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Economic Development

Trade along the U.S.-Mexico border is critical to the economic well-being of both countries. Contrary to popular belief, the United States imports the majority of its energy resources from the Western hemisphere – in return, as the world’s largest consumer of energy, the United States contributes hundreds of billions of dollars a year to the economies of American countries. Today, Mexico and Canada are two of the top three suppliers of oil to the United States. Yet energy goods only account for approximately 25% of Mexican imports to the United States. The vast majority are consumer goods such as appliances and TV’s, clothing, agricultural products and raw materials conveyed across the U.S.-Mexico border. Similarly, Mexico imports billions of dollars worth of consumer goods annually from the United States, in addition to advanced technology and manufactured goods such as vehicles.

   Despite the view that NAFTA, the North American Free Trade Agreement, has damaged nascent industry in Mexico, industry has actually expanded — especially around the border commercial zones. As a result of NAFTA, raw materials can be imported without taxes, assembled, and then exported, known as the “maquiladoras” industry. This low cost manufacturing has spurred job growth in Mexico and demand in the United States; according to official U.S. data, they have increased job opportunities by providing work to a low-skilled labor market along with wages that, on average, have increased since the introduction of NAFTA in 1993. Mexican foreign investment in the United States has steadily increased as well. According to the World Bank, Mexico’s GDP nearly doubled from $580 billion in 2000 to $1.085 trillion in 2008, largely thanks to its competitive export markets. Currently, the United States buys 80% of Mexico’s exports and sells Mexico 49% of its imports, making it Mexico’s single largest trading partner. Conversely, Mexico is one of the United States top three trade partners in both imports and exports. In 2008, the United States and Mexico conducted $366 billion in trade.

   To continue this trend of economic growth, U.S.-Mexico cross-border trade needs to become more efficient in transit and better able to deal with the security issues that arise from trans-national trade in a post-September 11th world. Secure manufacturing zones with a highly visible supply chain need to be created in conjunction with continued expansion of the FAST system of secure cross-border transit. The goal needs to be decreasing the time and cost of U.S.-Mexico trade while simultaneously increasing its security. This increase in manufacturing infrastructure must also coincide with an increase in education and civic infrastructure to develop human capital in the densely populated border regions, such as San Diego-Tijuana and El Paso-Ciudad Juarez. Policy on both sides of the border on issues related to economic development, such as immigration or the enforcement of environmental regulations among many others, can either hinder or accelerate growth. The economic development of the United States – Mexico border region is fundamental to maintaining the competitive edge of both the U.S. and Mexican economies.