you reference all the various Southwestern border states that are all competing with each other to get business with Mexico. It sounds like it is a fairly competitive environment.

Lee: It is an extremely competitive environment. As I said at the end of the day, I think it really comes down to mayors and their economic development people in terms of going out and talking to their business partners in Mexico and Canada, and getting them to invest or getting them to locate their operations in a given community.

KJZZ: Can you foresee a time, or maybe this is already in fact happening, when foreign countries are looking more to individual states to trade with as opposed to a unified policy with the entire country.

Lee: I think that is already happening. I think that’s been the case with both Mexico and Canada for quite some time. The folks they have there in the trade agencies, at the federal, state, and provincial levels are very, very savvy about the US market. Very, very focused on places like Silicon Valley, the industrialized Northeast. Southern states, which now have the Tennessees and Alabamas of the world, that have a lot of automotive operations, very focused on those areas. I think a few weeks ago the New York Times had a really interesting story on the fact that Canada’s trading outlook and strategy, vis-a-vis the United States, has really shifted from the federal level to the state and local level.

KJZZ: Erik Lee is the Executive Director of the North American Research Partnership.

NARP commentary to USTR on upcoming NAFTA negotiations

June 12, 2017
United States Trade Representative

Re: Commentary by the North American Research Partnership re: Requests for Comments: Negotiating Objectives Regarding Modernization of North American Free Trade Agreement with Canada and Mexico

While the Request for Comments from the USTR understandably focuses on tariff-related barriers to modern trade between the United States, Canada and Mexico, we believe that a number of barriers to North American trade are not directly tied to tariffs yet are significant and should therefore be included in the upcoming negotiations. In particular, the U.S.-Mexico border as it exists today presents numerous obstacles to expanded and more just trade between the three countries, and these obstacles without a doubt adversely affect economic development in U.S. border communities. We have identified and expanded upon these in several recent works, including The U.S.-Mexico Border Economy in Transition (2015) and Competitive Border Communities: Mapping and Developing U.S.-Mexico Transborder Industries (2015), both written in collaboration with the Mexico Institute of the Woodrow Wilson International Center for Scholars in Washington, DC.

As discussed in Competitive Border Communities, from the standpoint of U.S. border communities, the trade-facilitation approach of border management, while understandable from a macro standpoint as beneficial for the North American economy, has had a high cost for these communities in terms of foregone economic ties to their Mexican sister cities’ economies, which are generally more robust and built largely on advanced manufacturing.

Yet the economic vision of the border embedded in such a trade-facilitation approach can be limiting. The border essentially becomes little more than a point of friction in an otherwise seamless binational economy. Border communities aspire to be more than a node on a transportation network, more than what many of them have titled a “pass-through economy,” one in which too little value is added locally to the billions of dollars of commerce passing through its corridors each year.

In other words, U.S. border communities have a large federal security footprint, a tremendous amount of north-bound trade passing through their ports of entry, and not much to show for it in terms of local economic development.

As such, we present several recommendations below (many of which are from Competitive Border Communities) that touch upon these obstacles below for the USTR’s consideration. We believe that these are relevant to the upcoming discussions in that they are (a) “Relevant barriers to trade in services between the United States and Canada and Mexico that should be addressed in the negotiations,” and (b) “Issues of particular relevance to small and medium-sized businesses that should be addressed in the negotiations,” and (c) “Relevant environmental issues that should be addressed in the negotiations,” all important points in USTR’s Request for Comments.

The United States and Mexican federal governments must play an especially important role in cross-border economic development efforts. Given the fact that border economies have an international boundary running through the middle of them, stakeholder engagement efforts that build partnerships between federal agencies and local communities are invaluable in this process. U.S. and Mexican consulates can serve an expanded facilitating role in these cross-border economic development efforts.

However, given the enormous geographical expanse of the U.S.-Mexico border region and the numerous state and local jurisdictions along the international boundary, improved management of crossborder trade is really a multi-level, multi-jurisdictional task that includes the federal governments, bilateral organizations, state, regional and local governments as well as universities and the private sector. Based upon this understanding, we have the following recommendations.

1. Continue to support and grow the role of the North American Development Bank. The North American Development Bank (which was brought into being from one of the NAFTA side agreements) is one of the only institutions that we have that is specifically focused on infrastructure for the well-being of the border region. Many of the projects that it has funded have helped to mitigate the adverse environmental impacts of trade and underdevelopment in the U.S.-Mexico border region. As such, the bank plays an outsized role in the overall development of U.S border communities, some of which are among the poorest in the United States. In order to continue this important work, the bank needs to be recapitalized by the U.S. and Mexican federal governments, and the U.S. and Mexican federal governments need to continue to work together to find areas in which to utilize the banks resources and expertise.

2. Border communities should actively utilize cluster-based economic development, with its focus on collaboration among government, industry and educational institutions, as an opportunity to engage federal officials managing the border as partners in a joint effort. Too often, outreach efforts by border officials can be summed up as a process of receiving complaints from the local community.

3. Link up economic development organizations along the border through a variety of formal and informal mechanisms. As noted in previous work, the U.S.-Mexico border region is an enormous geographic space; this has, over time, served to make border-wide communication difficult. An annual meeting of border region economic development professionals and a robust online directory of individuals and organizations working in the field are two practical steps toward the sharing of best practices as well as addressing shared challenges and opportunities that could over time greatly enhance the capacity and awareness in the area. An annual advocacy day in each of the national capitals might also strengthen coordination among border communities while clearly communicating to federal officials that there are commonalities (albeit also differences) among the needs of the border subregions.

4. Minimize crossborder travel restrictions for university faculty, staff and students. University systems’ restrictions on faculty, staff and student welfare too often fail to reflect the actual risk inherent in crossborder travel. These concerns need to be weighed against their potential to hinder development of key faculty and student contacts, professional development, intercultural competency, and language skills; as well as the development of innovation ecosystems that are critically important to cluster development. University systems, state governments, and the U.S. Department of State (which issues travel warnings) must all work together to overcome this challenge and to lessen the formidible administrative costs associated with bringing students and workers across the border for even short-term student exchanges and internships. We found some border universities resistant to processing the substantial paperwork required in case of less-than-semester-long programs.

5. The two federal governments need to further harmonize (and localize) data collection across the border. This would allow better analysis of the crossborder economies of the southwest United States and northern Mexico, and it would improve the ability of border communities to communicate to potential investors their full range of assets and market size.

6. Update and streamline specialist, worker and student internship NAFTA visas to foster mobility. The NAFTA visa continues to be underutilized but could play a key role in building robust binational industry clusters. Firms and universities that want to develop internship programs utilizing the new binational Memorandum of Understanding on internships could benefit from a more useful NAFTA visa.

7. Create binational cluster councils with public, private and education sectors all at the table. Clusters need some level of organization in order to successfully employ cluster-based economic development strategies. This includes organization within a cluster or industry group and, potentially also the creation of a broader platform, or cluster council, through which the private sector, governments and universities pursue strategies to foster the development of a number of key industries (similar to the organizational structure currently used in Nuevo León). Creating binational cluster councils could foment the coming together of industry leaders and related cluster participants to create cluster-specific groups.
Furthermore, the role of mega regions should be encouraged to monitor the growth of emerging binational industries that could be good candidates for cluster-based economic development. A number of small industries—while not yet major employers— performed well enough between 2009 and 2013 in terms of percentage employment growth to warrant ongoing attention from mega regions. Subregional economic development organizations and government should keep close track of such emerging and dynamic industries, engaging them and exploring what they (the industry, not the individual companies) need to foster further growth.

See pp. 14-15 in Competitive Border Communities: Mapping and Developing U.S.-Mexico Transborder Industries.

We thank you for the opportunity to submit comments for these important negotiations.

Project Unveiling: Zones of Hope: Challenges and Opportunities in Improving Border Economic Micro-Zones

Join us for a discussion on the critically important cross-border pedestrian environment:

Zones of Hope: Challenges and Opportunities for U.S.-Mexico Border Economic Micro-Zones

July 14, 2016, 3:00 – 4:30 pm

Connect Lounge, The San Diego Outlets at the Border
4463 Camino De La Plaza, San Ysidro, CA 92173
Please RSVP to rsvp@naresearchpartnership.org

The pedestrian environment adjacent to U.S.-Mexico land ports of entry is the least visible, most impacted and, until recently, the least attended of the three major types of crossings at ports of entry. Yet it is the most important for local commercial districts, neighborhoods and communities on both sides of the border.

So, how do we capitalize on the the binational fusion of people, culture and ideas taking place on the ground right at the U.S.-Mexico border?

San Diego’s Border Fusion Group recently commissioned the North American Research Partnership to conduct a study of Border Economic Micro-Zones to determine a) their economic potential and b) practical next steps for key stakeholders to take in order to realize this potential.

This event will feature a presentation of the research initiative as well as a panel discussion among private- and public-sector experts on the past, present and future of these complex economic areas. A detailed agenda will be forthcoming.

Seating is limited. Please RSVP to rsvp@naresearchpartnership.org.

We are grateful to Border Fusion Group and the following Founding Sponsors for their generous support for Phase I of this unique applied research project:

– Crystal Clean Car Washes
– Futuranet Transportation
– WG Wireless Communication
– GMI Integrated Facility Solutions
– Baja-Mex Insurance Services
– LAZ Parking Services

Many thanks to our event partners: San Ysidro Chamber of Commerce and San Ysidro Smart Border Coalition

Colin Robertson – Bolstering Canada’s International Reputation

NARP Advisory Board member Colin Robertson is a former Canadian diplomat; Senior Advisor, Dentons, LLP; and Vice President and Fellow, Canadian Global Affairs Institute. He writes a regular column for The Globe and Mail newspaper that analyzes Canada’s role in the world and often North America specifically. During 2016 we will reprint or excerpt selected recently written columns, which are posted with the permission of the author. The views and opinions expressed in this article are those of the the author and do not necessarily reflect a position of the North American Research Partnership.
 

Three things Trudeau can do to bolster Canada’s international reputation
Colin Robertson  The Globe and Mail Tuesday, Jan. 05, 2016

“It’s 3 a.m. There’s a phone in the White House and it’s ringing. … Who do you want answering that phone?” National security experience didn’t do it for Hillary Clinton in 2008, but this ad could do the trick in 2016. Public anxieties about security and a fragmenting international order are rising.

Assessing geopolitical risk is a booming business for diplomats, spies and money managers.

Continuing instability in the Middle East and North Africa tops the Council on Foreign Relations’ annual Preventative Priorities Survey. At the top of the list is the conflict in Syria and Iraq that creates refugees and breeds terrorists. Current tensions between Saudi Arabia and Iran are a piece of the deep, historical divisions between Shiite and Sunni, Persian and Arab.

Other top-tier contingencies include a crisis with North Korea; disruptive cyberattacks; a terrorist attack on the U.S. or an ally; political violence in Turkey; political instability in Egypt or Afghanistan. Lower-tier contingencies include more Russian aggression in Ukraine; Russia-NATO tensions; European Union divisions caused by the refugee influx; South China Sea confrontations sparked by China.

Nor can we count on prosperous times to assuage tensions. Economists predict another anemic year for China and Europe. Global trade, the engine of growth since 1945, has slowed.

Another challenge that should worry policy-makers: Global democratization is in retreat.

In its annual assessment of social, political and economic freedoms, Freedom House reports that the state of freedom worsened significantly in nearly every part of the world.” The bright spots last year were few: fair elections in Argentina and Tunisia, Aung San Suu Kyi’s victory in Myanmar.

With more governments censoring information and expanding surveillance, Internet freedom declined for a fifth-consecutive year. Not since the Cold War have nation states’ commitment to an international system built on democratic norms been less durable.

Other human rights watchdogs drew similar conclusions, warning that women are particular targets of Islamic terrorists, such as Islamic State and Boko Haram.

Amnesty International wants a “dramatic shift” in how the international community handles the 19.5 million refugees. Resettlement placement remains disappointingly low. Canada, it noted, provided inspiration in pledging to welcome 25,000.

To demonstrate that “Canada is back,” we can do more to support international order.

First, actively recommit to internationalism.

Prime Minister Justin Trudeau has rededicated Canada to multilateralism, and he actively engaged at the quartet of recent international summits (G20, Commonwealth, APEC, Climate). On climate change, Canada put up money and worked constructively to help close the Paris deal.

More effective than creating new democracy institutes is bringing vigour and accountability to existing multilateral programs. This should include our own Parliamentary Centre and our international youth leadership programs.

Second, identify those niches where we can make a difference.

Our expertise in international refugee matters should be reactivated, drawing on our successful experiment in pluralism. We can also demonstrate to the Trumpsters and scaremongers that a generous resettlement policy is good international citizenship and builds a stronger nation.

Containing nuclear proliferation is another niche where we can help. We have both experience and expertise that can also serve our commercial interests in a world that wants to wean itself off carbon.

The “Canadian vaccine” that helped contain the Ebola epidemic makes the case for continuing investment in collaborative scientific research.

Water will likely replace oil as the vital commodity of the 21st century. It’s already the source of regional conflicts. With a century trans-boundary water-management experience, we can help. Significant advances in effective water usage by our oil, gas and hydro industries have wider potential.

And third, let’s invest in the Canadian Forces, especially our navy.

In an era of recurrent humanitarian disasters, there will be frequent calls at 3 a.m. for first responders. The Canadian Forces have demonstrated proficiency, but they need both trained personnel and new kit.

The promised defence review must re-examine our procurement policies. What continuing premium are we prepared to pay, not just in dollars but in fleet readiness, to “Buy Canada”?

Earning our way back to a level of international engagement commensurate with our aspirations means activist diplomacy and Canadian Forces with muscle. This requires long-term investments in money and resources.

The post-Second World War institutions that guided international relations through decades of bipolarity and years of unipolarity are under intense stress.

Coping with the new multipolarity requires every nation, including Canada, to step up their commitment to multilateralism. Queen Elizabeth II got it right in her Christmas broadcast, saying: “It is better to light a candle than curse the darkness.”

The international scene will test Mr. Trudeau’s “sunny ways.” By finding our niches, we can demonstrate that “Canada is back.”

Recommendation 1 from Competitive Border Communities

Over the next several weeks, we will periodically take a closer look at the eight principal recommendations from our 2015 report, Competitive Border Communities: Mapping and Developing U.S.-Mexico Transborder Industries, a collaboration with our partners at the Mexico Institute. Today we look at the first recommendation. 

Our leadoff recommendation (you can find the full list of recommendations on pages 14-15 of the report) has to do with the key economic development role played by the two federal governments at what is a very delineated, securitized border (which could not be more different from Europe’s Schengen area). To wit:
The United States and Mexican federal governments must play an especially important role in cross-border economic development efforts. Given the fact that border economies have an international boundary running through the middle of them, stakeholder engagement efforts that build partnerships between federal agencies and local communities are invaluable in this process. U.S. and Mexican consulates can serve an expanded facilitating role in these cross-border economic development efforts.
In other words, because of the highly “securitized” nature of the U.S.-Mexico border, border communities’ independent spirit won’t be enough to get the job done. In addition, post-9/11 security enhancements along the U.S.-Mexico border by the U.S. Department of Homeland Security have—as we have argued elsewhere—have made it that much harder to do economic development in border communities (much of which should be cross-border economic development).

Therefore, if the two federal governments want to utilize the border as a platform for economic integration, development and growth by helping to build transborder industry clusters, they must play a significant role in local cluster-based economic development efforts. Specifically, U.S. and Mexican Consulates in border cities will need to be staffed with additional experts on trade and export promotion, customs processes, agricultural issues and related topics. In addition, they are in the best position to pull together the numerous federal agencies with a stake in border economic issues.  There is much to do and the work has just begun, but the return on investment is potentially enormous.

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.

Michoacán and Public Policy: Never Let A Serious Crisis Go to Waste

Many thanks to Gabriella Sánchez for her interesting take on the local roots of the conflict in Michoacán, which serves not only as a dramatic example of public safety issues boiling over but also for the way it speaks to a number of public policy areas simultaneously, including environmental, agricultural and even fiscal policies, among others. Most directly, of course, the crisis brings attention on Mexican President Enrique Peña Nieto’s security policy, anchored by a focus on reducing violence, centralizing federal security efforts, a new communications policy and creating a national gendarmerie (I would highly recommend viewing analyst Alejandro Hope’s excellent review of the policy during the Mexico Institute’s recent event, “The State of Citizen Security in Mexico: The Pena Nieto Administration’s First Year in Review.”). In fact, watch the entire video.

The crisis in Michoacán has touched off a tremendous discussion in Mexico over what the next steps should be. The Saturday Los Angeles Times piece by Richard Fausset is one of the better articles in English on the crisis, with a focus on the difficult options for Mexican federal, state and local officials. To wit: How do federal forces work together with the grupos de autodefensa? Should Mexico incorporate some or all of the vigilante groups into formal law enforcement? What is to be done about the government officials who aided and abetted the Knights Templars? In other words, extremely tough public policy questions, but an impressive range of ideas from analysts that have the potential to impact the issues going forward. “Never let a serious crisis go to waste,” to quote Rahm Emanuel.

Though Michoacán is located hundreds of miles south of Mexico’s border with the United States and by no means has a direct impact on U.S. security, it does raise comparisons to the (binational) response to the violence in Tijuana and Ciudad Juárez during the truly dark days of 2009-2011. The security situation in Tijuana and Ciudad Juárez is now much improved; in both cities, the role of civic organizations and detailed state-federal political and policy agreements were critical factors in bringing the city back from the brink. The multi-issue, multi-level response to border security challenges is a clear indication that Mexico is more than capable of addressing security issues. These are solvable problems in the medium-term that require strong initial investment and then a willingness to take on significant institutional change.

Of course, a number of critically important security areas in Mexico need continuing attention, including public participation, police reform and judicial reform. Successfully addressing these issues will positively impact U.S.-Mexico border security, as Eric Olson and I wrote in our chapter on security in the State of the Border Report. Binational collaboration can help to a degree in certain specific areas, and through the Mérida Initiative, the United States has invested in rule of law efforts in Mexico, including trainings for Mexican judges, prosecutors, forensic experts and police coordinated by the Conference of Western Attorneys General. Our 2011 report on binational anti-human trafficking cooperation efforts highlighted some additional and important collaborative work on an issue of mutual importance to both governments.

Public security in Mexico is a complex topic of immense importance for Mexico and, indirectly, the United States and Central America. A quick list of recommended work in English in this area includes David Shirk’s recent policy piece on the state of public security in Mexico, Daniel Sabet’s Police Reform in Mexico: Informal Politics and the Challenge of Institutional Change and Robert Donnelly and David Shirk’s Police and Public Security in Mexico. In Mexico, the Instituto Mexicano para la Competitividad, CIDAC and México Evalúa are among many non-governmental groups doing important work in this area.

 

 

Robert Pastor

American University Professor Robert Pastor, a friend and colleague to many of us working on issues relating to North America, passed away last week after a long battle with cancer. Bob was very respected for his tremendous body of work on North America and Latin America; his most recent book, The North American Idea: A Vision of a Continental Future was simply the latest in a long and impressive list of publications. His advice and insights were always helpful and came from broad and deep experience. His colleagues, friends and former students were amazed at his tenacity and work ethic up until the very end of his life. For a full accounting of his interesting life—including his time as President Carter’s national security advisor on Latin American and Caribbean affairs—we highly recommend reading the Washington Post’s remarkable obituary. Rest in peace, Bob Pastor.