States like Arizona hope to cash in on NAFTA supply chain

Marketplace Contributor Oct 31, 2012

States like Arizona hope to cash in on NAFTA supply chain

Marketplace Contributor Oct 31, 2012

Exports from big states like Texas, California and Michigan have soared since the 1990s, when the North American Free Trade Agreement opened U.S. markets to Mexico. But not every state has been as savvy promoting cross-border trade.

Despite its proximity to the border, Arizona is one of those states, say economic developers and politicians.

About 250 miles south of Nogales, Ariz., in the Mexican port city of Guaymas, those same people see an opportunity. On a brilliant October afternoon, the Sea of Cortez shimmers in distance while a backhoe dumps powdery black ore onto a conveyor belt. It leads to a humongous cargo ship.

“You can see we are loading a ship with copper concentrate that comes from Arizona,” said Guaymas port spokesman Guillermo Von Borstel, who added the cargo will take 24 hours to finish loading. “We are shipping to China.”

This is how Mexico links Arizona and other Southwestern states to the rest of the world. NAFTA’s presence here has boosted the confidence of American investors, and has been an important factor in the growth of Mexico’s infrastructure, according to trade experts.

Long term, Guaymas officials are planning for 10 additional docks.

Early next year, a new shipping service could distribute 10,000 containers annually to the globe. It’s a fraction of what the world’s large ports export, but if it goes according to plan, many of the Guaymas containers will be full of goods from Western states.

“It’s a small amount. That’s why we’re at the beginning of this journey,” Von Borstel said.

Arizona’s Dilemma

Twenty years after NAFTA’s signing, it’s the beginning of a trade journey for U.S. states like Arizona as well.

The Guaymas port is at the southern end of the CANAMEX Corridor, a high-priority transportation route from Canada down to the U.S.-Mexico border in Arizona. The NAFTA creation was intended to “harvest the benefits of increased trade.” While Texas and California have seen benefits from similar routes, Arizona has failed to fully capitalize on its position on the border.

“If you look at it as a football analogy, we’re an expansion team,” said Darren Henderson, a transportation planner with consulting firm Parsons Brinckerhoff. “We’re just starting to get into the game.”

The numbers back him up. Arizona is one of just three states to see foreign exports fall since 2006, according to trade data from the U.S. Commerce Department. In that time, Texas exports are up 66 percent.

Referring to Arizona’s performance, Henderson said, “We need to move away from being one dimensional, focused on the construction of housing and look at what opportunities present themselves.”

A Logistical Future?

Regional developers are betting that opportunity is in Mexico and in freight logistics. Standing below the roar of jetliners at the Phoenix-Mesa Gateway Airport, Suzanne Kinney of the Arizona Chamber of Commerce and Industry said, “it is a vision we have for our state to make Phoenix a hub of commercial activity and international trade.”

Here on the outskirts of Phoenix, land is plentiful and industrial buildings are still empty after the real estate bust. The chamber’s idea is to use that space to build a transportation nexus with services that includes freight forwarders, warehousing, and customs brokers, Kinney said.

States like Texas have already done this. The Alliance Global Logistics Hub outside of Dallas is considered the gold standard for connecting U.S. goods and consumers to the rest of the world. Arizona could take note, and intercept foreign cargo that normally passes right through Arizona, Kinney said. Much it would come from — or be delivered to — Mexican ports like Guaymas.

“They’ll be able to bring these massive cargo ships in,” Kinney explained. “Then it’s a matter of transportation infrastructure, highways and rail to get it in the rest of the way.”

Plans like this have been circulating among development groups from Tucson to Phoenix for years. As Arizona’s economy slowly recovers, disparate plans from investors and governmental groups have resurfaced. Coalitions of cities are commissioning freight and rail studies. The Arizona Department of Transportation is holding meetings on a proposed Interstate 11 between Phoenix and Las Vegas.

This global connectivity must be a part of Arizona’s future, said Gateway Airport air services manager John Barry.

“It has to be,” he said. “If Arizona wants to compete in a global market it has to be.”

Perhaps not surprisingly, Arizona isn’t the only state with plans.

Just a few miles from the border, Union Pacific has already broken ground in New Mexico on a freight logistics center worth $400 million.

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