Go, Go, Mexico?
Our southern neighbor’s ascent to top American trade partner is hardly a resounding victory for the people of the United States.
Mixed news. Per a mid-July report, Mexico continued to surpass China as the United States’ primary trading partner this year. For the interests of national security, this is good news. China, which had muscled its way back to the top American trading partner slot on the tsunami of Covid relief cash–fueled consumer spending in 2020, is now a distant third behind Mexico and Canada.
The good part of the mixture is, of course, China’s falling share in American trade. Even the densest heads in our political class have noticed that the Reds do not in fact have our best interests at heart, WTO membership or no; doux commerce has failed to discourage the construction of naval bases and a growing squeeze on the wayward province that happens to be the world’s premiere supplier of microchips. Further, the Chinese communist regime is not very nice, and strategic and moral considerations happily coincide. Despite the gremlinesque Janet Yellen’s protests, giving Xi Jinping fewer American dollars to oppress his people and antagonize the United States is an all-around worthy cause.
The bad parts of the mixture are variform. First is that the trade numbers still give a fairly dire diagnosis of the underlying dysfunction of the American economy. The American trade deficit remains high. In the modern American context, “trading partner” means mostly “source of imports.” Roughly $107 billion of exports to our southern neighbor have been matched and overmatched with $157 billion of imports.
As shown in Robert Lighthizer’s excellent new book on trade policy, which I reviewed recently, trade deficits matter. The outflow of American dollars for goods is funded by selling American assets by the pound to the very countries that are funded by our imports; this seemingly untenable dynamic is propped up by the artificially strong American dollar.
And of course, there’s Mexico itself: the Syria on our southern border. As Lighthizer details, Mexico has been a persistent cheater on trade deals since NAFTA, from labor and climate standards to country of origin regulations. While the USMCA that he brokered on behalf of the Trump administration took steps towards remedies, one may be excused for doubting that the America-haters in Mexico City have completely abandoned their penchant for covert economic parasitism. Further, Mexico has proven generally willing to deal with states hostile to American interests, especially China, despite the current administration of Andres Manuel Lopez-Obrador taking steps to bring strategic sectors of the Mexican economy under Mexican control.
The mere economic relation does not give a full picture of the problems in the American-Mexican relationship. Mexico is a weak state; a recent study found that lynchings are a widespread problem in Mexico because of the profound dysfunction of the state justice system, both in its inability to stop vigilantism and its inability to render justice with speed and equity for the people it nominally serves. Hence it is no surprise that organized criminal syndicates can go toe to toe with the Federales for sovereignty over large and prosperous portions of the territory claimed by the Mexican state. The cartels have at various points held entire cities under their direct sway.
The cartels, unfortunately, are a problem for the United States. They are deadly, and, worse, they are sophisticated. Some 70,000 Americans died from fentanyl overdoses last year—a multiple of the casualties of the 9/11 attacks and our moronic wars in response. The cartels in part directly administer ongoing madness, murder, and rapine at our southern border. When the lackadaisical grandees at Mexico City decide to intervene against them, they muster the powers of the incoherent international human rights regime and NGOcracy to win friends within the nations whose commonweal they are directly attacking.
So, at best, one half-hearted cheer for our new top trading partner. As sanity in the form of foreign policy realism begins to percolate into the political mainstream, we must consider what is to be done about Mexico. Some have suggested an American military intervention against the cartels, a proposal that has been met with great indignation by the Mexican state.
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Others—including the estimable Phillip Linderman, former American consul at Nuevo Laredo, writing for The American Conservative—have suggested bringing economic punishments to bear to prod the Mexican state into doing something. Perhaps something in between—for example, a policy forcing American companies using Mexican labor and facilities rather than keeping American capital in America to take a modicum of responsibility for Mexican stability and welfare—is the solution. (So long as the policy-making class has its sights set on Ukraine and, to a lesser extent, Taiwan, we are unlikely to find out.)
Decoupling from China is well and good—very well and very good—but it is not enough. Reducing the trade deficit must remain an American policy priority. Keeping America’s strategic industrial base under American control must remain an American policy priority. (Do you sleep soundly knowing that the largest American pork concern is Chinese-owned?) American industrial policy programs must be carefully considered and written—the splashing of American subsidy money to foreign businesses, as has been rampant under the Orwellianly named Inflation Reduction Act, undercuts the very point of those programs. (The misty-eyed sentiments of Atlanticism aside, our supposed allies are still very happy to abuse our economy as they can.)
We have previously wondered about making the perfect the enemy of the good. In the case of America’s trade situation, we have yet to achieve the good. Improvement is not the same as success.