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Mexico: Too Big to Fail

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As President Obama visits Mexico to discuss, among other things, U.S. immigration reform, it's too bad that members of Congress who are involved in drafting legislation have left out a key ingredient to addressing undocumented immigration from Mexico: investing in Mexico in order to create jobs and ease the need for migrants to cross the border to seek employment. Apparently, the Obama Administration gets this. Ben Rhodes, an Obama deputy national security adviser, has acknowledged, "If the Mexican economy is growing, it forestalls the need for people to migrate to the United States to find work."

The fact that the Congress and the White House are tackling comprehensive immigration reform is good news for the estimated 11 million undocumented immigrants in the United States and their supporters. However, if the package does not include at least the first steps toward helping Mexico improve its economy and infrastructure, undocumented Mexican migration will not be solved permanently.

In 1994, we were told that NAFTA would solve the undocumented problem because jobs would be created in Mexico. But NAFTA contributed to huge job losses in Mexico. For example, Mexican corn farmers could not compete with heavily-subsidized U.S. corn farmers, and now Mexico imports most of its corn from the United States. For years, Mexico provided support to rural areas through systems of price supports for producers and reduced prices of agricultural products for consumers, but after NAFTA, Mexico withdrew this support. The United States, however, continued to produce subsidized corn in huge quantities at low prices, undercutting Mexico's corn prices; this subsidized system displaced Mexican workers because corn was a major source of rural income. The wages for low-wage workers have declined, and the rural poverty rate has increased. The idea of NAFTA-created jobs that would reduce pressure to migrate simply has not become a reality.

The fact that Mexico has faced job creation challenges under the NAFTA manufacturing model is even more troubling when placed in the context of the worldwide framework. Mexico was the first low-wage country that became a free trade partner with the United States and Canada. However, more and more free-trade agreements are being consummated, and WTO membership is growing. China's acceptance to the WTO created more competition for Mexico's manufacturing exports (especially in apparel and electronics). China is now the largest exporter to the United States, followed by Canada and Mexico. The United States and China are entering into more free-trade agreements with other countries, meaning other low-wage countries are gaining access to U.S. markets. U.S. agreements with Central American countries also mean that countries other than Mexico are using low-wage labor to produce goods headed for the United States.

Economic development in Mexico is the key to stopping undocumented migration. An investment fund to invest in roads, telecommunications, and post-secondary education in Mexico must be initiated. A national plan for infrastructure and transportation must be developed. Reducing geographical disparities within Mexico would likely decrease pressures to emigrate, and a first priority should be improving the road system from the U.S. border to the central and southern parts of Mexico. In spite of the growth in trade under NAFTA, significant investment in transportation and infrastructure has not occurred.

Although Mexico and the United States have developed the border area and NAFTA has helped to infuse new investment, the border region is burdened. By building up the central part of the country, border congestion could be relieved, and the whole system could be better managed.

Focusing on the educational system in Mexico also is key. Mexican students fall near the bottom in cross-country comparisons on basic literacy, math, and science. While the adult education level in the United States is twelve years, in Mexico, the level is about seven years. This low education level has severe implications for economic competitiveness and the standard of living for Mexicans whether they remain in Mexico or migrate to the United States.

One thing NAFTA has taught us is that, if we expect employment growth in Mexico to materialize as a result of trade agreements, investments must be targeted. We have to determine how to help Mexico's domestic industries by, for example, using domestic parts and supplies in production exports.

The rural parts of Mexico suffered under NAFTA. Subsistence farmers did not receive assistance or time to adjust to the new trade regime. Nothing was done to help protect their incomes as trade conditions changed. Forced to leave agriculture, these rural workers had little help moving into other sectors.

In order for any significant effect on Mexican migration to take place, significant investment in new technologies in small and medium-sized industries is necessary. Some of this new investment can be achieved through tax incentives to spur economic growth in the country's interior. Fruit and vegetable production development can absorb some of the rural workers previously displaced. Mexico's public infrastructure should be a major priority.

The recent Senate legislation on immigration reform crafted by the bi-partisan Gang of Eight allocates an additional $6.5 billion for border enforcement. The wisdom of huge, additional enforcement dollars targeting individuals who are entering in search of work to feed their families is questionable. Those funds would be spent so much more wisely and effectively on helping Mexico with its economy. The notion of a strong border may sound appealing, but a strong Mexican economy is the real way to reduce economic migration.

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