James Gerber, “Are Services an Alternative to Nearshoring in Northern Mexico?,” Rice University’s Baker Institute for Public Policy, March 12, 2026, https://doi.org/10.25613/YBGQ-3M71.
Changes in U.S. trade policy since 2016, coupled with the global pandemic, have generated excitement in Mexican border cities about the possibilities for nearshoring. The hope is that U.S. firms and other sellers into the North American market will relocate investments into northern Mexico. A more pessimistic view is that water, energy, and skilled labor shortages in Mexican border cities are a major obstacle to significant new investments. On a global scale, manufacturing automation continues to depress labor demand in manufacturing, while intense competition for new investments with other low wage countries poses additional obstacles for Mexican cities. Less noted is the growth in services’ productivity and trade. Information and communication technology (ICT) enabled services trade has continued to grow globally, including in emerging markets while manufacturing led export growth has become more difficult. Services are usually not a key part of national economic development strategies due to the problems of scalability, innovation, and productivity. Nevertheless, the growth rate of productivity in services tends to be higher than in manufacturing, while the productivity gap favoring manufacturing is smaller than generally recognized. Services exports also have the potential advantages of lower water and energy consumption, less reliance on seaports, highways, and rail connections, and greater employment opportunities for women. They require a steady and reliable supply of electricity, broadband connectivity, together with new workforce skills. This research paper looks at the complement of service activities in Mexico’s border cities and compares productivity levels in services and manufacturing.
This page was updated on March 17, 2026, to reflect revisions made by the author.
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