The U.S.-Mexico collaboration thrives on a foundation of shared history, economic interdependence, and a vibrant cultural exchange. Nowhere is this more evident than along the U.S.-Mexico border, where communities thrive on collaboration and innovation.
In this blog post, I want to focus on the economic dimension of the US-Mexico relationship, specifically highlighting the importance of trade and collaboration between our border communities. I propose that we shift the focus to the bridges we have built and the potential for even stronger ties. More than just neighbors, the United States and Mexico have a complex, intertwined history that forms the basis of a partnership with vast untapped potential. As the Chairman of the Board of the US-Mexico Foundation, I have seen first hand how our nations, through trade and collaboration, have the power to bolster not only each other's economies but also the very fabric of our societies.
Texas, with its long and storied history intertwined with Mexico, provides a compelling example of the mutual benefits that stem from a strong US-Mexico partnership.
The North American Free Trade Agreement (NAFTA), implemented in 1994, ushered in a new era of economic integration between the United States, Mexico, and Canada. Since then, trade between the US and Mexico has flourished. Trade of goods has grown from $206 billion in 1994 to $799 billion in 2023, adjusted for inflation. In fact, Mexico surpassed China to become the United States' leading trading partner in 2023, a testament to the deep economic ties that bind our nations. The value of goods imported from Mexico rose nearly 5% to $475 billion compared to the value of Chinese imports, which fell 20% in the same period.
Today, trade between both nations is well diversified across sectors, and it’s comprised of mostly intermediate goods (also known as intra-industry trade). Since NAFTA we have seen greater levels of business cycle synchronization between the U.S. and Mexico.
Every dollar’s worth of goods the U.S. imports from Mexico contains 40 cents of U.S. content. The number for Canada is 25 cents. For reference, there is only 4 cents of U.S. content for every dollar in goods we import from China. This indicates a strong partnership among North American countries and common manufacturing platforms.
Texas has been at the forefront of this economic boom. The state facilitates the movement of billions of dollars in goods annually. Major Texan cities like El Paso, Laredo, and McAllen have become hubs for international trade, with manufacturing, logistics, and retail sectors thriving on cross-border commerce. Texas has developed a close-knit economic partnership with Mexico, showcasing the benefits of nearshoring and highlighting the economic and cultural synergies that come with it.
Take a look at the US-Mexico border zones and their characteristics in this e-book.
El Paso, for instance, is a major center for the import and export of automotive parts, medical devices, and consumer goods. This robust trade activity has spurred significant economic growth in El Paso and surrounding areas, creating jobs on both sides of the border. The maquiladora industry highlights the synchronization of manufacturing employment in El Paso and the border city of Ciudad Juárez, Mexico. According to the Federal Reserve Bank of Dallas, a 10% increase in maquiladora output in Ciudad Juárez leads to a 2.8% increase in total employment in El Paso. This job growth is concentrated in transportation, retail trade, business services, finance, insurance and real estate.
The benefits of US-Mexico trade extend beyond just large corporations. Small and medium-sized businesses (SMBs) on both sides of the border are increasingly participating in cross-border commerce. E-commerce platforms and streamlined customs processes have made it easier than ever for Texan businesses to reach Mexican customers and vice versa. This fosters innovation and entrepreneurship, contributing to the overall economic dynamism of the border region.
Trade is just one facet of the economic interdependence between the U.S. and Mexico. It also embodies the shared values of community and family that are inherent to both cultures. Workers from Juárez helping to assemble products destined for global markets in El Paso are not just employees; they are part of an extended family that transcends borders. This human connection adds an invaluable layer of mutual understanding and respect that is often the foundation for lasting partnerships.
Remittances, the money that Mexican migrants working in the US send back home, play a vital role in the Mexican economy. In 2023, remittances to Mexico from the US reached a record high of nearly $61 billion (Banxico via Tukan), representing an 8% growth over 2022. Further, in 2022 remittances amounted to 4.5% of Mexico's GDP, up from about 2.5% a decade ago. Border states make up over half of the total remittances from the United States.
Border security is another critical aspect of the US-Mexico relationship. Secure borders are essential for facilitating legitimate trade and cross-border movement while deterring illegal activity. Collaboration between US and Mexican law enforcement agencies is crucial in this regard. Information sharing, joint patrols, and coordinated efforts to combat drug trafficking and human smuggling are all essential for maintaining a safe and secure border. Additionally, initiatives to develop border infrastructure and foster U.S.-Mexico collaboration between customs authorities can enhance security and increase the efficiency of cross-border operations. Read more about the binational, legislative collaboration in our e-book.
The US-Mexico relationship is constantly evolving, and new opportunities for collaboration are emerging. Nearshoring, the trend of companies moving manufacturing operations from Asia to Mexico, presents a significant opportunity for both countries. Mexico's proximity to the US market, skilled workforce, and established trade infrastructure make it an attractive destination for nearshoring businesses.
This trend can create jobs on both sides of the border, strengthen supply chains, and foster innovation in the manufacturing sector. The US-Mexico Foundation is committed to supporting nearshoring initiatives by facilitating connections between businesses, promoting investment, and advocating for policies that encourage closer economic integration.
In the face of adversity, it is our shared history and common destiny that compel us to look forward optimistically. A future characterized by a deep and reciprocal partnership between the United States and Mexico is not just desirable; it is indispensable. It is my hope that through concerted effort and visionary leadership, we can continue to build bridges and create an enduring legacy of cooperation that benefits all who call this region home.
The relationship between the United States and Mexico is a complex and multifaceted one. However, at its core, it is a relationship built on mutual respect, economic interdependence, and a shared desire for prosperity. The border communities of Texas serve as a shining example of the success that can be achieved through collaboration.
Together, we can build bridges—not walls—and create a future that is brighter, more connected, and more prosperous for all.
This blog post was redacted with insights generated in part by comments made by Roberto A. Coronado from the Federal Reserve Bank of Dallas.