Border economics 101

As the United States throws billions more at border enforcement, it's worth looking at big picture trends affecting border economics that frame how officials must address immigration enforcement and drug smuggling operations.

This morning I listened to a couple of hours from a hearing of the Texas House Border and International Affairs Committeee from August 22. (See the broadcast for yourself.) You didn't need to hear much of the testimony to realize that recently stepped up border security plans like Operation Linebacker and the National Guard deployment won't significantly reduce illegal immigration or drug smuggling.

According to Mike Allen of the Texas Border Coalition, expansion of the US Border Patrol and National Guard presence along the border has focused so far only on areas between the checkpoints. But no new staff, he said, has been added to process legal migration through regular "ports of entry." That tells me the new deployments ignore most cross-border traffic, including traffic in illegal immigration and drugs, most of which still comes through regular checkpoints.

If it were only that new spending won't help much, things might not be so bad. What's less often emphasized is how border security's failure to accomodate trade and commerce harms Texas' and the US economy. Currently, Texas businesses earn $128 billion per year from exports to foreign countries; Texas exports to Mexico account for $45 billion of that.

The situation is untenable already. In the next few years, though, the crush will become worse due to massive new freight traffic, the committee was told, not just from Mexico and Latin America but the Pacific Rim. The ports of Los Angeles and Long Beach are overwhelmed with backed up shipments and a massive pollution problem that prevents their expansion. So new ports on Baja and further down the Mexican coast will take on the load, plus a new inland shipping center in central Mexico and related highway expansion to funnel the goods through Laredo and up I-35.

That translates into a lot more legitimate, economically necessary traffic crossing the border. Freight demands on the US west coast due to Pacific Rim imports are increasing at an astonishing rate, equivalent to one port of Vancouver per year. So expect ever-more pressure on the major points of entry from Mexico in the next few years, and many more opportunities for smuggling operations of all types to go unregulated.

Allen told the committee that the border region can no longer compete with the Pacific Rim on cheap labor, its historic competitive advantage. The border's emerging advantage compared to Asia, he said, lies in "logistics," i.e., the ability to transform the area into a transportation hub.

That's where ham-handed border security measures cause trouble. Already on the southern side, traffic is backed up for miles each day waiting to pass through checkpoints, exacerbated by the post-NAFTA boom in maquiladora plants, (foreign-owned businesses on the Mexican side that import raw materials, component parts, or other property into Mexico duty free to be used in manufacturing, primarily for export). The lack of additional staff at those checkpoints is stalling legitimate commerce, even as the number of Border Patrol agents multiplies.