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Cross-border Prosperity

September 20, 2018

EL PASO, Texas — If you’re looking for a way forward on border issues, trade, immigration and even cultural identity, you may want to start with El Paso del Norte. This community of 2.3 million people includes 700,000 residents of El Paso, Texas, 1.5 million residents of Ciudad Juarez, Mexico, and more than 100,000 residents of Las Cruces, New Mexico. The region, one of the world’s largest binational metropolitan areas, points to the challenges and benefits of the two nations’ close relationship. To the naked eye, it is almost impossible to determine where one country stops and the other starts. Still, bonds of family, community and history have transcended the border for generations. They even predate it, since El Paso was a trade and government center of the Spanish empire. Nearly 25 million people cross annually by car or the footbridge that links the two downtowns. They visit families and friends. Some are students commuting to the University of Texas at El Paso. These human ties drive and are driven by the region’s embrace of trade, particularly the North American Free Trade Agreement. Everyone recognizes their and their community’s path to prosperity depends upon goods and services crossing the border. The Dallas Federal Reserve Bank projects total trade in El Paso to be up 5.2 percent from a year earlier — a faster pace than the national economy. Trading relationships existed before NAFTA, but the treaty has affected each side of the border. Take the expansion of Juarez’s maquiladora factories. They specialize in such products as auto parts, and electronics. Employment in Juarez’s maquiladoras has grown 56 percent since 2010. El Paso’s low-wage jobs took a hit as the maquilas grew. But El Paso has rebounded and focused on how its residents could provide financial and business services for Juarez’s factories. UTEP’s Hunt Institute for Global Competitiveness reports that El Paso’s service sector increased its share of the city’s total employment from 53.8 percent in 1990 to 68.0 percent in 2014. The United States and Mexico have announced “agreement in principle” to increase the amount of North American content that an auto would have to include to qualify for duty-free access to the U.S. market. It is tempting to see this as a win for manufacturing employment, but it does tend to raise the cost of manufacturing in the United States and Mexico — and economics teaches us that when you raise the cost of something, you get less of it. “If you want to learn about immigration, this is where you learn,” El Paso Mayor Dee Margo says. Consider those Juarez students attending UTEP. They acquire skills that allow them to work across borders. So do many of UTEP’s 23,000 students. They are being equipped to work across nations and cultures, which is a selling point to companies that make their mark globally. In the internet age, working across borders doesn’t necessarily mean moving across borders. The two countries’ labor markets are tightly synchronized even without cross-border movement. So we should remember that wages and employment in Mexico are linked to wages and employment in our country. The region faces challenges. Juarez’s drug-related violence has resumed, with more than 350 homicides in June and July. Fortunately, El Paso remains very safe, with 17 homicides in 2016, half the national average. Still, the cross-border community is aware of the human and economic cost of Juarez’s crime. A more subtle challenge is the differing federal, state and local laws that may put off companies from creating jobs there. “A market cannot function without a common regulatory framework,” says Patrick Schaefer, the Hunt Institute’s executive director. Yet as you visit El Paso, you see what former U.S. ambassador to Mexico James Jones describes. Both nations have plenty to learn from their shared border region how an integrated regional economy can produce prosperity and community. When you have those, you have a future.

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