Time to Get Tough with Mexico
Mexico is a failing narco-state and an economic parasite, and the United States and Canada are hitched to the wagon. The weak foreign policies and welcoming trade agreements toward Mexico by its two democratic and wealthy northern neighbors have not been productive. It is time for a rethink on how we should deal with Mexico, and most importantly, it is time to get tough and practice realpolitik rather than a utopian fantasy. Kicking Mexico out of the 1994 North American Free Trade Agreement (NAFTA) needs to be on the table.
Between 2005 and 2013, Mexico has been ranked from 73rd (2005) to 105th (2008) on the Failed States Index, with a near-constant ranking in the "warning" category from 94th to 98th since 2009 -- currently at 97th for 2013. The situation in Mexico is simply not improving. By comparison, Mexico's NAFTA partners are ranked 159th (USA) and 168th (Canada) -- two of the most stable countries -- and have been for many decades. Mexico is in some undesirable potential failed state company: Nicaragua, Algeria, Honduras, Venezuela, and Vietnam, to name but a few.
The Economist Intelligence Unit has Mexico ranked as a "flawed democracy" on its Democracy Index, with no measurable improvement in its overall index score since 2006, and civil liberties are on the decline. Of course, the USA and Canada have always been full democracies on this index. Freedom House ranks Mexico as only "partly free" on its Freedom in the World scale, the state Mexico has been in for almost all of the post-1973 period since this organization began ranking nations.
In terms of governance indicators, Mexico ranks down in the 45th percentile among all nations for corruption and is declining (USA is 86th; Canada is 96th), at the 62nd percentile for government effectiveness (USA, 90th; Canada, 97th), at the 23rd percentile for political stability (USA, 57th; Canada, 81st), at the 59th percentile for regulatory quality (USA, 90th; Canada, 96th), at the 34th percentile for rule of law (USA, 91st; Canada, 96th), and at the 52nd percentile for voice and accountability (USA, 87th; Canada, 94th). We're seeing no governance improvement in Mexico, and it lives -- and has always lived -- in a different (and vastly inferior) governance world compared to the USA and Canada.
Mexico's press freedom is in the toilet. In 2002, Reporters Without Borders had Mexico ranked 75th in the world on its Press Freedom Index. That's bad enough, but by 2013, Mexico's rank had slipped to an abysmal 153rd out of 179 nations. This is effectively no press freedom. Russia, Burma, and the Democratic Republic of the Congo are ahead of Mexico.
Similarly, back in 2004, Transparency International had Mexico ranked 64th on its Corruptions Perception Index. Once again, this is bad enough, but by 2012 Mexico had slipped to a tie for 105th with seven other nations, making Mexico one of the most corrupt countries, in the company of Bolivia, Niger, and Egypt.
During the 1992 presidential debate, Ross Perot accurately characterized the true nature of NAFTA: that "giant sucking sound going south" to Mexico from the USA and Canada of jobs and wealth that will equalize only when the northern nations are as poor, corrupt, and generally undesirable to live in as the parasitic southern "partner." Perot was prescient, and the data backs his concerns up in their entirety.
NAFTA came into force in 1994. Between 1985 and 1994, the United States averaged only a modest annual trade in goods deficit with Mexico, at $2.9 billion (all values are in constant 2012 US dollars). From 1991 through 1994, the USA ran trade surpluses with Mexico each year for a total of $17 billion over this period. In 1995, the USA instantaneously had a large post-NAFTA trade deficit of $24 billion with its southern neighbor and has not seen a trade surplus with Mexico since. The lowest post-NAFTA trade deficit with Mexico was $21 billion in 1997, and the largest was $83 billion in 2007 (the 2012 deficit was $62 billion). The average post-NAFTA trade deficit is $49 billion per year, for a total U.S. trade deficit with Mexico of over $881 billion between 1995 and 2012.
We see the same trends in Canada. Between 1988 (the earliest year in the Canadian International Merchandise Trade Database) and 1994, Canada averaged a $2.8-billion (all values in constant 2012 Canadian dollars) trade in merchandise deficit with Mexico. From 1995 through 2012, the trade deficit with Mexico has increased steadily to $21 billion in 2012, and averaged $13 billion per year over this timeframe, for a total post-NAFTA trade deficit of $228 billion.
While the USA and Canada both saw large declines in manufacturing as a percentage of GDP over the past two decades (similar to what we find throughout the OECD), Mexico has actually increased the manufacturing share of its economy since NAFTA came into force. How was this accomplished? By vacuuming up high-paying manufacturing sector jobs from the USA and Canada with that "giant sucking sound going south" that Perot predicted.
In a recent Wall Street Journal piece, George Shultz argues that North America is a global powerhouse, and that NAFTA has greatly facilitated this. I'll take a very different reality-based view of the so-called "North American Global Powerhouse" since NAFTA. In 1981, the USA made up 24.8% of the global economy. All together, the USA, Canada, and Mexico summed to 30.5%. By 1994, this total had declined to 27.3% of the world's economic output, with the USA down to 22.9% (of note: during Reagan's term in office, he increased the American share of the world's economy from 24.7% in 1980 to 25.1% in 1988). In 2012, the NAFTA partners only comprised 22.8% of the global economy (the USA was at 18.9%, Canada at 1.8%, and Mexico at 2.1%). Looks like the "powerhouse" is headed rapidly in the wrong direction, in large part due to the abandonment of true conservative principles during the post-Reagan period. It's long past time to stop paying attention to former political leaders whose unconservative ideas are demonstrably wrong.
The Mexican drug war has led to a large increase in the number of drug-related deaths and increasing homicide rates, particularly in communities directly affected by the conflict. We also see evidence for strong linkages developing among the drug cartels, Middle Eastern terrorist organizations (e.g., Hezb'allah), and rogue nations (e.g., Iran). Given the porosity of the U.S.-Mexico border, this should give everyone pause. The failure of Mexican law enforcement authorities is so profound that vigilante justice has risen up in order to fight the cartels and do what the government is failing to. And what does the Mexican government focus on when its own incompetence and corruption leads to societal degradation of sufficient degree that ordinary citizens feel compelled to take matters into their own hands? Well, devote precious resources to going after those interested in a strong, stable society -- of course -- rather than tackling the problem that leads to vigilantism. It's clear that the Mexican government, despite all of its public claims to the contrary, really isn't that serious about squelching the cartels.
So what should be the path forward with Mexico? Remove the country from NAFTA, and scale back or eliminate other trade initiatives with this nation. Free trade works favorably only in both directions between partners that share a similar economic status and regulatory framework, as well as an equivalent respect for democracy, freedom, and basic human rights. In the absence of this balance, the richer and more free nation becomes progressively more contaminated by the diseased partner.
And what with the deep infiltration of the Mexican government and general population by the drug cartels and their terrorist friends, the USA and Canada need to be far more cautious with their immigration policies for Mexican emigrants, particularly when it comes to allowing Mexican emigrants to influence our government policies from either inside or outside the system. These are real national security threats that are currently being largely ignored.
Finally, if the situation continues in Mexico for much longer, American and Canadian military forces may need to take direct action along the U.S.-Mexico border and into Mexican territory. A failed narco-state with global terrorist network linkages, possibly falling farther under the influence of our adversaries (China, Iran, Russia, etc.), is unacceptable.