Opinion

The Great Debate

Why North America is stronger than its parts

Twenty years ago NAFTA, the most ambitious free trade agreement negotiation of its time, gave birth to a profound transformation of the economies and the regional value chains of Mexico, the United States and Canada. Trade dramatically changed the relationship between the three countries, though asymmetries of power and economic vitality persist.

This week, at the North American Leaders Summit in Toluca, Mexico, Presidents Obama and Peña Nieto, together with Canadian Prime Minister Stephen Harper, continued a dialogue about trade, economic growth and the energy revolution in North America. A priority for all parties should be the continued economic integration of the three countries — the region’s greatest hope for job creation and prosperity.

Since 1994 NAFTA, in terms of trade, has triggered a rising tide, lifting boats in all three countries. The numbers are compelling: more than $1 trillion of trade in goods and services annually between the three partners; $1.2 billion of daily trade between Mexico and the U.S.; 6 million U.S. jobs directly related to trade with Mexico; and Canada and Mexico buying more U.S. products than any other nation on the face of the earth.

To understand these numbers in the context of the Trans-Pacific Partnership (TPP) and the Transatlantic Trade and Investment Partnership (TTIP) — the two ambitious and critically relevant trade negotiations the U.S. is currently pursuing — the combined exports of the United States’ two neighbors is more than six times that of the other TPP nations, and U.S. exports to Mexico and Canada exceeds those to all EU nations.

But beyond the importance of North America as a marketplace, NAFTA led to one of the most significant trade realignments of any economic bloc: today, Mexico, the United States and Canada have become partners in manufacturing. Through production sharing, the countries are actually building products together, such as automobiles and aerospace parts.

Mexico’s reversal of fortune

In Latin America, this looks to be the year of Brazil — thanks to the impending World Cup and presidential elections. But with another lackluster year looming in emerging markets, fans of transformation, growth and investment potential should instead look to Mexico.

Brazil’s president, Dilma Rousseff, is expected to win a second term this year, and its soccer team stands a good shot at victory. But growth has slowed considerably. In the world’s seventh largest economy, reforms are stagnating and the country faces a possible ratings downgrade.

Mexico, by contrast, is in the throes of serious reforms. It will likely lead Latin America with at least 4 percent growth this year and an improving investment outlook. Standard & Poor’s recently boosted Mexico’s credit ratings because of energy reforms that the rating company trumpeted last month as a “watershed moment” for the country. It is becoming a story of inverted fortunes, as Michael Shifter and Cameron Combs of the Inter-American Dialogue recently wrote.

Danger and delay on dirty bombs

When highly radioactive material that can be used in a “dirty bomb” is moved to or from a hospital in New York City, it is done in the dead of night on cordoned streets with high security.

In Mexico two weeks ago, a truck moving a large canister containing radioactive material was hijacked at a gas station — where it had been parked with no security. The cobalt-60 that was stolen from the vehicle and then extracted from its protective lead shield is so potent that it is considered a significant national security threat under U.S. guidelines.

There are now no international mandatory requirements for how to control these dangerous materials — including how they should be transported. The International Atomic Energy Agency (IAEA), the international nuclear watchdog, has only issued recommendations, in the form of a voluntary Code of Conduct.This disconnect between how nations manage extremely dangerous nuclear materials sought by terrorists creates significant security vulnerabilities. If a dirty bomb is exploded anywhere in the world, it would cross the nuclear terrorism threshold and open the door to further attacks.

Argentine leader’s health recovering, as her dynasty ebbs

As Argentina’s Cristina Fernandez de Kirchner convalesces in the presidential residence after surgery, a poor prognosis for her political and economic agenda awaits her outside. Yet the populist leader is unlikely to respond with major policy initiatives as she enters a prolonged lame duck period.

Fernandez faces big losses in Sunday’s mid-term congressional elections, which will likely determine how much legislative clout she can muster. Hope for her third presidential mandate is all but extinguished. Under her administration, Latin America’s third largest economy is slipping further behind the region’s top two — Brazil and Mexico — and looking ever more like the laggard Venezuela.

The 60-year-old Peronist leader was ordered to rest after an emergency operation to remove blood from the surface of her brain, sidelining her from the campaigning she led earlier to keep “Kirchnerismo” alive.

For Biden, Mexico’s endless allure

Vice President Joe Biden recently canceled the Panama leg of his trip to Latin America, citing the need to be in Washington, focusing on Syria. He did not, however, cancel his visit to Mexico.

Biden arrived in Mexico late Thursday night and is due to meet with President Enrique Peña Nieto, and kick off the U.S.-Mexico High Level Economic Dialogue (HLED). There were plenty of reasons for the vice president to stay home — including the brewing budget battle, and the shootings in Washington’s Navy Yard — in addition to Syria. So it is worth asking why he didn’t.

Biden had both political and economic reasons to visit Mexico. On the political front, he is seeking to strengthen his credibility with the businesses that can benefit from strengthened trade and investment with Mexico. But perhaps Biden’s most important reason is the power of Latino voters. The 2012 election made it clear that any viable Republican presidential candidate would need to win the support of close to 40 percent of Latino voters. President George W. Bush did this in 2004; Mitt Romney got 27 percent last year.

The looming U.S.-China rivalry over Latin America

President Barack Obama meets with Chinese President Xi Jinping (L) in California, June 7, 2013. REUTERS/Kevin Lamarque

Though the U.S. and Chinese presidents heralded a “new model” of cooperation at their weekend summit, a growing competition looks more likely. The whirlwind of activity before President Barack Obama met with President Xi Jinping in the California desert revealed that Beijing and Washington’s sights are set on a similar prize — and face differing challenges to attain it.

Their focus is Latin America and the prize is increased trade and investment opportunities in a region where economic reforms have pulled millions out of poverty and into the middle class. Latin America is rich in the commodities and energy that both China and the United States need, largely stable politically and eager to do deals.

Which Mexico for Obama?

When President Barack Obama meets this week with President Enrique Peña Nieto in Mexico, he will be visiting a country that was much maligned throughout his first term.

Washington has viewed Mexico largely as a source of problems for the United States in the past six years. Many Mexicans, in a mirror image, consider the United States the origin of their troubles. They blame Mexico’s epidemic of violent crime on an insatiable appetite for drugs and loose control over gun and ammunition sales in the United States. In addition, the U.S. financial crisis left the Mexican economy reeling in 2009.

But in the past year, particularly since Peña Nieto’s election in July 2012, Mexico’s standing in the United States and internationally has increased dramatically — along with its national self-esteem.

America is losing as many illegal immigrants as it’s gaining

You’d never know it from the Republican primary debates, but for the first time in more than four decades, illegal migration from Mexico has fallen to a net zero. All data indicate that the undocumented population of the United States is no longer growing. According to estimates from the U.S. Department of Homeland Security, that population peaked at around 12 million in 2008, fell to 11 million in 2009 and has remained constant since then. Independent estimates prepared by the Pew Hispanic Trust show the same thing, and Mexican census data reveal unusually large numbers of former U.S. migrants remaining home rather than heading northward.

These population estimates are consistent with individual-level data collected by the Mexican Migration Project, a binational program I co-direct that has been surveying legal and unauthorized migrants on both sides of the border for 30 years. Statistical analyses reveal that the rate of new migration to the United States is essentially zero, while repeat visits by returned migrants are rare. In keeping with these calculations, border apprehensions have fallen to the lowest number since 1970 despite the fact that there are more Border Patrol agents on duty than ever.

Surprisingly, this turn of events does not likely have anything to do with border enforcement. Historically, the volume of undocumented migration is uncorrelated with the size or budget of the Border Patrol. According to a recent assessment by the National Academy of Sciences, studies of migrant behavior “generally show that rising enforcement has little deterrent effect on undocumented migration,” which instead reflects the economic trends in Mexico and the United States and ongoing opportunities for legal entry to the U.S.

Is Burma the next Mexico?

By Federico Varese
The opinions expressed are his own.

Hillary Clinton had many “hard issues” to tackle during her recent visit to Myanmar. Yet there was no mention of one of the most, if not the most, difficult issue Burma faces: their lucrative drug trade.

Northern Burma is the home of the “Golden Triangle,” a hub for opium production and the location of hundreds of heroin and amphetamine refineries. So how do political leaders and the international community plan to tackle this problem in the event that Burma truly becomes  a democratic country?

The totalitarian regime which has ruled Burma since 1962 has been, to a point, successful in keeping the production of illicit substances under control. In 1999, Burma’s notorious military junta (which is now dissolved) started a ruthless elimination plan of opium in the Golden Triangle (the Shan State, the Wa Region and the Kachin State). The region produced one-third of the world’s opium in 1998, but that figure was down to about 5% nine years later. From 2006 to 2007, the army eradicated 8,895 acres of opium fields. A 2007 United Nations Report trumpeted that “a decade-long process of drug control is clearly paying off.”

California vote and Mexican drug cartels

What would legalizing marijuana in California, America’s most populous state, mean to the drug cartels whose fight for access to American markets have turned parts of Mexico into war zones? Shrinking profits? Certainly. Less violence? Maybe.

These topics are being raised as the U.S. heads towards Nov. 2 mid-term elections which in California include a ballot initiative, Proposition 19, providing for marijuana to be treated like alcohol and tobacco for Californians over 21. A vote in favour would end 73 years of prohibition and have enormous political impact not only on the rest of America but also on the long-running global war on drugs.

Experts on the issue have been working overtime and the latest of a string of academic studies, out this week, came from the RAND Corporation, a California-based think tank. The voluminous paper is entitled: Reducing Drug Trafficking and Violence in Mexico – Would Legalizing Marijuana in California Help? The study’s four authors, all prominent authorities on the illegal drug business, hedged their answer.

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