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Friday, January 27, 2017

The Mexican Muddle - or - The Peso Pundits

Did you know that there is a "major crisis" in relations between the USA and Mexico?  That's what the Washington Post said today, so it must be true, right?  Actually, the real answer is that there is no major crisis.  What is happening right now is that for the first time in a long time, the USA is not catering to Mexico and its needs, but rather is insisting on doing things that benefit America and its people.

Here are a few things that need to be kept in mind:

1.  There is enormous trade between the USA and Mexico.  When this trade is examined in detail, however, it becomes clear that cutting off or reducing that trade would not be a great thing for the USA, but it would be an unimaginable disaster for Mexico.  There is no way that the Mexicans could ever move towards actions that would cut the US/Mexican trade flows unless they had first decided to become suicidal.

2.  For the last twenty years at least, Mexico has benefitted in a major way from the actions of the United States.  We agreed to a trade deal (NAFTA) that permitted American companies to move to low-labor-cost sites in Mexico and to continue to sell their products across America.  Jobs by the tens if not hundreds of thousands moved south out of America and into Mexico.  The US also tried to stop the flow of illegal drugs from the Mexican drug cartels into the USA while the Mexicans gave, at most, half hearted support to the effort.  The Mexicans refused to allow immigration into their nation except for a very tiny number of people, but they permitted hundreds of thousands of people each year to traverse Mexico in order to sneak into the USA.  When America tried to catch those entering illegally, the Mexicans did nothing to assist in that effort.

3.  President Trump is trying to make the Mexican/American relationship more even-handed.  Trade will continue, but the benefits will go to both side, not just to the Mexicans.  Drug traffic will be stopped or at least lessened with cooperation on both sides.  The flow of illegal immigrants from Mexico will be stopped.  Many in Mexico (as well as much of the left in the USA) see these changes as an affront to Mexico, but they are just a return to plans that provide fairness for both sides.

Ultimately, President Trump understands that in this situation, the Mexicans will have to give in and accept modifications to the current situation that will restore fairness to both sides.  President Nieto of Mexico may not be coming to visit next week, but he will do anything possible to avoid real damage to the US/Mexico trading relation.  Any such damage would be an unthinkable calamity for the Mexicans. 

The funny thing here is that the supposedly sophisticated Washington Post and its punditry do nott seem to understand what is happening.  President Trump, who the WaPo criticizes as a novice, has the situation in hand.

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