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Tuesday, 6 September 2016
Why Trump Nailed It in Mexico
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by Jesse Sandoval

Mexico is the most important geopolitical relationship for the United States. Not Canada. Not Britain. Not the European Union. Not China.  

With over $600 billion in trade, Mexico is America’s largest trading partner [edging Canada out slightly in 2016]. There are over 40 million Americans of Mexican decent in America and an estimated 11 million Mexicans living illegally.  Nearly half of the Western United States belonged to Mexico for forty years, and to Spain for longer than America has been an independent state.  The cultural connections between America and Mexico run so deep the two nations share an inseparable destiny.

Yet when you compare the relationship between Canada and America to that of Mexico and America, you walk away feeling disappointed. Unlike the seemingly stable relationship to the north, the relationship to the south is mired with drugs, arms and people trafficking. The drug trade results in $64 billion in gross proceeds to Mexican drug cartels per year. Of the 15 million illegal weapons in the Mexico, an estimated 85% come from America. And lastly, an estimated half a million Mexicans cross illegally into America every year.

This is hardly the stuff of a successful partnership. One would think that a solution is impossible – certainly no administration since Nixon has successfully reduced the number of illegal border crossings, drug imports, or flow of weapons. Yet Donald J. Trump ventured into the eye of this hurricane to try and stake out an ambitious solution to this problem. And nailed it he did – addressing the heart of the problem is a five-point plan.

Donald J. Trump’s Mexico policy presented alongside President Enrique Pena Nieto can be summarized in the following way:

1.     Ending illegal immigration;

2.     Securing the US-Mexico border;

3.     Dismantling the trafficking of drugs, weapons and people;

4.     Improving NAFTA;

5.     Keeping trade wealth within North America;

Each one of these solutions has implications that are valued in the hundreds of billions of dollars for Mexico and America. Their impact is not to be underestimated. 

First, illegal immigration hurts Mexican (as well as Central & South American) migrants more than it helps them. By entering America illegally, migrants live outside the protection of their human & legal rights. They are taken advantage of through below market wages. They lack access to education, health & service. They lack police & legal protection. The long-term benefit of being a migrant in America is forsaken for the short-term gain of entering illegally. Yet a superior solution is possible – one that enables migrants to enter en masse under work permits and temporary visas (as was done between 1940 and 1980). There may be less total migration, but the quality of outcome will be far superior than is presently the case.

Secondly, securing the border is a necessity given the severity of illegal trafficking along the US-Mexico border. While much of the border is already fenced off and monitored, there has never been the political will in America to undertake a more ambitious control of the border similar to what you see between Ciudad Juarez and El Paso. A militarized wall (or otherwise), along the border serves as both a deterrent to smuggling and method of control to minimize the risk that human, drug or arms traffickers penetrate the border. The more militarized the border, the more credible the deterrent.

Third, dismantling the drug cartels, and punishing human and arms smugglers is an essential requisite to reducing violence and bringing order to the border. The drug cartels have claimed the lives of an estimated 82,000 Mexicans since 2006, while competing violently for a piece of the $64 billion market for the trafficking of cocaine and methamphetamines. The deplorable numbers are astronomical. Entire parts of Mexico are controlled by the cartels.  Further, elements of the Mexican government, armed forces and law enforcement are complicit in the drug trade.  Without the political leverage that Donald J. Trump is advocating against the Mexican government, it is unlikely the cartels will ever be dismantled. Therefore it becomes necessary to concentrate maximum leverage (as Donald J. Trump has argued) against the Mexican government to seek both a purge of its law enforcement, and a dismantling of the criminal organizations. By removing the cancer of drug cartels, the democratic institutions underpinning Mexican society can be protected before the situation worsens.

Fourth, improving the terms of trade under which NAFTA was created. It’s difficult to empirically strip out the job losses that America suffered to Mexico from the job losses it suffered to China after China’s entry to the World Trade Organization (WTO) in 1999, but the body of evidence overwhelmingly points to 35% drop in US manufacturing employment (according the Bureau of Labor Statistics). The American import competing sectors in manufacturing suffered tremendously, as expected, but their transition to service-based jobs never fully materialized. While this is the responsibility of American administrators, the case remains that improving terms of trade with Mexico (for America’s advantage) can lead to lower under & unemployment in America. Improved terms of trade could take the form of unemployment benefit payments over a prolonged schedule to American employees when employers are incentivized to move to Mexico. Another avenue would be to pressure the Mexican government to enforce the environmental and labor standards that would raise the cost of entering the Mexico’s ‘comparative advantage’ low cost market.

Lastly, Donald J. Trump has argued that too much manufacturing is moving from both America & Mexico and to China.  According to Donald J. Trump, the wealth created from these manufacturing jobs is being kept in China, instead of North America – leading to a trade imbalance that enriches a communist country, and not a democratic partner. By collaborating more closely on improving terms of trade, Donald J. Trump is arguing that Mexico and America can be a far more competitive economic engine (in some manufacturing markets) than China. Indeed Mexico is already a cheaper destination for manufacturing based on labor rates.

Donald J. Trump’s five point plan for a new relationship with Mexico is precisely the out-of-box thinking that is required to address and fix core problems between our two nations. One of Mexico’s pre-revolutionary presidents, Porfidio Diaz, stated ‘poor Mexico; so far from God and so close to the United States’. This irony-laden quote, reminds us that Mexico is neighbor to the wealthiest most successful country – a position that almost every other nation would gladly trade for if they had the chance. Arguably Mexico takes extreme advantage of this relationship; to the point where the relationship teeters on breakdown. The shared destiny of both states requires a productive relationship – one in which America believes its southern neighbor compliments in ways that will eventually not need a wall for its own protection. 
 

Jesse Sandoval is a graduate of Stanford University in International Relations & Economics.  Jesse Sandoval is based in Los Angeles, works in the private equity industry and actively blogs on foreign affairs.  He may be contacted at [email protected]

 

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Posted on 09/06/2016 5:57 AM by Jesse Sandoval
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