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.  (AFP/Getty Images)

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.