Foreign trade zones were sparse in 1965 and those in existence back then had ocean and river connections.
There was not a single land port-based foreign trade zone in the mid-1960s. It was 1965 when a group of McAllen business leaders got the idea of establishing a FTZ. These zones allow companies to bring goods onto U.S. soil without paying duty taxes and use parts to manufacture a product that can be exported without import/export surcharges.
It was a leap of faith to believe a FTZ could make it in McAllen. The maquiladora industry was just starting in Mexican border cities. It was theory that a U.S. border city could connect logistically to manufacturing in Mexico. The uncertainty didn’t stop the city’s business leaders from raising funds through the selling of bonds to purchase land. They would establish the infrastructure for what would become the McAllen Foreign Trade Zone #12 in 1970.
On what was once farmland well south of McAllen at that time, FTZ #12 was built. Warehousing and shipping operations would soon follow. It would become one of the nation’s busiest such zones and the first non-seaport FTZ in the United States. Eras have passed and border trade and commerce has changed dramatically since 1970, but it was still noteworthy to mark the 50th anniversary of McAllen’s FTZ in October 2020 and what it has meant to the city.
FTZ Defines A City
“The foreign trade zone is a big part of that magical thing that made McAllen what it is,” said Keith Patridge, the president and CEO of the McAllen Economic Development Corporation. “It’s about a bunch of men who recognized many years ago an opportunity and went after it for the good of the community.”
McAllen’s FTZ rumbled in the 1970s and 80s and into the 1990s. Trucks and commerce were going from the maquila plants of Reynosa to their warehouses and shipping points in McAllen. General Electric, Zenith and many other Fortune 500 companies operated huge warehouses and transportation operations at the FTZ.
The cross-border trade established McAllen as a preeminent capital of business. It solidified its identity as a city of both business and economic development. This was especially true during the era of NAFTA.
“It became a manifestation of what made McAllen McAllen,” said Patridge, who also oversees the FTZ in his role as president of the EDC. “It became a key component in the character of McAllen.”
McAllen’s FTZ for many years was led by Mike Allen. The priest-turned-EDC president was a relentless promoter and believer in McAllen’s potential as a business leader on the border. He was particularly known for his close ties to Reynosa’s maquiladora industry. Patridge succeeded Allen and has made his own mark in his leadership of the EDC and FTZ.
USMCA And The Future
McAllen and other border cities are about to enter another momentous era of trade and commerce. The USMCA agreement will tweak NAFTA rules, mandating a higher percent of the total value of a product be made in the United States, Mexico or and Canada. In the automotive sector, at least 40 percent of a vehicle has to be produced by workers making at least $16 an hour with benefits. Economic development specialists hope it will lead to new manufacturing facilities moving to the Rio Grande Valley.
“We’re all hoping that it lead to some great opportunities for the Valley,” Patridge said of the new USMCA agreement.
It’ll be the latest chapter in a story that began 50 years in scouting farmland for what would become one of the nation’s biggest FTZ success stories.