Sunday, June 5, 2016

The Truth About Trump And Mexico

The truth about Trump and Mexico

‘If you look at Mexican exports to the US, some 40 per cent of these were created with “made in America” components’
Illustration by Ulla Puggaard
© Ulla Puggaard
Last week, Enrique de la Madrid, Mexico’s secretary of tourism, visited New York with a sales pitch. It was not to proclaim the joys of Mexico’s beaches or culture; instead, de la Madrid is part of a cohort of Mexican ministers who are being quietly dispatched this summer to America on a mission to persuade voters to feel grateful for their trade partnership.
Recently, the word “Mexico” has stirred up all manner of political tension: Donald Trump has said he will force the country to pay for a border wall and continues to make derogatory comments about Mexican immigrants. Unfortunately, this anti-immigrant — and anti-Mexican — tone has infected other corners of the Republican debate.
So now the Mexicans are trying to fight back — but not with more insults or by mentioning Trump by name.“We are not focused on any particular candidate,” de la Madrid told me when I met him last week. Instead, they are marshalling data to show why, as de la Madrid puts it: “The relationship with Mexico is good for Americans.” Call it, if you like, an attack by a statistical shock troop that aims to “set the record straight”.
Will it work? By any standard, the statistics that de la Madrid and others are waving around are fascinating. Most Americans assume that Mexicans have been flooding into the US in recent years, as legal and illegal immigrants. And, if you look back, that is half right: some 16 million Mexicans moved north between 1965 and 2015, according to Pew Research. But last year the flow of people slowed, and went into reverse, since more Mexicans left than arrived.
Trade flows, too, are no longer a one-way street. Yes, the US is still importing some $315bn of goods per annum from Mexico, much of it cheaply made widgets that might have once been produced in American factories.But what tends to be overlooked in the debate is that exports from the US to Mexico have recently soared, reaching $270bn per annum. That apparently leaves Mexico the “second biggest export destination for the US”, which “supports six million American jobs”.
“Texas exports $90bn to Mexico, which is 38 per cent of their exports. In Arizona, there are $9bn exports, or 41 per cent of the total,” de la Madrid continued, with the air of someone who has memorised his brief. “Even Wisconsin exports $3bn — Wisconsin!” And then some “20 million Mexicans come each year for tourism and business travel — that represents $20bn of expenditure”.
It is striking stuff. And the Mexican government certainly deserves credit for trying to take the moral high ground in fighting back. However, as I listened to de la Madrid speak, I couldn’t help but feel cynical about whether it will work. After all, many Trump supporters today are driven by anger, frustration and fear. Those emotions will not be easily assuaged by Wisconsin trade data. Like the Brexit row in the UK, this is not a fight about numbers.
And in any case, if you dig into the trade data, they are often not entirely what they might seem. Many of the US’s new “exports” to Mexico represent just one stage in a bigger supply chain: goods are being sent to Mexico to be assembled in factories there, before being reimported. And sometimes those “made in America” components have themselves been initially imported from Mexico.
The auto sector is a case in point. These days, America “imports” finished cars from Mexican factories. But, as the Washington-based think-tank the Wilson Center has pointed out, the components used to make those cars often originate in the US — and can end up crossing the border between six and eight times during the assembly process. Indeed, if you look at Mexican exports to the US, some 40 per cent of these were created with “made in America” components.
The key point, then, is that it seems outdated to talk about “imports” and “exports” — as both Trump and the Mexican government are apt to do. In the 21st century, countries are linked by complex supply chains that do not fit into traditional statistical boxes, or political rhetoric.
That point will not reassure Trump supporters; on the contrary, it may horrify them. Trump wants the entire car to start — and finish — in America, even if that makes it more expensive.
But the existence of these tightly interconnected supply chains also increases the likelihood that disentangling those “trade” ties could cause a huge shock and raise consumer prices. “Made in America” might make powerful politics but it is no longer a clear idea in economic terms.
The tragedy is that it is painfully hard to communicate this messy new reality to a sceptical voter base; phrases such as “supply-chain integration” do not pack much rhetorical punch. Therein lies the challenge for the Mexican government today as it embarks on its sales pitch. I wish it the best of luck; it will need it in a world of Trumpian soundbites.
Illustration by Ulla Puggaard
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