Binational clusters strategy would boost the U.S. – Mexico border economy
By Nancy J. Gonzalez
Although U.S.-Mexico trade has boomed since the implementation of the North American Trade Agreement, border regions are missing opportunities by not taking a more integrated approach to economic development and are just a node on a transportation network or “pass-through economy,”, according to a report released by the Wilson Center Mexico Institute.
“We won’t have strong binational clusters unless we choose to build them,” said Chris Wilson, deputy director of Wilson Center’s Mexico Institute. “That means choosing to have joint economic development strategies that cross the border.”
Wilson said is not enough economic development agencies and the private sector have some initiatives, but to also integrate the universities and governments to get a comprehensive strategy on both sides of the border.
The report “Competitive Border Communities: Mapping and Developing U.S.-Mexico Trans border Industries” is the result of a collaboration between the Wilson Center in Washington, D.C., and the Phoenix-based North American Research Partnership. Its authors say that the solution lies in the creation of strong cross-border clusters with participation of business groups, educational institutions and representatives of local, state and federal governments.
“With binational economic development as the goal, the U.S.-Mexico border becomes not so much an obstacle as an opportunity. In fact, the very unevenness of development and the multiple jurisdictional boundaries that are regularly understood as challenges to economic development in the region are also the keys to its advance. The linguistic, cultural and economic diversity within border communities provide them with a collection of assets unmatched anyplace else in the world and allow them to articulate a unique value proposition and strong case to attract industries looking for a place to invest,” the report says.
The report focuses on five binational border sub regions: California-Baja California; Arizona-Sonora; Paso del Norte, which includes El Paso and Ciudad Juarez; the area encompassing the Texas border with Mexican states of Coahuila, Nuevo Leon and part of Tamaulipas; and the border’s eastern end defined by Lower Rio Grande Valley and the eastern part of Tamaulipas.
“What we found was the development of clusters on both sides of the border, but few cases of trans border clusters developing,” said Erik Lee, executive director of the North American Research Partnership.
He pointed our several regions work using clusters, but none of them have an official binational cluster, which is needed to create economic development.
The Cali Baja Bi-National Mega-Region has developed a successful biotech cluster. Most of the research is being done in the San Diego area while the manufacturing process is done in Tijuana and Mexicali.
According to San Diego Regional Economic Development Corporation, San Diego’s biotech industry is the darling of the local economy, with US$700 million a year in venture capital funding and more than 700 companies. However, biotech has grown so large that it is now a very diverse cluster, with some businesses research oriented, others as testing laboratories.
While experts expect the cluster as a whole to grow, some sub-industries within that cluster are expected to grow at an even faster clip.
The life sciences industry is a major driver of the innovation economy in the San Diego region, while Tijuana and Mexicali concentrate growing medical devices manufacturing facilities.
Even though San Diego has built successful industry sectors in telecommunications, computers and electronics programming, and software development, converging to establish the region’s Information and Communications Technologies (ICT) cluster, the Mexican manufacturing facilities are not included on this cluster. The ICT cluster contributes more than US$8.5 billion in GDP to the region and it is forecasted to grow in the upcoming years.
The Cali Baja Bi-National Mega-Region has other 14 clusters developed, but they have not fully embraced their binational nature. These industries provide many high value-added employment opportunities. Defense and Transportation Manufacturing, Business Services, Financial Services, Computer and Electronics Manufacturing, IT, and Medical Services are all examples of mature cluster industries in this region. Most high technology jobs are concentrated in the mature and emerging cluster groups.
The North American Borderplex Region – which includes Juarez, El Paso, Santa Teresa and Las Cruces – is another border region trying to embrace the binational cluster strategy to promote economic growth.
According to a study published by Borderplex Alliance, this border region needs to target six industry sectors: life sciences, defense, advanced manufacturing, tourism, business support services, and advanced logistics.
The analysis show the life sciences industry cluster can be developed faster because all the cities have a unique characteristic to offer.
Las Cruces has a very strong cluster in scientific research and development services. Both El Paso and Las Cruces also have sizable clusters in ambulatory health care services and social assistance. Each of these clusters can help the Life Sciences industry overall flourish in the region.
There are at least 12 significant maquiladora operations in Juarez that manufacture medical supplies and products. Those operations employ more than 13,000 workers.
This medical manufacturing segment is relatively small compared to the dominant types of manufacturing found in Juarez. However, the growth of health care in El Paso and Las Cruces, as well as the growth seen nationally in the U.S., makes opportunity to advance the manufacture of medical supplies especially attractive in the region.
“We have everything we need to create this medical cluster in Juarez and El Paso,” said Julio Chiu, CEO of SEISA Medical LP. “Some facilities in Juarez are now developing medical devices and their contribution can be greater than just manufacturing processes.”
Even though automotive is the dominant manufacturing process in Juarez, the U.S. cities in this region have little activity on this field, clearly a significant area of opportunity.
SpaceX has encouraged the creation of an aerospace cluster in the Rio Grande Valley. Many communities in this region want aerospace companies, especially SpaceX suppliers to establish operations in the region to create economic growth.
“It should be a focus for all of Cameron County, now that we have SpaceX and United Launch Alliance, to work to develop an aerospace cluster,” said Harlingen Mayor Chris Boswell. “The more people we can expose to the fact that both of these aerospace companies are here in Cameron County the more they will see there are more opportunities for other aerospace manufacturers and those who make industry components to locate here.”
Boswell pointed out Harlingen has a long history of involvement with aerospace companies, including Boeing, Lockheed Martin and General Dynamics.
“The workers at United Launch Alliance, here in Harlingen, do exceptionally well in manufacturing components for rockets. We do it cheaper than anybody else can do it in the country. When you compare South Texas with Long Beach, California, and the astronomical cost of doing business over there, we are a natural place to come,” he said.
The role of the Mexican border communities on this initiative is unknown. McAllen and Brownsville are also trying to attract more aerospace companies to the Rio Grande Region.
McAllen also has a biomedical cluster. So far, this cluster employs 40,000 people and the forecast is to grow in the upcoming years. On the other hand, Reynosa is on the way to create 4 industrial clusters: automotive, electronics, IT and metallurgical.
Furthermore, Nuevo Laredo recently formed an energy cluster to attract more energy related companies to the region. Mexican official said this city wants to partner with U.S. local governments as well as universities to join this effort.
The Wilson report recommended an annual meeting of border region economic development professionals and a robust online directory of individuals and organizations working in the field. These two strategies will promote 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 among the needs of the border sub regions,” the document states.
Also, it endorses to minimize cross border 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 cross border 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, says de document.
Furthermore, the document encourages NAFTA visa for students and says mega regions should 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. Sub regional economic development organizations and government should keep close track of such emerging and dynamic industries, engaging them and exploring what they need to foster further growth,” the study concluded.
Wilson said it is imperative that the Mexican and U.S. federal governments need to have a seat at the table because of their important role in managing the border.
Economic development directors along the U.S. – Mexico border said binational promotion has been encouraged lately, but binational clusters are relatively new for most of the communities.
Binational economic development efforts in the border region have emerged recently. New organizations, like the CaliBaja Mega Region, the Borderplex Alliance in the Paso del Norte region, the AriSon Mega Region, and BiNED in the Lower Rio Grande Valley, are joining others that have been working to strengthen binational ties.
These groups seek to transition the border economy from one of low-cost, low-skill assembly and services to one driven by innovation and advanced manufacturing. Their efforts have become more inclusive, cooperative and binational in recent years, replacing competitive approaches with projects to jointly strengthen multi-jurisdictional local communities.
In conclusion, trans border economic development efforts are vitally important to border communities. Government, educational institutions, and businesses must all create platforms for engagement robust enough to overcome border barriers.
Rather than compete to each other, the border communities should pursue collaborative cross-border strategies as a part of cluster-based economic development to leverage local knowledge and help border community economies develop to their fullest potential beyond their current status as transit points and “pass-through” communities.
The report finds the development of trans border cluster groups and the creation of sub regional cluster councils are a method to advance cooperative approaches to strengthening regional competitiveness, identifying significant opportunities for cross border cluster-based economic development in the aerospace, automotive, medical devices, energy, and logistics industries, among others.