Mexico & Nafta - February 2009 (ISSN 1741-444X)

On 6 February Arturo Sarukhán, Mexico's ambassador to the US, called on the new US president, Barack Obama, to adopt a broad stategy of engagement with Mexico in order to restore the influence which he claimed the US had lost in Mexico.

Sarukhán was commenting on a 72-page report from the Woodrow Wilson International Center for Scholars. The report was entitled: The United States and Mexico: Towards a Strategic Partnership. The report indeed calls for a more strategic approach to common problems. It argues that there is plenty of day-to-day conatct between agencies and governments (both federal and local) on both sides of the border, but frequently the discussions just address single facets of a problem rather than the whole issue. The report argues that a more coordinated approach could pay off over a range of issues, from energy through migration to combating organised crime.

It is worth noting that energy is an extremely tricky issue for Mexico. The state still has a monopoly over oil exploration and production and the courts have banned successive governments' backdoor attempts to allow the private sector to play a bigger role in the electricity industry. The energy chapter of the Nafta treaty is short and specific: all electricity publicly consumed in Mexico has to be supplied by the Federal Electricity Commission, which sets the prices for private generators. Whether foreign investors would be interested in developing alternative energy supplies under these conditions must be doubtful.

The report springs from the musings of four working groups set up last year. The working groups looked at four issues: security cooperation, economic integration, migration and border management. The Center stressed that none of the participants in the working groups necessarily endorsed all the suggestions or indeed even what their particular working party produced. I targued that it was developing policy options which needed to be properly designed before being implented. The Center also recoiled from the idea that it was advocating a particular policy or set of policies.

In the introduction, the report highlights the problem of drug trafficking gangs in Mexico. The report endorses, broadly, the Mexican argument that the US demand for illegal drugs provides the cash that allows the gangs to arm themselves with increasingly powerful weapons. The Center estimates that the gangs have a cash inflow of between US$15bn and US$25bn a year.

The second big issue in the report is the integration of the two economies. Mexico is the US's second biggest export market (after Canada). The third issue is immigration: a third of all US immigrants come from Mexico. Over 10% of Mexico's population lives in the US and 3% of the US population was born in Mexico.

What is interesting and significant about the report is that it is realistic. It accepts that the Obama administration has more urgent priorities than Mexico and that it cannot commit much money now to supporting policies south of the border. Nevertheless, it makes a couple of modest suggestions that could deliver substantial medium-term benefits. One of these is to allow some Mexican hospitals to become eligible to provide Medicare treatment. This would inject some much needed price competition into the US healthcare industry.

Another is to cooperate on developing biofuels and alternative energy. The problem with this is the role of the Mexican state in the electricity industry. A third is to create a development fund, presumably along the lines of the European Investment bank, to help develop major economic regeneration projects in economically depressed regions of all three Nafta members.

The report argues that a comprehensive immigration reform in the US would create a huge amount of goodwill in Mexico that would allow the two governments to start tackling trickier issues such as enhanced forms of security cooperation.

Sarukhán argued that the report was important if only because it contradicted the growing assumption among some in the US that Mexico was either already a failed state or about to become one. Sarukhán argued that US governments did not usually even think about entering into agreements with failed states. “One cannot construct strategic relationships with failed states." Sarukhán asserted.

Sarukhán himself had some input into the report and broadly endorsed it. He argued that a sensible immigration reform in the US was crucial and the US should resist the protectionist pressures that are erupting as the recession starts to bite. Sarukhán claimed that 300,000 Mexicans were still crossing into the US every year to work. When the US economy was booming 500,000 crossed the border every year.

It is worth noting that on 4 February President Felipe Calderón Hinojosa telephoned the prime minister of Canada, Stephen Harper, to discuss the protectionist moves in the US. The two leaders agreed to oppose any such moves and said that the way forward should be to improve competition in the Nafata region. It is far from clear, however, what this means or how it would work.

What the North American economy needs at the moment is demand to replace what is being lost as US citizens learn to live within their means. To be fair, Calderón also highlighted the ways in which the Mexican and Canadian counter-cyclical economic packages coinicided.

Jeffrey Davidow, a former US ambassador to Mexico, who also had some input into the report, argued that the Obama administration should try to avoid focusing its Mexico policy around one issue. In the 1980s and 1990s the key issues were drugs and economic stability. In the 2000s, immigration to the US was the dominant bilateral issue. Now, he said, both countries had to resist the temptation to focus just on security. He suggested that both governments should set up a commission to evaluate Nafta but neither should comit themselves to renegotiating the agreement. He said that the commission should look at what Nafta had achived and where it has fallen short. It is not clear whether Canada should also be included in the commission, in Davidow's view.

Denise Dresser, a political scientist at the Instituto Tecnológico Autónomo de México (ITAM), another of the report's contributors, argued that Mexico has become a state at bay (“acorralado" was the word she used), where the government has become unable, at several levels, to discharge its basic responsibilities such as protecting life and property. She said that President Calderón has to contend with a corrupt police force, an army that is all-but out of control, a deficient judicial system and a penal system that is, effectively, run by criminal gangs.

Dresser asserted that the US's Iniciativa Mérida, designed to help Mexico overcome these issues, was not sufficient to make a difference, given the size and scale of the problems.

• Securing Mexico for the US
  Another of the Woodrow Wilson contributors, Lázaro Cárdenas Batel, the grandson of Mexico's greatest 20th Century president, Lázaro Cárdenas de Rio, and like his father and grandfather, a fomer governor of Michoacán, used a similar phrase to Calderón in describing the security issues that confront the US and Mexico. Cárdenas said that the “security of its neighbours is the security of the US". Calderón's phrase was: “I think the safer Mexico is, the safer the US will be."