Tag: Mexico

Managed Trade for Sugar from Mexico?

Mexican Economy Secretary Ildefonso Guajardo was in Washington this week arguing on behalf of an agreement to suspend the U.S. antidumping/countervailing duty (AD/CVD) investigation against imports of sugar from Mexico.  The case will soon enter its final phase, with the U.S. International Trade Commission (ITC) expected to determine early next year whether the U.S. sugar industry has been injured by imports from Mexico. 

In the context of North American sugar politics, an agreement to suspend the AD/CVD process and implement a managed-trade arrangement makes some sense.  Both U.S. and Mexican sugar industries already are more or less wards of the state, or at least are very heavily guided and controlled by their respective governments.  Both governments have given indications that they are interested in settling this dispute.  The history of bilateral sugar trade has been dominated by government intervention rather than by free-market economics.  It seems almost natural to take the next obvious step by allowing Mexican sugar to enter the United States only under terms of a suspension agreement (i.e., with the quantity limited or the price set high).

It’s worth mentioning that Mexican sugar growers are the only ones in the world currently allowed to sell as much sugar as they wish in the U.S. marketplace.  Even U.S. growers are not permitted to do so.  Years ago they gave up that right in exchange for retaining an almost embarrassingly high level of price support.  That strong price incentive was inducing them to grow more sugar than the market could absorb.  Under the provisions of the U.S. sugar program, that excess sugar could end up being owned by the U.S. Department of Agriculture at considerable expense to taxpayers.  So U.S. sugar growers made the decision to sell less sugar, but keep the price high.

Mexican growers, on the other hand, obtained unfettered access to the U.S. market in 2008. That followed a contentious period of bilateral trade in sugar and high-fructose corn syrup (HFCS) dating to 1994, which was when the North American Free-Trade Agreement (NAFTA) began to be implemented.  In a nutshell, the United States adopted a much more restrictive approach to imports of Mexican sugar than Mexico thought had been negotiated, and the Mexicans reciprocated regarding imports of HFCS. 

Given that historic context, the open access to the U.S. market enjoyed by the Mexicans since 2008 seems to be rather an anomaly.  Why not go back to the good old days of closely managed trade? 

Mexican Immigration Policy Lowers the Cost of Central American Migration to the US

One persistent American complaint about the Mexican government’s opposition to immigration laws like Arizona’s SB-1070 is that Mexico’s immigration policy is far more restrictive than that of the United States or anything proposed in Arizona. In 2010, Representative Ted Poe (R-TX) articulately pointed out the Mexican government’s blatant hypocrisy. Brutal Mexican immigration laws were not only bad policy for Mexico but exposed an absurd level of hypocrisy.

After Representative Poe’s comments, the Mexican government passed a Migratory Act in 2011 that went into effect on November 1, 2012. This law replaced the General Law of Population that created the oppressive Mexican immigration laws Rep. Poe and others rightly critiqued. The Migratory Act made a number of significant changes:

  • Guarantees the equal treatment of migrants and Mexican nationals under Mexican law, entitling them to due process, 
  • Establishes “family unity and the best interests of children and adolescents as the principal criteria for the admission and stay of foreigners for temporary or permanent Mexican residency, alongside labor and humanitarian causes,” 
  • Establishes offices for protection of migrants’ human rights and the investigation of crimes purportedly committed against migrants, including those committed by immigration officials,
  • Simplifies entrance and residence requirements,
  • Establishes a point system for those who apply for residence,
  • Creates a 3 day regional visitors visa for people from neighboring countries, 
  • Streamlines the visa application process.

Other legal changes to Mexican laws in 2008 reduced the punishment for illegal entry from up to ten years in prison to a maximum fine of 5000 pesos. The Mexican government also introduced temporary visas, valid for up to a year, for agricultural laborers from Guatemala and Belize working in Mexico’s southern states. In 2010, undocumented migrants were guaranteed the right to report human rights violations and receive medical treatment without prosecution.

Mexican Immigration Laws, Central American Free-Movement Zones, and the Increase in Central American Immigration

One unintended consequence of Mexico’s more liberalized immigration laws, partly in response to legitimate American criticism, is that now the migration of people from Central America to the United States through Mexico is much cheaper than it used to be. The biggest hurdle for Central American migrants used to be the militarized Southern Mexican border and the abuse by corrupt police, which the Migratory Act of 2011 mitigates.

Mexico isn’t the only country that changed its immigration and border control policies in recent years. In June 2006, El Salvador, Honduras, Guatemala, and Nicaragua signed the Central America-4 (CA-4) Border Control Agreement that created a common passport and obliterated border controls and movement restrictions between those four nations. The removal of political barriers to movement has decreased the costs of migrating northward toward the United States.

Liberalized Mexican and Central American immigration laws and border controls likely play a role in lowering the cost of migrating to the United States. Ironically, American complaints that partly spurred Mexican immigration policy changes are likely a contributing factor of the recent increase in Central American migration.

Nicaraguan Unaccompanied Child Migrants - Where Are They?

U.S. policy is equally generous to unaccompanied children (UAC) from El Salvador, Guatemala, Honduras, and Nicaragua – but today’s child migrants are not coming from Nicaragua.  Explaining why Nicaraguan UAC are not part of the recent surge may help explain why so many are coming from El Salvador, Guatemala, and Honduras - the so-called Northern Triangle. 

Nicaragua has low rates of violent crime, gang membership, and fewer family connections to the United States than the Northern Triangle.  If U.S. policy was the main reason why there is a sudden surge of UAC, it should also pull UAC from Nicaragua.  This suggests that other factors like the high levels of violence and strong family connections are the main reasons why UAC from the Northern Triangle are coming and why Nicaraguan UAC are absent.        

Nicaragua has a much lower homicide rate than El Salvador, Honduras, and Guatemala.  According to the United Nations, there has been a dramatic increase in murder rates across Central America since 2006 – except in Nicaragua.    

 

Source: United Nations Office on Drugs and Crime https://www.unodc.org/gsh/en/data.htm.

Sugar from Mexico: Who’s Being Injured?

On March 28, 2014, the U.S. sugar industry filed antidumping and countervailing duty (AD/CVD) petitions against imports of sugar from Mexico.  From the time that NAFTA’s sugar provisions were fully implemented in 2008, Mexico has been the only country in the world with unfettered access to the U.S. sugar market.  Sugar interests now are hoping to clamp the fetters back on.  It is not at all clear whether that effort will succeed.

Both the Commerce Department and the U.S. International Trade Commission (ITC) play important roles in this process.  Commerce must determine the extent of any dumping margin (selling at “less than fair value” due to pricing practices of individual firms) and any countervailing duty margin (benefit received by Mexican exporters from subsidies provided by their government).  The estimated dumping margins for the preliminary phase of the investigation range from 30 to 64 percent; they are likely to be adjusted based on additional information gained in the final phase of the investigation.  Commerce has not yet had an opportunity to establish CVD margins.  Given the degree of government involvement in Mexico’s sugar business, a CVD margin at some level seems likely.

The job of the ITC is to determine whether the domestic sugar industry has been “injured” by the imported sugar.  In its preliminary determination, the commission voted unanimously in the affirmative, which means that the investigation will go forward into its final phase.  This vote was not at all a surprise.  The legal standard for a negative vote in a preliminary determination is quite high.  To have voted in the negative, the ITC would have had to conclude that there was no “reasonable indication that a domestic industry is materially injured or threatened with material injury.”  That is a very difficult standard to meet on the basis of the somewhat limited preliminary record – often with inconclusive evidence – that must be compiled not more than 45 days after the case has been filed. 

Family Reunification and Other Explanations for the Border Surge of Unaccompanied Children

There are two main issues surrounding the increase in the migration of unaccompanied children (UAC) and asylum seekers in recent years that have recently reached crisis proportions.  The first is the treatment of those children who are apprehended by Border Patrol and how American policy is reacting to the surge. 

The second is explaining why UACs are coming.  Below I will lay out three different theories that attempt to explain the surge in UACs.  Each theory has some merit and I present evidence in support and opposition to each one.  

First Explanation: Family Reunification

Immigration by stages and family reunification could explain part of the UAC border surge.  Stage migration works like this:  First, the single breadwinner of the family immigrates to find work in the United States.  After getting established, finding employment, and figuring out how to function in his new country, the initial immigrant then sends for the rest of his family.  Sometimes the initial immigrant’s spouse will come alone while leaving the children in the care of extended family.  Often times, after the second parent is working, they will then have the funds to send for the children to join them in the United States. 

This pattern of family separation through stage immigration and eventual reunification is a desperate strategy undertaken by poor people who don’t have any other options.  Regardless, it explains part of the surge in unaccompanied children who are joining their unlawful immigrant parents and families who previously arrived in the United States.

Smuggling prices for unauthorized immigrants from Central America are higher than for unauthorized Mexican immigrants.  Mexicans pay about $4000 to be smuggled to the United States by land and $9000 to be smuggled in by sea.  Guatemalans pay about $7000.  But since Guatemalans are so much poorer than Mexicans, on average, it can take many more years for them to save for the trip, often meaning that both parents are more likely to come to the United States first to work and send money back to Guatemala to finance the sending of their children.  As a result, many of the children would come alone. 

The price of human smuggling has risen substantially due to increased U.S. border enforcement.  The higher price of migrating and the relative poverty of Central American migrants mean that families are more likely to be separated during the migration process, explaining part of the surge in UACs from Central America.  Ironically, increased border enforcement and crackdowns on human smugglers have probably caused more family separation and eventual reunification – partly explaining the scale of the current UAC migration.

Mexican Violence and Unauthorized Immigration

The murder rate in Mexico is a serious and troubling issue that I’m frequently asked about in relation to immigration. Although far lower than in other Central American countries, the Mexican murder rate is almost three times as high as it was in 2007 – and potentially much higher. But, do unauthorized Mexican immigrants come to the United States to avoid the violence in their home country?

I decided to plot the number of Mexican nationals apprehended by Customs and Border Protection (CBP) on the left axis, an admittedly imperfect measurement of the intensity of unauthorized immigration, and the murder rate in Mexico per 100,000 people on the right axis.

Sources: Sources: Customs and Border Protection U.S. Border Patrol Statistics and Trans-Border Institute.

A Look at the OAS Report on Drug Policy in the Americas

Last Friday, the Organization of American States released a groundbreaking report on the future of drug policy in the Americas. The OAS received the mandate to produce this document at the Summit of the Americas last year in Cartagena, Colombia, where some presidents aired their frustration with the war on drugs and even suggested legalization as an alternative to fight the cartels.  

The document is based on solid premises:

  1. Drug violence is one of the greatest challenges facing the Americas
  2. The current approach is a failure isn’t working
  3. New policy alternatives need to be discussed and implemented
  4. Drug use will remain significant by 2025

These premises might seem pretty obvious, but when it comes to drug policy, stating the obvious hasn’t been the norm for those who believe in the status quo: for example, in 1988 the UN held an event titled “A drug-free world: we can do it” (consumption of marijuana and cocaine has increased by 50 percent since then). Or the latest National Drug Control Strategy, which claims that the greatest accomplishment of the Mérida Initiative with Mexico has been “the mutual fostering of security, protection and prosperity” (never mind the 60,000 people killed in drug violence in six years in Mexico).

The OAS report avoids recounting this fairy tale. It also avoids making recommendations, given the lack of consensus among its authors about where drug policy should be headed in the next 12 years. Instead, the document lays out four different interpretations of the “drug problem” and presents the scenarios of what the response should be. The report also presents the challenges facing each scenario (name in bold):

Together: Under this scenario, the problem is not drug laws but weak institutions. It foresees greater security and intelligence cooperation among nations, more expenditure in the security and judiciary apparatuses and tougher laws dealing with corruption, gun trafficking and money laundering.

Latin American countries indeed suffer from weak institutions. The shortcoming of this scenario is that prohibition actually exacerbates the problem since it inflates the profit margins of the cartels to stratospheric levels, thus increasing their corrupting and violent power. In 2010 all seven Central American countries combined spent nearly $4 billion in their security and judiciary apparatuses (a 60 percent increase in five years). And yet that fell terribly short of the estimated revenues of the Mexican and Colombian cartels which, according to a report from the Justice Department, could reach up to $39 billion a year.

The report foresees another challenge with this approach: a disparity among countries in their institution-building efforts, which would lead to the balloon effect of criminal activities. This is perhaps the main feature of the drug business in the Americas: its high capacity to adapt to changing circumstances. For example, in the early 1990s, as pressure grew on coca growers in Peru they moved to Colombia. Now, after a decade of eradication programs in that nation, they are moving back to Peru. Overall the Andean region continues to produce the same amount of cocaine as it did 20 years ago.

Over the years the common denominator of the war on drugs in Latin America has been the attempt to export the problem to your neighbor. Greater cooperation, harmonization of efforts, and same-pace institution building seems unrealistic.

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