After Some Sluggish Years, NAFTA Creates Border Boomtowns
EL PASO, Texas Texas border cities are showing signs of prosperity 20 years after the signing of the North American Free Trade Agreement.
The situation was just the opposite in the years after North America opened its doors to free trade. Manufacturing jobs in the Southwest declined by an average of 4 percent, according to the U.S. Bureau of Labor Statistics. Nationally those jobs dropped by nearly 6 percent.
Along the U.S.-Mexico border the decrease in manufacturing was particularly devastating to the city of El Paso, which for 40 years relied heavily on the garment industry. In the 1950s El Paso began building a reputation as America's Blue Jean Capital.
The city marketed itself as the place where an ample Latino workforce could sew a pair of Wranglers for cheap. Some 50,000 El Pasoans worked in manufacturing, half of them in apparel. But beginning in the 1990s those jobs started to disappear. Some went to Mexico while others went to Central America and Asia. El Paso was suddenly faced with an identity crisis.
"The community went into shock," said El Paso City Councilman Steve Ortega.
Ortega is one of a handful of young leaders who came of age during the city's slow and painful post-NAFTA transformation.
"In 1998 there was a community summit that was called together by business and political leadership," he said. "The question was 'What is El Paso going to do?' And at that time the idea was, 'Let's start to focus on our location as a positive.'"
So El Paso decided to befriend its enemy. Instead of cursing the job-snatching factories across the border, the goal became to service them. That meant starting companies that could provide services like logistics, transportation, accounting and company management. Over the last 20 years those service sectors and others have matured and multiplied, ultimately helping boost the economy. Today, one out of every four new jobs created in El Paso is credited to cross-border trade.
An example of such a company is Secure Origins, founded six years ago. Its business is to monitor the transportation of goods across the U.S.-Mexico border using GPS and computer technology. Through this monitoring they aim to prevent contraband, like narcotics, from mixing with the cargo.
The company was founded in El Paso by a local entrepreneur with a history in computer software. Its chief of operations, John Rippee, joined the company after serving as a helicopter pilot in the U.S Army.
"I think there's probably more promise and opportunity here than you've ever seen in the history of the region," Rippee said. "That's why I'm here."
The young company demonstrated its promise to the state of Texas which, in 2007, awarded it a $2 million grant to expand operations. Earlier this month the city of El Paso contracted Secure Origins for $195,000 to start a program meant to expedite commercial truck traffic at the port of entry.
"We have $80 billion dollars worth of trade every single year coming through in this particular region," Rippee said. "If we could increase that 10 percent, that's billions of dollars that are coming back across our borders. Those are more jobs, that's increased quality of life."
Secure Origins hires and develops engineering students from the local university. The company is housed together with other emerging tech companies in an old garment factory. It's the kind of industry turnaround that's advancing the economy even in the face of a national recession.
A study by the Federal Reserve Bank of Dallas released this summer shows that in the last decade per-capita income in Texas border cities has been rising faster than the national average. The study attributes two-thirds of that growth to cross-border trade. California is experiencing similar growth while Arizona and New Mexico are just waking up the economic opportunities of trade with Mexico.
"It's a good transition overall for the economy," said Roberto Coronado, who co-authored the study. "Service related jobs typically come with higher wages, higher standards of living and that's exactly what we find in our analysis."
There's still a ways to go. Border cities still rank below the national average for per-capita income. In 2010, per-capita income in El Paso was $28,698, or 30 percent lower than the national average of $41,560. The good news, according to the Dallas study, is that in the past 10 years El Paso has managed to narrow the gap by 10 points.
In order to continue making positive gains, Coronado says cities like El Paso must work on improving their educational institutions and city infrastructure. The U.S.-Mexico border is also home to some of the poorest zip codes in the nation.
But the proof of new prosperity is undeniable. In 2009 a medical school opened in El Paso. The city recently signed a deal to host a Triple A baseball team and El Pasoans are even excited about soon getting their first IMAX theatre.
Meanwhile dozens of locally owned restaurants, bars and cafes have flourished in the hands of young entrepreneurs like Raul Gonzalez, also known as Chef Rulis. On a recent weekday at lunch, his place was packed.
"You can come here and you'll have musicians and artists sitting next to bankers and lawyers sitting next to health care workers," Gonzalez said.
A look at the impact of NAFTA after 20 years.
Four and a half years ago Gonzalez left his banking job in Houston. Opening his own hometown restaurant has always been his dream.
"People are proud of their local establishments," he said. "And we are getting people to be proud of the city which is important because the people are what make the city cool."
And that's a pride long overdue.