Introduction - Just in Time Manufacturing El Paso and Ciudad Juarez, sister cities, form the production-sharing capital of North America. As the prime maquiladora location in Mexico, Juarez is a valuable resource for the American and Texan manufacturing industry. While hundreds of companies now base operations in Juarez, too few have taken advantage of the proximity of El Paso as a hub for cargo transportation, research and development, and manufacturing support. One of El Paso's important clusters for job growth is just in time manufacturing with Juarez.

The manufacturing industry, a powerful driver of the state economy, creating jobs and supporting other industries, can be a value added economy for El Paso and the Border Region because of the proximity to Mexico. Value added refers to the additional value created at a particular stage of production. For El Paso and the Border Region, this term refers to the contribution of low-cost and high-skill manufacturing in Mexico that raises the value of a product without significantly raise the cost of production. In other words, goods can be produced in Mexico and transported to Texas for very little cost and then sold at a higher price. With the value added promise that manufacturing holds, the El Paso-Juarez metroplex would greatly benefit from increased manufacturing. In fact, the Center for American Progress, a nonpartisan research and educational institute in Washington D.C. said of manufacturing, "It is the primary source of America's explosive productivity growth over the past decade and has larger employment spill-over effects, pays higher wages, and provides more benefits than other sectors of the economy." To realize this full potential of border manufacturing, we must facilitate the link between world class manufacturing operations in Mexico and world class logistics in Texas. By streamlining transportation, creating secure manufacturing tax incentives, and ensuring a strong and viable financial industry, we should be able to attract more manufacturers to the area.

Facts
Since Mexico's entry into the General Agreement on Tariffs and Trade (GATT) in 1986 and the ratification of the North American Free Trade Agreement (NAFTA) in 1994, trade has shifted to a north-south orientation. Moreover, as the U.S. and Mexican economies integrate due to NAFTA, trade between the two countries grows, increasing over 400 percent in the last 15 years. And, more recently, with the expansion of the Central American Free Trade Agreement (CAFTA), trade with Latin American countries will only continue to grow. CAFTA, signed by President Bush just this week, reduces trade barriers with more Central and South American countries. This growing trade relationship and the growing demand for labor in Mexico has supported a burgeoning high-tech maquiladora industry. The maquiladoras are the second largest source of export earnings in Mexico, producing approximately 13 percent of the country's GDP; and, more than 2,000 of Mexico's 3,000 maquiladoras line the border.

Ciudad Juarez is home to more than 300 maquiladoras, about 70 of which are owned by Fortune 500 companies. These facilities serve a broad swath of the manufacturing sector, including telecommunications, electronics, consumer appliances, and automotive products. They also provide highly specialized work such as clean room manufacturing for medical supplies. The Juarez maquila industry supports a payroll of almost $250 million for maquiladora employees who live in El Paso and commute across the border daily. Five years ago the maquiladora industry seemed to suffer from labor differentials in Asia, particularly China, but there has been a resurgence of manufacturing in Juarez and along the Mexican border in the past few years. Manufacturers who were turning to the cheaper labor available in Asian markets are returning to manufacturers in Mexico. The shorter supply line, more qualified labor market, secure manufacturing, and lower tariffs are strong incentives for American production companies.

Yet north of the border, there has been a significant erosion of the manufacturing base as domestic operations are under-priced by foreign producers. More than three million manufacturing jobs have been lost nationwide over the past seven years. This trend has hit every state in the country, including Texas, where the manufacturing industry lost over 107,000 jobs from June 1995 to June 2005. The significant reduction in North American manufacturing is directly tied to the relaxation of trade restrictions. NAFTA and other trade agreements significantly reduced, and in some instances eliminated, tariffs on the importation of goods. With lower tariffs, American producers moved manufacturing operations to countries where the cost of production, especially labor cost, is lower.

Manufacturing: The Key to a Value-Added Economy
Manufacturing remains the key to fueling a value-added economy. Providing two-thirds of all research and development in this country, the innovation that manufacturing produces drives every sector of our economy. Increases in manufacturing productivity reduce fabrication costs, raise the standard of living, raise wages, maximize profits, and keep inflation low. Despite a slowdown, manufacturing still leads every other sector of the U.S. economy. In Texas, manufacturing has seen rapid growth in high technology industries, including computer hardware and software, industrial machinery, and electronics.

Creating manufacturing jobs has a multiplier effect: for every manufacturing job created, four additional jobs are created that depend on that original manufacturing job. On the other hand, as our national trade deficit grows, manufacturing jobs are lost to low-wage, low-cost Asian suppliers. To stay competitive in the world market, American manufacturers need to take advantage of inherent efficiencies in the maquiladora system, coupled with short supply lines primed to support just-in-time markets.

Moreover, it is imperative that American producers couple our high technology industries and manufacturing with the inherent value added economy of the maquiladora industry. When advanced technologies are used throughout the manufacturing process and a high technology good is produced, the added value of that good is multiplied. Advanced technology manufacturing requires that the entire manufacturing chain incorporate advanced technology. The higher skilled and higher wage jobs associated with advanced technology manufacturing span the entire manufacturing chain. Moreover, high technology manufacturing often requires innovative solutions to new manufacturing challenges and high technology research is required. Research spawns more manufacturing and a new value added economy is developed.

El Paso-Juarez: The Just-in-Time Capital of North America
The manufacturing industry south of the border has thrived over the past decade, and simple maquiladoras have been joined by sophisticated high-tech operations run by multinational corporations seeking to take advantage of Mexico's skilled labor. But, as NAFTA opened the borders for a southward shift of labor jobs more than a decade ago and CAFTA promises to further that southward labor shift, lower wages and relaxed regulatory standards in South America and Asia now threaten to draw manufacturers away from Mexico.

In El Paso, we have the chance to attract companies that will bring highly skilled workers to this area and realize the city's economic potential. The maquiladora industry imports approximately 98 percent of the equipment and inputs for their manufacturing processes. At the nexus of Texas, New Mexico, and the Mexican state of Chihuahua, El Paso has easy access to raw materials, skilled labor, transportation, and capital and could be the main source for the maquiladora inputs. Unfortunately, currently El Paso supplies a mere 7 percent of Juarez's needs.

U.S.-owned maquiladoras allow manufacturers to move capital equipment, machinery, and materials into Mexico, and then bring products back into the country duty-free. Consolidating manufacturing, research and development, and other operations in the El Paso-Juarez metroplex allows manufacturers to speed products directly into just-in-time markets in the U.S., with streamlined logistics and immediate access to nationwide and worldwide markets with access to interstates, cargo rail, and the El Paso's airport's newly expanded air cargo facility. This proximity to U.S. distribution centers and immediate markets makes maquilas more attractive than overseas or South American fabrication operations.

A complex system of interconnecting maquiladora clusters creates efficiencies for advanced manufacturers. Each advanced technology manufacturing operation requires multiple specialized maquiladora sites that produce separate components in the manufacturing process. Working together as industry clusters, maquilas specialize operations around specific processes, maximizing efficiency and productivity. These clusters reduce supply lines and cut the overall cost of manufacturing.

Maquiladoras also serve as catalysts to attract economic development, since each cluster supports a collateral stream of needs. Maquilas rely on supplies of raw materials from local suppliers in Mexico and Texas. Maquilas also support other manufacturing operations to build tools and components for use in fabrication operations. Products such as precision tooling, tool and die, metal stamping, and instrumentation are needed for maquiladora operations. If suppliers of those specialized products move to the border, they, in turn, will support other industries that need those supplies.

Attracting manufacturers to El Paso also will have substantial indirect benefits. Already, the border maquilas purchase $1.6 billion of support services from El Paso, such as retail sales, transportation, banking, and home building. The manufacturing sector has the potential to drive these and other segments of El Paso's economy.

Building a Secure Manufacturing Zone
Since NAFTA was ratified more than ten years ago, border communities have taken steps to achieve closer economic integration. Congestion at the border still slows the movement of raw materials and finished goods. Importers face numerous slow-downs, including multiple inspection requirements, staffing and human resource problems, insufficient roads, and limited coordination between various inspection agencies.

Political leaders from the U.S. and Mexico forming the Border Legislative Conference (BLC) have advocated a Secure Manufacturing Zone at the border. The concept of a Secure Manufacturing Zone is that local leaders must identify and build on strategic relationships and incentives to induce manufacturers to invest in the region. Creating a secure international zone, with manufacturers, transporters, wholesales and leaders working together towards an end goal, will allow efficient and secure point-to-point movement of supplies between plants and industries on both sides of the border.

A secure manufacturing zone would use interoperable technologies to reduce congestion and facilitate commercial movement. Transponder applications and GPS would be used to track the location of individuals trucks, while electronic container seals would prevent tampering. Trucks leaving maquilas in Mexico would be secured with intelligent seals and lock-in devices equipped with GPS technology for central tracking of all shipments. Trucks then would pass through an expedited border inspection facility and proceed directly to their U.S. destinations.

By bolstering local cross-border ties, El Paso and Juarez should be able to create a manufacturing cluster that will entice advanced technology and innovative businesses. Creating a secure manufacturing zone will need strong commitment from local, state, and federal governments in both countries. In order to implement a secure manufacturing zone at the border, officials in El Paso and Mexico must encourage public-private sector cooperation to increase security and compliance of commercial shipments, and to expand electronic exchange of data. The region also should create tax incentives to attract specific industries, such as defense-related manufacturing.

Investment in high technology infrastructure is another crucial part of that plan. Businesses seeking to invest in the border economy will need broadband access to facilitate communication, monitoring, and security. So far, in areas with relatively low population densities, such as the border region, investment in the infrastructure needed for widespread broadband access has been slow. While programs such at the Texas Infrastructure Fund (TIF) have promoted widespread internet access in underserved areas, the state needs to remain committed to investing in broadband access throughout the state. Access to the internet will be essential for local business to compete in the global knowledge-based economy.

Conclusion
El Paso and Juarez form a uniquely appealing environment for high-tech manufacturers seeking streamlined access to just-in-time markets. To attract new industries to this are, El Paso's leaders must work to promote the advantages of cross-border manufacturing operations by easing border congestion, streamlining border inspections, and creating tax incentives.