Mexico and the United States

by | Oct 24, 2001

In less than a decade, Mexico and the United States have outgrown the North American Free Trade Agreement, NAFTA. Mexican president Vicente Fox would like to move on to something he has called “NAFTA plus.” U.S. president George W. Bush appears to be listening.

The two presidents have much in common. Both come from conservative political parties. Both embraced centrist or “compassionate” agendas (though not always consistently) in domestic politics. Both were elected by a minority of their nation’s voters. Both face major problems in getting legislation through their congresses. Both could gain leverage at home with foreign policy breakthroughs. And both recognize that rationalizing and deepening the U.S.-Mexican relationship would be a logical place to do just that.

All this suggests that in the next few years the Mexican and U.S. governments will make rapid progress in improving aspects of the relationship that are controlled by their respective executive branches. This will include cooperation to reduce the dangers faced by undocumented migrants crossing the border, solving a series of NAFTA-related trade disputes (trucks, avocados, tuna, and the like), and improved collaboration between law enforcement agencies (especially in the drug war) and military establishments. In these areas and some others, the two presidents have the power to act without new legislation.

Unfortunately, the agenda of urgent issues that both governments will have to deal with, and very soon, is much longer. Immigration, the border environment and infrastructure, NAFTA extension or separate free trade agreements involving other countries, and many others questions cannot be addressed without Congressional action in one or both countries. Neither president is well placed to build this kind of consensus.

Thus, the future of Mexican-U.S. relations will be determined by the answers to two key questions. First, how and to what extent will economic trends, future elections, evolving public opinion, and powerful private pressures persuade the two congresses to transform the legal and institutional framework of our relations? Second, how will non-governmental activity–including trade, investment, migration, the media, labor unions, NGOs, and even protesters and their marches–change the context in which both governments make their decisions about the future? Of course, presidents will always be major players in relations between Mexico and the United States, but they are not the only players nor even the most important ones anymore.

To put current actors and issues in perspective, it may be useful to peer into the future and ask what both countries should be doing now to ensure maximum economic growth, social progress, a clean environment, democratic governance, and the benefits of cultural diversity for their citizens a decade or two in the future? What will U.S.-Mexican relations look like after another generation of cultural, social, political, demographic, and economic changes in both countries? How will changing U.S.-Mexican relations impact, or be impacted, by changes in the rest of the hemisphere or the globe?

 

Start With the Border

The flow of capital, technology, goods, and services between the United States and Mexico has become progressively freer since Mexico’s turn toward liberalization beginning in 1985 and the further boost from NAFTA in 1994. All that remains is to complete that process–and drop restrictions on the international migration of citizens and residents between all three NAFTA countries. Twenty years from now, the borders between the United States and its two neighbors may have ceased to exist for all practical purposes–like the borders between the European Union countries, where guard posts, immigration controls, and customs inspectors have all disappeared.

Currently, an estimated 450,000 Mexican citizens enter the United States every year, over a third with documents and the rest without. In a U.S. labor force of 140 million, the impact of Mexican immigration is very small.

High wages provide the incentive to move to the United States and the presence of friends and relatives at the end of the journey lowers the cost and the risk of migrating. Average wages in the United States, adjusting for differences in price levels, are three to four times higher than Mexico, though the difference between U.S. wages and the relatively high wages paid in Mexico’s border states like Baja California, Chihuahua, and Nuevo Leon is smaller. The question for U.S. policymakers is how many more Mexicans would immigrate if the United States were to open the border. One way to find out is to open the border slowly and monitor the results.

This is exactly what the U.S. and Mexican governments have agreed in principle to do, possibly by expanding and modifying existing temporary or “guest” worker programs. The commission established by presidents Bush and Fox at their first meeting in February 2001, consisting of the U.S. Secretary of State and Attorney General and their Mexican counterparts, has already recommended a series of changes in U.S. immigration laws, from legalization of Mexicans already in the United States to a major increase in the number of Mexican citizens admitted to work in the United States. The first big test of the new U.S.-Mexican relationship will come when Congress takes up these issues in late 2001 and 2002.

The movement towards an integrated North American labor market will inevitably raise major issues for all three NAFTA countries. For the United States, at least two questions will need to be faced. First, though legalizing an existing flow of undocumented migrants would have miniscule short term effects, the number of Mexicans seeking to immigrate could begin to increase well beyond current levels in future years. If Mexican immigration rises quickly while U.S. economic growth is slowing down or a recession is in progress, wages in the U.S. could be pulled down somewhat, especially among the more vulnerable unskilled workers. These wage effects would be too limited and localized to produce a major anti-immigrant backlash, but the growing immigrant population could create pressure for major extensions of the federally-funded social safety net, especially in heath care and education to help states and communities cope. On the other hand, since immigrants from Mexico are on average much younger than the U.S. population, immigrant contributions to social security and Medicare are already beginning to play a significant role in keeping these programs financially sound and viable.

Second, if the United States moves to liberalize immigration from Mexico, it will have to re-examine its immigration policies toward other parts of the world. Whatever policy the United States adopts towards immigration from the rest of the Western Hemisphere or the world as a whole will be much less difficult and costly to enforce with Mexico’s cooperation. And the price of Mexico’s cooperation is freer Mexican immigration. Indeed, with relatively free immigration from Mexico, the effective land border of the United States would become the Mexican border with Guatemala. Mexican harbors and airports would become points of entry into the United States and vice versa. Delegating enforcement of immigration laws to the police and immigration authorities of another nation has no precedent in U.S. or Mexican history. To contemplate it is to imagine a level of cooperation and trust that would be equally unprecedented–though no more extraordinary than the achievement of the historic adversaries that now form the European Union (E.U.).

 

Commitment to Development

NAFTA does not require its richer members to commit themselves to the economic development of their less developed partner. This is an odd omission, since Mexico’s attractiveness both as a trading partner and a source of opportunities for private investment for the United States and Canada depends on Mexico’s economic success. In the European Union, by contrast, the wealthier members like France, Germany, and the United Kingdom routinely provide billions of dollars every year to Ireland, Portugal, Spain, and other poorer members for investment in infrastructure and education. These investments have promote development–and made the recipients better trading partners.

Spain, to take one example, had a per capita GDP less than two-thirds the E.U. average two decades ago. Until the 1990s, Spanish migrant workers could be found throughout western Europe working in menial jobs in service industries and as agricultural and factory laborers. With E.U. compensation funds fueling growth, Spain has now caught up. Per capita income is now over 90 percent of the E.U. average. Spanish migrant workers have disappeared. And the E.U. subsidies will soon be phased out.

In twenty years with similar investments in infrastructure and education, Mexico could experience a similar leap forward. If the U.S. economy grows at its usual long term rate of about 1.5 percent per capita, while Mexico achieves a six percent growth rate comparable to Spain the 1990s or East Asia in recent decades, Mexico’s GDP per capita would rise from just under 30 percent of the US level to nearly half (43.6 percent) in ten years and two thirds (67.3 percent) in twenty. By the middle of the twenty-first century, at these rates, Mexico’s economy would have caught and passed the United States. Of course, these figures are purely hypothetical. If Mexico grew at six percent, U.S. growth would probably pick up. And as Mexico rose closer to the U.S. level, its growth rate would begin to diminish to levels closer to those of the developed world.

The point is that a U.S. commitment to Mexico’s economic growth could help Mexico reach the ranks of the developed countries in a generation or so, with huge benefits for both countries. Mexico could virtually end the extreme poverty in which nearly one fifth of its citizens now live (18.6 percent of Mexicans survive on less that one U.S. dollar per day) and move into the ranks of the developed world. The benefits to the United States would be nearly as impressive. From any perspective–economic, political, strategic, even cultural–the United States would profit enormously from having a modern, developed country on its southern as well as its northern border.

 

Institutions

With Mexico’s economic growth accelerating, the United States and Canada might find it easier to develop North American (perhaps even hemispheric) institutions that would look more like the European Union than the nearly institution-less NAFTA. Twenty years from now, Mexico and the United States will probably have ceded decision-making powers on important bilateral (and many other) issues to a series of commissions and courts governed by a dense network of agreements on a broad variety of issues.

As Jorge Domi­nguez and Rafael Fernandez de Castro point out in their excellent new book, The United States and Mexico: Between Partnership and Conflict (London: Routledge, 2001, p. 31), “By the late 1990s, some 50 different bilateral commissions were at work on such issues as agriculture, transportation, rules of origin, industrial and health standards, customs cooperation, dispute resolution in trade and investment, labor, and the environment, among others.” Many of these bodies, as the authors points out, were set up to coordinate and communicate, rather than adjudicate or make binding decisions. Many lack funds or authority to be effective. And many important issue arenas are missing or referred to weak hemispheric or other multinational bodies.

As economic integration proceeds, the need to institutionalize and render predictable and law-like many of the informal or consultative arrangements that currently exist could become irresistible. The issues range from financial and monetary coordination (especially if Mexico and others in the hemisphere move closer to dollarization) to human rights and democracy, labor and environmental standards, cultural and educational exchange, and many more. This will not be an easy process, but once started it is likely to prove irreversible. NAFTA locked Mexico into a strategy that ties its economic future to the United States and beyond it to the global economy. Now, as both countries and their Canadian partners appear to agree, something more (Fox’s “NAFTA-plus” perhaps) is needed to institutionalize past gains, ensure that they continue into the future, and deepen their impact so that no citizens of any of the three NAFTA countries are left behind.

Fall 2001, Volume I, Number 1

John H. Coatsworth is the Monroe Gutman Professor of Latin American Affairs and director of the David Rockefeller Center for Latin American Studies.

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