DEAN CALBREATH
Migration has links to U.S., China trade ways

May 6, 2007

Cinco de Mayo is supposed to commemorate the Mexican army's defeat of a French invasion force 145 years ago, but with all the Mexican flags flying in Old Town and the Gaslamp around this time of year, you'd think that fabled battle occurred much closer to San Diego.

Of course, some of the people waving those flags are gringos who know nothing of the Battle of Puebla, but instead use the holiday as an excuse to quaff some Coronas and listen to some fine mariachi music.

Yet the recent popularity of the holiday underscores the influx of Mexican immigrants moving north of the border. About 11 million native-born Mexican nationals live in the United States – half legal residents, half undocumented, according to Mark Krikorian, executive director of the Center for Immigration Studies in Washington, D.C.

That's roughly equal to one-tenth of the Mexican population, although some economists say the number of immigrants may be much higher – close to a sixth of the population.

About 800,000 undocumented immigrants arrive each year, although that number is tempered by hundreds of thousands who return home, according to the Center for Immigration Studies.

Alarmed by such statistics, immigration hawks have proposed a number of drastic measures: Build a wall at the border. Issue national ID cards. Put more illegals in jail. Send in the National Guard.

Before taking radical actions, however, why not take a look at why this mass migration is happening? A spate of recent studies suggest the latest wave of immigration parallels a decline in the Mexican economy. And the root causes of the decline have as much to do with trade policies in Washington, D.C., and Beijing as with economic blundering in Mexico City.

“The most important reason for immigration is the lack of expectation of having good living standards in Mexico,” says Carlos Salas, economist with the Institute for Labor Studies in Mexico City. “And a major reason for that is that Mexican policy makers decided to take a low road to development here, making Mexico a paradise for low-wage companies. They had the idea that once you develop your economy up to a certain level, things will get better by themselves and everyone will benefit by economic growth. But that just hasn't happened.”

Except for a blip in hiring during the run-up to last year's presidential election, Mexican job growth since 2000 has been 30 percent less per year than the average job growth in the 1990s, Salas wrote in a recent report on the Mexican labor market. Since 2003, the median salary has grown by less than 2 percent a year, lagging behind inflation. Nearly half of the new jobs do not provide benefits.

In a separate study, Ray Marshall, a labor secretary under former President Jimmy Carter, noted that the average Mexican makes 10 percent to 20 percent the salary of the average U.S. worker. Mexico's daily minimum wage is less than the U.S. hourly minimum wage. And roughly half the Mexican population lives below the poverty level.

Faced with that bleak outlook, who wouldn't toy with leaving their homeland and taking a stab at finding a job elsewhere?

Of course, the Mexican economy has long lagged behind the United States. But the rise in immigration – especially illegal immigration – is a relatively new phenomenon. Blame NAFTA.

Under the North American Free Trade Agreement, Mexico was forced to lower its protections on corn, beans and other produce. Imports of cheap, heavily subsidized, mass-produced produce flooded the Mexican market. Facing competition that they could not compete with, between 1 million and 2 million Mexican farmers left their fields and headed north.

Between 1995 and 1999, the five years after NAFTA was signed, an average of 505,000 Mexicans immigrated to the United States each year, representing a 36 percent jump from the previous five-year period. Because of the recession and the post-9/11 crackdown on border crossings, immigration rose only 14 percent between 2000 and 2004, hitting 575,000 per year, 85 percent of whom are undocumented.

This outward flow of migrants has put many areas of Mexico into a vicious cycle. When so many productive workers walk out, it can throw an economy out of whack. In states such as Zacatecas and Oaxaca, poverty is on the increase because so many productive workers have headed north. More than a third of Mexican municipalities show negative growth rates. As the economies in those cities worsen, even more workers hit the trail north.

NAFTA did create some jobs in Mexico, especially in the maquiladoras along the border. To attract foreign manufacturers, Mexico kept its wages, taxes and property costs low. But the low wages did little to build a stable society. And then along came a country that Mexican wages could not compete with: China.

Thanks to a currency set at an artificially low rate, China pays its workers half as much (in dollar terms) as Mexico. After China entered the World Trade Organization in 2000 – which helped it gain access to a wide variety of markets – Mexico slipped from being the top U.S. manufacturing site.

By 2003, China surpassed Mexico to become the United States' second-largest trading partner after Canada. By 2005, the amount of Chinese exports entering the United States was almost double the amount of similar Mexican products, including products manufactured in maquiladoras. During the last four months of 2006, total exports from China were 38 percent higher than Mexico's exports.

Largely because of Chinese competition, Mexico lost more than 300,000 manufacturing jobs and nearly 200,000 textile jobs between 2000 and 2004. And guess where many of those workers went.

Ricardo Rami'rez Hernandez, a trade attorney with the Thacher Proffitt law firm in Mexico City, warns that Chinese competition will get even tougher in December, when Mexico's remaining trade barriers against Chinese goods are slated to dissolve.

“The Mexican private sector is organizing to see what can be done,” Hernandez said. “We're going to be trying to make things cheaper.”

But the drive to “make things cheaper” than China seems like a race to the bottom that nobody's going to win.

In the end, one of the main reasons we are seeing so many immigrants come north of the border is a flawed free trade agreement that did not do much to help the Mexican economy or ours. It's a stark contrast to the way the economic powerhouses of the European Union brought in Portugal, Greece and Spain – their own private Mexicos.

To avoid the sticky situation we're now facing – with a relatively strong economy next door to an ailing one – the rich nations of the European community funded economic development programs for the poorer ones to stimulate job growth. They also insisted on domestic reforms to ensure that everyone would benefit from the economic growth. As a result, the people of the poorer nations stayed put and helped their countries prosper instead of migrating into the richer countries nearby.

Former labor secretary Marshall says that over the long term, one of the best ways for the United States to combat illegal immigration is to help Mexico promote job growth and an economic safety net within its own borders. He suggests that the United States should help create trade, investment and aid program deals that could reduce Mexico's poverty, facilitate the creation of independent labor unions (most Mexican unions are tied to the government and employers) and give workers opportunities that some now only find in the United States.

“The U.S. has to get it right this time,” Marshall says. “An effective immigration policy has to strengthen our economic and social stability and relations with Mexico and other countries. Or else, we're headed for 20 more years of problems.”


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