Border Crisis, border security, Central America, Charles Grassley, illegal aliens, Im-Politic, immigrants, Immigration, Mexico, migrants, remittances, tariffs, Trade, Trump, U.S.-Mexico-Canada Agreement, USMCA
It’s not every day that I praise veteran Republican Senator Charles Grassley of Iowa. In fact, I don’t believe I’ve ever praised him in print. On trade policy he’s often especially especially clueless – his last foray into this field consisted of threatening to use his chairmanship of the Senate Finance Committee to scuttle the U.S.-Mexico-Canada Trade Agreement (USMCA) unless President Trump withdrew his tariffs on metals imports from Mexico and Canada.
(Grassley was upset because Mexico in particular had retaliated by slapping tariffs on some key American farm products exported by states like Iowa. He didn’t seem to realize that, as I’ve written here, the tariffs needed to be global in scope to be effective. Meanwhile, however serious American farmers’ woes, they began in earnest years before any Trump tariffs went into effect.)
So imagine my surprise yesterday upon learning that Grassley has proposed a response to Mexico’s foot-dragging on helping to ease the crisis on its border with the United States that’s much better than President Trump’s tariffs.
According to Grassley, the way to pressure Mexico to tighten its own curbs on the floods of Central Americans streaming through its territory toward the United States is to tax the remittances sent to their home country by Mexicans who have moved northward both legally and illegally.
Remittances consist of money sent by immigrants back to their home country – usually to relatives. They encourage immigration because they come from wages earned by newcomers to the United States that are much higher than those they can make in their countries of origin.
And we’re unmistakably talking big numbers – especially for Mexico. The country’s own central bank pegged them at almost $31.5 billion last year. That’s more money coming into the Mexican economy than it makes from oil exports, and in fact its second largest foreign exchange earner after auto parts exports.
Unlike tariffs, remittances taxes wouldn’t harm Americans who buy imports from Mexico – whether consumers or businesses. All the victims would be Mexicans in Mexico. And because so many poor Mexicans in particular rely on these funds to help maintain and improve their living standards, a smaller flow would squeeze their finances and surely increase political instability in a country that’s long suffered more than its share of turmoil. Don’t think Mexico’s leaders – who are already sounding inclined to make concessions to Mr. Trump to avoid the threatened tariffs – could brush these sanctions off.
At least as important, unlike the proposed tariffs, remittance taxes wouldn’t endanger Congressional passage of the USMCA or undermine the Trump administration’s China trade policies by reducing Mexico’s attractiveness as an alternative export platform for companies looking to move in whole or in part out of the People’s Republic.
The President has actually spoken of taking this step to raise the resources needed to finance a Border Wall, but never followed through. At the time, covert and overt Open Borders supporters charged that the move could be counterproductive, since the remittances increased the well-being of their recipients enough to encourage them to stay in Mexico.
But since these payments still represent only a fraction of the earnings of Mexicans in the United States, it makes no sense to believe that many Mexicans in Mexico seriously contemplating moving across the border would be satisfied by receiving a fraction of a loaf if they thought it was all potentially available.
It’s possible that the Trump tariff threat could suffice to produce enough of a Mexican response to satisfy him on border security and declare victory with no levies. In this vein, it’s significant that Mexico’s president has already signaled his willingness to appease Mr. Trump somehow. But a remittances threat could have accomplished the same goal with much less muss and fuss. If negotiations with Mexico can’t resolve the issue by the announced Trump deadline of June 10, switching tactics to a remittances tax a la Grassley would be an unmistakable no-brainer.