Transaction Costs: Delays at the San Diego-Tijuana Border

by Elaine Schwartz    •    May 31, 2013    •    1230 Views

By: Lauren Miller, Guest Blogger and Senior at Kent Place School

The San Diego-Tijuana border is the busiest border crossing in the world. Over 80,000 people cross daily for the primary reasons of commuting to work, shopping, visiting family and friends, and attending school. Based on a survey completed between July 2010 and June 2011, the average time people waited to cross the border was 52 minutes, and at peak times, up to 2 hours. The long waits reflect the high border security enforced by the US government in response to heightened concerns of illegal immigration.

A proposal to expand the border infrastructure has been approved, but no action has been taken to realize the plans. In addition to adding more crossing lanes, the border must hire more agents and update its technology in order to cut inspection times down from minutes to seconds. Although Tijuana is still a very poor region along the border, the city has increased its GDP by over 60 percent ($10 billion to $16 billion) in the past decade, stimulating job creation and wealth. As Mayor Carlos Bustamante of Tijuana remarked,  “We are an economic force now in a way that we were not a decade or two ago. It is in everyone’s interest to take advantage of that.” A more fluid border will strengthen the economic connection of San Diego and Tijuana and lead to greater prosperity on both sides.

The binational region of San Diego and Tijuana is a haven of economic opportunity. San Diego is thriving as a center of technological development and education, and Tijuana is vastly expanding its infrastructure to accommodate a growing manufacturing sector. Together these cities have the potential to immensely gain from trade with one another. However, an incredibly tight border inhibits San Diego and Tijuana from efficiently capitalizing on their ideal geographic and economic position.

As Mayor Bob Filner of San Diego remarked, “We need to make the border the center, not the end — but the biggest problem we have is not security, it is openness and communication.” A study estimated that the San Diego-Tijuana region loses $2 billion dollars annually to the long border waits. San Diego is one of the safest regions along the Mexican border, so increased border security is not only unnecessary, but discourages cross-border relations and the opportunity for huge economic gains.

An orthopedic company, DJO, based just outside of San Diego, has moved its manufacturing to Tijuana. In doing so, DJO created hundreds of jobs and was able to maximize profits by capitalizing on cheap labor and low shipping costs. If border security becomes more efficient in the region, business ventures as this would become increasingly appealing to Californian companies and stimulate tremendous economic growth in San Diego and Tijuana.

The Economic Lesson: The long delays at the San-Diego-Tijuana border are transaction costs that make cross-border trade more expensive. Increasing efficiency at the border will decrease the cost to trade, encourage strong cross-border relations, and stimulate sustained economic growth in the region and ultimately throughout both countries.

Sources: This New York Times article inspired my interest in the San Diego-Tijuana economy and offered fascinating statistics. I also found additional information from this article on Patch, and Wikipedia offered a great overview into the history of the region.

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