The U.S.-Mexico High Level Economic Dialogue was inaugurated in Mexico City this past September by Vice President Joe Biden and Mexican Secretary of Finance Luis Videgaray and represents a concerted effort by the governments of the United States and Mexico to focus on the two nations’ enormous economic relationship, which now totals over a half trillion dollars annually in two-way trade of goods and services. The North American Research Partnership took advantage of an opportunity provided by the U.S. Department of Commerce to submit formal comment on the U.S.-Mexico High Level Economic Dialogue and its initial work plan.
The work plan’s three pillars are Promoting Competitiveness and Connectivity; Fostering Economic Growth, Productivity and Innovation, and Partnering for Regional and Global Leadership. In general we emphasized four principal points which we have summarized below:
a. Keep the big picture in mind. Economic security is real security. From the U.S. perspective, the raison d’être for the HLED is stated clearly in the Federal Register notice itself: “Mexico represents a critical strategic ally and partner of the United States.”
b. This effort will require numerous different types of expertise and a new way to work. This is a big challenge and calls for a type of “whole of government” (interagency) work for which there is no readily available and unanimously agreed upon, successful model. Other binational processes (Border 2020 and the 21st Century Border Management Executive Steering Committee) offer interesting lessons and ideas for the HLED.
c. Outreach will be key to the success or failure of the HLED. Stakeholders, policymakers and citizens need to understand the work of the HLED to appreciate its importance. Outreach on international trade is particularly challenging because as a topic it is simultaneously politically difficult, abstract and highly detailed, an unfortunate combination in public policy. Such a high-level dialogue will necessarily need to support and hear input from local- and state-level groups on a continuing basis; as such the HLED should consider a range of robust formal and informal mechanisms for outreach to these groups.
d. Selecting and communicating progress on real metrics will help the HLED and the two nations build better policy on economic engagement. Vice President Biden’s encouragement to reach two billion dollars per day in crossborder trade in 10 years is an ambitious but easily grasped starting point. Keep it simple.
We focused additional comments on specific topics within the second pillar, Fostering Economic Growth, Productivity, Entrepreneurship, and Innovation, which we look forward to sharing in future posts.
Tourism is an underestimated economic driver for the U.S. and Mexico that tends to be taken for granted somewhat in the broader binational discussion. Two recent media reports highlight its importance. Associated Press reporter Elliot Spagat recently sought to draw out potential impacts to border communities from the Mexican government’s doing away with the preferential tax status of the border zone. On January 1, the federal value added tax was raised to the standard 16% after a decades-long policy of a reduced 11% rate in Mexico’s border region. As Spagat concludes, this is essentially an added incentive for Mexican crossborder shoppers to make their purchases in San Diego, El Paso, Tucson, Brownsville and other U.S. border communities rather than at retailers on the Mexican side of the border (retailers in the U.S. often have other advantages, including intense competition, generous return policies, and greater variety, particularly in apparel and electronics). Spagat quotes statistics from the University of Arizona’s widely cited 2008 study on the economic impact of Mexican visitors to Arizona; as the report notes, just over 48% of sales tax revenue in Santa Cruz County in southern Arizona are generated from sales to crossborder Mexican shoppers. This is a remarkable level of dependence on retail sales to Mexican consumers; some in southern Arizona believe that the real figure is even higher. As the Arizona Republic recently pointed out, policymakers at the local level throughout Arizona have become so interested in the potential economic value of Mexican shoppers that the Maricopa Association of Governments is spearheading an effort to include the entire state within the “border zone” (which currently extends 75 miles north of the border).
We have pointed out the importance of Mexican tourists to the U.S. economy at various times, including our March 2012 study, “Realizing the Full Value of Tourism from Mexico to the United States,” which we presented at an interagency meeting at the White House on travel and tourism to the United States. With the complete numbers for 2012 finally out, Mexico again tops the list of destinations for U.S. tourists, as the Los Angeles Times pointed out on January 1 in an article featuring the latest statistics on the issue from the U.S. Department of Commerce’s Office of Travel and Tourism Industries. Although the numbers of U.S. tourists to Mexico slipped somewhat in 2011 and 2012, Mexico still stands at the top of the list, ahead of Canada by a good eight million trips annually.
The last couple weeks have brought some interesting news of state and local officials working on improving trade relations with Mexico. Today the San Diego Union Tribune reported on a trade delegation to Tijuana by California State Senator Lou Correa (D-Anaheim), Assemblymember Travis Allen, (R-Huntington Beach), and Assemblymember Rocky Chavez (R-Carlsbad) and retired state senator (and NARP board member!) Denise Moreno Ducheny from San Diego. Other stories have included Tucson Mayor Jonathan Rothschild’s recent visit to Mexico City to meet with officials there, including Foreign Minister José Antonio Meade as well as a remarkably detailed Arizona Republic Fact Check of Phoenix Mayor Greg Stanton’s recent comments about the economic impact to Phoenix of air travelers from Mexico. And Nevada Gov. Brian Sandoval’s recent signing of an agreement with the state of Mexico to work together on issues that includes not only tourism but also manufacturing, mining and education is interesting for a number of reasons (perhaps chief among them that Nevada’s trade with Mexico has historically been so focused on Mexican tourism to the state).
The international impact of policies taken by state and local officials in North America is of particular interest to the North American Research Partnership as we analyze what works and what doesn’t work with the “bottom-up” models of governance and hence international engagement that are so strong in the West and Southwest.
NARP has unveiled and discussed the State of the Border Report to continental and national audiences but is taking both the report and its implications locally. I spoke with local decision makers when I presented the report at the San Diego Association of Governments (SANDAG) borders committee meeting last Friday in San Diego. Local actors understand the border better than the federal capitals and can often interpret and even design optimum solution sets. The comprehensive approach to border issues that NARP affords helps avoid unintended consequences.
So, I also shared a panel with ex-Secretary of Energy Bill Richardson last week (you can read a recap and watch the full event video here). I was advocating for a North American greenhouse gas exchange strategy so that when North America becomes a energy exporter we will have accommodated the climate threat. But the Secretary-Ambassador-Governor had a few interesting points. He was imagining a NAFTA for energy and a continental renewable portfolio standard (RPS). After all, he was Secretary when OPEC wanted $10/barrel. He believes Mexican President Enrique Peña Nieto has the “right stuff” to reform PEMEX and only through common standards and policies can we achieve a common grid with our neighbors.
I was impressed.
Yesterday I shared the stage with Prof. Robert Pastor, the intellectual father of the big idea of North America and Consul David Fransen from Canada’s Department of Foreign Affairs and International Trade to talk about how broken security processing is at the ports of entry are since we have prioritized investment almost exclusively to the distances between the ports over economic security. Among the ideas I shared from the Trilateral Border Symposium we held in the spring were:
- A common external security perimeter
- A common customs union and tariff
- A common greenhouse gas emission reduction credit exchange
- A common infrastructure investment fund.
We have a common future, so why not arrive there together?
The possibility of North American energy self-sufficiency, aka security, through interdependence is as elusive today as it was in the past, the recently discovered reserves and technologies developed notwithstanding. One of the more active portfolios of both the North American Research Partnership and the US-Mexico Border Research Partnership is on energy. On Wed, July 24 Rick Van Schoik, director of NARP’s energy portfolio and Duncan Wood, director of the Mexico Institute, will share insights as respondents to Bill Richardson, Secretary of Energy for President Clinton when he speaks at an event in Washington sponsored by the New Policy Institute. Rick will talk about past failed energy initiatives across one or more borders and about eventual possible mechanisms for moving forward on siting, environmental review, finance, and international permitting of energy projects and transmission infrastructure with emphasis on renewable and other clean energy sources. Among the options he will describe is a regional/international greenhouse gas offset and reduction (RIGOR) program for North America. You can RSVP for the event here.
Arizona Daily Star border reporter Perla Trevizo had a longish article from this past Sunday’s paper on how ports of entry fit in–or don’t fit in–to the current immigration debate. I commented for the article on this issue that is particularly critical for border communities and for the U.S. and Mexican economies more generally. Long story short, our 47 ports of entry on our shared border with Mexico are critical “membranes” that must do double-duty by providing both security and trade facilitation with Mexico (our third most important trading partner in the world), but they generally receive scant attention from policymakers and the public. Chris Wilson and I wrote on this issue in our trade chapter for the State of the Border Report. In addition, NARP is working on an ongoing initiative called “Realizing the Strategic National Value of Our Trade, Tourism and Ports of Entry with Mexico” with DC think tank NPI, and if you need an overview of the issue you can read the latest report for this initiative here.
Just an excellent event yesterday in San Diego at the U.S.-Mexico Border Philanthropy Partnership. Our launch and the presentation of the State of the Border Report were attended by over 70 people, and the feedback we received from the Mexican and Canadian Consulates and the stakeholders in the room on the report was very, very high quality. Indeed, the San Diego/Tijuana region stands out for its large, sophisticated group of binational stakeholders in numerous issue areas. Mexican Consul General María de los Remedios Gómez Arnau specifically mentioned the Cali-Baja Megaregion Initiative as an economic development model worthy of analysis in our next State of the Border Report. In addition, we think it is often a good idea to include perspectives on the U.S.-Canada bilateral relationship when talking about the U.S.-Mexico border. So Canadian Consul and Trade Commissioner Lisa Stockley’s comments on the enormous U.S.-Canada bilateral economic relationship were particularly on point for the report, which emphasizes the sheer enormity of the U.S.-Mexico economic relationship, now at over a half trillion dollars a year.
Suggestions from the group for additions to future iterations of the report include a closer look at border deaths; a larger North American frame; a close look at health issues that affect the border region; a discussion of data differences between U.S. and Mexico; an analysis of border innovation clusters; and a look at border region newcomers and efforts to integrate these newcomers.
Good morning all. It is a gorgeous midsummer morning here in San Diego, and we have a capacity crowd registered for this afternoon’s presentation of the State of the Border Report and the formal launch of the North American Research Partnership at the Malin Burnham Center for Civic Engagement in beautiful Liberty Station. We look forward to an engaging discussion with the numerous San Diego/Tijuana area border stakeholders who will be in attendance. Today’s presentation of the State of the Border Report follows two previous presentations in Washington, DC (May 23) and Mexico City (June 8).
We’ll check back in later with a recap of today’s discussion.