Money is flowing over the U.S.-Mexico border, but it’s going north

In 2006, Hazleton, Pa., became the center of the national debate about illegal immigration. Faced with an influx of immigrants, many of them from Mexico, it was the first city to pass local ordinances that banned hiring or renting to unauthorized immigrants. Although the courts eventually struck down the ordinances, Hazleton’s city council had accurately captured the fears that many Americans had about the wave of unauthorized immigration then coming from south of the border, fears that still echo in this year’s election campaigns.

But ten years later, illegal immigration from Mexico has dropped to historic lows, while Hazleton has become the center of another, newer — and perhaps more surprising — flow from Mexico. Instead of people coming across the border in large numbers, now products and investments are flowing north. And in and around Hazleton, at least four of the region’s main manufacturing plants are owned by Mexican companies, which have hired thousands of American workers to produce some of the U.S. market’s best-loved products.

In 2009, the U.S. division of Mexico City-based Grupo Bimbo, the largest bread producer in the world, started the first of its two large plants in Hazleton, which produce and package its leading brands such as Sara Lee, Orowheat, Stroehmann’s, Arnold, Freihofer’s, Brownberry, Boboli Pizza Crust, and Thomas’ English Muffins. More recently, Mission Foods, owned by Mexico’s Gruma, built and later expanded a plant in nearby Mountain View that makes tortillas and health-food wraps. And Arca Continental, a Mexican snack-food company based in Monterrey, acquired Wise Foods in Berwick, Pa., only a few minutes away, to produce potato chips and Cheez Doodles.

At a time when few Mexicans are coming to the United States as immigrants, Mexican investors have started pouring billions of dollars into the U.S. economy. Today, Mexican companies are among the industry leaders not only in bread, tortillas and wraps, but also in milk and dairy products — thanks to Borden Milk, owned by Mexico’s Lala, the second-largest producer of dairy products in the United States — and in hot dogs and lunch meat, where Mexico’s Sigma Foods sells its American-made products under the Bar-S and Fud labels. Mexico’s America Movil owns the largest prepaid wireless service in the United States, TracFone, while Mexico’s Cemex is the second-largest cement manufacturer in the country, literally helping build the foundations of America’s cities and towns.

And while U.S. automakers have transferred some of their manufacturing operations to Mexico, large Mexican auto-parts companies such as Nemak, which produces the aluminum engine blocks and heads used in a quarter of all light vehicles around the world, and Rassini, one of the world’s largest brake and suspension manufacturers, have started manufacturing operations here, in places such as Glasgow, Ky.; Dickson, Tenn.; Montpelier, Ohio; and Plymouth, Mich.

Mexico is also the United States’ third-largest trading partner and second-leading destination for exports after Canada. But unlike U.S. trade with the rest of the world, many of the manufactured goods that flow across the border with Mexico are products that U.S. and Mexican firms assemble together in shared supply chains. According to Chris Wilson at the Woodrow Wilson Center, 40 percent of the content in finished goods that Mexico exports to the United States is actually made in the United States.

In other words, much of what is assembled in Mexico — including cars, trains, helicopters, planes, computers and smartphones — is actually built in large part out of American-manufactured parts. The number is 25 percent for Canada, which is part of many of the same supply chains, but is only 2 to 5 percent for the European Union, India, China and South Korea. In North America, we don’t compete for jobs as much as we build things together.

Of course, some manufacturing jobs have shifted south, at the same time that others have been created north of the border. Mexico’s lower wage costs have made the country attractive for some large assembly operations, while much of the specialized production of parts still takes place in the United States. But more important, the integrated supply chains that stretch from Mexico through the United States to Canada have helped keep major manufacturing industries in North America rather than moving across the ocean, and they have made these industries increasingly competitive in the global market.

Today, millions of American jobs are tied directly or indirectly to these two flows — Mexican direct investment in U.S.-based manufacturing and joint manufacturing between the two countries (or often three countries, with Canada included). And in the future, these flows are likely to continue to increase — to the benefit of workers in both countries. At a time when American manufacturing is in decline overall, our trade and investment relationship with Mexico may be one of the few bright spots.

In Hazleton, once a declining town where rising immigration fueled division among townspeople, the economy has begun to grow again, and, like in many cities and towns across the country, Mexico, a next-door neighbor, has played a small but largely unnoticed part in that revival.

The opinions expressed here are solely those of the author.

This article was originally published in the Washington Post.