Looking Past the Rhetoric to the Promising Economic Future of U.S.-Mexico Relations

While Trump threatens to build a wall, the benefits of collaboration between the two neighboring nations are vast. And companies in tech, manufacturing, and other sectors are now seeing more and more opportunity across the border.

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The mudslinging and rhetoric of the U.S. presidential race is bleeding over across the border. While the entire Republican field has had a lot to say about Mexico, it has been Donald Trump’s ongoing talk of building a wall to keep out criminals that has drawn the most ire from the Latino community both at home and abroad.

In addition to security concerns, Trump has tied the construction of the wall to the two nations’ massive trade relationship. He said that funding for the project would come out of Mexico’s trade surplus. In February, former Mexican President Vicente Fox brought the situation to a boil by bluntly summing up an outrage shared by many. “I have to say that we are not — I am not — going to pay for that f***ing wall,” said Fox in an interview with Maria Bartiromo on Fox Business Network. Trump’s response did nothing to calm hostilities. “The wall just got 10 feet higher” he said at a campaign rally soon after.

Amid the tension, Carlos Sada, the newly appointed Mexican ambassador to the United States, wants to replace emotional posturing with a fact-based case that the neighboring countries should expand relations rather than — literally — put up walls. He is more interested in trying to inform Americans about just how much the relationship adds to the U.S economy. “For every dollar that Mexico exports to any part of the world, 40% of it stems from the integration with the U.S., as that percentage comes from U.S. products assembled here,” he recently said, according to Mexico News Daily. “Many products come and go six or seven times from one side of the border to the other.”

The overall economic numbers are staggering. Each day, according to the Council for the Americas, roughly $1.5 billion in goods cross the border, with the two-way trade total exceeding $583 billion in 2015. Because imports ($316.4 billion) outweighed exports ($267.2 billion), it is a popular view to consider this a problem. But Kezia McKeague, director of government relations at the Washington office of the Council of the Americas, says that is missing the bigger picture.

“Ironically, politicians in the United States may focus on our trade deficit with Mexico but are forgetting that U.S. workers create roughly 40% of the values of imports coming from Mexico,” McKeague recently told Nearshore Americas. “Because we’re not just trading finished goods. We’re literally producing goods together. It’s very much a highly integrated production platform for manufactured goods.”

A now-common view in the auto industry, for example, is that cars are no longer made in the United States or Mexico. They are made in North America. Different aspects of the process happen on each side of the border, and the necessary parts can crisscross that line multiple times from the time they are created to when the car is actually sold.

These are the facts that the new ambassador and the Mexican government are trying to get out there. They want to dispel the myths about how Mexico interacts with the U.S. economy. “Mexico’s new ambassador who is arriving in Washington this week, Carlos Sara, I think will really prioritize this … The Mexican government is really hoping that some of these private sector stakeholders will step up and tell the story about how many jobs in the United States actually depend on trade with Mexico,” said McKeague.

The Department of Commerce says that U.S. exports of goods and services to Mexico supported an estimated 1.1 million jobs in 2014. McKeague notes that trilateral trade — between the United States, Canada, and Mexico — “has literally tripled since NAFTA was implemented in 1994.” So increased interaction with Mexico is just a reality for many companies now. And most hope that the current toxic narrative can change.

Ford, for example, recently drew criticism for putting a new $1.6 billion plant in Cuautitlan Izcalli, Mexico. It is the auto giant’s third assembly plant in the country, and Trump ramped up his bluster in response. “This transaction is an absolute disgrace,” said Trump in a statement. He added that, under his administration, protectionist policies would give companies few incentives to put factories abroad. “When I am president, we will strongly enforce trade rules against unfair foreign subsidies, and impose countervailing duties to prevent egregious instances of outsourcing.”

Many in both Mexico and the United States believe such views represent an outdated view meant to drive emotion rather than embrace economic potential. The value of both goods and services crossing the border, particularly in the tech world, is only rising.

Silicon Valley is increasingly investing in startups in Mexico, with one fintech firm recently getting $35 million in funding. The state of Querétero has become a hub for aerospace innovation, a sector that is led by companies like Airbus and Bombardier and contributed 47% of foreign direct investment into Mexico, according to a statement from Querétaro Aerospace Cluster president Klaus Gobenceaux.

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On a smaller scale, companies like Genpact in Juaréz are showing how the border matters less and less, with several of its employees living in El Paso, Texas, then crossing the river each day to go to work in another country. The rising tech hub in Tijuana represents a similar story. And demographic data suggests that the rising scarcity of tech workers in the United States means that the large labor pool of developers and programmers in Mexico will be critical to the industry in the years to come.

There is also the vast potential of companies, and especially tech-minded firms, selling to the Mexican market. While smartphones and many other gadgets are ubiquitous in the United States, there is no such saturation in the land of 120 million to the south. Dan Restrepo,  a senior fellow at the Center for American Progress who spent six years as the principal advisor to President Barack Obama on issues related to Latin America, is seeing more companies trying to tap this both the Mexican market and the growing U.S. Latino population.

“You’re also seeing U.S. companies recognizing the value of being part of, in essence, two emerging markets: Both Mexico as an emerging market and U.S. Latinos as an emerging market,” Restrepo recently told Mexico IT. “If U.S. Latinos were a standalone economy, we would be the world’s 12th largest economy. We would be a member of the G-20. That’s 55 million people, a trillion and a half dollars roughly in purchasing power. That puts the U.S. Latino GDP on par with Mexico’s GDP — and basically tied for second place behind Brazil as the largest Latin GDP … Companies are starting to realize that there are plays into Mexico that are also plays into this kind of shared economic space.”

Companies that see this potential want the politicians to get off their soapboxes and start focusing on the actual border issues that matter. There is no questioning the fact that security, and people illegally living in the United States without a visa, is an issue. But it is far from the only issue.

In economic terms, businesses would love to hear less about the reasons for a wall and more about how politicians can cut down on wait times at the border to speed up trade, promote infrastructure investment, fund better training for customs agents, and otherwise foster a climate in which these two giant neighbors can work together instead of be driven apart.

“Too often the conversation about the border in this country is about thugs and drugs,” said McKeague. “When in reality, it’s a windpipe for both of our economies. So while not ignoring the important security gains that have been made, we’ve tried to shift the focus of the discussion a little bit more towards economic competitiveness and how we can make the border work better for the bi-lateral business community … Unfortunately it often gets overshadowed in the political debate — but the economic reality is here to stay.”

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