February 7, 2023

U.S., Mexico, drugs, trade and the future

This morning on Breitbart News Daily on SiriusXM, I was listening to senator Joni Earnst talk about the border with Mexico and the issues in Mexico in broader.   She was making the point about the flow of drugs such as fentanyl into the United States, but also equally important is the flow of guns from the United States into Mexico particularly the fact that most of those were flowing to the drug cartels.

The United States and Mexico have mutual problems, but equally important is that the two countries have a mutual opportunity. It's readily apparent that Mexico wants to stop the inbound flow of weapons as much as the U.S. wants to stop the inbound flow of drugs.  The Mexican government cannot fight an increasingly armed and impervious ring of cartels without a co-operative effort within the United States, and the same is true for America with respect to the drug flow.  The inertia that prevents doing something about both of these issues (spawned by Democrats' desire for more illegal voters to pad their vote totals) really mostly benefits the drug cartels at the expense of the people of both countries. 

Aside from the obvious notion that a wall would benefit both countries (thank you president Trump for pushing for that), it's less obvious but still true that there is a potential for mutual economic benefit.  

The Background

As Peter Zeihan points out, there is a massive onshoring of manufacturing coming to North America in this decade. The below video provides a good summary of his reasoning as to why it's happening. 

Specifically here, he expounds on the Texas-Mexico manufacturing landscape:

Because of demographics, this cannot be an entirely American effort.  Mexico has the demographics to assist.  Canada doesn't reallyMexico is also changing it's tune on dealing with the drug cartels. It has to do so and despite the current relations blip, it will inevitably require increased cooperation between the two countries.

Assuming Peter Zeihan is even only partly right (and I believe he's more than just a little bit right), the economic integration of the United States and Mexico is inevitable.  Mutual interest means that co-operation in the short term will aid economic synergy in the medium to longer term.

The Future

With both countries needing to industrialize or re-industrialize rapidly, the need to begin several things in earnest is strong.  Economic and security cooperation must not only start right away, they need to start hand in hand.  They are interlinked and inseparable;  Mexico not be considered a secure place for lower end industrialization if it is overrun with cartels. For its part, the United States, with an emphasis on higher end industrialization and not the best demographic situation, cannot do lower end manufacturing internally, at least not all of it.  It's in both nations' best interest to make Mexico safer and the border more secure so that rapid industrialization and mutual beneficial trade can occur.  For the United States this also helps significantly (though not completely) neuter China economically. Its a win win win.

How this happens depends on a lot of things.  To me the obvious way forward is to not parcel the pieces together and deal with each issue independently. 

(1) Work with Mexico to build the wall as a mutually beneficial exercise as part of a broader effort.

Focus on it as part of holistic plan for controlling the flow of drugs, guns and illegal immigrants; it needs to be more than just a wall.  It requires proper documentation of all travelers (yes sneaking drugs and people and guns is going to be more than just at proper ports of entry), hence the wall. But it will also require enhanced enforcement and surveillance of delivery systems (e.g. FedEx, postal systems, shipping).  This will require additional people (maybe those 86,000 newly hired and armed IRS agents could be appropriated to more serviceable roles). It will require a new and innovative way to allow express trade but still monitor for the illegal transfers.

The slowing of the illegal guns to Mexico as Earnest pointed out this morning will weaken the cartels and help Mexico combat them.  The benefit to the United States from that is that weakened cartels will decrease their ability to smuggle drugs into America AND weaken their ability to impinge on future manufacturing zones thus helping trade.

(2) Work with Mexico to develop a high speed trade corridor.

A high speed trade corridor, dedicated to shipments and not human traffic will expedite not only trade but the mutually beneficial trade.  I would not expect the exports to flow entirely one way.  Firstly as a subcomponent of this, it would b good to establish spheres of specialization among the two countries to enhance trade relations.  Peter Zeihan touched on this. Left out however was the idea that American trade goods need to flow into Mexico as well.  The balance of payments cannot be one-sided.  Replacing a massive trade deficit with China to that of one with Mexico only weakens China; it does not strengthen America except in relative terms with China.  Therefore American goods need to flow into Mexico as well.

With manufacturing jobs developing in Mexico and increased Mexican security against the cartels (hopefully in a snowball effect), Mexicans should have more disposable income and thus be able to purchase more American goods.  A growing and more stable GDP in Mexico should allow Mexico more tax revenue to purchase military equipment and police force equipment as well, to help fight the cartels while at the same time mitigating the potential trade imbalance.

In conjunction with this, both countries could improve trade (particularly exports) with the soon to be struggling European countries.  This would be a further boon to both nations' economies.

Improved domestic economic conditions could also significantly reduce illegal immigration to the United States with more jobs and security becoming available within Mexico. There is a language and cultural advantage for Hispanics to remain in a Hispanic and Spanish-speaking country. Ironically, this may eventually shift the illegal immigration problem to Mexico's southern border. 

(3) Plan for the next stage.

It's possible that as this shift occurs, Mexican birth rates inevitably decline as the nation becomes wealthier.   This has been the inevitable fate of industrialized nations.  To sustain it's economic growth Mexico may be forced to allow increased immigration into its southern border to fill the need.  Alternately it could lead to a further southward migration of low tech manufacturing as Mexico itself upgrades to higher tech industrial manufacturing and outsources the lower end of the scale to Central America, while the United States does the same into ultra-high tech.  This in effect would expand prosperity ever southward.  That of course is only one possible outcome but possible nonetheless.

All of this is hypothetical of course, but the current paradigm offers a massive opportunity for both nations, far greater than allowing the status quo to continue.  For its part the United States should push these ideas where it can but not in such a way as to demand specific actions by Mexico.  Pointing out the mutual benefit (using the carrot) will yield far more than threats (the stick) ever will.

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