[House Hearing, 113 Congress]
[From the U.S. Government Printing Office]
IMPROVING SECURITY AND FACILITATING
COMMERCE WITH MEXICO AT AMERICA'S
SOUTHERN BORDER
=======================================================================
HEARING
BEFORE THE
SUBCOMMITTEE ON
THE WESTERN HEMISPHERE
OF THE
COMMITTEE ON FOREIGN AFFAIRS
HOUSE OF REPRESENTATIVES
ONE HUNDRED THIRTEENTH CONGRESS
FIRST SESSION
__________
DECEMBER 9, 2013
__________
Serial No. 113-111
__________
Printed for the use of the Committee on Foreign Affairs
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COMMITTEE ON FOREIGN AFFAIRS
EDWARD R. ROYCE, California, Chairman
CHRISTOPHER H. SMITH, New Jersey ELIOT L. ENGEL, New York
ILEANA ROS-LEHTINEN, Florida ENI F.H. FALEOMAVAEGA, American
DANA ROHRABACHER, California Samoa
STEVE CHABOT, Ohio BRAD SHERMAN, California
JOE WILSON, South Carolina GREGORY W. MEEKS, New York
MICHAEL T. McCAUL, Texas ALBIO SIRES, New Jersey
TED POE, Texas GERALD E. CONNOLLY, Virginia
MATT SALMON, Arizona THEODORE E. DEUTCH, Florida
TOM MARINO, Pennsylvania BRIAN HIGGINS, New York
JEFF DUNCAN, South Carolina KAREN BASS, California
ADAM KINZINGER, Illinois WILLIAM KEATING, Massachusetts
MO BROOKS, Alabama DAVID CICILLINE, Rhode Island
TOM COTTON, Arkansas ALAN GRAYSON, Florida
PAUL COOK, California JUAN VARGAS, California
GEORGE HOLDING, North Carolina BRADLEY S. SCHNEIDER, Illinois
RANDY K. WEBER SR., Texas JOSEPH P. KENNEDY III,
SCOTT PERRY, Pennsylvania Massachusetts
STEVE STOCKMAN, Texas AMI BERA, California
RON DeSANTIS, Florida ALAN S. LOWENTHAL, California
TREY RADEL, Florida GRACE MENG, New York
DOUG COLLINS, Georgia LOIS FRANKEL, Florida
MARK MEADOWS, North Carolina TULSI GABBARD, Hawaii
TED S. YOHO, Florida JOAQUIN CASTRO, Texas
LUKE MESSER, Indiana
Amy Porter, Chief of Staff Thomas Sheehy, Staff Director
Jason Steinbaum, Democratic Staff Director
------
Subcommittee on the Western Hemisphere
MATT SALMON, Arizona, Chairman
CHRISTOPHER H. SMITH, New Jersey ALBIO SIRES, New Jersey
ILEANA ROS-LEHTINEN, Florida GREGORY W. MEEKS, New York
MICHAEL T. McCAUL, Texas ENI F.H. FALEOMAVAEGA, American
JEFF DUNCAN, South Carolina Samoa
RON DeSANTIS, Florida THEODORE E. DEUTCH, Florida
TREY RADEL, Florida ALAN GRAYSON, Florida
C O N T E N T S
----------
Page
WITNESSES
The Honorable Alan Bersin, Assistant Secretary, Office of
International Affairs and Chief Diplomatic Officer, U.S.
Department of Homeland Security................................ 9
Mr. Eric Farnsworth, Vice President, Council of the Americas and
Americas Society............................................... 14
Ms. Lea Marquez Peterson, President and Chief Executive Officer,
Tucson Hispanic Chamber of Commerce............................ 22
Mr. Glenn Hamer, President and Chief Executive Officer, Arizona
Chamber of Commerce and Industry............................... 27
Mr. Timothy C. Hutchens, Executive Vice President and Head,
Federal Lessor Advisory Group, CBRE, Inc....................... 34
Mr. Christopher Wilson, Associate, Mexico Institute, Woodrow
Wilson International Center for Scholars....................... 40
LETTERS, STATEMENTS, ETC., SUBMITTED FOR THE HEARING
The Honorable Alan Bersin: Prepared statement.................... 11
Mr. Eric Farnsworth: Prepared statement.......................... 17
Ms. Lea Marquez Peterson: Prepared statement..................... 25
Mr. Glenn Hamer: Prepared statement.............................. 30
Mr. Timothy C. Hutchens: Prepared statement...................... 37
Mr. Christopher Wilson: Prepared statement....................... 42
APPENDIX
Hearing notice................................................... 62
Hearing minutes.................................................. 63
The Honorable Matt Salmon, a Representative in Congress from the
State of Arizona, and chairman, Subcommittee on the Western
Hemisphere: Material submitted for the record.................. 64
IMPROVING SECURITY AND FACILITATING
COMMERCE WITH MEXICO AT AMERICA'S
SOUTHERN BORDER
----------
MONDAY, DECEMBER 9, 2013
House of Representatives,
Subcommittee on the Western Hemisphere,
Committee on Foreign Affairs,
Washington, DC.
The subcommittee met, pursuant to notice, at 10:18 a.m., at
Tucson City Council, City Hall, 255 West Alameda Street,
Tucson, Arizona, Hon. Matt Salmon (chairman of the
subcommittee) presiding.
Mr. Salmon. A quorum being present, the subcommittee will
come to order. I am going to start by recognizing myself and
the other members to present our opening statement, and then I
will present the rules of the hearing and yield time to our
witnesses.
Good morning, and welcome to this hearing on our vital
commercial relationship with Mexico and what we can do to
enhance the flow of commerce while maintaining security along
the southern border. I would like to give a warm welcome and
personally thank Albio Sires, who is our ranking member on the
subcommittee, for braving the scary skies right now this time
of year with all the weather patterns across the eastern
seaboard, and appreciate the fact that he was able to get here.
I know he had some real difficulties, so thank you for taking
the time.
I would like to thank my colleagues from Arizona, Ron
Barber, Kyrsten Sinema, and David Schweikert, for attending
this meeting. I believe it is one of extreme importance to the
State of Arizona, and particularly here in southern Arizona.
The chairman of the full committee, Ed Royce, was going to
be here, but his airplane, because of the weather across the
country, got cancelled last night, and he sends his profound
regrets. But he has been incredibly supportive of the
Subcommittee on the Western Hemisphere, and I appreciate his
trust in asking me to chair this subcommittee. I knew
immediately when he asked me to chair this subcommittee that I
wanted to focus on the growing trade and investment
opportunities that exist throughout the western hemisphere. I
pay particular attention to potential energy independence and
security in North America. Thanks to our own energy renaissance
and increased production in Canada, I have been pushing the
Obama administration to finally approve the Keystone XL
Pipeline, which promises to create jobs while making us less
dependent on energy from areas around the world that are less
friendly to our interests.
Right now, Mexico is debating meaningful energy sector
reforms, reforms that would open up their energy sector to
private investment through a constitutional amendment. If
passed, and most experts believe that it will, Mexico will be
able to realize its real production potential, making North
America--the U.S., Canada, and Mexico--truly energy self-
sufficient. Mexico is moving ahead with reforms in the
education and telecommunications sectors as well. Reforms in
Mexico, including judicial reforms, are significant steps the
Government of Mexico is taking to improve its economic
landscape.
As you all know, the economies of the United States and
Mexico are deeply intertwined, linked by geography, cultural
ties, and the North American Free Trade Agreement. Since NAFTA
took force nearly 20 years ago, the stock of bilateral foreign
direct investment has increased six-fold. In 2012 alone,
bilateral trade in goods and services between our two countries
topped $\1/2\ trillion. Our economic partnership with Mexico
has the potential to play a key role in strengthening supply
chains and boosting exports to the rest of the world.
Our production-sharing relationship with Mexico is
important to understand. Indeed, 40 percent--that is right, 40
percent--of the value of all U.S. imports of final goods from
Mexico actually come from materials and parts produced in the
United States. This means that approximately 40 cents out of
every dollar U.S. consumers spend on Mexican imports actually
goes to United States' companies and workers. This is a direct
result of production sharing that is made possible and enhanced
by proximity and cultural ties with our Mexican and our
Canadian neighbors.
The same cannot be said for goods coming from anywhere
outside of North America. For example, U.S. imports from China
have an average of only 4 percent U.S. contact as compared to
the 40 percent figure I mentioned with Mexico. Exports to
Mexico from the great State of Arizona have increased by 225.2
percent since NAFTA took force. And Arizona is the sixth
largest exporter of goods to Mexico among all the States in the
Union.
Mexico is Arizona's top trading partner with upwards of $13
billion worth of trade crossing our shared border each year,
and Mexican visitors spend over $7 million each day in Arizona
translating to $2.3 billion annually for Arizona and tourism
from Mexico. It is clear that in terms of job creation and
economic opportunity for Arizona and the country, our
relationship with Mexico and, of course, Canada is vital.
The good news is that our commercial relationship with
Mexico continues to grow. The bad news is that our ports of
entry face significant challenges keeping up with this growth,
resulting in wait times along the border that cost an average
of $7.2 billion a year.
The September 11th, 2001 attacks on our country, coupled
with the costs of illegal immigration, particularly on the
border States, forced the United States to reevaluate border
management, meaning needed security improvements have often
been made at the expense of maintaining efficiencies. I convene
this hearing today specifically to get at what we need to do
both in the public and private sectors to improve border
infrastructure to better facilitate trade without letting down
our guard on border security efforts.
The United States is already partnering with Mexico on
security through the Merida Initiative, a partnership that I
support strongly. While Mexico has made important commitments
to security along our border, the United States must continue
pressing Mexico to step up efforts to address violence among
the most dangerous parts of our border by increasing Mexican
deployments able to conduct joint patrols with the U.S. Border
Patrol. It is important that we not lose sight of the serious
security concerns that continue to plague Mexico.
Efforts to further secure our border can and should be
achieved without hampering better and more efficient flows of
commerce across our various ports of entry. Border security and
efficient flows of commerce need to be mutually conductive
efforts. Working to pass pro-trade policies that include--
excuse me--that improve our important economic relationship
with Mexico and serve to benefit both our economies should be a
major goal for all Members of Congress, regardless of their
political party.
Here in Arizona, we know trade, particularly with our North
America partners, is not a partisan issue, and I am so pleased
that my Democratic colleagues are joining me here today for
this bipartisan hearing. I would like to make a side note. This
is my second time serving in Congress, and I have got to tell
you I have never seen a more cohesive, friendly, let us get
things done kind of attitude delegation. I mean that across the
board with our Republicans and our Democrats. I believe that we
have a very, very good relationship. And though you are hearing
a lot through the media that the partisan rancor on Capitol
Hill is at an all-time high, I am pleased to say that we
actually, from our delegation, are friends and we work well
together.
I am disappointed that due to the weather delays, Assistant
Secretary Alan Bersin of the Department of Homeland Security
could not be with us today, but I would like to ask for
unanimous consent that one of our staff members, Mark Walker,
would be allowed to read the entire testimony. I believe it is
very, very valid. So without objection, so ordered.
Secretary Bersin has been involved in the important
negotiating agreements with his counterparts in Mexico that
will improve security and commercial flows along our southern
border. His testimony is an important component of this
hearing. And in addition, Secretary Bersin will be making
himself available to answer questions from the members at a
date to be determined in Washington, DC.
I am also grateful for our distinguished panel of private
witnesses: Mr. Eric Farnsworth of the Council of the Americas,
Ms. Lea Marquez Peterson, president and CEO of the Tucson
Hispanic Chamber of Commerce and a rising star not just in
Arizona, but I think here in the United States. I am pleased to
have Mr. Glenn Hamer, president and CEO of the Arizona Chamber
of Commerce and Industry, a dear friend and a great leader, Mr.
Timothy Hutchens, executive vice president of the Federal
Lessor Advisory Group, and Mr. Christopher Wilson from the
Mexico Institute at the Woodrow Wilson Center.
I would now like to recognize my dear friend, and
colleague, and ranking member of the subcommittee, Mr. Sires,
for his opening remarks.
Mr. Sires. Well, good morning, everyone. Chairman, thank
you very much for inviting me. I cannot think of anybody better
to serve with in Congress than my colleague as chairman here.
This is my second time in Arizona. I have been to the golf
courses in Scottsdale, but they tell me that the golf courses
down here at more beautiful. [Laughter.]
It is beautiful here, so I am looking forward to this
hearing.
Good morning, and thank you to our witnesses for being here
today. The U.S. and Mexican bilateral relationship is critical
to the economic and public security of both nations.
Unfortunately, it also has to be amongst the relationships most
taken for granted and least appreciated in U.S. foreign policy.
This is in spite of the fact that our nations share a vast
history, common values, and a nearly 2,000-mile border. The
U.S. is Mexico's largest trading partner and largest foreign
investor. Mexico, in turn, is the third largest U.S. trading
partner after Canada and China.
In 2012, combined annual trade between our two nations was
$494 billion, and since the North American Free Trade Agreement
took effect in 1994, U.S. trade with Mexico has increased over
500 percent. Additionally, Mexico-U.S. migration remains today
the largest bi-national migration in the world. These
statistics are significant and set the backdrop for today's
discussion on improving security and facilitating commerce with
our southern neighbors.
Neither the U.S. nor Mexico lives in isolation. Clearly
what happens on the one side of the border has political and
economic repercussions on the other. This was clear surely
after the global financial crisis that beset the United States
and soon after the escalation of drug trafficking related
violence that spread in Northern Mexico. The push and pull
factors that dictate migration flows were turned upside down by
local communities on both sides of the border due to negative
economic activity. In that regard, the United States and Mexico
have an undeniable and mutual responsibility to border security
and facilitating the flow of goods and people in an effective
and a humane matter. Advancing border security and trade
facilitation are often thought to be mutually exclusive goals.
On the one hand, border security entails risk management of
border flows by identifying and preventing the illegal entry of
illicit goods and unauthorized persons while enforcing policies
that govern their exchange and transit. On the other hand,
trade facilitation involves improving the efficiency and
predictability of processing times at U.S. ports of entry for
both goods and people. By their very nature then, border
security affects efforts, creates speed bumps of ports of entry
while trade facilitation aims to remove them, caught in the
middle of the U.S. and Mexican economies with billions of
dollars in lost economic output and the thousands of authorized
persons crossing daily alongside countless unauthorized persons
attempting to do the same.
I would be interested to hear how U.S. consulates and
border patrol, associated Homeland Security, and U.S. Agencies
Division are aiming to address the tension that exists between
border enforcement and trade facilitation. The tension between
border security and trade facilitation does not only affect the
flow of goods and services and those persons authorized to
cross freely between our respective borders. A byproduct of
this tension is a series of adverse unintended consequences
resulting in border area crime, civil rights abuses, and loss
of life.
A more profound and distressing toll is taken by the
thousands of unauthorized persons who by no fault of their own
are compelled to leave their home and endeavor a life-
threatening journey involving extortion and sexual assaults,
over treacherous terrains in hopes of entering the United
States. Although an effective deterrent, increasing force and
monitoring would also compel many would-be unauthorized persons
into the United States utilizing smuggling networks to resort
to riskier means to enter the United States.
While many of these migrants come from regions other than
Mexico, like Central America, approximately half of the
unauthorized immigrants in the United States are from Mexico.
Most of these migrants endeavor this journey in the hope of a
better life. Nevertheless, the possibility exists that persons
wishing to inflict harm on the United States' public can also
enter through these means. Additionally, for those unauthorized
persons that are captured, detained, and eventually
repatriated, we must ensure that the enforcement of our laws is
done in a humane manner, respectful of our Constitution and
their civil rights. Deportees are at risk of becoming repeat
offenders and victims of border crime syndicates. We shall seek
balance between national enforcement and repatriation that
lessens this likelihood.
The current paradigm between our nations is all too real,
while also being broken down by the communities that straddle
our 2,000-mile border, and our brave men and women assigned to
protect it. As potential legislation affecting the nearly
11,000 million undocumented immigrants remains stalled in
Congress, policymakers in our Nation's capital must be equally
mindful and aim to break down this divide.
I look forward to hearing from our panelists. Thank you
very much. And I would also like to welcome my colleagues,
which I should have done at the beginning, but I am grateful
they are here with me. Thank you very much.
Mr. Salmon. Thank you. I would like to recognize the
gentleman from Tucson, Mr. Barber.
Mr. Barber. Well, thank you, Mr. Chairman, and thank you,
Ranking Member, for having this hearing and inviting myself and
my colleagues from the Arizona delegation.
As a member of the Homeland Security Committee and ranking
member on the Oversight Committee, I am very concerned about
the issue that you have brought to the table today. And I
really look forward to the opportunity to hear from the
witnesses.
But here is my take on it. We must expedite the legal flow
of commercial traffic into our country. When you have to wait
2\1/2\ hours at our ports of entry here in southern Arizona,
you are not going to be coming as often as you might. Thirty
percent of the revenue that is taken in at the major malls in
Pima County, 30 percent of that revenue comes from visitors who
come from Mexico. When they wait 2\1/2\ hours, they are not
going to come through this port of entry. They are going to
find another place to come.
We must also pay attention clearly, Mr. Chairman, to border
security. I live in Tucson, but I represent a district that has
13 percent of the Mexico-Arizona border. We have done a lot of
work to improve border security, but we have not completed the
job. When the people I represent who live outside of the ports
of entry, rural Pima County or rural Cochise County, I should
say, from Douglas to the New Mexico State line, and in between
the ports of entry going west, they live each day in fear of
the cartels. We have to protect people living in those homes
and on those ranches, but we also have to be smart about how we
do it.
To me it is about border security coupled with economic
security. The commercial traffic that comes into our State if
we do a better job of staffing the ports of entry will be
incredible growth potential for our State and for the country.
I have spoken to people down in Nogales and Douglas about the
delays and what it means to them. The Fresh Produce
Association, Bruce Bracker, I believe is here today
representing that community and has, I think, a lot of great
insights about what needs to be done to staff up the ports of
entry.
While we have appropriately increased the number of border
patrol agents we have in the southwest border, we have done
very little, Mr. Chairman, to increase the number of customs
agents that staff the ports of entry. We are getting ready to
open the Mariposa extension of the Nogales port of entry, a
tremendous new asset to increasing commercial traffic. We need
to be ready for the increased commercial traffic that is going
to come from Mexico when the port at Guaymas is deepened and
will rival Los Angeles as a major place where imports and
exports come and go. If Arizona is not ready, we will lose a
tremendous amount of economic benefit from that deepening of
the port.
But even now before that is available, we have problems at
the ports of entry both in Douglas and in Nogales. Douglas, for
example, a port of entry that was built in 1932 without any
measurable improvements since that time, needs to be upgraded.
We need more agents. We need a better infrastructure.
Nogales, certainly a much more modern port. The DeConcini
port of entry and the Mariposa port of entry are going to be,
when they are completed--Mariposa--tremendous avenues for legal
commercial traffic. And unless we staff them properly, we will
never get the job done. When we look at the potential economic
development and benefit to Arizona and to the Nation at large,
those ports of entry have to be properly staffed.
But going back for a moment to the issue of border
security, we cannot have one without the other. I am very proud
to say that the Homeland Security Committee passed a bill
called the Border Security Results Act, a bill that I co-
sponsored. And that bill was passed unanimously, Mr. Chairman,
by every member of that committee, Democrat and Republican
alike. That is the kind of bipartisanship we need in the
Congress more, and we are getting it, as you have mentioned, in
ways that do not meet the headline test. They do not get
publicized because it is not great news when people get along,
and cooperate, and get things done.
But that Border Security Results Act could be a path toward
improving ports of entry staffing and to securing the border in
a smart way, which requires that stakeholders who live and work
on the border, border patrol agents, law enforcement officials
are consulted by the Department of Homeland Security before
they develop a strategic plan to implement a better and
improved border security plan. So we have great potential, and
I hope that all members of the House of Representatives will
soon have an opportunity to vote on that bill and to move
forward with that important development of our border security
and economic security opportunities.
It is really a privilege to be with you today. Thank you,
Mr. Chairman and Ranking Member, for inviting myself and our
colleagues from Arizona to join you, and we look forward to
hearing from the witnesses. I yield back.
Mr. Salmon. Thank you, Mr. Barber. The chair recognizes the
gentlewoman from CD 9, Ms. Sinema.
Ms. Sinema. Thank you so much, Mr. Chairman, and thanks for
inviting me to join you all here today. It is great to be back
in my hometown of Tucson, Arizona. And I really feel honored
and privileged to be with all of you here today to talk about
an issue that is important not just to our Nation, but, in
particular, important to Arizona and southern Arizona.
While Canada and China are the two largest trading partners
at the national level for the United States, Mexico is
Arizona's largest export market and our top trading partner. In
2012, the year for which we have the most recent statistics,
Arizona exported nearly $6.3 billion in goods and services to
Mexico, and, of course, this number totals over 30 percent of
all of Arizona's exports. So the importance of having a smooth
and efficient relationship with our largest trading partner
cannot be over emphasized here in Arizona.
I am proud to say that Congressman Salmon and I are working
together with a host of business organizations in Arizona to
increase Arizona's export industry to all nations, but
particularly to our largest trading partner and our closest
neighbor, Mexico. However, I think we all can recognize that
many hurdles prevent the efficient and effective movement of
goods and services from Arizona to Mexico, and equally
importantly from Mexico into Arizona. For instance, the
unpredictable and lengthy wait times at Arizona's ports of
entry from Mexico have forced many of our produce companies to
divert their import traffic to southern Texas. No offense to
them, but we would like that traffic right here in Arizona.
Congress must take action to ensure that the U.S. Customs
and Border Protection Agency can operate all ports of entry in
our country smoothly and efficiently to allow for the free and
efficient flow of commerce back and forth across our border.
Equally, Congress must also take action and pay attention to
immigration in a fashion that ensures border security, and that
adjusts our visa system to meet the demands of the U.S. labor
market rather than continuing to rely on an antiquated and
outdated visa quota system that fails to meet the needs of
American businesses and employers. Nowhere is that felt more
acutely than here in Arizona.
So, Mr. Chairman, thank you again for inviting me to join
this field hearing today, and I believe if this panel were
granted the authority to come up with the solutions and address
them with Congress and the Senate, I think we would be able to
solve this problem. So if there is a way for the Speaker to
allow this group to make the decision, I think we would be able
to solve this problem and get our State and our country back on
a strong economic footing to increase trade, to protect our
borders, and to grow our economic engine in America. Thank you,
Mr. Chair.
Mr. Salmon. Thank you. The chair now recognizes the
gentleman from Fountain Hills, Mr. Schweikert.
Mr. Schweikert. Scottsdale.
Mr. Salmon. Scottsdale.
Mr. Schweikert. Thank you, Mr. Chairman. And I will not
argue with you about the golf courses, but----
Mr. Sires. That is what they said.
Mr. Schweikert. You know, just next time you come to
Scottsdale, call me, we will work something out for you.
Mr. Sires. You got it.
Mr. Schweikert. And, Mr. Salmon, to members and everyone
here, one of the things our office has been specializing in is
the other side of bilateral trade and regional trade, and that
is also the externalities of transaction costs, whether it be
regulatory, whether it be financial. And much of this, we have
a great interest in what is happening not only directly south
of the border, but in the entire region with modernization of
banking systems, but also the promises that were woven within
NAFTA 20 years ago of being able to have, you know, fair, open
contracts, whether it be within telecommunication, within the
next generation of the banking systems, and the transactional
costs that that will bring.
What is unique for all of us in this is we have an amazing
opportunity just before us. Some of this is because of what is
happening from the energy sectors in our country and also south
of the border to actually have an entire region that actually
has an amazing energy future and with that, the ability to
become a key manufacturing hub for the entire world. But with
that, we also have to overlay the honest discussions of
security and what it means to our populations on both sides of
the border.
And I hope actually as we hear the different witnesses come
up and speak we have a discussion that is more than just-in-
time products, perishables, backing up, but also the
discussions of what is the next generation solutions. Is it a,
you know, subscription express type lane mechanisms to move
those just-in-time perishable products, and if so, what should
those partnerships end up looking like? And with that, Mr.
Chairman, I yield back.
Mr. Salmon. Thank you, Mr. Schweikert.
Pursuant to Committee Rule 7, the members of the
subcommittee will be permitted to submit written statements to
be included in the official hearing record.
Without objection, the hearing record will remain open for
7 days to allow statements, question, and extraneous materials
for the record, subject to the length and limitation of the
rules.
As I mentioned earlier, Secretary Bersin was waylaid due
some of our airline traffic problems. And without further ado,
I am going to ask Mr. Walker to go ahead and read his
testimony. And as I mentioned, before, he will make himself
available when we get back to Washington to answer questions
that we might have. Mr. Walker?
Mr. Walker. Mr. Chairman, let the record reflect that I am
Mark Walker, staff director for the Western Hemisphere
Subcommittee on the House Foreign Affairs Committee. And I have
been asked today to read the statement as provided for the
record of Alan D. Bersin, Assistant Secretary for the Office of
International Affairs and Chief Diplomatic Officer of the U.S.
Department of Homeland Security.
STATEMENT OF THE HONORABLE ALAN BERSIN, ASSISTANT SECRETARY,
OFFICE OF INTERNATIONAL AFFAIRS AND CHIEF DIPLOMATIC OFFICER,
U.S. DEPARTMENT OF HOMELAND SECURITY
[As read by Mr. Walker.]
Chairman Salmon, Ranking Member Sires, and distinguished
members of the subcommittee, on behalf of the Department of
Homeland Security, Acting Secretary Rand Beers, I want to thank
you for your continued support and the opportunity to testify
today about trade facilitation in the border region.
In the last 5 years, the United States and Mexico have
revolutionized their security and trade relationship, achieving
unprecedented levels of cooperation and success. This
transformation has been largely built on a new understanding of
borders, a new bi-national approach to border management, and
direct sustained bilateral engagement at the most senior levels
of government. Now, historical levels of cooperation are on
display across the spectrum of both countries' governments, and
the U.S.-Mexican border is safer, more secure, and more
efficient than it has ever been.
The core of DHS interests lies in improving joint border
management, which includes everything from investigations to
disaster response, admissibility determinations to joint
operations, and appropriate information sharing to the
repatriating of Mexican nationals. The majority of the DHS
programmatic efforts with Mexico are focused on expediting the
legitimate flow of goods and people and interdicting and
preventing the illicit trafficking of people, weapons, drugs,
and currency. DHS continues to have a robust and mutually
beneficial relationship with our counterparts in the Government
of Mexico based on the doctrines of co-responsibility of our
shared border and co-management of migration issues.
The United States and Mexico share a historical unique
relationship of migration, trade, and cultural exchange. The
1,969-mile border between the United States and Mexico is the
most frequently crossed border in the world. Trade between the
United States and Mexico continues to grow, totaling nearly
$500 billion in goods during 2012 alone, making Mexico the
United States' third largest trading partner and second-largest
export market. Mexico also has the largest number of airports--
36--of any nation in the world providing last point of
departure service to the United States.
Conventional wisdom on the U.S.-Mexico border has told us
for many years that trade and security are mutually exclusive,
that an increase in one must lead to a decrease in the other.
We have learned that this is a false dichotomy when managing
the border. First, it fails to address the everyday experiences
of people who live along the U.S.-Mexico frontier. Second, it
ignores the growing importance to the prosperity of both
nations of our bi-national trade. Third, it poses a false
anachronistic choice between security and trade that results in
grossly inefficient border management.
We are now devising innovative solutions to address the
difficulties we face head on and liberate us from the
conceptual straitjackets of security versus trade or national
versus local. Commerce and public safety can be mutually
reinforcing from the standpoint of both Federal requirements
and local interests. The fact that trade and security can
enhance one another does not mean that they automatically will.
We must regularly use smarter security practices and
technologies on our border that allow us to process with
maximum efficiency goods and travelers that we know are safe
and legitimate, and focus our energies on people and shipments
that could potentially pose a threat to our safety and our
prosperity.
The concerted reshaping of the U.S.-Mexico bilateral
relationship begun in earnest through the Merida Initiative was
deepened and memorialized in the 21st Century Border Management
Declaration. Spurred by this declaration, we have begun to move
decisively. Trusted partner programs for people in commerce,
such as SENTRI and Global Entry/Viajeros Confiables, FAST and
C-TPAT/Nuevo Esquema de Empresas Certificadas, or NEEC, must be
expanded dramatically and utilized more systematically. These
programs allow us to move quickly to process cargo and
previously vetted travelers, which in turn allows a focus of
time and energy on goods and people about which less is known.
Local communities and businesses must partner with Federal
authorities to expand the number of trusted travelers and
cargoes so that we can expedite their movement at scale and
focus regulatory attention in a targeted fashion.
In 2013, C-TPAT and NEEC finalized the details of a joint
work plan that will guide the work required toward achieving
mutual recognition, or MR, in 2014. MR will benefit both
Mexico's and U.S.' trade community and governments by
increasing resource efficiency, transparency, and decreasing
duplication of efforts while still bolstering security across
both borders.
Federal authorities working with local communities must
continue to support initiatives that are tailored for specific
ports of entry and that reengineer processes to make more
efficient use of existing infrastructure. Local efforts are
customized to reflect the needs and circumstances of the local
community as well as the resources available to it. The
important point is that they result from a process of co-
creation by and between the U.S. and Mexican public and private
sectors.
Our policy making and politics must take account of the
international and domestic interests affected by border issues
and the nature of border issues. Today the communities both at
the border and in the interior most deeply touched by border
policies developed in Washington and Mexico City often have
little role in developing and implementing those policies. Not
only does this fact lead them unrepresented on matters that
ultimately affect them, it robs the policy making process of
much needed local expertise and experience as well as political
support. To generally secure our border and encourage trade, we
must enlist the interests, insight, and imagination of local
communities on both sides of the borders.
[The prepared statement of Mr. Bersin follows:]
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Mr. Salmon. Thank you, Mr. Walker. I will excuse you, and I
would like to seat the second panel. Before I introduce the
panel, I want to inform the members that two of our witnesses
may have to leave early because of prior commitments.
I would like to begin introducing the panel starting with
Mr. Farnsworth. Mr. Farnsworth is the vice president of the
Council of the Americas and Americas Society. He is a foreign
policy professional with experience in public, private, and
non-profit sectors.
Ms. Marquez Peterson is the president and CEO of the Tucson
Hispanic Chamber of Commerce and is an advocate of the southern
Arizona business community. She received a B.A. in marketing
and entrepreneurship from the University of Arizona, and an
M.B.A. from Pepperdine University. I understand the University
of Arizona is going to get a great ranking today, or has that
already come out? [Laughter.]
Number one, right? All right. That is what I am hearing.
All right. Next is Mr. Hamer. He is the president and CEO of
the Arizona Chamber of Commerce and Industry. He is overseeing
the organization's development in one of the most respected
pro-business public policy entities in the State. Mr. Hamer is
a graduate of Cornell University School of Industrial and Labor
Relations and Arizona State University College of Law.
Mr. Hutchens is a CBRE executive vice president and the
head of Federal Lessor Advisory Group. He received his B.S. in
economics from Johns Hopkins University and his J.D. from the
University of Chicago Law School.
Mr. Wilson is an associate at the Mexico Institute of the
Woodrow Wilson International Center for Scholars. He oversees
regional economic integration in U.S., Mexico, and border
affairs. Mr. Wilson holds an M.A. in international affairs from
American University.
Let us begin. Mr. Farnsworth, you are recognized.
STATEMENT OF MR. ERIC FARNSWORTH, VICE PRESIDENT, COUNCIL OF
THE AMERICAS AND AMERICAS SOCIETY
Mr. Farnsworth. Well, thank you very much, Mr. Chairman,
and good morning to you and to the members of the subcommittee.
And I really would like to thank you for the opportunity to
testify today both because the issues are so important and also
because it gets me out of Washington during winter and brings
me here to Tucson. I really appreciate that. And as you know,
this hearing today continues the outstanding efforts both of
the full committee and also the subcommittee to address the
most important issues that are facing us in the western
hemisphere.
And I really wanted also congratulate all of you for the
outstanding introductory comments that were made. I thought
they really captured the issues quite well, and I wanted simply
to reflect that.
The Council of the Americas has a long history of
engagement on the U.S.-Mexico relationship, and we firmly
believe that Mexico is critically important to the core
prosperity and security of the United States. As the location
of this field hearing suggests, the relationship is not limited
to Washington and Mexico City. Intense interaction takes place
at all levels of government and in the business community and
civil society.
Nonetheless, the depth of the bilateral agenda represents a
fairly recent development. In trade alone, annual bilateral
exchange has gone from less than $100 billion per year prior to
NAFTA to today more than $1 billion in goods and services every
single day. Mexico is now our second largest export market and,
has been mentioned, our third largest trading partner.
For 23 States, including Arizona, as well as many non-
border States, Mexico is the first or second export
destination. Beyond these tangible commercial benefits, NAFTA
institutionalized the bilateral relationship within a broader
North American context and, in our estimation, helped anchor
Mexico to a path of economic reform, development, and
democracy.
This reality, as has been discussed a little bit already,
has unfortunately been overshadowed by the security issues
which people in the border communities and elsewhere know so
well. But as the Council has highlighted through our border and
competitiveness initiative, within North America, we do not
merely trade products anymore, we now design and make them
together. Joint production and supply chains have developed so
that from a commercial perspective at least, national borders
no longer define production. North America itself is the
production platform.
Businesses are generally optimistic about Mexico's
trajectory, and we are increasingly observing companies leaving
China and other Asian sites setting up plants in Mexico as they
seek to develop their own manufacturing base and cut high
transport costs, reducing delivery times to the United States.
This is hugely important because as has been mentioned,
according to the National Bureau of Economic Research, every
dollar of U.S. imports from Mexico includes 40 percent of U.S.
content, while imports from China to the United States include
barely 4 percent of U.S. content.
Foreign direct investment is also pouring into higher-end
manufacturing in central Mexico and elsewhere, making clear
that the country is no longer a low-cost labor player. In fact,
from 2009 to 2012, foreign direct investment from the United
States increased over 50 percent into Mexico. Yes, labor costs
are lower than in the United States, but the production is also
cutting edge. Who in Washington knows, for example, that Mexico
has a successful and growing aerospace industry, or that the
number and quality of Mexican engineers producing for the
global market is highly competitive?
Broadly, what we are seeing is design work done in the
United States and Canada followed by high end manufacturing in
Mexico and final production and path-to-market in the United
States as Mexico moves up the value-added chain. Without the
ability to do work in Mexico, overall production would be
uncompetitive, and dependent U.S. jobs would evaporate. This
turns the old NAFTA as job killer argument squarely on its
head.
To paraphrase the old television program, our strategic
opportunity, if we choose to accept it, is to capitalize on
this increasingly unified economic space and Mexico's emerging
economic dynamism. But to do so, we need to think bigger and
bolder about the bilateral relationship. A joint
competitiveness agenda should prioritize making business easier
at our common border as clearly this hearing is designed to do.
Important security gains have been made during the last decade,
but trade facilitation has received insufficient attention, in
my view, even as cross-border supply chains have steadily
integrated. As a result, long and unpredictable crossing times
have produced bottlenecks and relatively few ports of entry
have seen major upgrades. Recent discussions in Washington on
border security sometimes overlook the urgent need to direct
investments toward infrastructure improvements.
As Mexico's Ambassador to the United States, Eduardo Medina
Mora, has said recently, ``We have a 21st-century trade model,
operating on a 20th-century policy format, with a 19th-century
infrastructure.'' The financing of needed investments could
overcome budgetary constraints through the use of innovative
mechanisms like public-private partnerships--Mr. Sires, I know
you have had some direct experience with that in New Jersey in
the housing sector, for example; very successful--mixed capital
investment vehicles for project finance, and allocation of
capital to multilateral development banks like the North
American Development Bank. Infrastructure improvements must
also be accompanied by staffing increases. We have heard a
little bit of that already today. Although staffing for the
U.S. Border Patrol has grown in recent years, the number of
Customs and Border Protection officers has remained largely
unchanged.
More broadly, among other things like regulatory
harmonization and simplification, governments should strengthen
multilateral trade cooperation beyond just border issues.
Mexican and Canadian entry into the Trans-Pacific Partnership
negotiations was a critical step. Now we should also consider
negotiating, together with Mexico and Canada, the Free Trade
Agreement with Europe. Similarly, future economic association
among the NAFTA and Pacific Alliance nations would be timely
and, in our view, appropriate.
Of course, Mexico must continue along the reform path in
order to build its own competitiveness, including in the energy
sector. And we saw some of the potentially dramatic changes
that have been proposed just over this recent weekend.
Meanwhile, unaddressed security issues affect the economic
agenda because perceptions of insecurity in Mexico impact the
willingness of entrepreneurs to bet on Mexico. At the same
time, failure by the United States to address the demand for
illegal drugs or the supply of weapons contributes to Mexico's
security difficulties.
Nonetheless, as NAFTA turns 20 on January 1st, the United
States is positioned to write the next chapter of global
competitiveness. To do so, we have to begin to view North
America as a more unified production platform and the U.S.
border with Mexico as a line that unites, rather than divides,
our two great nations.
Mr. Chairman, I look forward to your questions.
[The prepared statement of Mr. Farnsworth follows:]
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----------
Mr. Salmon. Thank you very much.
Ms. Marquez Peterson, you are recognized.
STATEMENT OF MS. LEA MARQUEZ PETERSON, PRESIDENT AND CHIEF
EXECUTIVE OFFICER, TUCSON HISPANIC CHAMBER OF COMMERCE
Ms. Marquez Peterson. Thank you, Mr. Chairman, Ranking
Member, and members of the subcommittee. Thank you again for
your invitation to testify today. I am grateful for the
committee's interest in the small business experience along the
Arizona-Sonora Border.
In my role as the president and CEO of the Tucson Hispanic
Chamber of Commerce, I represent over 1,000 member businesses
in which 70 percent have less than 25 employees, which is
reflective of the businesses in Arizona. Our chamber works with
businesses in Arizona on reaching the fast-growing Hispanic
market and assisting businesses in Arizona and Mexico
interested in international trade.
We have built a reputation in our geographic region for
being a resource for businesses interested in exploring
international trade in Mexico, and work closely with referral
partners from Arizona businesses such as the U.S. Department of
Commerce and the U.S. Small Business Administration. In
addition, we assist Mexican businesses who are interested in
investing or expanding into Arizona.
The border States in the U.S. and Mexico have a population
of 14 million people. I believe that there are many best
practices that we can learn from different States and regions.
The more information we can share between business
organizations, like chambers of commerce, the better we can
collaborate, learn of resources, and advocate for changes in
our respective State administrative codes. Ultimately, this
will lead to a positive impact on our economy.
The United States and Mexico are critical economic
partners, as we have heard this morning. In May 2013, President
Obama and President Pena Nieto announced the formation of the
High Level Economic Dialogue. We share not only a 2,000-mile
border, but a dynamic commercial relationship that generates
more than $500 billion in trade in goods and services and
supports millions of jobs in both countries. The global
competitiveness of both of our countries requires continued and
deepened economic integration, commercial exchange, and policy
alignment.
At a local level, our chamber has focused on building
relationships cross-border between these businesses. Our member
businesses are from diverse industries, and approximately 65
percent are Hispanic owned or managed firms. The key to the
economic recovery of our Nation and bolstering economic
development within our border States is the support of
entrepreneurship and the promotion of the value of our
bilingual workforce. A key to the continued economic recovery
of our Nation is that support of entrepreneurship.
Arizona, like many of our border States, has a fast-growing
Hispanic population, and experts expect that by 2035 the
majority of the State's population will be Hispanic. These
dynamic attributes are an asset to our Nation, and the Hispanic
market represents $50 billion in purchasing power in our State
alone.
The Tucson Hispanic Chamber hosts trade mission trips 2 to
3 times a year to Sonora, Mexico. On our most recent trip in
September, we had 21 attendees who represented our local
businesses, our university, our community college, and our
county. During the trip, we toured the manufacturing facilities
of the Offshore Group, an Arizona business operating in
Guaymas. We also toured the Port of Guaymas and discussed the
impact on the Arizona economy, met with the Mayor of Guaymas,
and signed an economic development agreement with the chamber
of commerce in Guaymas. This 2-day trip provided our attendees
with key contacts and the ability to follow up to develop
resources within their respective industries. Our chamber is
currently planning our next trade mission trip to Cananea,
Sonora to study the expanding mining industry and explore
opportunities. Mining continues to be a key industry for
Arizona. We plan to invite Arizona suppliers who specialize in
the mining industry, logistics businesses, and other service-
related companies, to join us.
Over the last 4 years, our chamber has developed a regional
business presence in Mexico. Four years ago, our Arizona
businesses were subject to the boycott as a result of Arizona's
SB 1070 law. We worked closely with our fellow chambers of
commerce in Sonora to advocate for the 65,000 Hispanic-owned
businesses and our greater business community in Arizona during
the time of the boycott. We focused on the economic
interdependence of our Southern Arizona-Sonora region and the
importance of a Federal response to immigration reform.
Mexico is the main destination for exports in Arizona,
California, and Texas. Additional business incentives, the
removal of impediments, and identification of resources and
tools are necessary to build export opportunities for our
business community. Cooperation in transportation and freight
systems between the U.S and Mexico is important. Several
programs have been valuable in assisting retailers on both
sides of the border, such as FAST and SENTRI, to name a few.
Easing transportation challenges for consumers and businesses
can assist our Arizona businesses in building cross-border
relationships. The extension of the proposed I-11 corridor from
Las Vegas to Phoenix through Tucson and Nogales will provide a
more efficient method for goods to travel from Latin America
throughout the United States.
The U.S. Government estimates that each additional billion
dollars in new exports supports more than 6,000 new jobs.
Exports to Mexico increased $18 billion in 2012 alone, thus
potentially helping create over 107,000 new U.S. jobs. Almost 6
million U.S. jobs rely on trade with Mexico, according to the
U.S. Chamber of Commerce. In Arizona, businesses export more $6
billion worth of goods to Mexico, and over 111,000 jobs in
Arizona rely on trade.
In closing, I would like to address specific needs of small
businesses in our border States related to trade with Mexico.
At the Tucson Hispanic Chamber, we have learned that making the
business decision to export can have a transformational effect
on sales and growth, but exporting can seem complicated,
especially for smaller firms. We heard about a lot of
challenges, which include difficulty accessing financing,
trouble finding skilled workers, lack of information about
foreign markets, and the high cost of establishing a physical
presence in foreign countries.
The Mexican Government is paying close attention and is a
ready partner in collaborating with business organizations,
such as the Tucson Hispanic Chamber. As part of President
Enrique Pena Nieto's economic policy, on January 11, 2013, his
decree created the National Institute of the Entrepreneur. The
INADEM goal, which is that organization, is to implement,
execute, and coordinate the national policy on supporting
entrepreneurs, as well as micro, small and medium enterprises,
bolstering their innovation and competitiveness in order to
increase their contribution to economic development and social
welfare. Furthermore, it seeks to provide help toward the
development of policies which foster entrepreneurial culture
and productivity. According to the OECD, small- and medium-
sized businesses in Mexico represent the vast majority of
businesses. They account for 41 percent of GDP and generate 64
percent of total employment.
Mr. Chairman, coordination between the U.S and Mexico on
the effort to bolster micro and small business activity in
international trade would greatly enhance the economic recovery
of our region and ultimately our Nation. Small business is such
a vital part of both countries, especially along our mutual
border States. I ask that the committee make efforts to
understand the financial impact of an improved small business
trade environment to our country.
Thank you. I look forward to answering any questions.
[The prepared statement of Ms. Marquez Peterson follows:]
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Mr. Salmon. Thank you, Ms. Marquez Peterson.
The chair recognizes Mr. Hamer.
STATEMENT OF MR. GLENN HAMER, PRESIDENT AND CHIEF EXECUTIVE
OFFICER, ARIZONA CHAMBER OF COMMERCE AND INDUSTRY
Mr. Hamer. Thank you, Chairman Salmon and members of the
committee. Thank you for putting on the on button. Technical
expertise is not my area of expertise.
Chairman Salmon, members of the committee, thank you for
holding this very important hearing today. There are a few
things that we can do to better improve the economy of Arizona
and the United States than to look for ways to increase our
positive trading relationship with Arizona's largest trading
partner, Mexico. And how appropriate it is that we are now just
less than a month away from the 20th anniversary of the
implementation of the NAFTA to be discussing best practices and
ways we can further facilitate this relationship. And we will
talk a little bit about some of the things Congressman Kolbe
has done, but I want to also commend Chairman Salmon for his
sponsorship of the Outer Continental Shelf Trans-Boundary
Hydrocarbon Agreement Authority Act. You want to talk about
something that is timely. As the President of Mexico is, I
believe, this week, there should be progress on his legislation
to open up energy markets in Mexico. Getting this legislation
through the U.S. Congress is vitally important not just for the
success and the improvement of our economy, but also for
Mexico's. I will talk a little bit about that later, but I
wanted to, from the outset, applaud Congressman Salmon for his
leadership on that issue.
We have now 20 years of positive experience under our
collective belts with U.S., Mexico, and Canada. And it is
exciting that we are now all part of the Trans-Pacific
Partnership trade talks, an agreement poised to link the
markets of Asia and the Americas, accounting for about 800
million people and a combined GDP of $27.5 trillion. The
importance of trade with Mexico is not lost on the Arizona
Chamber of Commerce and Industry or with the larger business
community. We recognize the 6 million U.S. jobs that depend on
trade with Mexico and the $12 billion in trade between Mexico
and Arizona in 2012 alone. It was mentioned earlier today that
one-third of our exports in Arizona occur with Mexico--one-
third. That is a very significant number.
To that end, the chamber in 2012 formed a Trade and Tourism
Committee, which serves as our one-stop public policy shop for
trade and international travel promotion. Our chamber has
advocated for improved transportation links between our State
and Sonora, increased international flights from Mexico, and
better resources and infrastructure to process the trade
flowing between our two countries. And I believe that has been
a theme that we have heard here many times earlier today about
the need to do more so we can better process the trade between
our two countries. And we would also like to see additional
educational exchanges.
In 2013 alone, I have had the distinct pleasure of
traveling to Mexico City with our Arizona Speaker of the House,
Andy Tobin, as part of a bipartisan delegation of lawmakers and
business leaders to visit with members of Mexico's Congress. We
were treated very warmly. Over the past several years, I have
also had the great privilege to travel to Mexico City and to
Guadalajara with a number of our excellent mayors, including
the mayor of Tucson, as well as Mayor Stanton, who I had the
privilege to be on a trade mission to Guadalajara a few months
ago, where we were part of a new non-stop flight between
Guadalajara and Phoenix. And by the way, every new flight
between Mexico and Phoenix represents hundreds of thousands of
dollars of new economic activity for our entire State.
One thing that is sort of interesting is that the increased
trading opportunities and the desire for Arizona to deeper
relationships with Mexico is really part of our culture. Our
professional sports teams also have recognized the importance
of the Mexican market and the positive role sports can play in
forging new relationships. I could tell you from my experience
on the Guadalajara trade mission that having the Diamondbacks'
World Series hero, Luis Gonzalez, as part of your delegation
makes an incredibly positive impression. Our NFL Arizona
Cardinals have played a regular season game in Mexico City, and
have a huge broadcast presence in Mexico where their games are
broadcast to 18 cities throughout the country, including Mexico
City and Guadalajara. Yesterday our friends in Mexico were able
to hear the very good news of Carson Palmer and company slicing
and dicing the St. Louis Rams. The NBA's Phoenix Suns have not
only participated in trade missions to Mexico, but they are
also the first NBA team to conduct their own youth basketball
clinics in that country.
And I mentioned my former Southern Arizona Congressman, Jim
Kolbe, fought right from the start for NAFTA. It is not
hyperbole to say I am not sure if that agreement would be in
effect today if not for his work. Congressman Kolbe was also
critical in the expansion of the border travel zone, which
governs how far Mexican nationals in possession of a valid
border crossing card may travel before requiring additional
documentation. Because of his work in 1999, Mexicans crossing
the border into Arizona may travel as far north as Tucson,
where they can enjoy world-class resorts and shopping
destinations.
Along most of the U.S.-Mexico border, Mexican visitors may
travel only 25 miles north before requiring an additional form.
Earlier this year, the Department of Homeland Security expanded
the border zone in New Mexico where business leaders there
cited Arizona's positive experience as a case study for
increased travel access. The Maricopa Association of
Governments, MAG, the Council of Governments for the greater
Phoenix area, is now leading an effort for the entire State of
Arizona to be considered part of the border travel zone as a
means to further grow the tourism opportunities between Arizona
and Mexico.
Arizona, as you all know, is also home to the Arizona
Mexico Commission. The AMC, chaired by Governor Jan Brewer--and
the president, Larry Lucero, is here today--has since 1959
sought to promote a better relationship between Arizona and
Sonora through twice yearly plenary sessions and cultural and
educational exchanges.
In just the last few years, Arizona has dramatically
stepped up its efforts to promote our State's outstanding
business environment to the rest of the world. Mexico figures
prominently in that strategy. Arizona in 2010 formed the
Arizona Commerce Authority, which right now is being
extraordinarily well run by Sandra Watson. This is a public-
private entity to lead the State's job attraction efforts, and
we have put a lot of effort in the State to make Arizona the
most competitive place when it comes to export-oriented
industries. The push is on to open additional trade offices in
Mexico. There has been a lot of discussion about doing some
things in Mexico City on the State level as well as through
several cities.
I will close by saying, again, we need to do everything we
possibly can to enhance this relationship. There is a lot that
we need to do in terms of improving the number of customs
agents. We have made a lot of great moves in terms of
modernizing Nogales, but we need to make sure that it is
properly staffed. We have heard about the backups.
You have the power to change that. We need to do more
things along the lines of what Chairman Salmon is doing in
terms of increasing our ability to take advantage of the energy
revolution, which could truly make North America energy
independent.
Thank you for the opportunity to testify this morning.
Thank you, Chairman Salmon, for your leadership.
[The prepared statement of Mr. Hamer follows:]
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Mr. Salmon. Thank you, Mr. Hamer.
Mr. Hutchens, you are recognized.
STATEMENT OF MR. TIMOTHY C. HUTCHENS, EXECUTIVE VICE PRESIDENT
AND HEAD, FEDERAL LESSOR ADVISORY GROUP, CBRE, INC.
Mr. Hutchens. Thank you, Mr. Chairman. I would also like to
thank the ranking member when he returns and the rest of the
committee for the opportunity to appear before you today.
In his invitation to appear today, Chairman Royce indicated
that the purpose of the hearing was to examine the U.S.-Mexico
trade relationship, including existing trade mechanisms, and
the projects that are being considered, and what can be done to
streamline commerce with Mexico. A critical element for a
strong cross-border trade with Mexico is sufficiently-sized,
well-equipped, and adequately-manned land ports of entry that
promote the efficient movement of people as well as goods
across the border by taking advantage of the latest
technologies. This applies to all modes of cross-border
traffic, including pedestrians, automobiles, trucks, and rails,
as each of these will benefit cross-border trade if they are
handled efficiently and effectively.
As the volume of commerce with Mexico has increased over
the past 15 years, the capacity and technology of our LPOEs has
not kept pace with this increasing demand. This is seen most
often, as we have heard several times today, in long lines and
extended wait times that are now common at many of our
southwestern border LPOEs, especially for truck traffic.
Further, while these long lines evidence the need for border
station improvements. What they do not show is the loss of
trade as shippers and manufacturers either scale back
operations or direct trade and commerce elsewhere. Addressing
this deficiency on both sides of the border is critical if we
are to continue to enhance and encourage increased trade with
Mexico.
This is not to say that we have completely ignored the need
for improvements to our LPOEs on the southwestern border during
the last decade. In recent years, in fact, primarily as a
result of the Stimulus Act, we have invested over $950 million
in improvements to our border facilities around the country,
not just on the southwestern border, and added significant new
technologies. The primary expenditure of these funds on the
southwestern border has been on the completion of phase one of
the redevelopment of the San Ysidro LPOE and the significant
corollary improvements at Otay Mesa.
And this investment is paying off in the increased flow of
goods in both directions across the border in the San Diego
area to the tune of almost $1.2 billion a day in cross-border
trade in that region. What is needed now is a similar
investment in other key southwestern border stations in
California and here in Arizona as well as in Texas and New
Mexico that are important to U.S.-Mexico trade. Given the need
for this investment and the scarcity of Federal dollars to
address this need, I believe the government must actively
consider, where appropriate, engaging with the private sector
to seek alternative development services and funding for the
redevelopment of these border stations.
There was a reference to public-private partnerships. What
I am discussing are not public-private partnerships because
that is a bad word at OMB. We refer to these as public-private
collaborative efforts to stay within the bounds of their rules.
But in these types of transactions, which are an alternative to
the Federal design bid build approach to standard construction,
the government would enter into a ground lease of an aging
asset with a private development team who in turn commits to
using its own financial resources and technical expertise to
replace or significantly renovate the facility in question in
full compliance with government requirements.
The government would in turn lease the redevelopment
improvements for a lease term not to exceed 20 years pursuant
to a lease which itself is approved by the relevant
congressional oversight committees. This approach will reduce,
if not eliminate, the need for current appropriations dollars
and can offer many key additional benefits besides just the
improvements. These include insulating the Federal Government
from cost increases that are so common in Federal construction
projects since they are fixed priced projects; an ongoing
obligation on the part of the private sector to actually
maintain these facilities for the full term of the lease;
freeing up the U.S. CBP personnel to focus on their core
mission of border operations and border security; significantly
shortening the development timeline for these projects by as
much as 3 to 5 years over Federal appropriation; enhancing
border security from the resulting physical, locational, and
technological improvements that these projects will entail; and
significant environmental benefits, primarily from reduced
vehicle emissions at the border stations as wait times are
reduced.
The funding for these projects would ultimately come from
two sources, the lease payments that would be due from the
Federal Government in future years and, in most instances, by
the implementation of a tolling operation at the affected
border station. Tolling appropriately shifts a portion of the
costs of the--excuse me. Tolling appropriately shifts a portion
of the costs to the key beneficiaries of the new and improved
border stations, the users. Modern technology--and this is
important--affords the ability to implement fully automated
tolling regimes at our border stations which will not impact or
add any further burden on the CBP as they operate these border
stations.
Questions have been raised about whether this approach
would constitute an evasion of the congressional budget
process, and I would answer that it does not. It is far from
it. Far from being an evasion, current law permits the ground
lease of these facilities, and before any CBP occupancy lease
can be signed, it must approved by various House and Senate
committees to ensure compliance with oversight and budget
priorities established by Congress.
As I noted, this approach would be particularly effective
for larger projects, such as the critical need that CBP and GSA
have identified for the LPOEs at Calexico, California, which is
also a project supported by the local stakeholders, by the
Mexican Government, and by California Governor Jerry Brown. The
Calexico downtown port of entry is located too close to the
border, and its aging facilities have limited space, resulting
in difficulties in both trade and security, yet this facility
handles over 4 million vehicles and 5 million pedestrians a
year. Calexico East, while relatively new--it was built in
1997--is currently handling almost 8,000 cars and 1,000 trucks
a day, approximately double its original intended capacity.
My written statement includes more information about
Calexico, but I believe this project could serve as a model for
similar projects, including needed projects here in Arizona. In
the case of Calexico, it is also important to note that the
Mexican Government has already earmarked funds for the
corollary improvements which need to occur on the other side of
the border to make the border station improvements function and
work as intended.
On a final note, it has been argued by some that current
budget guidelines do not allow this type of an occupancy lease
that I am proposing because these assets are special purpose
assets of the government. I would counter this by noting that
the intent of this budget guideline and the requirements that
assets leased have a private sector market is to prevent the
government from leasing goods and services--goods and
materials--excuse me--that can only serve a governmental
purpose.
A good example of this is war materials, and, in fact, this
restriction was introduced specifically to prevent the leasing
of warships--excuse me--of airplanes and warships during the
Vietnam era. In the case of LPOEs, we are essentially talking
about buildings and roads, items that are in use in the private
sector throughout the Nation. Of course, the government use
here, as it is whenever the government leases an asset, is for
governmental use, but the key is that the assets are not
unique.
I believe the approach I have discussed could have both
immediate long-lasting benefits for enhancing trade as well as
increased border security, and I would encourage the committee
to consider it further.
[The prepared statement of Mr. Hutchens follows:]
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Mr. Salmon. Thank you, Mr. Hutchens.
Mr. Wilson, you are recognized.
STATEMENT OF MR. CHRISTOPHER WILSON, ASSOCIATE, MEXICO
INSTITUTE, WOODROW WILSON INTERNATIONAL CENTER FOR SCHOLARS
Mr. Wilson. Chairman Salmon, Ranking Member Sires, members
of the subcommittee, thank you for this opportunity to join
such a distinguished panel of experts to address the important
issue of U.S.-Mexico trade and border management. In my
testimony I will focus on the development of a multifaceted
approach to border management that promotes security, trade and
competitiveness and a high quality of life for those living in
the border region. I will present a summary of my full written
testimony, which I have submitted to the subcommittee for
inclusion in the record.
Over the last 20 years, there have been two clear turning
points in border management, and a third one may well be
underway. First was the implementation of the North American
Free Trade Agreement in 1994, which lowered barriers to trade
and investment and caused tremendous growth in cross-border
flows. This trend of quickly rising legitimate cross-border
traffic during the first years of the post-NAFTA era ended in
2001. Whereas between 1993 and 2000, bilateral trade grew at an
average annual rate of 17 percent, between 2000 and 2008 trade
growth cooled to just 5 percent per year.
Security improvements at the border ports of entry
following the terrorist attacks of 2001 were real and
significant, but they came with a cost to businesses and border
communities: The long and unpredictable wait times to cross the
border. The unique nature of U.S.-Mexico trade causes
congestion at the border to have a magnified impact on regional
manufacturers. The key is that the United States and Mexico do
not simply buy and sell finished products; they build them
together.
The manufacturing sectors of our two countries have become
deeply integrated and, as a result, materials and parts often
flow back and forth across the border multiple times as goods
are manufactured. This means that any cost associated with
crossing the border--paying a trucker to wait in line, using a
customs broker, et cetera--is often paid multiple times during
the production process. These costs, which amount to a border
tax, eat away at the competitiveness of these goods and provide
an inadvertent boost to the relative competitiveness of
manufacturers outside our North America region.
Thankfully, the story does not end with the slow growth of
the early and mid-2000s. After falling sharply during the Great
Recession, U.S. exports to Mexico have rebounded, growing at an
average annual rate of 19 percent per year, which is faster
than the growth in U.S. exports to China. Much of the recent
growth is due to changes in the global economy: Currency
values, quickly rising wages in China, high shipping costs, et
cetera. But also in recent years, border management has become
somewhat more efficient. Much remains to be done in this
respect.
In my judgment, the framework for border management
currently in place is strong. Building on the Smart Border
Agreement of 2002, President Obama and then President Calderon
launched the 21st Century Border initiative in 2010, which was
reaffirmed by President Obama and President Pena Nieto in May
2013. The concept of a 21st century border asserts that not
only can security and efficiency at the border coexist, but
that a robust, multifaceted border management strategy can
simultaneously improve security, efficiency, environmental
sustainability, and the quality of life of residents living in
the border region. It is within this framework then that there
exists the opportunity to realize the full potential of the
U.S.-Mexico partnership for a secure and competitive border.
While significant progress has been made toward this goal,
I will outline a few important remaining challenges that the
subcommittee may wish to consider. Additional issues are
included in the written testimony.
Most cross-border infrastructure was built in the years
before NAFTA fundamentally altered the nature of the U.S.-
Mexico economic relationship, increasing the volume of traffic
and magnifying the importance of connectedness between our two
countries. Investments are needed to update and expand port of
entry infrastructure.
On staffing, infrastructure can only be utilized if the
ports of entry are adequately staffed. While the size of the
Border Patrol has increased five-fold since the early 1990s,
the number of Customs and Border Protection officers working at
the ports of entry has not experienced similar growth.
Trusted traveler programs--trusted traveler programs, which
Global Entry, SENTRI, FAST, C-TPAT, and the Mexican NEEC
Program are of critical importance. They offer expedited
passage across the border to those individuals and companies
that have voluntarily undergone extensive background checks and
committed to high security standards. By facilitating the flow
of designated low risk travelers, border officials increase
overall throughput while freeing up staff resources to focus
attention on individuals and shipments that present a higher or
unknown level of risk. Global Entry and SENTRI are growing
quickly, but C-TPAT and especially FAST, which are the
commercially-oriented programs, are facing challenges in
increasing their levels of enrollment and use. Increasing the
portion of commercial traffic in these programs may be among
the most cost-effective way to reduce congestion and boost
U.S.-Mexico trade.
Finally, cooperation with Mexico. Last, but extremely
importantly, border crossings are, by definition, bi-national
projects, but border management benefits enormously from
coordinated and cooperative efforts. Efforts are needed to
ensure that dedicated trusted traveler lanes extend as far back
into Mexico as needed so the benefits of limiting border
congestion can be maximized. Intelligence sharing for
strengthened border security has improved significantly over
the past several years, but additional progress is possible
there.
In an ideal world, U.S. and Mexican officers would work
side by side to run streamlined ports of entry together. To
move toward this ultimate goal while continually achieving more
concrete short-term progress, ongoing bilateral consultation,
confidence building, and capacity building efforts are all
needed.
Thank you, Mr. Chairman.
[The prepared statement of Mr. Wilson follows:]
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----------
Mr. Salmon. Thank you. It is now time for the members of
the subcommittee to be able to ask questions. Before I ask the
first question, I would like to introduce this letter from the
Fresh Produce Association of the Americas regarding our ports
of entry and some of the concerns that they have, without
objection.
I am going to start out by yielding myself 5 minutes for
questions, and I would like to start out with you, Ms. Marquez
Peterson. How has the emphasis on border security affected the
competitiveness and productivity of industries located along
the U.S.-Mexico border and throughout the United States, in
your estimation?
Ms. Marquez Peterson. Mr. Chairman, certainly the
conversation about border security is very complex, and a lot
of the businesses that we work with are primarily small
businesses that are interested in trade cross-border. Where we
have seen the challenges occur is really the wait times and
impediments of regulation when people are considering doing
cross-border trade.
I do not believe that particular border security details
have perhaps impacted them as much as the lack of resources in
the Customs officers, which increases their wait time at the
border, and certainly impacted our retailers in southern
Arizona, manufacturers, and entities, like the Fresh Produce
Association.
Mr. Salmon. To what extent do you think the U.S. Government
has included the views or ideas of U.S. manufacturers and
importers in the design of its border security efforts or ports
of entry improvements?
Ms. Marquez Peterson. So, Mr. Chairman, that is a very
interesting question. I think at the State level, which is
primarily where I operate, there is an Arizona Manufacturing
Council, which Glenn is very familiar with. I think more
conversation could be occurring. The conversation, such as the
tour that we recently hosted to the Offshore Group where they
are an Arizona entity allowing and helping American businesses
who want to manufacture in Mexico. I believe more dialogue
could occur at that point. There are some great resources that
I think they could be giving you day-to-day experiences.
Mr. Salmon. Have manufacturing industries presented
proposals on how trade facilitation could be enhanced? And, if
so, what are the proposals?
Ms. Marquez Peterson. So, Mr. Chairman, I am not aware of
proposals specifically for the manufacturing industry in the
State of Arizona, but perhaps Glenn Hamer can speak to that a
little bit more.
Mr. Salmon. Okay. Mr. Hamer, maybe you could address that.
And then, Mr. Hamer, I had an additional question on that. Does
the CBP have adequate personnel to manage trade flows at ports
of entry on the U.S.-Mexico border? And how would increasing
CBP officer deployments affect port hours of operation, border
wait times, trade enforcement, and import safety?
Mr. Hamer. Mr. Chairman, both are great questions, and I
believe one of the things that has really come out of this
hearing is that there is a real staffing issue. You know, we
have some really good things happening on the infrastructure
side, but an infrastructure that is not adequately staffed is
still going to create major problems. And it really seems that,
you know, one of the major things that could come out of this
hearing is the need to make sure that we have more resources on
the Customs side.
If we are able to get these new facilities or these
modernized facilities properly staffed, we are going to see a
decrease in wait time, and that will increase our
competitiveness, particularly in Arizona. I believe one of the
witnesses or earlier today it was discussed that we are having
some issues with Texas now. And I know not everyone on the dais
is from Arizona, but from the Arizona perspective, we want to
make sure that we can have the maximum amount of international
trade go through our borders. And probably the most concrete
thing I could say is if we are able to get some additional
resources into Customs, you could almost take it to the bank
that we are going to see smoother trade between our two
nations.
Mr. Salmon. One of my big frustrations is that a lot of
times in government we are penny wise and a pound foolish, and
we ought to be putting more and more resources into those areas
that are profit centers, and this definitely is a profit
center. This is an opportunity to increase commerce, and
increase jobs, and increase revenues, and it seems like kind of
a no-brainer.
Mr. Hamer. And, Mr. Chairman, if I may say, you know,
during your first round in Congress, I would argue that few, if
any, members had more of an impact in really increasing our
commercial opportunities with Asian countries. I mean, you take
a look at a lot of the work that you did for normal trade
relations and increasing our trading relationships with other
Asian countries, and you look at the increase in wealth and
opportunities in that part of the world. I think the more we do
on the infrastructure in our neck of the woods, the more
prosperous our State will be.
Mr. Salmon. Mr. Hutchens, I am running out of time. But,
you know, I think the entire panel has pretty much shared with
us today that the existing infrastructure and personnel are
inadequate to meet the demands of our current commerce or
desired commerce levels with Mexico. You have come up with some
good ideas for accomplishing things with limited government
resources. Could you maybe share what port infrastructure
investments should be viewed as top priorities?
Mr. Hutchens. Obviously the project that we have identified
as the top priority right now is Calexico, and part of the
reason we have identified Calexico as opposed to, you know,
certain Arizona LPOEs that require massive infrastructure as
well, is because the GSA has already funded the design for the
redevelopment of Calexico. This project was recognized as a
mission critical project 5 years ago. Twenty-eight million
dollars has been since spent on the design, but the budget
process for the improvements themselves has not proceeded, you
know, very far along. So those plans will get old, they will
get stale if you do not move forward on them. So that is why
that is the project that we have identified as probably the
most mission critical and most doable.
I would like to offer one other comment, if I may, about
staffing, and that the approach that I have talked about can
also have a very positive impact on staffing at the border
stations for two reasons. One, if the air conditioning system
breaks at an LPOE, instead of having to take money out of the
budget that might otherwise have gone to Customs agents, the
landlord is going to fix it. It is in the budget. It is in the
rent. You know what it is. In addition, you are not having to
divert personnel and personnel time to the administrative
burden of keeping the facilities clean, of keeping the lights
on, of these improvements. And that will also free up resources
at the CBP level to focus on the core mission.
Mr. Salmon. And ultimately, since I am hearing more from
the panel that infrastructure is a big issue, but staffing
maybe even is a bigger issue right now, I would be really
interested, and time will not permit an answer, but I would
love to maybe continue a dialogue on how--I am going to use the
wrong term--but public-private partnerships maybe with
staffing, too, not just infrastructure, could be addressed by
this Congress.
Mr. Hutchens. Certainly.
Mr. Salmon. Mr. Sires, I would recognize you.
Mr. Sires. Thank you, Mr. Chairman. I am just curious. I
assume that a lot of the merchandise accounts through these
ports come in containers, trucks? How much emphasis is placed
on security on the point of departure before it gets to the
border as point of entry? Is there a lot of emphasis in
negotiations? Because one of the things, I represent the Port
of Newark and the Port of Elizabeth, and after 9/11 obviously,
we get a lot of merchandise. Eighty percent of the merchandise
that comes through those ports is consumed in the region, and
only 20 percent goes to the rest of the country.
And one of the questions was, how do we secure these
containers? And they have come up with a pretty good system of
point of departure, you know, those companies that do business.
But, you know, I was just wondering here in Arizona how much
emphasis is placed on point of departure as point of entry in
terms of security?
Mr. Wilson. If you do not mind, Ranking Member Sires, I can
answer that question to a certain extent. The program C-TPAT,
Partnership Against Customs Terrorism, is exactly that. It is a
program where companies join----
Mr. Salmon. Mr. Wilson, could you bring the mic just a bit
closer? Thanks.
Mr. Wilson. Yes, absolutely. It is a program that--there we
go. Thank you. It is a program in which companies that join
agree to secure their entire supply chain starting at the point
of departure. It means that they install things like cameras,
seals on their containers, other mechanisms by which they can
ensure that the containers are not tampered with in the course
of transport to the physical border. And these have been
successful because they allow then Customs and Border
Protection at the ports of entry to spend less time inspecting
these containers because they have a higher level of confidence
that they do not contain illicit goods.
Now, the problem is that that those programs are not used
enough. We still need to get a higher percentage of the total
containers crossing the U.S.-Mexico border involved in C-TPAT
and the fast lanes that they can then use to cross the border.
Some very interesting new efforts are being piloted right now
in terms of Customs pre-clearance, which takes this process
really one step further. It allows there to be U.S. officials,
U.S. CBP officers in Mexico actually, you know, verifying the
safety and security of these containers as they are being
processed so that we can spend even less time inspecting them
as they cross the border. So it is a program that is very
important, both of these programs, and there are ways to
improve security and efficiency at the exact same time.
Mr. Sires. Mr. Hutchens, I was very curious about your
program of build, design, and operate. Are you talking about
operating actually these border entries?
Mr. Hutchens. No, we are talking about operating the, you
know, physical facility. The Customs function would be left to
CBP agents. In other words, the guy you hand your passport to
or who inspects the truck would continue to be a U.S.
Government DHS employee. The person is making sure that the
lights are on, that the grass is cut, as I said, the HVAC
systems are working. And quite frankly, a lot of the
maintenance would be in the roads, that the roads are well
paved. It would be the private developer who takes over the
operation of the facility, but the government operation would
stay in government hands.
Mr. Sires. They would get part of the tolls? Is that how
that works?
Mr. Hutchens. The tolls would be used to defray the costs
of the upfront improvements. You know, for instance, again, at
Calexico, we are talking about doubling the size of the east
port of entry, adding 3 new truck lanes, adding 6 new passenger
lanes. The tolls would go toward helping fund the cost of those
improvements.
And this is not a completely unique technique. It has been
employed by the Department of Energy. I just mentioned it since
we are in Arizona. And the Department of the Army specifically,
the Army was interested in working with Arizona in keeping
General Motors' warm weather test track here in Arizona. And we
did a project at Yuma Proving Ground where the Army leased the
land to General Motors. General Motors built a shared new test
track which is now used by the Army and General Motors for
vehicle testing. It is a very similar type process.
Mr. Sires. Yeah, I am familiar with this build and design
operation because we built a light rail. It is more used and
more effective with transportation because the concern I would
have is the security part of it.
Mr. Hutchens. Right, and that is why----
Mr. Sires. That is why, you know, the operations part of it
is handled by the government.
Mr. Hutchens. Correct. Correct. Very much like the Chicago
Skyway, but, yes, transportation works very well, and this is
functionally a transportation project. But the government
function would remain with the government.
Mr. Sires. You know, I always read about the tension on the
border. Tell me the impact this tension has had in the last few
years on the economy of this region.
Mr. Farnsworth. Mr. Ranking Member, I assume you mean the
tension between security and economic growth.
Mr. Sires. Yes. Yes. And after 9/11, everybody is very
concerned about terrorism.
Mr. Farnsworth. Yes, well, and appropriately so. I do not
know that anybody has actually quantified the amount of
foregone economic exchange, but I think we hear anecdotally all
the time of companies that find it easier to get product in
from China or product in from other places than simply from our
closest neighbor, Mexico, and even Canada, too.
You hear a lot of discussion about the so-called thickening
of the border, which means the border itself has become more
complicated to get across. And as global production patterns
have changed, this becomes important because if you are
bringing in a product from China, you bring it into the United
States once. If you are producing in North America, that same
product might cross the border three, four, five, sometimes
even six or seven times. So each time it has to cross the
border, that adds cost, delays, everything else.
And I agree with some of the things that have been said in
terms of C-TPAT and pre-clearance, and I think that is an
important part of the solution. But there are some even more
fundamental issues here. Just basic forms that have to be
filled out, I mean, they are different on both sides. And they
have to be filled out each time the product goes back and
forth. I mean, this is just a tyranny of small differences. And
what we need, we just need to think bigger about the
relationship and the way to understand that patterns of global
trade have changed. It is not the way we did things 20 years
ago.
North America itself is a production platform, but you also
have a couple of things that are coming online here in the next
year. Two thousand fourteen is going to be a huge year, perhaps
2015 when they actually open the Panama Canal. You are already
seeing ports in the United States dredging deeper, preparing
for the patterns of change that are coming through the Panama
Canal. Vice President Biden was just there with mayors from
various port cities in the United States. That is going to
change patterns of trade. It is going to make it easier to get
product into ports like New Jersey, and Florida, and Virginia,
et cetera. That could impact here.
But you also have the whole idea of energy liberalization
in Mexico, too, and we have talked a little bit about it, but I
want to be very clear. If that passes in Mexico in the way that
it could, that is going to open up a huge opportunity in
Mexico, not just in the energy sector, but in every sector
where energy is an input, and that is everyone. And to the
extent you have the cost of energy decrease in Mexico, which
was most likely what would happen, what you are going to see is
a manufacturing renaissance in Mexico in the same way it is
occurring in the United States and Canada. That is going to put
monumental pressure on the border because you are going to have
all that product trying to get into the other countries of
North America in a way that the border is already over-
burdened.
So what is going to happen when that increases
dramatically? Now, Mexico is trying to develop relations with
China right now. They are trying to develop relations with
Europe and other countries in South America so that the United
States is not their only market--over 80 percent of their
product comes to the United States--but that they diversify.
Having said that, if that energy reform occurs, it is going
to be, in our view, very important for the people of Mexico,
very important in terms of energy integration, et cetera, but
you are also going to put increased pressure on that border. So
that, plus the Panama Canal, plus the changing patterns of
trade means that, you know, if we are still dealing with the
border in the way of each border crossing. You know, it takes
20 years or whatever to get upgrades, and we are talking about
staffing, and we are talking about forms that do not match. The
private sector is just going to say, well, we are going to go
somewhere else, and that is what we are seeing. And that is not
just here in Arizona. That is across the border. That is Texas.
That is California. That is everywhere else.
So there is some urgency here, and the idea of getting the
private sector engaged in the financing side I think is very,
very important. The appropriations process in Washington takes
a long time. We know the budget realities in terms of
Washington. There are some big issues here, but I think working
together we can work to get through them.
Mr. Sires. Thank you. Thank you very much, Chairman.
Mr. Salmon. Thank you. Mr. Barber?
Mr. Barber. Again, I want to thank the chairman and the
ranking member for bringing us some really outstanding
witnesses. I have a few questions, if I could start with Mr.
Farnsworth. We have had several hearings in the Oversight
Committee and the full committee of the Homeland Security
Committee of the House. And We have focused a lot on what I
believe, and I think many members believe, is the lack of
accountability and transparency in the operation of the
Department of Homeland Security. In all fairness, 22 legacy
agencies, trying to pull them together into a common mission,
not an easy task.
But when I look at some of the money that I believe, quite
frankly, has been wasted, two examples. In Ajo, Arizona, the
Homeland Security Department built homes at the average cost of
$600,000 in a community where the average cost of homes is
under $100,000. We had a hearing recently where we were looking
at information technology improvements, $24 million on a
project that was stopped because it was not going anywhere.
So my question, Mr. Farnsworth is, given these constraints
that we have in these tight budget times, how would you, if you
were able to, direct the Department of Homeland Security to
focus on priorities? Where would you take that money that
should not have been spent wastefully and put it to make the
most use in terms of economic development and improvements in
what we want to have happen as you all have discussed here
today?
Mr. Farnsworth. Well, thank you for the question, and I
wish Assistant Secretary Bersin were here so that he could
answer directly on behalf of----
Mr. Barber. So do I. [Laughter.]
Mr. Farnsworth. So I certainly will not attempt to speak
for him or for the U.S. Government. But I do think there are
some important realities here in terms of where could
additional funds be spent. My personal view is that border
infrastructure is a clear winner here because you get to the
point, and we have talked a lot about it. All the witnesses
have talked about simply the ease of getting across the border.
Now, that could be in terms of bridges. It could be in terms of
enhanced facilities.
Each local community is going to have their own priorities,
and I think that is a critically important aspect of this. We
have to get the local communities involved. In fact, in some
ways, the local communities need to lead the effort so that
they are creating a sense of place not just for the communities
on this side of the border, but certainly on the Mexican side
of the border as well, so that you have a much more integrated
approach. I think that is critically important.
I do think that this is where, frankly, it is important to
bring in the conversation of private sector funding because
these are projects that are really, really expensive. And I
think with new and innovative financing models, I think that is
going to be a critically important aspect of the entire effort.
I mentioned in my oral testimony the North American
Development Bank, the NAD Bank. I think they are doing some
very interesting things. I think to the extent they could get
private sector money into their budget process and use that in
terms of border infrastructure and development, I think that
could be a positive step. I am not sure that people have talked
about that in any specific way. But again, there are vehicles
there. We just have to be creative and find them.
Mr. Barber. Thank you for that. And let me just turn to
both Lea and Glenn for this question. Sitting on the Small
Business Committee, one of the most frustrating things that I
have heard over and over again from small businesses is a lack
of access to capital. Recently I met with some businesses in
southern Arizona. One woman who owned a business, a very
successful business, for 20 years, was trying to expand her
business along the same track, but in a different area of the
country. She went to every bank she could think of in Arizona
that she had done business with. Could not get a line of credit
or a loan. She ended up going to Portugal to get the line of
credit that she needed. I mean, that is outrageous. We cannot
have that happen.
So from your experience, first of all, access to capital I
think is an issue. What are some of the ways in which you think
we can overcome this important problem, because we know that
small businesses are 70 percent of our economy? If we get them
moving, the economy gets moving. So what would you say about
access to capital?
Ms. Marquez Peterson. Absolutely. Thank you, Congressman
Barber. That is absolutely the number one issue we hear from
small businesses is the access to capital. I wish I had a
solution to pitch to you today, but we continue to have this
layer. I know there are activities and actions being taken by
the U.S. Government that is not flowing down. It is not hitting
our small business community. It is even harder to grow a
business and get access to capital to grow and expand here in
the United States. But when you take that the next step and
look to exporting, it is even more challenging.
Our chamber hosted a meeting just yesterday, in fact, with
Ex-Im Bank so that we could understand what it took to utilize
the services there, to find perhaps more delegate banks in the
State of Arizona who could assist businesses who need credit
insurance or need to do term loans to do exporting. We are out
there searching for those opportunities, but that is number one
the biggest issue that small businesses face.
Mr. Barber. Mr. Hamer?
Mr. Hamer. Congressman, I am not sure I have much to add. I
mean, we have been, the Arizona Chamber, strong supporters just
in the context of trade of the Export-Import Bank. But I
believe Lea's comments were right on the mark, and I am sorry
to hear about the situation with the company that had to go to
Portugal.
Mr. Barber. Pretty absurd, is it not, that we would go
there. Mr. Hutchens, I would like to ask you a question about
this. And I am going to say the word that must not be spoken,
``public-private partnership.'' I think it works. [Laughter.]
We like it. And, you know, the port of entry at Douglas,
which is on the border of the city. Right across from Douglas,
Agua Prieta, has about 240,000, Douglas maybe 40,000. The
economic improvement that could be made in Douglas and all of
Cochise County and all the way up Arizona are immeasurable if
that port were upgraded. It was built in 1932 without any
improvements pretty much since that time. We have been working
with the mayor and council down there to try to encourage and
support public-private partnerships in improving that port of
entry.
Can you speak to what barriers we in Congress need to
address to help move that forward? I am really practical when
it comes to these things. I want to see what we can do as
Members of Congress to be pragmatic and then move the agenda,
and not just to talk about it. So what things can we and should
we be doing about that?
Mr. Hutchens. There are a couple of barriers that are the
primary things that you have to be concerned with. The number
one barrier to these kinds of projects are a set of budget
scoring rules that OMB adopted in response to a congressional
resolution in 1990 called Budget Resolution 90-02. And the
primary focus of Budget Resolution 90-02 was the U.S.
Government can borrow money cheaper than the private sector, so
if we want to build a capital asset, the Federal Government
should pay for it up front and not lease it.
You know, that was a fine budget resolution when two things
were happening. One, the country had enough money to build
these kinds of projects, and, two, there was a fairly big
interest rate differential between what the Federal Government
could borrow money at and what the private sector could borrow
money at. And over the past 25 years, both of those things have
changed dramatically. Obviously the budget priorities of the
United States, there are things we have to fund, and a lot of
these infrastructure projects, which are long-term capital
projects and could benefit from private sector expertise, could
be funded through this lease-lease back mechanism. But again,
we have to deal with what are called the A-11 scoring rules,
which have a six-part test, and it seems like if we do not get
hung up on one of them----
I mean, one of the great things about the project I am
talking about is the tolling gets us under the primary problem
of this, which is it cannot exceed 90 percent of the value.
Well, if the tolls are paying for 40 percent of the project, I
do not have a 90-percent problem. What I am hearing from OMB is
they are concerned about the unique government nature of the
project. And as I say, as I addressed in my testimony, I do not
believe this is what those rules were intended to address. So
getting some relief from that, getting OMB to look at their
rules in a more 21st century realistic way would be very
helpful. GSA needs to be encouraged to pursue these projects.
They have, in effect, not pursued them because of the worry of
whether they were going to get approved by OMB, and so those
are the two things that really need to happen.
Mr. Barber. It sounds like a bureaucratic two-step to me. I
am familiar with that in State government, and I am seeing it
in abundance in the Federal Government. We just need to cut
through all that nonsense and get to the decisions.
I just have one follow-up question, if I may, Mr. Chairman,
and that is, have you seen or been able to study effectively
what the impact of tolls have on travel, on tourism, on
commercial travel? Does it have a negative effect? Does it
suppress that desire to come through that port of entry?
Mr. Hutchens. What we have seen is that it actually does
not have a negative effect. The fact is that people are willing
to pay not to have to wait 2\1/2\ hours in line. The primary
tolling focus will be on the commercial traffic, and believe
me, a truck sitting in line costs $125 an hour to sit there. If
they can pay $25 to go across the border in 15 minutes as
opposed to spending 2\1/2\ hours in line, for them it is pure
economics.
As we design these tolling schemes, the primary emphasis
will be on the commercial traffic, then there will be emphasis
on faster lanes on the auto, and as little as possible on the
pedestrian side because that is where it has the most impact.
But we have found that for convenience, people are much willing
to pay the convenience actually when you implement these, and
southern California is where they have been implemented the
most. Traffic actually increases, not decreases.
Mr. Barber. Thank you, Mr. Chairman. I yield back.
Mr. Salmon. Thanks, Mr. Barber. I think this recurring
theme that we all seem kind of excited about, the whole idea of
public-private partnerships, it sounds like a big part of the
impediment is just maybe we need some legislative language,
some clarity from the Congress to the administration to jump
start this thing. I think that is kind of what I am hearing.
Mr. Hutchens, if you could maybe guide us to how that would
be----
Mr. Hutchens. I would be happy to send you some follow-up
materials that I have prepared.
Mr. Salmon. That would be great. That would be great. Ms.
Sinema.
Ms. Sinema. Thank you, Mr. Chair. And my question, sir, is
directed to Ms. Marquez Peterson and Mr. Hamer. Thanks so much
for being here today, both of you. In particular, I wanted to
just get your feedback about how Arizona businesses find their
own interaction with the trusted trade programs that do exist
with imports into the United States from Mexico. And if you
can, talk about what some of the concerns or benefits your
members feel about cargo pre-clearance programs.
I know that there has been some excitement about cargo pre-
clearance programs, but also some concerns around security and
cost-effectiveness. So if you have feedback from businesses in
southern Arizona and central and northern Arizona, that would
be really helpful. Thanks.
Mr. Hamer. Do you want to go first?
Ms. Marquez Peterson. Okay. Thank you, Congresswoman
Sinema. Primarily, a lot of our interaction has been with
Arizona businesses who are at a point in their business life
cycle, I guess I would call it, where they are prepared to do
exporting. They are looking for relationships cross-border,
specifically in Mexico, which is where our chamber assists. A
key partner has been the U.S. Department of Commerce and
commercial services. We refer quite a bit to Eric Nielsen, who
I believe is here in the audience, the businesses that are
qualified and able and have that infrastructure and that
financial stability to look for contacts cross-border.
Oftentimes, the biggest challenge we hear from them is
certainly looking for the vendors, suppliers, the connections,
building those relationships.
Working in Mexico is a much longer sales cycle. It is
creating that relationship, and it could be throughout a year
or multiple years before an actual transaction occurs. Our
Chamber of Commerce is focused particularly on working with
Mexican chambers of commerce so that we are business to
business, B2B, and we are establishing those relationships and
focusing and stressing the economic interdependence of our two
States in the case of Sonora and Arizona that kind of outlives
a lot of the politics that are happening, whether it is in our
State or in our Nation. And that seems to be handled well
through the business community.
So I think that is probably the most important resource we
have got is with the U.S. Department of Commerce, and we are
exploring other opportunities at this time.
Ms. Sinema. Thanks.
Mr. Hamer. Thank you, Congresswoman, and I want to--I did
it in my opening remarks--thank the other members of the
Arizona delegation for being here today. It says a lot.
Congressman Barber, I know this is your neck of the woods, but
you have really worked very hard on these issues, and
Congressman Sinema and Congressman Schweikert, for you to
travel from the Phoenix area today says a lot. And I would
second Lea's comments about the good work of Eric Nielsen and
the U.S. Department of Commerce, that we have found them to be
very helpful for a number of our members.
In terms of the pre-clearance, there is very, very strong
support from our members to do more of that type of activity.
Of course, we are all concerned about security, but we believe
that there are ways that we can do it so that we would not
jeopardize security, but could dramatically increase the
efficiency of our commercial interactions.
Ms. Sinema. All right. Thank you. And, Mr. Chair, not a
question, but just a follow up to Mr. Hutchens' last statement.
I think it would be really helpful to get information from you
and your team about what we as Members of Congress could do to
clarify public-private partnerships. While it may not be a
great word for you, it is very popular in Arizona, and it has
helped us to create and implement some of the most cost-
efficient and effective programs in the country. So we are very
proud of public-private partnerships, and we would love to, I
think, work together to find opportunities to streamline
Federal Government rules and regulations so that we can
continue that work in Arizona and help other parts of the
country do what we do well. Thanks.
Mr. Hutchens. I will make sure I coordinate with the staff
so that I can get that material to you.
Ms. Sinema. Thank you.
Mr. Salmon. I think the appetite is pretty voracious up
here for something like that. I recognize Mr. Schweikert.
Mr. Schweikert. Thank you, Mr. Chairman. Just for the fun
of it, Mr. Wilson, what do you think of Mr. Hutchens' sort of--
I do not like to call it a ``toll,'' but sort of participatory
costs for those who want to save time whether they have
perishables or just-in-time inventory.
Mr. Wilson. I know the concept is a bit controversial, and
there are proponents, and there are people who are detractors.
I look at the example of Texas where many of the bridges across
the Rio Grande are actually owned by the cities, and they
generally do use tolls on those bridges as a way to pay for
that infrastructure. And that has been a very successful model,
so it is actually a model not in the context of public-private
partnerships, but in public-public partnerships, has been used
on the border between the U.S. and Mexico for a long time with
a lot of success. But it is obviously important to make sure
that we do not implement tolls in a way that does limit
traffic, that does limit the ability of members of family to
visit one another.
Mr. Schweikert. Well, but conceptually it does just the
opposite. For truck traffic it creates a, hey, here is the
value of a couple of hours of produce sitting in the back of my
truck, and pulls that traffic away. Does that provide, you
know, other capacity in other spots? I mean, that is at least
the underlying economic theory.
Mr. Wilson. That is absolutely how it tends to work.
Mr. Schweikert. Mr. Hutchens, how do you feel about Mr.
Wilson talking about some of the express programs? What is it?
It is FAST and some----
Mr. Wilson. C-TPAT.
Mr. Schweikert [continuing]. C-TPAT are being under-
utilized. And what are we doing wrong? Are we not marketing
them? Are we not educating? You know, so why are some of our
partners on the other side of the border not embracing these
more so?
Mr. Hutchens. I think that, you know, you are getting a bit
out of my area of expertise, but I do think that a lot of those
programs were really designed with sea ports of entry in mind.
A lot of the containers, a lot of the cargo stuff, I know a lot
of the work they have done at Oakridge National Laboratory in
terms of being able to see inside vehicles are geared toward
containers and not necessarily 18-wheeled trucks going up and
down the road.
Mr. Schweikert. Yes. And that is one of the uniquenesses of
what we do. But to that, Mr. Farnsworth, sort of the same
question. Why not more adoption?
Mr. Farnsworth. Well, I think there is an education issue
in some ways, just the idea that this could be a real solution.
You know, the truth of the matter is we have to look at all of
the programs that are out there. It has to be an all-of-the-
above type solution, whether it is C-TPAT, whether it is fast
lanes. I think that is exactly right.
But I come back to there are other things that need to be
looked at, too. I mean, just basic forms need to be
standardized, and you should not need to have the same process
back and forth every time you cross the border. I mean, this
should be something that we can figure out together with our
Mexican partners in this. So I think an all-of-the-above
approach could work pretty well.
Mr. Schweikert. In that same line, I know there was a
discussion last year about even doing an electronic form where
you pull it up, you hit the button, you send it in, instead of
the, you know, carbonless paper walking up to the staff and
having to fill it out and look for your mistakes. From your
position, when you look at the discussion of trying to do a mix
of structure, is the problem physical structures at the border
or is it staffing?
Mr. Farnsworth. I think it is both, and I think it varies
depending on each border crossing. And I think this is why it
is so vitally important to engage the local communities because
what works in San Diego and Tijuana may not work in Laredo and
Nuevo Laredo. And what might work in Arizona might not work
elsewhere because the issues are different. I think if you look
across the border, and I have participated in meetings across
the border from San Diego literally to Laredo, there are
different issues. And sometimes it really is a staff problem.
Mr. Schweikert. But to that point, let us say, you know, I
came to you tomorrow and said, hey, we found magic money. You
have unlimited staff. Are you maximizing the use of your ports?
Remember there have been the discussions of should we go to 24
hours in certain lanes. Has this been properly modeled?
Mr. Farnsworth. I think that the answer would be that if
you just found a magic pot of money to be utilized right now,
you are going to have existing infrastructure. So the best use
of that money would be in terms of personnel and finding ways
to increase staffing time, increase agents, and increase the
throughput in terms of existing infrastructure.
Mr. Schweikert. So today staff and personnel would consume
more of my capital than structure?
Mr. Farnsworth. Well, if you had that pot of money and you
just had to spend it in this fiscal year, yes.
Mr. Schweikert. Mr. Hutchens, in that sort of discussion,
as you start to model ways to pay for it, because, you know, as
we start to move into the demographic crisis that, look,
everyone understands what is happening. Resources are already
very, very tough. Is there a way of using that sort of express
pass mechanic, tolling mechanic to also provide hours of access
as much as new physical facilities?
Mr. Hutchens. You know, much like the concern over tolling
and is tolling going----
Mr. Schweikert. I beg of you to pull the mic a little
closer.
Mr. Hutchens. Sorry. Much like the discussion with tolling,
you know, there is a question of if you increase staffing and
you say we have got these three lanes, and they are open 24
hours a day. But do people really want to cross the border
between 2 o'clock and 4 o'clock a.m. because that is when the
time is available. I think that it is a balance between
staffing and facilities. If you are going to create these
opportunities for trade, you know, you want people coming
across the border to go to the shopping centers, as we were
talking about, when the shopping centers are open, not in the
middle of the night. So I think staffing is very important.
And for CBP, it is one of their concerns as we talk to them
about increasing the number of lanes. They are worried about
where they are going to get the staff from. So we have got to
focus on both.
Mr. Schweikert. If today our staffs wanted to say where is
the best data sets, you know, where is my data set to say here
is where I am at capacity. Is it capacity because of my hours
of service, because of my physical location? Is it I have
enough lanes, but the lanes to it are restrictive on either
side of the border? Where do I go to get the best quality
research to understand what we should be doing? And I see Mr.
Wilson sort of standing up in his chair. [Laughter.]
Mr. Wilson. It is because there is a fundamental problem in
that respect, and the fundamental problem there is that we do
not have clear data on the wait times that are currently in
place at each of our border crossings. There is not a
consistent methodology being applied to measure the length that
cars and individuals are waiting to cross the border. There is
some work that is being done on that to use RFID chips to
improve that data set. But it is critical that we improve that
data set so that we can make rational decisions about
investment at the border.
Mr. Schweikert. And my understanding is it is ultimately
much more complicated than that. In discussions I have had with
some of Mr. Hamer's members, it is not only wait times, it is
wait times of which hours in the day, what types of products,
seasonality of certain products, and how that ends up causing
the skewing effects. And then, god forbid, it be on either side
of a holiday.
Mr. Wilson. And that is why we need data to be able to
analyze each of those variables that you brought into the mix
there.
Mr. Schweikert. All right. Thank you all. Mr. Chairman,
just two quick comments, and this is to my buddies at the other
end of the table. Sometimes when you see us sort of cringe a
little bit when we use the term ``public-private partnership,''
it is not the working with private sectors, vice versa. It is
who ultimately carries the risk portion of the transaction,
because so many times in the past, you know, as government took
the risk and handed sort of the profit-making side to the
public, there needs to be an honest risk sharing instead of
socializing risk and privatizing the profit side.
And your discussion, this one, you and I have had multiple
times. We passed the JOBS Act a couple of years ago that was
going to have crowdfunding, and, you know, the Reg As, and all
the other things that were going to provide access to capital.
And it has disappeared in the bureaucracy, particularly at the
SEC, which breaks my heart because that was designed
particularly for our types of business. And Congressman Barber
has heard me rattle on about this in the small business
community and committee because it was designed for our types
of businesses here in Arizona. And if we could ever get some
rational rule sets out of the SEC, I think actually we have a
great future. So, Mr. Chairman, with that, I yield back.
Mr. Salmon. Thank you. All the questions have concluded,
and this has been an outstanding panel. I cannot tell you how
much I appreciate you taking the time. Thank you for braving
the weather, those of you that came in, and good luck getting
back tonight. [Laughter.]
A few of us are on the red eye tonight, and we are kind of
biting our nails to see how that goes. But I want to thank you.
More than anything, I wanted this hearing to symbolize
something far greater, and that is that Arizona, in particular,
is extremely interested in improving our relationship with
Mexico; that in the past we have had what I would like to call
water under the bridge. It is a new dawn, and you have got a
team of people up here, both sides of the aisle, that want to
do everything that we can to try to improve those relationships
not just with trade, but in every aspect of that bilateral
relationship. We would like to explore the opportunity, I
think, for some economic trade zones and what other
opportunities can put us in the most positive light as we
possibly can.
I think Mr. Farnsworth was talking about some of the
changing demographics of global trade. With China losing some
of its manufacturing swagger, Mexico is going to be up at the
forefront. We would like to be partnering shoulder to shoulder.
And on the energy forefront, those reforms portend to provide
economic opportunities not just in the energy sector, but
across the table. And we would like to be there to work with
them to get that done.
So that having been said, thank you so much. And this
subcommittee hearing is adjourned.
[Whereupon, at 12:11 p.m., the subcommittee was adjourned.]
A P P E N D I X
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Material Submitted for the Hearing Record
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