Why What’s Good for Mexico Is Good for Us

There’s an opportunity for more productive discussions with our neighbor to the south. We shouldn’t squander it.

President Obama is welcomed by Mexican President Enrique Pena Nieto upon his arrival at the City Hall in Toluca, Mexico, on February 19, 2014. Obama arrived in Mexico for a summit with the Mexican and Canadian leaders focused on trade but marked by some frictions between the North American trio. 
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Ronald Brownstein
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Ronald Brownstein
Feb. 20, 2014, 4 p.m.

Fol­low their roots and two of Wash­ing­ton’s most po­lar­iz­ing de­bates twist back in­to the same con­tested ground: the com­plex U.S. re­la­tion­ship with Mex­ico. Both the con­gres­sion­al stale­mate over im­mig­ra­tion re­form and the rap­idly harden­ing im­passe over trade policy are groun­ded in ex­ag­ger­ated con­cerns about this coun­try’s in­ter­ac­tion with its neigh­bor to the south.

That’s how Si­mon Rosen­berg, founder of NDN, a cent­rist Demo­crat­ic group that tracks bor­der is­sues, per­cept­ively sees things. On over­haul­ing the na­tion’s im­mig­ra­tion laws, con­ser­vat­ives are ped­dling fear; on trade, it’s lib­er­als rais­ing alarms. But in each in­stance, the case against Mex­ico is “more theo­lo­gic­al than fact-based,” as Rosen­berg says. Un­less these in­flated fears are dis­pelled, the United States will fail to seize the op­por­tun­it­ies for fur­ther eco­nom­ic in­teg­ra­tion that Pres­id­ent Obama, Mex­ic­an Pres­id­ent En­rique Peña Ni­eto, and Ca­na­dian Prime Min­is­ter Steph­en Harp­er touted dur­ing their brief sum­mit in Mex­ico this week.

On the trade is­sue, the shad­ow of the North Amer­ic­an Free Trade Agree­ment with Canada and Mex­ico, which George H.W. Bush ne­go­ti­ated and Bill Clin­ton pushed through Con­gress in 1993, looms over Obama’s ef­forts to reach fur­ther free-trade deals, par­tic­u­larly the 12-na­tion Trans-Pa­cific Part­ner­ship — nearly con­cluded — that would in­clude Mex­ico and Canada. Op­pon­ents of that deal like to ar­gue that NAF­TA proves the dangers. “By any meas­ure,” Jeff Faux of the lib­er­al Eco­nom­ic Policy In­sti­tute wrote re­cently, “NAF­TA and its se­quels have been a ma­jor con­trib­ut­or to “¦ rising in­equal­ity.”

But NAF­TA’s im­pact, two dec­ades later, has been more nu­anced. While the over­all volume of U.S. trade with Mex­ico has soared, crit­ics are right to point out that the bal­ance has de­teri­or­ated, from roughly equal in 1994 to a $61 bil­lion U.S. trade de­fi­cit today. (The United States runs a smal­ler de­fi­cit with Canada.) And even NAF­TA’s ad­voc­ates ac­know­ledge that the treaty en­cour­aged some U.S. man­u­fac­tur­ers to shift jobs to Mex­ico.

Yet in a re­lent­lessly glob­al­iz­ing world, most jobs that moved to Mex­ico since NAF­TA would likely have shif­ted to some lower-wage coun­try. “We are a glob­al eco­nomy wheth­er we like it or not,” says Los Angeles law­yer Mickey Kan­tor, who served Clin­ton as U.S. trade rep­res­ent­at­ive when Con­gress ap­proved NAF­TA. “Busi­nesses, cap­it­al, and jobs are go­ing to move back and forth.”

What crit­ics miss is that the U.S. is bet­ter off when those jobs move to Mex­ico rather than to China or else­where in Asia. Since NAF­TA was en­acted, the eco­nom­ic re­la­tion­ship between the U.S., Mex­ico, and Canada has been trans­formed. No longer does each coun­try sell things to the oth­ers in isol­a­tion. Now, all three are woven in­to a soph­ist­ic­ated, in­teg­rated sup­ply chain. “We build things to­geth­er, and we sell it to the world to­geth­er,” a seni­or ad­min­is­tra­tion of­fi­cial said be­fore the sum­mit began.

This in­teg­ra­tion has helped U.S. man­u­fac­tur­ers “main­tain com­pet­it­ive­ness by im­port­ing parts and com­pon­ents” from lower-cost Mex­ico while pre­serving oth­er high-value activ­it­ies in the United States, ac­cord­ing to Duncan Wood, dir­ect­or of the Mex­ico In­sti­tute at the Woo­drow Wilson In­ter­na­tion­al Cen­ter for Schol­ars. The two eco­nom­ies are now so con­nec­ted, he notes, that each dol­lar of goods the U.S. im­ports from Mex­ico con­tains a re­mark­able 40 cents of value that ori­gin­ated in the United States — com­pared with only 4 cents for China. “By im­port­ing goods from Mex­ico, as op­posed to im­port­ing them from China,” Wood says, “you are sup­port­ing jobs in the United States.”

Out­dated ste­reo­types equally plague the im­mig­ra­tion de­bate. House Re­pub­lic­ans in­sisted re­cently they were shelving re­form le­gis­la­tion be­cause Obama had failed to se­cure the bor­der. But with de­port­a­tions soar­ing and the es­tim­ated num­ber of il­leg­al entries less than half the level of a dozen or so years ago, the best es­tim­ates con­clude that more un­au­thor­ized im­mig­rants are leav­ing the U.S. each year than ar­riv­ing.

The irony, Rosen­berg says, is that the Right’s con­cerns about im­mig­ra­tion from Mex­ico and the Left’s un­ease about U.S.-Mex­ic­an trade both point to­ward the same solu­tion: bol­ster­ing our south­ern neigh­bor. “If those are your driv­ing fears, the single best way to re­solve both of them is to lift Mex­ico up the eco­nom­ic value chain and make it a more mod­ern coun­try,” he says.

Un­til re­cently, Obama didn’t pay much at­ten­tion to Mex­ico, which still faces moun­tain­ous prob­lems of drug vi­ol­ence, cor­rup­tion, and in­equal­ity. But as Peña Ni­eto pur­sues the sweep­ing eco­nom­ic re­forms he spot­lighted at the sum­mit, a win­dow is open­ing for more pro­duct­ive dis­cus­sions.

North Amer­ica con­tains im­port­ant ad­vant­ages in the glob­al eco­nom­ic com­pet­i­tion, by Wood’s ac­count, in­clud­ing an ac­cel­er­at­ing en­ergy boom, a re­l­at­ively young pop­u­la­tion, and the con­tin­ued in­teg­ra­tion of the re­gion’s eco­nomy. Two ways the U.S. can max­im­ize those as­sets are by en­act­ing im­mig­ra­tion re­form, which would es­tab­lish pre­dict­able labor flows, and by com­plet­ing the Asia-Pa­cific trade agree­ment, to open mar­kets for the emer­ging North Amer­ic­an sup­ply chain.

This To Do list sug­gests an­oth­er way the trade and im­mig­ra­tion de­bates are linked. Just as im­mig­ra­tion re­form can pass only if Speak­er John Boehner is will­ing to ad­vance le­gis­la­tion that most House Re­pub­lic­ans op­pose, the Pa­cific trade pact can be­come law only if Obama per­severes and over­comes op­pos­i­tion from most House Demo­crats, as Clin­ton did with NAF­TA. Un­less each lead­er first chal­lenges his friends, the U.S. will squander valu­able op­por­tun­it­ies presen­ted by its neigh­bors.

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