2003 July 03 Thursday
Mexico Losing US Export Market To China

Nicole Gelinas has written an excellent article about the squeeze on Mexico from competition from China and the Mexican political system's failure to adopt needed economic reforms.

China has also beaten Mexico in manufacturing markets. China continues to gain ground in the mid-skilled telecom equipment-making industry, having increased its share of that market from 12 percent in 1999 to 17 percent last year while Mexico has stagnated, according Berges. At this rate, China will soon surpass Mexico as the world's second-largest exporter of goods to the U.S.

So how can Mexico save itself? Mexico excels in manufacturing and exporting products that require close proximity to the U.S. market, like autos and other heavy equipment. But Mexico risks losing these jobs to China as well if it cannot improve its domestic investment environment.

Faced with unreliable monopoly power providers, ever shifting tax and regulatory laws at the state and local level, and assorted other obstacles to doing business in Mexico a lot of American companies are picking up and leaving for China. NAFTA opened the US market to Mexico but NAFTA can not fix what is wrong with Mexico internally. Only the Mexican government can do that and so far it has chosen not to.

Gelinas says that the PRI (Institutional Revolutionary Party) is using its control of both houses of the Mexican legislature to block economic reforms sought by Mexican President Vicente Fox and his party PAN (National Action Party with the word order flipped around in Spanish). She adds "At best, Fox's fixation on free migration to the U.S. is a distraction.". Yes, no kidding. The solutions to Mexico's economic problems lie in Mexico, not in Mexican workers abandoning Mexico for the US.

Imagine what the effects would be if the US adopted a very hard line toward immigration from Mexico. Suppose the US started building a wall to close off the border (total cost of only about $3.4 billion dollars) and started to round up and deport the millions of illegal aliens currently living in the US. The shock of the closing of the emigration escape valve on the Mexican political system would shatter the status quo thinking that maintains the current political deadlock over economic reform. The forces that stand against the modernization of Mexico might well feel so much pressure that they'd cave in and stop blocking obvious needed reforms.

The US, by accepting continuing waves of legal and illegal immigration from Mexico, is acting rather like an enabler in a relationship with a substance abuser. The Mexican government needs to break up and sell off government-owned businesses, to lift government-granted monopolies, and do all the classic things involved with modernizing an economy to introduce more free market forces and predictability to the legal environment.

Share |      By Randall Parker at 2003 July 03 02:39 AM  Immigration Border Control

Allan Wall said at July 3, 2003 1:19 PM:

The typical take on the Mexican political situation is that Vicente Fox is the great reformer and the PRI party is an obstacle to change. The truth is a little more complicated. The PRI is a broad-based party, and there are politicians in it who would work with Fox to achieve the structural reforms Mexico needs IF Fox would exhibit the political skills necessary. But after two and a half years as president, Fox has failed to exhibit the leadership skills to bring about real reform. (Being a Coca-Cola executive is not the same as leading a country).
Plus, Fox has frittered way too much energy on the immigration issue, which is an impediment to real change. Under no circumstances should the U.S. sign a an immigration "accord" with Mexico, that would be a major obstacle to Mexican reform.

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