Ernesto Zedillo, a professor in the field of international economics and politics at Yale University, was president of Mexico from 1994 to 2000.
The Mexican government has been courteous toward Donald Trump, as both a candidate and now U.S. president. Indeed, Mexican President Enrique Peña Nieto has paid a high political cost at home for his being open to working constructively with President Trump. But Peña Nieto has done the right thing by putting the interests of Mexico and the preservation of mutually beneficial relations with our neighbor above his personal popularity. Nevertheless, the time has come to admit that the actions of the new administration have closed off, at least for the foreseeable future, the possibility of any agreement being achieved through dialogue and negotiation that could satisfy the interests of both parties.
This is an unfortunate and sad situation, but the effort to accommodate President Trump’s capricious wishes has proven worthless and should not be continued. It is not useful for Mexico or the United States.
In retrospect, the probability of reaching a mutually beneficial agreement on the topics on President Trump’s Mexico agenda was always small, considering that his demands have defied legal and economic rationality all along.
For example, President Trump’s aspiration to renegotiate NAFTA stems from the incorrect idea that the trade balance between the two countries originates in Mexican advantages built into NAFTA and that a trade balance, if positive for Mexico, means the automatic transfer of jobs from the United States to its southern partner. Both concepts are mistaken.
Equally erroneous is President Trump’s failure to account for how modern transportation systems and information technology have changed international trade. This progress has created sophisticated supply chains that deliver products and services, including new ones, at low prices.
Given its amazing technological and entrepreneurial capacity, the United States has been the main beneficiary of this new way of organizing international production and trade. Many American firms are able to compete successfully around the world with those from Europe and Asia, and therefore can provide high-quality, good-paying U.S. jobs, precisely because they are free to develop links along their supply chains in places such as Mexico — in this case thanks to NAFTA.
That’s why it should have been evident from the start that it would be impossible to accommodate President Trump’s objective of balancing the trade account with Mexico by tweaking NAFTA alone. If President Trump remains obsessed with that wrongheaded objective, Mexico should take that as a wish to kill NAFTA, which of course is something that he has the legal ability to do.
It would be a waste of time for the Mexican government to play a NAFTA-tweaking game with the Trump administration. Only if the U.S. government submits a serious and clear agenda of NAFTA-related points, consistent with the interests of the two countries, should Mexican authorities move to restart the dialogue. At this point, however, such a scenario is most unlikely, and the prudent thing would be to assume that President Trump will kill NAFTA. Of course, this would be costly for the two economies — and, at least initially, disproportionately so for Mexico.
But such an outcome should not be cause for despair in my country. NAFTA has been an excellent instrument, but it is only one among many tools available to pursue the goals of economic growth and development. Unlike its northern neighbor, Mexico should reinforce its commitment to openness and sound economic policies. We cannot afford to do otherwise.
Mexico can create new conditions that will keep, and even enhance, our standing as a good place for global companies to produce for our own and other important markets, not least the United States. We should reassure global companies, with concrete actions, that Mexico will remain open for business and that our government will not try to intimidate them or tell them what, where and how to produce. The current Mexican administration, which successfully launched incredibly ambitious economic reforms in its early years, should return to this reformist impulse. The end of NAFTA, as disruptive and costly as it would be in the short term, could be compensated for with the right set of policies.
Of course, as he has threatened, President Trump may wish to go beyond the cancellation of NAFTA and try to impose additional barriers on trade with Mexico. My country must be ready to use all legal instruments possible, particularly those provided by the World Trade Organization, to contest any arbitrary and illegal action. President Trump could even entertain the withdrawal of the United States from that central arbiter of international trade disputes, at which point the Mexican issue would become a global problem that would have to be confronted by the full international community.
As for President Trump’s border wall: Obviously there is little the Mexican government can do to encourage more enlightened U.S. immigration policies; these are strictly a domestic matter, despite the consequences for other countries, including Mexico. But it’s clear that if economics counts, it is far better to make good laws than pernicious walls. Those laws must support a well-functioning U.S. labor market without providing incentives for a black market of undocumented low-skilled workers.
Of course, repeating this to President Trump would be beside the point; the wall seems to be another of his obsessions vis-a-vis Mexico, and it’s none of Mexico’s business if the U.S. government wants to add to its national debt by building a white elephant on its own territory. What we reject, under any circumstances, is any attempt to use a single inch of our territory to build such an abominable structure. All Mexicans are behind President Peña Nieto when he tells President Trump that we will not pay for his extravagant, offensive and useless project.
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