Wouldn't legalization of drugs in the broad sense cripple the financial resources of drug cartels? Mexico can't fight the cartels because the huge inflow of dollars allows them to buy anything, from tanks to judges.
Thanks. My wife and I just vacationed in Costa Rica for a week. Lovely experience. I agree wholeheartedly with your recommendations for how we could better engage this region, to our mutual benefit. As you become better educated on this region, please continue to share your knowledge, recommendations and good sources of intel.
A comment from a neighbor that is nowhere mentioned in your column: Canada. We have had a free trade agreement with you for automobiles since the 1960s, and a comprehensive agreement since 1988. It has been a rocky relationship.
A perpetual irritant has been exports of softwood lumber from Canada to the U.S. Here, most forests are owned by governments, and so there is no payment to private owners of trees. Instead, lumber companies pay stumpage fees. The U.S. claims these are too low and so imposes countervailing tariffs. The issue has been to arbitration panels several times and, to my knowledge, Canada has always won. Yet the U.S. always manages to find new grounds for applying tariffs yet again.
There are many other such irritants. A big one was included in President Biden's Build Back Better bill. It provided for significant subsidies to electric cars, on condition that they be built in the U.S. This would have devastated the Canadian automobile industry, in violation of the spirit, and most probably the letter of the new USCMA.
While I agree with the logic of the central argument Matt is making here, I do think think one reason jobs got outsourced to China, and not to Honduras or Dominican Republic, is the former's ability to ensure rule of law. US companies could be confident that the investments made in China would be protected, and that the factories etc. will not be impacted by lawlessness, which unfortunately is a hallmark of the countries south of the US border. One might argue that this lawlessness is a consequence of the US (both in terms of providing a huge market for illicit drugs as well as being a source for assault weapons).
Mmm, rule of law in China is ... somewhat flexible, both in terms of (1) the chance that your business partner will decide it's no longer a partnership and (2) rampant IP theft and after-hours production of competitive grey-label goods using your own design....
Those of you who know me, know I am work in Latin America quite regularly.
Full confession. Up until I started working in Latin America 10-years ago, I was pretty much a border controls limit immigration guy.
But during that time I have both seen steady and sometime amazing economic progress.
Colombia is my favorite example. It has this reputation for being a Narco state, but when you go downtown and meet young people. English is more and more common. They have call centers! The downtowns are clean and modern. Bars, restaurants, signs of western civilization.
But even Mexico. I was just in Hermosillo. In parts... you would swear you were in Arizona. The thing that really struck me there was the development of gated American like suburbs. Also the cars... high end, modern cars everywhere.
I had a similar experience when I was visiting UNAM in Mexico City in 2017 and recall being pretty surprised by it. I'm pretty sure there were more English signs in the mall than Spanish, for example. And the Wal-Mart was practically identical to the one near me here in the US. In contrast, Oaxaca did appear to be a bit poorer (in 2015 at least).
"we’ve consistently acted like the main point of negotiating trade deals is to help American exporters, using the lure of access to the American domestic market to try to bully smaller countries into taking more American agricultural exports or adopting our intellectual property rules. ... That’s all very shortsighted." Shortsighted?
"The U.S. should prioritize prosperity in Mexico, Central America, and the Caribbean"
No, the US should prioritize working class and low income prosperity within its own borders because the US has invited in too much poverty from those places already. Once we get our own house in order, including stopping the flow of millions of poor and uneducated from those places, we can work on providing some assistance to benefit their working class and poor.
Is this popularist, though? The negative effects of NAFTA are among the few issues that Bernie Sanders and Donald Trump agree on. Looking at some polls (https://en.wikipedia.org/wiki/US_public_opinion_on_the_North_American_Free_Trade_Agreement#US_public_opinion) the numbers are not quite as anti-NAFTA as I had expected, but this strikes me as the type of issue where those in favor are tepid in their support and those against are passionate (like gun control).
Amen to all of this. I grew up near the South Texas border country, where (at the time) people and goods flowed pretty much freely across the border. Most border towns (on either side of the Rio Grande) were unified economic zones in practice, if not in legality. While there are obviously limits to the parallels between local and national (or continental) trade, I think the principle is the same. Free trade among neighboring countries helps everyone do better. That’s why I’ve always believed in free trade generally.
I listened to John Mearsheimer recently on Andrew Sullivan's podcast - toward the end Mearsheimer points out the folly of the US creating a peer competitor (by having a policy in the 90s to promote Chinese industrialization). I was frustrated because Sullivan tiptoes up to, but never asks the hard question about the moral choices, since Chinese industrialization took so many people out of poverty.
And I've been thinking about the US's treatment of our neighboring countries, including the war with Mexico, embargoes on Cuba, and interference in South America, particularly in the context of evaluating Russia's current actions in Ukraine and China's possible future actions in Taiwan. Mearsheimer's take on Ukraine is that "big countries tend to do whatever they want WRT their smaller neighbors" and he would find anything less than China trying to annex Taiwan to be really surprising.
So today's article fits into this in an interesting way - our Western hemisphere trading partners are countries where we could promote industrialization without a strategic risk, do humanitarian good, and address domestic problems all at the same time.
It's interesting that the US's Mancur Olson-type constellation of blocking interests has failed to slow the penetration of Chinese goods into the US, while it seems to be doing a pretty good job of doing so for Central American goods. Was there no "yarn forward" constraint on Chinese textiles? If so, what caused the difference?
One thing that both Brexit and YIMBY-ism really brought home to me is how much of a drag the cumulative effect of individually-defensible box ticking exercises like rules-of-origin can be. The entire thing just becomes hella cumbersome in a way that I think a lot of my fellow progressives can miss.
I do not understand the idea that liberalizing trade with China (even if is did not result in more political liberalization there) was bad or in some sense in trade-off with liberalizing trade with C&S America (or anywhere else). The point I made in another post -- that most people in the US would be better off if we had prioritized opening markets for US exports over trademark and copyright protection -- apply very strongly to China.
I think if you're a China hawk then you see it as bad, e.g. if you think it's bad that China is in a position to challenge US hegemony internationally by having a combination of a large population and a reasonably high level of industrialization.
If you're a globalist who thinks the main point was lifting people out of poverty and not some zero sum clash of great powers, then maybe you're unhappy that the Chinese government is repressive but otherwise glad that people have more food.
I am a "hawk" in regretting that the CCP is using part of their wealth to challenge some desirable aspects of US "hegemony." But that does not mean that it would have been desirable (or passible) for the US to prevent China from carrying out the economic reforms that have created so much wealth. Would Chinese GDP really be that much smaller and it's ability and inclination to threaten Taiwan, repress the Uyghurs, and prop up Duterte and Kim if the US had opposed China's entry to the WHO?
The US's mistake vis a vis China is to have mismanaged the US economy -- structural deficits, immigration restrictions, urban housing and development restrictions, trade restriction -- to have produced low GDP and GPD GDP per capita growth rates.
Too bad you don't bring your hot takes about LatAm.
Perhaps it's time to franchise Slow Boring?
"Aburrilento"
Wouldn't legalization of drugs in the broad sense cripple the financial resources of drug cartels? Mexico can't fight the cartels because the huge inflow of dollars allows them to buy anything, from tanks to judges.
Great post!
Thanks. My wife and I just vacationed in Costa Rica for a week. Lovely experience. I agree wholeheartedly with your recommendations for how we could better engage this region, to our mutual benefit. As you become better educated on this region, please continue to share your knowledge, recommendations and good sources of intel.
Hi Matt
A comment from a neighbor that is nowhere mentioned in your column: Canada. We have had a free trade agreement with you for automobiles since the 1960s, and a comprehensive agreement since 1988. It has been a rocky relationship.
A perpetual irritant has been exports of softwood lumber from Canada to the U.S. Here, most forests are owned by governments, and so there is no payment to private owners of trees. Instead, lumber companies pay stumpage fees. The U.S. claims these are too low and so imposes countervailing tariffs. The issue has been to arbitration panels several times and, to my knowledge, Canada has always won. Yet the U.S. always manages to find new grounds for applying tariffs yet again.
There are many other such irritants. A big one was included in President Biden's Build Back Better bill. It provided for significant subsidies to electric cars, on condition that they be built in the U.S. This would have devastated the Canadian automobile industry, in violation of the spirit, and most probably the letter of the new USCMA.
This is not how friends behave.
While I agree with the logic of the central argument Matt is making here, I do think think one reason jobs got outsourced to China, and not to Honduras or Dominican Republic, is the former's ability to ensure rule of law. US companies could be confident that the investments made in China would be protected, and that the factories etc. will not be impacted by lawlessness, which unfortunately is a hallmark of the countries south of the US border. One might argue that this lawlessness is a consequence of the US (both in terms of providing a huge market for illicit drugs as well as being a source for assault weapons).
Mmm, rule of law in China is ... somewhat flexible, both in terms of (1) the chance that your business partner will decide it's no longer a partnership and (2) rampant IP theft and after-hours production of competitive grey-label goods using your own design....
Those of you who know me, know I am work in Latin America quite regularly.
Full confession. Up until I started working in Latin America 10-years ago, I was pretty much a border controls limit immigration guy.
But during that time I have both seen steady and sometime amazing economic progress.
Colombia is my favorite example. It has this reputation for being a Narco state, but when you go downtown and meet young people. English is more and more common. They have call centers! The downtowns are clean and modern. Bars, restaurants, signs of western civilization.
But even Mexico. I was just in Hermosillo. In parts... you would swear you were in Arizona. The thing that really struck me there was the development of gated American like suburbs. Also the cars... high end, modern cars everywhere.
I had a similar experience when I was visiting UNAM in Mexico City in 2017 and recall being pretty surprised by it. I'm pretty sure there were more English signs in the mall than Spanish, for example. And the Wal-Mart was practically identical to the one near me here in the US. In contrast, Oaxaca did appear to be a bit poorer (in 2015 at least).
"we’ve consistently acted like the main point of negotiating trade deals is to help American exporters, using the lure of access to the American domestic market to try to bully smaller countries into taking more American agricultural exports or adopting our intellectual property rules. ... That’s all very shortsighted." Shortsighted?
"The U.S. should prioritize prosperity in Mexico, Central America, and the Caribbean"
No, the US should prioritize working class and low income prosperity within its own borders because the US has invited in too much poverty from those places already. Once we get our own house in order, including stopping the flow of millions of poor and uneducated from those places, we can work on providing some assistance to benefit their working class and poor.
I would agree with you if there were a tradeoff.
Is this popularist, though? The negative effects of NAFTA are among the few issues that Bernie Sanders and Donald Trump agree on. Looking at some polls (https://en.wikipedia.org/wiki/US_public_opinion_on_the_North_American_Free_Trade_Agreement#US_public_opinion) the numbers are not quite as anti-NAFTA as I had expected, but this strikes me as the type of issue where those in favor are tepid in their support and those against are passionate (like gun control).
Amen to all of this. I grew up near the South Texas border country, where (at the time) people and goods flowed pretty much freely across the border. Most border towns (on either side of the Rio Grande) were unified economic zones in practice, if not in legality. While there are obviously limits to the parallels between local and national (or continental) trade, I think the principle is the same. Free trade among neighboring countries helps everyone do better. That’s why I’ve always believed in free trade generally.
I listened to John Mearsheimer recently on Andrew Sullivan's podcast - toward the end Mearsheimer points out the folly of the US creating a peer competitor (by having a policy in the 90s to promote Chinese industrialization). I was frustrated because Sullivan tiptoes up to, but never asks the hard question about the moral choices, since Chinese industrialization took so many people out of poverty.
And I've been thinking about the US's treatment of our neighboring countries, including the war with Mexico, embargoes on Cuba, and interference in South America, particularly in the context of evaluating Russia's current actions in Ukraine and China's possible future actions in Taiwan. Mearsheimer's take on Ukraine is that "big countries tend to do whatever they want WRT their smaller neighbors" and he would find anything less than China trying to annex Taiwan to be really surprising.
So today's article fits into this in an interesting way - our Western hemisphere trading partners are countries where we could promote industrialization without a strategic risk, do humanitarian good, and address domestic problems all at the same time.
Excellent post.
It's interesting that the US's Mancur Olson-type constellation of blocking interests has failed to slow the penetration of Chinese goods into the US, while it seems to be doing a pretty good job of doing so for Central American goods. Was there no "yarn forward" constraint on Chinese textiles? If so, what caused the difference?
One thing that both Brexit and YIMBY-ism really brought home to me is how much of a drag the cumulative effect of individually-defensible box ticking exercises like rules-of-origin can be. The entire thing just becomes hella cumbersome in a way that I think a lot of my fellow progressives can miss.
"not in the sense of telling other countries what we think they should do (be less corrupt! make good decisions about everything!)"
Hey, nothing wrong with that (although like anything else it COULD be perused in such a ham-fisted way as to be counterproductive).
I do not understand the idea that liberalizing trade with China (even if is did not result in more political liberalization there) was bad or in some sense in trade-off with liberalizing trade with C&S America (or anywhere else). The point I made in another post -- that most people in the US would be better off if we had prioritized opening markets for US exports over trademark and copyright protection -- apply very strongly to China.
I think if you're a China hawk then you see it as bad, e.g. if you think it's bad that China is in a position to challenge US hegemony internationally by having a combination of a large population and a reasonably high level of industrialization.
If you're a globalist who thinks the main point was lifting people out of poverty and not some zero sum clash of great powers, then maybe you're unhappy that the Chinese government is repressive but otherwise glad that people have more food.
I am a "hawk" in regretting that the CCP is using part of their wealth to challenge some desirable aspects of US "hegemony." But that does not mean that it would have been desirable (or passible) for the US to prevent China from carrying out the economic reforms that have created so much wealth. Would Chinese GDP really be that much smaller and it's ability and inclination to threaten Taiwan, repress the Uyghurs, and prop up Duterte and Kim if the US had opposed China's entry to the WHO?
The US's mistake vis a vis China is to have mismanaged the US economy -- structural deficits, immigration restrictions, urban housing and development restrictions, trade restriction -- to have produced low GDP and GPD GDP per capita growth rates.