Trump and Mexico Need Each Other

From immigration to trade, the interests of the U.S. are broadly congruent with the agenda of Andrés Manuel López Obrador.

The border wall separating Tijuana and San Diego is reflected in the Pacific Ocean
The border wall separating Tijuana and San Diego is reflected in the Pacific Ocean (Gregory Bull / AP)

It is no secret that Donald Trump began his presidential campaign with a series of calumnies directed at Mexico, which he painted as a wily enemy, and its émigrés, whom he damned as bearers of drugs and crime. Again and again, he boasted that he would force Mexico to pay for his border wall, a claim that met with ferocious denunciations from Mexicans who had every reason to resent the slight. So it is fitting that for Trump’s nationalist agenda on trade and immigration to achieve durable success, he will have no choice but to secure Mexico’s fulsome cooperation.

Over the past few days, negotiators representing the U.S. and Mexico have expressed cautious optimism about the prospects for a revised NAFTA. The hope is that a deal can be finalized before Enrique Peña Nieto, Mexico’s widely reviled incumbent president, leaves office, thus sparing Andrés Manuel López Obrador, the president-elect, considerable vexation. Mexican officials are reportedly willing to make concessions on the rules governing the tariff treatment of the automotive sector while their U.S. counterparts are softening their demands for new protections for fruit and vegetable growers. Many sticking points remain, but the renewed urgency on both sides is an encouraging sign. Notwithstanding the president’s insistence that he is “in no rush” to cut a deal, there is a widespread belief in the Trump White House that a preliminary agreement with Mexico on NAFTA would prove a political boon. If nothing else, it would reassure panicked Republicans that the threat of an immensely disruptive North American trade war has passed, and it might even allow Trump and his allies to claim, however implausibly, that the president’s brinkmanship had yielded a better deal for U.S. workers.

It must be said, though, that even if we assume that a preliminary agreement is reached, and that the Canadian government proves accommodating despite its frustration over having been marginalized thus far, and that the legislative bodies of all three states ultimately sign off, there will still be far to go. The grand strategy of Trumpism demands more than just a slight tweak of NAFTA’s status quo ante. Rather, it demands a further deepening of North American economic integration, on terms compatible not just with Trump’s brand of nationalism but also, crucially, that of Mexico’s López Obrador.

Consider that one of Trump’s priorities is to revitalize America’s industrial commons. To that end, he has sought, albeit haphazardly, to reverse the integration of the Chinese and U.S. economies. Needless to say, this is a controversial proposition, not least because so many Americans have been enriched by the transpacific supply chains that form the sinews of “Chimerica.” Yet it’s not just Trump who believes that Sino-American integration has gone much too far. So too do many leading members of the U.S. security community, who fear that an overreliance on Chinese manufacturing has sapped the American capacity for process innovation, which in turn has created a grave strategic vulnerability. Taking these assessments seriously leaves just two ways forward. The U.S. could embrace economic autarky, a ruinous path that would greatly reduce the country’s productive potential, and that might necessitate a large influx of low-skill labor, a course of action nationalist conservatives would surely reject.

Alternatively, the U.S. could pursue policies that would have the net effect of reorienting the multi-country, multi-firm production networks that are so central to its economy away from China and toward states that are, to put it bluntly, more firmly in its sphere of influence. To narrow things down further, an ideal partner would be a state in close geographic proximity with which we share deep cultural ties. Mexico fits the bill perfectly.

Even now, it makes more sense to speak of a North American industrial commons than of one limited to the borders of the U.S. Just as German manufacturers have successfully leveraged the skilled workforces of neighboring states in central Europe to maintain their competitiveness as exporters of capital goods, a more prosperous and productive Mexican workforce could serve as a force-multiplier for U.S. firms. To get there, however, Mexico would have to overcome a number of structural deficits. In Under-rewarded Efforts: The Elusive Quest for Prosperity in Mexico, Santiago Levy, vice president of the Inter-American Development Bank and, for years prior, a distinguished senior official in the Mexican government, carefully outlines the sources of Mexico’s economic underperformance, which he chiefly attributes to a problem of misallocation. In short, Mexico has implicitly, and mostly inadvertently, subsidized small, low-productivity firms at the expense of the larger, higher-productivity business enterprises that are the chief drivers of long-run economic growth. Failure to address this perverse bias has, according to Levy, rendered other worthwhile policies, such as boosting investment in human capital and infrastructure, less effective. One hopes that López Obrador will heed Levy’s advice, which is fully compatible with his broader goal of forging a more egalitarian Mexican society.

But what about U.S. workers? Say López Obrador really does embrace an agenda that greatly increases Mexico’s productive potential, and that makes his country the perfect complement for high-skill, high-wage U.S. workers. Over the course of the ongoing NAFTA negotiations, the U.S. has pressed for rules stipulating that a certain share of all auto parts subject to preferential tariffs be manufactured by workers earning $16-an-hour or more. Does this not mean subjecting low-skill U.S. workers to more intense competition? As immigration advocates often stress, the supply of low-skill U.S. workers is declining over time due to aging and rising educational attainment, which in turn implies that the share of the U.S. workforce that competes directly with Mexican labor is declining—a trend that will likely accelerate if low-skill immigration is limited further, one of the Trump administration’s central objectives. If Mexican workers make gains in the years to come, they will do so by achieving, and hopefully surpassing, the industrial prowess of their counterparts in China’s Pearl River Delta, not by “stealing” jobs from U.S. workers. Under these circumstances, the yawning economic gap separating Mexico and the U.S. will start to close, and Mexico will have the wherewithal to itself become a country of refuge for Central Americans and others looking for a better life.

That is not the only possibility, however. One can just as easily imagine the U.S. low-skill workforce surging as Mexicans bitterly disappointed by López Obrador’s failure to lift their fortunes head northwards, and as an impoverished Mexico does little to stem unauthorized migration to the U.S. from elsewhere. Only a stronger, more equitable partnership with Mexico can forestall this outcome.

In a letter to Donald Trump, sent shortly after his election victory in July, López Obrador laid out a compelling vision for Mexico’s economic transformation and for how the U.S. and Mexico might work together to address the underlying drivers of migration. In a humane and rather moving way, he wrote of his ambition “to make emigration optional and not necessary” and “to ensure that people find work and wellbeing in their places of origin, where their families, their customs, and their cultures are,” as if to underscore that for most émigrés, abandoning home is wrenchingly difficult. To that end, he called for a series of ambitious investment projects, ranging from the restoration of forestland in Mexico’s southeast to a vast infrastructure corridor in the Isthmus of Tehuantepec to the creation of a free-trade zone along the U.S. border, which he artfully described as “the last curtain to retain workers in our territory.” Regrettably, Trump has expressed little interest in helping López Obrador realize his ambitions, despite the congruence of their objectives: reducing emigration driven by desperation, in López Obrador’s case, and reducing immigration driven by it, in Trump’s.

Yet if Trump were willing to extend a hand to López Obrador, he’d have a shot at greatly mitigating the ongoing Central American migration crisis, arguably the gravest failure of his presidency so far. The Trump administration has long wanted a “safe third-country agreement” with Mexico, which would require asylum seekers to seek protection in Mexico before moving on to the U.S. As the Washington Post reported in July, such an agreement “would allow U.S. border guards to turn back such asylum seekers at border crossings and quickly return to Mexico anyone who has already entered illegally seeking refuge, regardless of their nationality,” which in turn would lead to a drastic reduction in cross-border flows. The Mexican government has been resistant, with Reuters reporting that senior Mexican officials see such an agreement as a red line they will not cross. Most observers assume that López Obrador will be even more bitterly opposed to a safe third-country agreement than the current Mexican president. One wonders, though, if this opposition is implacable—or if there is an offer Trump can make that López Obrador can’t refuse, one that will go a long way towards helping both men realize their loftiest ambitions.

Expecting Trump to be this far-sighted would be foolish. But those looking to claim his nationalist mantle would do well to take heed.