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Borderlands

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Emmanuel Brunet-Jailly

Chapter 7. The Economic Cost of Border Security: The Case of the Texas-Mexico Border and the US VISIT Program

J. Michael Patrick

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1Powerful forces of global economic integration, increasing cross-border trade and commerce, and recent acts of cross-border terrorism have renewed the interest of policy-makers and the public in the role of borders. In the United States, in response to the terrorist attacks on New York and Washington DC on September 11, 2001, President George W. Bush moved quickly to secure the nation’s northern and southern borders. The borders were never officially closed, but the intense scrutiny and security imposed by the US Customs Services and the US Border Patrol brought cross-border traffic, both of people and of cargo, to a virtual standstill. Three-to four-hour waits to cross the border at major US ports of entry became common in the days and weeks following the 9/11 attacks. However, although the heightened security procedures remain in place, border crossings have already rebounded to their pre-9/11 levels at most southern ports of entry.

2In the aftermath of 9/11 the chief national-security policy response has been to establish “smart borders.” This technology-oriented response to securing US borders against terrorist incursions includes screening, biometrics, and information technology. Pre-screening of individuals and cargo as well as dedicated lanes on international bridges facilitate the separation and expedited crossings of low-risk individuals and cargo operators, allowing customs, immigration, and border-patrol officials to focus their attention and inspection where potential threats are the greatest. Automated methods for recognizing humans, using unique physiological characteristics (biometrics) such as facial, fingerprint, retinal, and vocal features, help to separate legitimate border-crossers from suspicious individuals. Information-technology programs and interoperational databases that collect, track, and coordinate data on individuals passing through US border ports allow the Department of Homeland Security (DHS) and other agencies to share information on suspicious individuals and activities in “real time.” According to President Bush, the goal is to establish “smart borders” that pose little or no obstacle to legitimate trade and travel, while keeping pace with expanding trade and protecting the United States from threats of terrorist attacks, illegal immigration, drugs, and other contraband. Following the 9/11 terrorist attacks, the DHS implemented section 110 of the Illegal Immigration Reform and Immigrant Responsibility Act of 1996, known as the Automated Entry-Exit Control System, and renamed it the US Visitor and Immigrant Status Indicators Technology (US VISIT) program. Under the US VISIT program foreign visitors, students, and business travellers are tracked by using at least two biometric identifiers, such as digital fingerprints, iris scans, and digital photographs, when entering and leaving the United States.

3The purpose of this chapter is to estimate the potential economic cost of the implementation of one component of the “smart borders” policy, the US VISIT program, to Texas border communities. Mexico is America’s third-largest trading partner, accounting for millions of American jobs, while over 80 percent of US-Mexico merchandise trade crosses at US southern border ports of entry. Millions of Mexican border residents and others cross the border daily to shop and work. Any delays or disruptions to this cross-border flow of people and goods would have negative consequences for US border communities.

4The first section following this introduction provides a general assessment of the importance of trade and commerce to the United States and to the Texas border communities, and it discusses the growing concern that a porous southern border poses a serious security risk. The second section examines the US VISIT program and the opposition the program faces in Texas border communities. The program’s potential economic impact on Texas border communities is presented in the third section, followed by a discussion of those findings in the fourth. A conclusion and recommendations close the chapter.

5The discussion in this chapter is based on review and analysis of published studies and reports on the economic impact of increased border waiting times due to increased congestion at US-Mexico ports of entry. Specifically it looks at the potential economic cost of the US VISIT program to Texas border communities. The studies and reports that are evaluated here have employed a variety of methodologies to acquire and analyze data and information, including input-output models and descriptive statistics. A brief discussion of the methodologies used is provided as part of the discussion of each study or report evaluated.

THE IMPORTANCE OF TRADE AND COMMERCE

6Trade in goods and services with the rest of the world constitutes a significant component of the US economy. US trade increased 16 percent in 2004, to US$ 3.7 trillion, reflecting a stronger US economy as well as improved economic conditions in a number of US trading partners. The value of US goods and services traded in 2004 represented 25 percent of US GDP, up from 12 percent in 1970 and 20 percent in 1994. Canada, Mexico, and China are the leading trading partners of the United States, together accounting for 40 percent of US trade with the world (Office of the US Trade Representative 2004). US exports support 12 million American jobs, including one out of five manufacturing jobs. Workers in export-related industries receive, on average, 13-18 percent higher wages than the national average (International Trade Administration 2004).

7The large flows of people and goods that cross the US border daily thus lie at the heart of the country’s prosperity. At the same time, the sheer volume of this commercial and passenger traffic can provide opportunities for smuggling drugs, people, weapons, all types of contraband, and even terrorists. The relative ease with which the 9/11 hijackers entered the United States reveals how easy it is for its enemies to exploit this flow of people and trade (National Commission on Terrorist Attacks 2004). Thus the United States now faces the challenge of providing meaningful security on its borders while maintaining and enhancing the travel and trade that help to generate prosperity.

8Nowhere is the tension between security and cross-border commerce more pronounced than on the US southern border with Mexico. Economic activity in the region has grown rapidly since the implementation of the North American Free Trade Agreement (NAFTA). US-Mexico trade has increased from just over US$ 100 billion in 1994, the first year of NAFTA, to over US$ 260 billion in 2004 (see figure 7.1). Of that amount, merchandise trade by all modes of surface transportation increased more than 150 percent from 1994 to 2004 (International Trade Administration 2004).

Figure 7.1: Total US-Mexico Trade, 1990-2004

Value (US$ billions)

Annual average

Change (%)

2000

247.6

23.9

2001

232.9

-3.3

2002

232.2

2.5

2003

235.6

2.5

2004

266.6

12.8

2005 (first half)

140.3

8.5

1990-2004

2,362.2

23.7

Source: Texas Center for Border Economic and Enterprise Development, Texas A&M International University

9Texas ports of entry, which account for over 80 percent of total US-Mexico overland merchandise trade, experienced an 86.7 percent increase in truck crossings from 1994 to 2004, while vehicle crossings increased 65.1 percent, pedestrian crossings increased 14.5 percent, and rail-car crossings increased 149.1 percent (see tables 7.1 to 7.4.) The Laredo port of entry accounts for 41 percent of all US-Mexico overland merchandise trade, with daily crossings of some 25,000 pedestrians, 41,000 vehicles, 9,000 trucks, and 1,119 rail cars.

10Texas is the leading state exporting to Mexico, accounting for 14 percent of US exports to Mexico in 2004 (International Trade Administration 2004). The state’s leading industrial metropolitan centres export tens of billions of dollars in computer and electronic products, vehicles and transportation equipment, machinery, and chemicals to Mexico annually, supporting thousands of skilled, high-paying jobs (see tables 7.5 to 7.7). Exports to Mexico account for one out of every ten Texas jobs. Texas is also a major importer of Mexican goods, receiving over US$ 100 billion in 2004. Leading Mexican imports include energy, machinery, vehicles and transportation equipment, and high-technology and telecommunication products (International Trade Administration 2004).

11The degree of economic interaction and integration at the US-Mexico border is significant. Trade and commerce account for 30-40 percent of total industry sales and employment in Texas border communities (Texas Center for Economic and Enterprise Development 2005). Nearly four out of every ten jobs in the region are tied to trade and commerce activities with Mexico. A recent study by the San Antonio branch of the Dallas Federal Reserve Bank estimates that Mexican cross-border shoppers account for roughly 20 percent of total retail and wholesale sales in the Texas-border metropolitan communities of El Paso, Laredo, McAllen, and Brownsville. The study found that 49.4 percent of retail/wholesale sales (by value) in Laredo are made to Mexican shoppers (Federal Reserve Bank of Dallas 2004). (See table 7.8.)

12Mexico’s maquiladora industry, composed largely of multinational firms operating on Mexican soil, often in partnership with Mexican companies, is a significant generator of foreign-exchange earnings, and an engine of economic growth and industrial modernization. The industry dominates US-Mexico trade. Roughly 80 percent of the trade between the two countries is maquiladora-led intra-industry trade. Laredo is the maquilas’ port of choice, handling 90 percent of the industry’s output of vehicles and transportation equipment, electronics, and machinery. In addition, Laredo is a leading port for US agricultural trade with Mexico, accounting for roughly 80 percent of US shipments of animal feed and animal and vegetable fats and oils, crude and processed (International Trade Administration 2004).

Table 7.1: Border Pedestrian Crossings, 1994-2004

Table 7.1: Border Pedestrian Crossings, 1994-2004

Source: Texas Center for Border Economic and Enterprise Development, Texas A&M International University

Table 7.2: Border Vehicular Crossings, 1994-2004

Table 7.2: Border Vehicular Crossings, 1994-2004

Source: Texas Center for Border Economic and Enterprise Development, Texas A&M International University

Table 7.3: Border Truck Crossings, 1994-2004

Table 7.3: Border Truck Crossings, 1994-2004

Source: Texas Center for Border Economic and Enterprise Development, Texas A&M International University

Table 7.4: Border Rail Crossings, 1994-2004

Table 7.4: Border Rail Crossings, 1994-2004

Source: Texas Center for Border Economic and Enterprise Development, Texas A&M International University

Table 7.5: Texas Gross Domestic Product and Exports, Selected Years 1994-2004 (US$ billions)

1994

1997

2002

2004

GDP

484.1

601.6

712.4

847.8

Total exports

59.9

84.3

95.4

117.2

Exports to Mexico

23.8

31.2

41.6

45.7

Source: Texas Department of Economic Development, Texas Comptroller of Public Accounts

Table 7.6: Value of Texas Exports to Mexico by Sector, 2002 (US$ millions)

Texas

41,647

Computer and electronic products

10,565

Transportation equipment

6,368

Electrical equipment, appliances, and components

3,458

Chemicals and allied products

3,075

Machinery, except electrical

2,703

Plastics and rubber products

2,298

Petroleum and coal products

1,867

Fabricated metal products

1,842

Textile mill products

1,228

Primary metal manufacturing

1,170

Food and kindred products

1,164

Agricultural products

1,111

Paper and allied products

812

Miscellaneous manufactured products

780

Oil and gas

734

Total

39,175

Source: Texas Department of Economic Development

Table 7.7: Importance of Exports from the Ten Leading Metropolitan Areas in Texas to Mexico: State Output, Earnings, and Employment, 2002 (US$ Billions Except Employment)

Value of Texas exports to Mexico by sector in 2002

Output impact

Earning impact

Employment impact (thousands)

Texas

41.6

100.4

25.8

985.6

Ten Metropolitan Areas

30.1

73.2

19.8

745.6

Dallas

10.8

26.7

7.5

278.1

Houston

6.2

14.7

3.6

135.5

Fort Worth-Arlinton

4.8

11.4

3.0

114.6

Austin-San Marcos

3.4

9.0

2.6

92.0

El Paso

1.7

4.1

1.1

47.1

San Antonio

1.6

4.0

1.1

42.3

Brownsville

0.5

1.2

0.3

13.4

McAllen

0.4

0.7

0.2

10.3

Longview-Marshall

0.4

0.7

0.2

7.4

Beaumont-Port Arthur

0.3

0.6

0.2

4.9

Source: Derived from Texas Department of Economic Development and Texas Workforce Commission data, using the US Department of Commerce Regional Input-Output Modeling System (RIMS)

THE POROUS SOUTHERN BORDER

13According to the Department of Homeland Security (DHS), approximately 1.1 million illegal immigrants were apprehended on the southern border in 2005. Apprehensions in 2006 were about 1 million (http://www.dhs.gov/​ximgtn/​statistics/​). DHS estimates that between 150,000 and 600,000 succeed in entering the U.S. illegally every year (CBP Congressional Affairs Office, Department of Homeland Security 2005).” As T. J. Bonner (2004), the president of the National Border Patrol Council, has stated,

Prior to September 11, 2001, it was extremely easy to enter the United States illegally, either by sneaking across the border or by securing permission to enter temporarily and then never leaving.... With few exceptions, any individual who is determined to enter the United States illegally will eventually be successful.
We cannot pretend that our homeland is secure if our borders are not... If it is so easy for impoverished and poorly educated people to illegally cross our borders, consider how much easier it is for well-financed and highly trained terrorists to do the same.

Table 7.8: Texas Border Retail/Wholesale Trade and All Industry Sales 1994-2004 (US$ millions)

Table 7.8: Texas Border Retail/Wholesale Trade and All Industry Sales 1994-2004 (US$ millions)

Source: Texas Comptroller of Public Accounts

14According to DHS officials, terrorist organizations such as al-Qaeda recognize the vulnerability of the US-Mexico border. In 2002 al-Qaeda’s website noted, “In 1996, 254 million persons, 75 million automobiles, and 3.5 million trucks entered America from Mexico. At the 38 official border crossings only 5 percent of this huge total is inspected... These are figures that call for contemplation” (al-Qurashi 2004, 84).

15In the decades leading up to September 11, 2001, protecting US land borders was not viewed as a national security issue. It was either a drug or a crime or an immigration problem, but not one rising to the level of national security. As a result many critical problems that had been previously identified by border communities, industry groups, the Government Accounting Office, academics, and even congressional committees were largely ignored. Issues such as deteriorating infrastructure, inadequate facilities, insufficient staffing at border ports of entry, poor intelligence, and dysfunctional immigration laws were repeatedly identified but never adequately addressed (House Select Committee on Homeland Security 2004). Since September 11 this has changed. Significant attention is now focused on the southern border, and security is the nation’s number-one priority. Many community leaders on the southern border, however, are concerned that securing the homeland may come at the economic expense of their communities.

THE US VISIT PROGRAM AND TEXAS BORDER COMMUNITIES

16According to the DHS, the US VISIT program is a top priority because it enhances security for US citizens and visitors while facilitating legitimate travel and trade across US borders. The program is part of a continuum of security measures that begins outside US borders and continues through a visitor’s arrival (entry) in and departure (exit) from the United States. In those cases where a visa is issued by the Department of State, biometrics such as digital, inkless finger scans or digital photographs allow the DHS to determine whether the person applying for entry to the United States is the same person who was issued the visa by the Department of State at one of its embassies or consulates. Upon exiting the country a scan of the visitor’s travel documents permits the DHS to determine if the individual has entered the country illegally or overstayed his or her visa (Department of Homeland Security 2004).

17The US VISIT program’s entry procedures were put in place at 115 airports and 15 seaports on January 1, 2004, and were implemented at the 50 busiest land ports of entry on December 31, 2004. As of December 31, 2005, all procedures were to be in place at all remaining land ports of entry. The exit portion of the program is now being tested at airports and seaports, but a date for implementation at the land ports has not been set.

18The program’s procedures apply to all foreign travellers with the exception of most Mexican visitors who apply for admission to the United States using a Border Crossing Card (laser visa) within the 40kilometre (25-wide) “Border Zone.” Visitors seeking to travel to the US interior must apply for an I-94 visa, which subjects them to US VISIT procedures. The visitor’s biographic information and biometrics are electronically scanned, and the I-94 visa is processed in a matter of minutes, significantly reducing the time, according to DHS, previously required to fill out and process the 1-94 application. DHS officials estimate that only 10-15 percent of visitors seeking to travel to the United States from Mexico actually go beyond the “Border Zone” and therefore become subject to US VISIT procedures.

19Many officials and business leaders in Texas border communities are opposed to the US VISIT program because they are convinced that it will have a devastating impact on the border economy, the economy of Texas, and, indeed, the US economy overall. In August 2003, for example, the International Bank of Commerce, a leading southern Texas financial institution headquartered in Laredo since 1966, expressed the following views:

[There are] fears that implementation of the US VISIT program at land border ports will bring commercial and tourist traffic from Mexico into the US to a grinding halt. Likewise, it will choke commercial exports from the US to Mexico. Any slowdown in terms of people and commerce between NAFTA partners will work to the competitive advantage of the Pacific Rim and the European Union (EU). Increases in trade friction have the same impact as higher taxes or tariffs. US-VISIT will kill NAFTA (McAllen Economic Development Corporation/Chamber of Commerce 2003).
The border communities oppose the implementation of the “exit and entry system” ... It will destroy border economies ... For industry time is money. Manufacturers, which are located on both sides of the border, will face increased costs from transport delays. Shipping and traffic delays caused by the system could result in the loss of thousands of jobs along the border. The US/Mexico border handles more traffic with 600,000 vehicles crossing per day and 3.5 million commercial trucks per year ... Border communities rely heavily on retail trade and tourism. If border inconveniences continue, Mexican tourists will choose to spend their dollars elsewhere. The Mexicans play a huge part in the border retail market and provide substantial sales tax revenue to border communities.
The US has benefited from the huge flow of trade, tourism, shoppers, commuters, and family members across our borders with Canada and Mexico. IBC is concerned that the attempted controls proposed by the Department of Homeland Security (DHS) will devastate the lucrative trade and people with absolutely no assurance the US VISIT will stop the entry of terrorists and other criminals. This will have a direct negative impact on our nation’s Gross Domestic Product and cost the US a large number of jobs. The exit inspection process proposed by US VISIT does nothing to control suicide bombers who have entered the US and who died fulfilling their mission.

THE POTENTIAL ECONOMIC IMPACT OF THE US VISIT PROGRAM ON TEXAS BORDER COMMUNITIES

20The issue of delays at the US-Mexico border is a common topic of discussion in the popular media and at binational meetings, such as the annual US-Mexico Border Governors’ Conference. These sources of information, however, are based mostly on anecdotal accounts, and so provide a limited picture of the magnitude and consequences of border wait times.

21The most comprehensive study to date on the economic impact of border waiting times was completed in June 2005 by the San Diego (California) Association of Governments (SANDAG). In that study SANDAG reported that daily waiting times of forty-five minutes at the ports of entry between the San Diego region and Baja California were costing the San Diego region US$ 1.4 billion in revenues, US$ 2.4 billion in output, and 32,821 jobs lost on an annual basis (SANDAG 2005). The study noted that, although cross-border travel generates significant revenues in the retail, hotel and lodging, and recreations sectors in the San Diego region, increasing congestion and delays at the border are constraining cross-border trips, resulting in output and employment losses. The study attributed the increased congestion and longer waiting times at the border to the growing numbers of border crossings and to stepped-up homeland security activity following the 9/11 terrorist attacks.

22Few studies, to date, have attempted to estimate the economic impact that the US VISIT program may have on border communities, Texas, or the US economy. The results from available studies are summarized here.

The Perryman Group Study

23The Perryman Group, an economic and financial analysis firm, was hired by the International Bank of Commerce of Laredo, Texas, to determine the impact of the US VISIT program. In its 158-page report (Perryman Group 2004) it concluded that,

Analysis indicates that even under a conservative assumption regarding the delays (a 20 percent increase above the current level) the program could cost the US economy in excess of 375,000 jobs (0.2 percent of total), with more than 215,000 (0.2 percent of total) Texas positions lost. If delays prove to be more disruptive (up 75 percent), the job losses could top 1,400,000 (0.9 percent of total) in the US and 800,000 (0.8 percent of total) in Texas. Border areas would be particularly hard hit. Because much of this trade represents integrated production activity, the ramifications extend to US competitiveness on a global scale. While the intent of US VISIT is unarguably a very good thing, the current timetable and capacity for implementation is simply not appropriate and would be devastating to business activity on multiple fronts.

24According to its report the Perryman Group developed a dynamic input-output model (USMRIAS), using available data, to assess the economic impact of the US VISIT program. Apparently, interviews with cross-border Mexican shoppers were not conducted as part of the study. Tables 7.9 to 7.14 summarize the Perryman Group’s economic-impact assessment of the baseline 20 percent and 75 percent increases in delays on the Texas border economy and key metropolitan cities.

Table 7.9: Economic Impact Assessment (US$ Millions)

Total expenditures

Gross pruduct

Personal income employment

Texas border

1,666.6

1,048.5

638.1

-19,199

Brownsville-Harlingen area

175.8

109.6

66.4

-1.998

McAllen-Edinburg-Pharr area

539.4

343.5

210.1

-6,308

Laredo area

339.4

219.3

133.3

-4,067

El Paso area

432.2

262.1

157.6

-4,628

Baseline: 20% Increases in Delays

Table 7.10: Negative Impact with 20% Increase (%)

Output

Employment

United States

-0.3

-0.2

State of Texas

-0.2

-0.2

Texas Border

-3.7

-3.1

Table 7.11: Economic Impact Assessment 2003 (%)

Proportion of gross product

Proportion of employment

Texas border

3.7

3.1

Brownsville-Harlingen area

2.0

1.7

McAllen-Edinburg-Pharr area

3.4

3.5

Laredo area

5.2

5.4

El Paso area

1.5

1.8

Baseline: 20% Increases in Delays

Table 7.12: Economic Impact Assessment (US$ Millions Except Employment)

Total expenditures

Gross pruduct

Personal income

Employment

Texas border

6,249.7

3,931.7

2,393.0

-71,994

Brownsville-Harlingen area

659.2

411.0

248.9

-7,493

McAllen-Edinburg-Pharr area

2,022.6

1,288.0

787.9

-23,655

Laredo area

1,272.6

822.4

499.9

-15,252

El Paso area

1,620.6

982.8

590.9

-17,354

Baseline: 75% Increases in Delays

Table 7.13: Negative Impact with 75 % Increase (%)

Output

Employment

United States

-1.1

-0.9

State of Texas

-0.6

-0.8

Texas Border

-14.1

-11.6

Table 7.14: Economic Impact Assessment 2003 (%)

Proportion of gross product

Proportion of employment

Texas border

14.1

11.6

Brownsville-Harlingen area

7.4

6.6

McAllen-Edinburg-Pharr ares

12.7

13.2

Laredo area

19.4

20.3

El Paso area

5.7

6.9

Baseline: 75% Increases in Delays

25The Perryman Group also reported,

Assuming notable disruptions occur, bank deposits in the border region are projected to decline by [US]$ 2.285 billion (approximately 13.3 percent), which has a measurable impact on the ability of local banks to finance future growth.
Housing values in the border region would decline by 2.8 percent to 10.6 percent depending on the severity of the delays, thus causing substantial loss of household wealth.

The University of Texas-Pan American Study

26In December 2003 the Center for Border Economic Studies (C-BEST) at the University of Texas-Pan American conducted a study for which researchers interviewed 1,000 Mexican visitors over four days at four locations in McAllen (Hidalgo County) and Brownsville (Cameron County), in the lower Rio Grande Valley. The study’s findings were noted under two categories: the economic impact of Mexican visitors and findings related to the US VISIT program.

27Mexican visitors’ expenditures varied by mode of travel. A typical car traveller averaged almost US$ 5,000 a year (US $182 per visit), a plane traveller spent about US$ 8,000 a year (around US$ 2,000 per visit), while bus travellers and pedestrians spent approximately US$ 1,100 a year (US$ 80 and US$ 20 per visit, respectively). C-BEST’s researchers concluded that, given a total of 22.7 million Mexican border-crossers, total estimated expenditures by Mexican visitors amounted to US$ 1.4 billion in 2003. Using an input-output model (IMPLAN), the researchers estimated that these expenditures generated a total of approximately US$ 1.7 billion in output (sales), 41,000 jobs, US$ 560 million in wages, and US$ 203 million in business taxes. The researchers concluded that Mexican visitors’ expenditures support 12 percent of total output and 10-15 percent of employment in the lower Rio Grande Valley.

28Extensive delays (exceeding two hours) to enter the United States were generally not tolerated by visitors, and 70 percent of the study respondents indicated that such delays would cause them to reduce the frequency of their visits.

Texas A&M International University Studies

29The Texas Center for Border Economic and Enterprise Development has conducted three studies related to the economic impact of the US VISIT program.

30The first study by Texas Center researchers was conducted in August 2003. Using available border-crossing data and applying assumptions regarding cross-border Mexican shoppers’ expenditure patterns (based on previous research), researchers estimated the impact of 1 percent, 5 percent, and 10 percent declines in cross-border expenditures on sales, employment, sales-tax rebates, and bridge revenues. It was assumed that a decrease in cross-border sales to Mexican shoppers would lead to decreases in employment and sales-tax revenues. In addition, decreases in cross-border trade, that is, commercial truck crossings (of 1 percent, 5 percent, and 10 percent), would lead to decreases in employment and bridge revenues. Both sales-tax rebates and bridge revenues are important sources of revenue for local government. At the border-region level a 5 percent (permanent) decline in cross-border commerce and trade would result in an (estimated) loss of US$ 380 million in sales, a loss of 7,745 jobs, an increase in the unemployment level to 11.2 percent (from 10.0 percent), and the loss of US$ 2.7 million in sales-tax rebates and $3.6 million in local-bridge revenues (see tables 7.15a and 7.15b).

31Based on the assumptions used in this study, of the four border metropolitan communities, Laredo would be affected the most, in relative terms, by the US VISIT program. The researchers estimated that a permanent 5 percent decline in cross-border commerce and trade for Laredo would result in a 2.3 percent decline in local sales, a 2.6 percent decline in sales-tax rebates, a 5.0 percent decline in bridge revenues, the loss of 1,990 jobs, and a 3.0 percent increase in the unemployment rate (see tables 7.15a and 7.15b).

32Historically, border communities have demonstrated strong resilience in the face of external shocks to their economies, bouncing back from devaluations of the Mexican peso as well as from government policies that delay or restrict the flow of people and commerce across the border. For example, the decline in cross-border Mexican shoppers in border communities following the devaluation of the peso in 1995 was roughly 6 percent, though it was higher in some communities than in others. A year later the number of cross-border shoppers had recovered to pre-devaluation levels. The fall-off in cross-border shoppers following the 9/11 terrorists attacks and the heightening of border security was roughly 5 percent during September and October 2001 – though, again, it was higher in some communities than in others – yet by early 2002 the numbers of cross-border shoppers in most border cities had surpassed the levels seen before 9/11.

Table 7.15a: Estimated Impact of Permanent Decline in Border Crossings (Northbound and Southbound Pedestrian, Vehicular, and Commercial Trucks) of 1%, 5%, and 10% (Based on 2002 Data; Absolute Changes)

Table 7.15a: Estimated Impact of Permanent Decline in Border Crossings (Northbound and Southbound Pedestrian, Vehicular, and Commercial Trucks) of 1%, 5%, and 10% (Based on 2002 Data; Absolute Changes)

Table 7.15b: Estimated Impact of Permanent Decline in Border Crossings (Northbound and Southbound Pedestrian, Vehicular, and Commercial Trucks) of 1%, 5%, and 10% (Based on 2002 Data; Proportional Changes) (%)

Table 7.15b: Estimated Impact of Permanent Decline in Border Crossings (Northbound and Southbound Pedestrian, Vehicular, and Commercial Trucks) of 1%, 5%, and 10% (Based on 2002 Data; Proportional Changes) (%)

33The impact on Texas of a permanent 5 percent decline in the state’s exports to Mexico (see table 7.16) would result in an estimated loss of US$ 2.1 billion in export sales, a decline in the state’s gross product of $5.1 billion and earnings of $1.3 billion, and a loss of 42,000 jobs.

Table 7.16: Estimated Impact of a Decline in Texas Exports to Mexico of 1%, 5%, and 10% (US$ millions Except Employment)

Exports

Gross State product

Earnings

Employment

1% Decline

-417

-1,200

-258

-8,300

5% Decline

-2,100

-5,100

-1,300

-42,000

10% Decline

-4,200

-10,300

-2,600

-84,000

Table 7.17: Estimated Impact of a Decline in Numbers of Cross-Border Shoppers of 1%, 5%, and 10% on State Sales Tax Collections (US$ Millions)

1% Decline

-4.6

5% Decline

-22.9

10% Decline

-45.9

34A shortcoming of the study is that its impact estimates are based on assumptions, which may or may not be true, about how cross-border Mexican shoppers and businesses would react to border-crossing delays caused by the implementation of the US VISIT program. In an attempt to address this shortcoming, Texas Center researchers surveyed cross-border Mexican shoppers in Laredo about their likely responses to delays at the border. Two different studies were conducted: one in April 2004, during Easter Week, and the other in December 2004, over the weekend before Christmas. Both periods saw a large number of cross-border Mexican shoppers in Laredo stores. According to local merchants and business owners, April, December, and July (when Mexican students are on summer vacation) are their busiest sales periods, accounting for up to 60 percent of their total annual sales.

35Over the seven days from April 3 to 9, 2004, Texas Center researchers completed 595 random surveys with self-selected cross-border Mexican shoppers. Of those, 19 percent (113 surveys) were completed in Laredo’s downtown business district, adjacent to the international bridge, and 81 percent (482 surveys) were completed at the Mall Del Norte, Best Buy, and two Wal-Marts in its uptown district. Expenditure patterns, based on whether respondents crossed the border by foot (pedestrian), car, or bus and whether they shopped at least once a week, once a month, or once a year, are presented in table 7.18.

Table 7.18: Cross-border Mexican Shoppers’ Expenditures (Average), April 2004 (US Dollars and Numbers of Shoppers)

36Total number of shoppers: 595

Combined total expenditures: US $115,481
Average expenditure per shopper: US $194.08
Pedestrians as proportion of total: 14.9%
By car as proportion of total: 75.3%
By bus as proportion of total: 9.8%

37On December 18, 2004, Texas Center researchers completed 202 random surveys with self-selected cross-border Mexican shoppers. Of those, 16 percent (32 surveys) were completed in Laredo’s downtown business district and 84 percent (170 surveys) were completed in the uptown district as above. Expenditure patterns are presented in table 7.19.

38In both surveys, when cross-border shoppers were asked how they would react if the implementation of the US VISIT program were to result in border-crossing delays of more than an hour and a half, 40 percent responded that they would reduce their visits and expenditures by 30 percent.

Table 7.19: Cross-border Mexican Shoppers’ Expenditures (Average), December 2004 (US Dollars and Numbers of Shoppers)

39Total number of shoppers: 202

Combined total expenditures: US $73,449
Average expenditure per shopper: US $363.61
Pedestrian as proportion of total: 13.4%
By car as proportion of total: 75.7%
By bus as proportion of total: 10.9%

Summary of Studies

40The conclusion drawn from the studies, all of which were conducted before the implementation of the entry portion of the US VISIT program, is that significant economic harm, in lost jobs, income, and business activity, may occur in the border region if the program produces prolonged delays in moving people and merchandise across the border. As has already been described, trade and commerce with Mexico are vital not only to the economies of Texas border communities but also to the welfare of the state and national economies. Much of US-Mexico and Texas-Mexico trade involves the intra-industry shipments of key US industrial and agricultural products, including automobiles and automotive parts, electrical equipment, machinery, chemicals, and electronics – ranging from low-tech household appliances to high-tech telecommunications equipment and computers – as well as animal feed and animal and vegetable fats and oils. Significant border-crossing delays could disrupt the just-in-time delivery of essential products and parts, shutting down production lines at US automotive plants and other manufacturing facilities across the country, and producing negative rippling effects throughout the national economy.

41Conservative estimates (see table 7.20) indicate that a 5 percent decline in border crossings, due to delays, would result in drops in gross sales (2.1 percent; US$ 380 million), employment (9.2 percent; 7,745 jobs), sales-tax rebates (1.7 percent; US$ 2.7 million), and bridge revenues (5 percent; US$ 3.6 million), the latter two being important sources of local revenue in Texas border metropolitan communities. Although these declines may seem negligible, their impact would be a blow to the border communities and the region, as per-capita income is only 60 percent of the state and national average, and unemployment is twice as high.

Table 7.20: Impact of 5% Decline in Border Crossings (North and Southbound Pedestrian, Vehicular, and Commercial Trade) 2002 (%)

Brownsville

McAllen

Laredo

El Paso

Border

Gross sales

-0.9

-1.5

-2.3

-0.6

-2.1

Employment

-7.2

-8.8

-23.4

-7.0

-9.2

Sales tax rebates

-0.7

-1.5

-2.6

-1.0

-1.7

Bridge revenues

-5.0

-5.0

-5.0

-5.0

-5.0

Source: US VISIT: A Preliminary Impact Assessment on the Border and Texas Economies, Texas Center for Border Economic and Enterprise Development. Texas A&M International University (October 2003)

The Case of Laredo

42On January 3, 2005, three days after the implementation of the US VISIT program at the nation’s fifty busiest land ports, Asa Hutchinson, undersecretary for Border and Transportation Security at the DHS, announced that “the US VISIT Program [was] expediting the processing times for those visitors who [were] subject to the US VISIT procedures and land ports of entry” (Department of Homeland Security 2005). Hutchinson added that more than 16.9 million foreign visitors had been processed by the program without an adverse effect on waiting times.

43A big test for the program is the port of Laredo, the busiest land port on the southern border, which handles 41 percent of all US-Mexico overland trade: 25,000 pedestrians, 41,000 vehicles, 9,000 trucks, and 1,119 rail cars cross the border at Laredo daily. The entry portion of the program was implemented at the Laredo bridges on December 31, 2004. The grave concerns that community leaders and business owners had expressed about long delays and lost sales did not materialize. Indeed, Gene Garza, port director for the Laredo District in the Customs and Border Protection Bureau of the DHS (in conversation with this author on April 4, 2005) asserted that the implementation of the US VISIT program had gone smoothly. Mr. Garza cited reduced, not increased, waiting times at Laredo’s bridges and reduced time in processing I-94s, a process that requires travellers to submit to the program’s procedures for securing biometric data. Mr. Garza also provided information on peak-crossing days during the Christmas holidays (December 17 to January 10) and Easter (the ten days ending on Easter Sunday) for 2004 and 2005 (see tables 7.21 to 7.24).

Table 7.21: Waiting Times to Process I-94 Visas, December 17 to January 10, 2004 and 2005

Number of permits

Average waiting time

FY 2004

91,619

11-12 minutes

FY 2005 (with US VISIT processing)

93,981

3-4 minutes

Change (%)

+2.3

-67

Table 7.22: Waiting Time to Cross Bridge, December 17 to January 10,2004 and 2005 (Minutes)

Average

Maximum

FY 2004

24

95

FY 2005 (with US VISIT processing)

17

50

Change (%)

-29.2

-47.4

Table 7.23: Waiting Times to Process I-94 Visas, Ten-day Period Ending on Easter Sunday, 2004 and 2005

Number of permits

Average waiting time

FY 2004

66,867

11-12 minutes

FY 2005 (with US VISIT processing)

68,873

3-4 minutes

Change (%)

+3.0

-67

Table 7.24: Waiting Time to Cross Bridge, Ten-day Period Ending on Easter Sunday, 2004 and 2005 (Minutes)

Average

Maximum

FY 2004

10

44

FY 2005 (with US VISIT processing)

10

38

Change (%)

no change

-13.6

44Conclusive evidence about the impact of the entry portion of the US VISIT program on Laredo and other Texas border communities awaits further study. However, the lack of negative news stories and commentary from border officials and the business community suggests that, at least initially, the US VISIT program is not delaying border crossings or disrupting economic activity.

CONCLUSION: THE ECONOMIC COST OF THE US VISIT PROGRAM TO TEXAS BORDER COMMUNITIES

45Although the studies evaluated above confirm that trade and commerce, especially cross-border Mexican shoppers, are important to the border region, particularly Laredo, they also confirm that the implementation of the entry portion of the US VISIT program has had no measurable negative effect on the local border economies to date. The implementation of the exit portion of the program is the next challenge. As Mr. Garza acknowledged (in conversation in 2005), although it is not yet clear how the exit portion will be implemented, existing facilities and manpower are probably not adequate for the task.

46Many border community leaders, including the ranking member of the US House Select Committee on Homeland Security (2004), feel strongly that the infrastructure at southern-border ports of entry cannot effectively handle the hundreds of millions of inspections now being conducted annually. In addition, they believe that

the Southern Border’s infrastructure cannot support the implementation of new border security programs (like [the] US VISIT Program) without harming the economies of border communities... There is a need to balance the competing tension between screening people and vehicles for terrorist weapons, contraband, smuggled immigrants, and other prohibited items with the need to ensure an efficient flow of commerce. Substantial investment [estimated at US $1 billion] in border infrastructure is needed to ensure national security while sustaining economic prosperity caused by increased cross-border trade over the last ten years.
... Just as sufficient infrastructure is necessary to achieve both security and the efficient flow of commerce at the border, it is also necessary for the government to have the appropriate numbers of border agency personnel in order to achieve its trade and security goals. Government officials and community leaders have strongly asserted that staffing levels for all agencies responsible for border security are inadequate. Yet, three years since 9/11, no comprehensive staffing plan has been developed for the border. The number of border inspectors needs to be doubled to provide the needed level of security and support technological improvements.
... Border communities, along with many DHS officials at the ports of entry, [are expressing] grave concerns over the implementation of the [U.S. VISIT Program]. These concerns are focused on insufficient infrastructure and staffing requirements needed to support this new security initiative. The Department of Homeland Security also needs to better coordinate the implementation of the US VISIT Program with border communities. For it to succeed, border communities’ concerns must be addressed.

47Two important facts driving renewed interest in understanding borders must be kept in mind. First, borders are complex, are intimately related to the nature of their physical and human environment, and are shaped by culture, society, markets, and state-sponsored and state-enforced laws and policies. Second, borders are barriers to trade and commerce. Nonetheless, the presence of effective policy-making at multiple levels of government (national, state, and local) can reduce the barrier effects of borders on trade and commerce. Borderland communities play a central role in informing and effecting multiple-level government activity in border regions.

RECOMMENDATIONS

Designing and Implementing Border Security Programs and Measures

48The announcement by the DHS of the implementation of the US VISIT program brought cries of opposition from many border communities. This was not because they are opposed to secure borders but rather because they believed that the implementation of security policies and procedures would likely have an immediate and direct impact on their local economies and daily lives, which revolve around the steady and daily cross-border flow of people and goods, in the tens of thousands. Consequently community and business leaders in the border region wanted to have a say in the design and implementation of programs such as the US VISIT program. From the perspective of the border communities, the DHS and other federal (as well as state) agencies needed to seek input from and partnerships with border communities.

49In his review of the “smart border” regime put in place after 9/11 on the border between the United States and Canada, Emmanuel Brunet-Jailly (2004, 136) noted that

The federal governments of Canada and the United States dominate the key financial and regulatory decisions, and they sign international agreements. But in the end both depend on the local networks of public security agencies that span the border. Also, those security networks encompass both the functional agencies of both the public and private sectors.

50Brunet-Jailly (2004, 137) concluded

Indeed, a large number of the objectives listed in the Smart Border Declaration depend primarily upon the good will of lower-level security agencies, particularly, those of provincial and state governments and regional, county, and municipal governments ... From an implementation perspective, it is clear that this security policy (Smart Border) cannot be effective without the active interest and participation of all of the concerned security agencies. (137)

51Brunet-Jailly’s perspective on the importance of “multi-level governance” for successful implementation of security measures on the US-Canada border is equally valid for the US-Mexico border. A poorly conceived and implemented US VISIT program would impede rather than facilitate legitimate travel and trade between the NAFTA partners – the United States, Mexico, and Canada. A healthy US-Mexico trade relationship is key to a growing and modernizing Mexican economy, and without this it would be difficult to stem the flow of illegal immigration and drugs crossing the southern US border.

52The successful conceptualization and implementation of the US VISIT program may, arguably, require more, not less, input from the border communities. Only after repeated complaints from business leaders did the DHS seek, through public forums, media briefings, and advertising, to inform the border communities about the specifics of the program. The success of the program may be decided largely by the behaviour of residents, cross-border shoppers, shippers, business people, and local officials, who will have to adjust their personal and professional lives to meet its requirements. Involving those who will be affected directly by the program from the beginning may greatly improve the program’s chances of succeeding. To date, this is a point that DHS officials in Washington, DC, appear to be slow to recognize. In order to address not only border security issues but also economic integration, immigration, social, health, and environmental issues in the border region, the federal government needs to develop a formal liaison mechanism, for example, an Office of Border Relations, that would involve the active participation of border-community representatives in the federal policy-making process.

Measuring the Economic Impact of Border Security Programs

53Further research is needed to provide an accurate assessment of the potential economic impact of the US VISIT program and other border-security measures that affect the cross-border movement of people and goods. More in-depth and comprehensive survey work is needed to pinpoint the contributions that cross-border Mexican shoppers make to the border communities. For example, it is not clear what proportion of those who cross the border daily to go to work, take their children to school, attend college, or visit family and friends make purchases on the US side, or what impact they have on local sales and employment. Nor is it clear just how long they are willing to sit in line waiting to cross the border before they decide that it is more convenient to shop in Mexico. There is considerable anecdotal evidence to suggest that cross-border shoppers are willing to tolerate sporadic lengthy delays, up to an hour or more, but not persistently long delays. Research on the psychology of waiting suggests that waiting in line is more tolerable if it is understood to be a necessary part of the process of acquiring a good or service, accomplishing an activity, or achieving a goal (Maister 1985).

54Cross-border shoppers know that the process of crossing the border inevitably involves waiting in line, for some period of time, to clear customs and immigration inspections. Research also shows that the fewer alternatives people have to waiting, whether going without or switching to an alternative source, the more tolerant they are of waiting. Given that most cross-border shoppers in Texas border communities are local, the option of driving hours to another less congested border crossing is not practical. Shopping in Mexico, however, is an option for many cross-border shoppers.

55More research is needed to identify the threshold waiting times, those times beyond which daily and infrequent border crossers would decide to change their crossing plans, either postponing crossing to another time or choosing to cross fewer times. Evidence from the studies evaluated in this chapter indicate that a waiting time over one hour is the threshold point where many cross-border shoppers decide to cross less frequently. However, in most cases, these shoppers increase the size of their purchases when they do cross, so there is little overall negative effect on total expenditures. Much more research is needed to verify the threshold waiting times and their impact on the purchasing decisions of cross-border shoppers (both local and non-local) in order to get a more accurate estimate of the economic impact of waiting times.

Developing a Better Understanding of Borders

56At the same time as forces of global economic integration accelerate to eliminate borders, countervailing forces for border security are gaining momentum to keep, reinforce, and expand borders. The growing debate over “open” versus “closed borders has sparked a renewed interest in the study of borders and borderlands. This renewed interest gives scholars a unique opportunity to advance their understanding of borders and borderlands through the development and testing of theories and models of borders.

Bibliographie

LITERATURE CITED

Bonner, T. J. 2004. How Secure Are America’s Borders? Statement by National Border Patrol Council President T. J. Bonner. Washington D.C., August 23.

Brunet-Jailly, Emmanuel. 2004. “NAFTA, Economic Integration, and Canadian-American Security Regime in the Post-September 11, 2001 Era: Multi-level Governance and Transparent Borders?” Journal of Borderlands Studies 19:1, 123-41.

Center for the Study of Border Economic Studies, University of Texas-Pan American. 2004. The Economic Impact of Mexican Visitors to the Lower Rio Grande Valley 2003. Edinburg: Center for the Study of Border Economic Studies, University of Texas-Pan American.

Department of Homeland Security [US]. 2004. Fact Sheet: U.S.-Mexico Land Borders, US-VISIT. Washington, DC: Government Printing Office.

—. 2005. “US VISIT Process Saves Visitors Time Crossing Land Border.” US-VISIT UPDATE, January 4. Washington, DC: Government Printing Office.

Federal Reserve Bank of Dallas. 2005. Business Cycle Coordination Along the Texas-Mexico Border. Working paper 0502. Dallas, TX: Federal Reserve Bank.

House Select Committee on Homeland Security [US House of Representatives]. 2004. Transforming the Southern Border. Washington, DC: Government Printing Office.

International Bank of Commerce. 2003. US VISIT (Entry and Exit System). Paper. Laredo, TX: International Bank of Commerce.

International Trade Administration [US Department of Commerce]. 2004. Fact Sheet: Exports Are Important to the US Economy. Washington, DC: Government Printing Office.

McAllen Economic Development Corporation and McAllen Chamber of Commerce. 2003. US VISIT: A Threat to American Jobs and Economy. Paper. Laredo, TX: McAllen Economic Development Corporation and McAllen Chamber of Commerce.

Maister, David. 1985. “The Psychology of Waiting Lines.” The Service Encounter, eds. J. Czepiel, M. R. Soloman, and C. Surprenant. Lanham, MD: Heath and Company, Lexington Books.

National Commission on Terrorist Attacks Upon the United States. 2004. Final Report of the National Commission of Terrorist Attacks Upon the United States. Washington, DC: Government Printing Office.

Office of the US Trade Representative. 2004. US Trade in 2004. Washington, DC: Government Printing Office.

Perryman Group. 2004. Stalling the Engine of Growth in a Global Economy: The Impact of Implementation of the US VISIT Program at US-Mexico Border Crossings on Business Activity in the US, Texas, and the Border Region. Laredo, TX: IBC.

al-Qurashi, Abu Ubayd. 2004. “America’s Nightmares” (Al-Ansar [online], (February 13, 2002). Imperial Hubris, ed. Anonymous. Washington, DC: Brassey’s Press.

SANDAG [San Diego Association of Governments]. 2005. Estimating Economic Impacts of Border Wait Times in the San Diego-Baja California Region. San Diego: SANDAG.

Texas Center for Border Economic and Enterprise Development, Texas A&M International University. 2003. US VISIT: A Preliminary Impact Assessment of the Border and Texas Economies. Laredo: Texas A&M International University.

—. 2004. The Texas Border with Mexico: Opportunities and Challenges. Technical Report no. 10. Laredo: Texas A&M International University.

Table des illustrations

Légende Source: Texas Center for Border Economic and Enterprise Development, Texas A&M International University
URL http://books.openedition.org/uop/docannexe/image/1610/img-1.jpg
Fichier image/jpeg, 167k
Titre Table 7.1: Border Pedestrian Crossings, 1994-2004
Légende Source: Texas Center for Border Economic and Enterprise Development, Texas A&M International University
URL http://books.openedition.org/uop/docannexe/image/1610/img-2.jpg
Fichier image/jpeg, 290k
Titre Table 7.2: Border Vehicular Crossings, 1994-2004
Légende Source: Texas Center for Border Economic and Enterprise Development, Texas A&M International University
URL http://books.openedition.org/uop/docannexe/image/1610/img-3.jpg
Fichier image/jpeg, 249k
Titre Table 7.3: Border Truck Crossings, 1994-2004
Légende Source: Texas Center for Border Economic and Enterprise Development, Texas A&M International University
URL http://books.openedition.org/uop/docannexe/image/1610/img-4.jpg
Fichier image/jpeg, 260k
Titre Table 7.4: Border Rail Crossings, 1994-2004
Légende Source: Texas Center for Border Economic and Enterprise Development, Texas A&M International University
URL http://books.openedition.org/uop/docannexe/image/1610/img-5.jpg
Fichier image/jpeg, 201k
Titre Table 7.8: Texas Border Retail/Wholesale Trade and All Industry Sales 1994-2004 (US$ millions)
Légende Source: Texas Comptroller of Public Accounts
URL http://books.openedition.org/uop/docannexe/image/1610/img-6.jpg
Fichier image/jpeg, 308k
Titre Table 7.15a: Estimated Impact of Permanent Decline in Border Crossings (Northbound and Southbound Pedestrian, Vehicular, and Commercial Trucks) of 1%, 5%, and 10% (Based on 2002 Data; Absolute Changes)
URL http://books.openedition.org/uop/docannexe/image/1610/img-7.jpg
Fichier image/jpeg, 185k
Titre Table 7.15b: Estimated Impact of Permanent Decline in Border Crossings (Northbound and Southbound Pedestrian, Vehicular, and Commercial Trucks) of 1%, 5%, and 10% (Based on 2002 Data; Proportional Changes) (%)
URL http://books.openedition.org/uop/docannexe/image/1610/img-8.jpg
Fichier image/jpeg, 162k
Légende Combined total expenditures: US $115,481Average expenditure per shopper: US $194.08Pedestrians as proportion of total: 14.9%By car as proportion of total: 75.3%By bus as proportion of total: 9.8%
URL http://books.openedition.org/uop/docannexe/image/1610/img-9.jpg
Fichier image/jpeg, 85k
Légende Combined total expenditures: US $73,449Average expenditure per shopper: US $363.61Pedestrian as proportion of total: 13.4%By car as proportion of total: 75.7%By bus as proportion of total: 10.9%
URL http://books.openedition.org/uop/docannexe/image/1610/img-10.jpg
Fichier image/jpeg, 78k

Auteur

College of Business Administration and Graduate School of International Trade and Business, Texas A&M International University, College Station, Texas, United States

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