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Time to Open U.S. Borders? Not This Year

Vicente Fox finds his neighbors don't share his vision
By Jock O'Connell

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This commentary appeared on the Op-Ed page of the San Francisco Chronicle on August 25, 2000.

MEXICO'S PRESIDENT-ELECT Vicente Fox has been visiting his North American political relations this week, meeting with Canadian Prime Minister Jean Chretian in Ottawa on Monday, President Clinton and Vice President Al Gore in Washington, D.C., yesterday, and Gov. George W. Bush in Dallas today.

While ostensibly on a post-election get- acquainted trip, Fox is clearly anxious to frame the agenda for future trilateral discussions by laying out his vision of the relationship Mexico, Canada and the United States should enjoy as parties to the North American Free Trade Agreement.

Although his thoughts merit very serious consideration, there are definitely some features of Fox's pitch that U.S. leaders would probably just as soon he not bring up until next year, if even then.

One of them is Fox's intention to return to Ottawa and Washington this winter to request a substantial infusion of financial aid to help pay for infrastructure improvements and other economic development programs in Mexico. Another is Fox's ambitious call for the freer movement of labor -- as well as goods and capital -- among the NAFTA countries. Neither Gore nor Bush are likely to want this particular issue to surface before the November election. While both presidential aspirants are targeting Latino voters, both also comprehend how volatile the immigration question can become, especially in key states such as California. As much as some Latino groups and U.S. employers -- especially those in agriculture and the garment trade -- may welcome further immigration reform, political minds will recall 1994, when Proposition 187, the infamous anti-immigrant measure, received the backing of 59 percent of California's voters.

By prematurely raising the open border issue, Fox runs the risk of distracting public attention from a more pressing need: deciding how best to cope with the economic challenges Mexico faces. He campaigned on a pledge to raise the nation's GDP growth rate to 7 percent a year, a level his advisers feel is necessary, if Mexico is to provide jobs for the 1.2 million people entering the job market each year while also improving the lot of the 40 million Mexicans who live at or below the poverty level.

Sustaining such a prodigious growth rate is an extraordinarily tall order. Fox's prescription is essentially to pursue -- albeit more vigorously -- a strategy Mexico has followed ever since former President Carlos Salinas de Gortari (1988-94) began piv oting the nation away from a closed economy, characterized by hugely inefficient state-owned enterprises and protected domestic markets. Specifically, Fox wants to boost exports and nearly double the amount of foreign investment in Mexico. (At a time when China looks poised to join the World Trade Organization, Fox will have his work cut out for him. The WTO is at least as much about securing a climate favorable for foreign investment as it is about liberalizing trade. Once within the WTO fold, China should hoover up much of the available foreign investment capital.)

In Mexico's case, these dual objectives are intertwined. Indeed, the bulk of foreign investment that has gone into Mexico since the enactment of NAFTA has been directed toward the ``Gringo Archipelago'' -- a virtual entrepot economy comprising the maquiladoras: several hundred foreign- owned factories, largely unconnected with Mexico's indigenous economy, that principally exist to manufacture goods for the U.S. market. The rapid growth of the maquiladora sector has been a boon for the hundreds of California firms who supply these expatriate facilities with everything from assembly-line machinery to computers and office equipment. Fox's high priority drive to attract more foreign investment however will do nothing to wean Mexico from its near enslavement to the U.S. economy.

Even if the investment funds come from Europe or Asia, chances are the investors will be aiming to profit from access to the U.S. market. We are already Mexico's predominant trading partner by far, accounting for 88 percent of Mexican exports and 74 percent of Mexican imports in 1999. More foreign investment will only further exaggerate this link.

To be sure, tethering Mexico's fate to the U.S. economy has proved a shrewd bet over the past decade. But it has also left Mexico at the mercy of forces beyond its control. Should the country's economic fortunes reverse, Mexicans are apt to be more than a tad disconcerted to discover how little influence they have over their own destiny. Why Mexico needs to seek foreign investment is due, in part, to the fact that much of the country's wealth historically has been invested in havens abroad, thus denying local entrepreneurs and businesses access to cheaper sources of capital. Similarly, the need to look north for financial aid can be attributed, at least partially, to Mexico's notoriously porous tax collection system and to rampant official corruption that have effectively prevented the government from being more pro-active in stimulating economic development.

Washington and Ottawa will likely demand Fox take sizable steps toward remedying these domestic ills before any large checks are written.

Jock O'Connell is an international business consultant in Sacramento.


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