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Press Release · August 4, 2004

Crossing The Line: Integration Of California, Mexico Economies Is Largely A Border Story

SAN FRANCISCO, California, August 4, 2004 — For many businesses and workers, the California-Mexico border is the place to be, according to a report released today by the Public Policy Institute of California (PPIC). The network of trade, investment, and other economic relationships that exists between California and Mexico has grown dramatically since the late 1980s – and the border is where a great portion of joint activity is concentrated.

Mexico is California’s largest destination for exports – taking the top spot from Japan in 1999. In 2002, Mexico received over 17 percent of all California exports, totaling $16 billion worth of goods. Between 1988 and 2002, exports to Mexico grew by nearly 13 percent per year – faster than the growth in California exports to the rest of the world.

How much of a role does the border play? “More than 75 percent of all California’s exports to Mexico are shipped to border areas, and the vast majority go straight to Baja California,” says PPIC research fellow Howard Shatz, who co-authored the study with Luis Felipe López-Calva, a professor of economics at Universidad de las Américas – Puebla. “There’s an intense geographic concentration in the state’s exports to Mexico,” he says.

In addition to trade, investment in California by Mexican companies has increased considerably in recent years. Once again, the border is the epicenter: Nearly three-fourths (72%) of Mexican-owned subsidiaries in California are located in the border counties of San Diego and Imperial, and nearly half (47%) of California subsidiaries in Mexico are in border states such as Baja California, Chihuahua, and Nuevo León.

These location-specific economic ties have had significant regional effects, according to the report, The Emerging Integration of the California-Mexico Economies. Mexican manufacturing activity has led to a growth in employment in San Diego, and expanded export activity in Mexican border communities has increased employment in U.S. border cities.

Economic activity at the border has both costs and benefits, according to the report’s authors. They suggest that whether or not the state chooses to promote integration – or to let private businesses develop relationships on their own — it should consider focusing more attention on border areas. “At the border, we have to deal jointly with commuting, traffic, infrastructure, environmental stresses, homeland security, and immigration. The policy goal should be to ensure that both California and Mexico ultimately benefit,” says Shatz.

The Public Policy Institute of California is a private, nonprofit organization dedicated to improving public policy in California through independent, objective, nonpartisan research on major economic, social, and political issues. The institute was established in 1994 with an endowment from William R. Hewlett.