2016 election, capital equipment, Donald Trump, export-led growth, Im-Politic, Immigration, Mexico, remittances, The New York Times, Trade, trade wars, Vicente Fox, wall, Will Olney, Williams College
Since Donald Trump revealed key details behind his proposal to deal with illegal immigration from Mexico by building a wall along America’s southern border, I’ve been waiting for the critics to make abundantly clear why the plan is nuts. Judging from recent attacks from Mexico and in The New York Times, it looks like the wait will be lengthy.
The looniest claim by far is that Mexico would launch a “trade war” with the United States if the Republican front-runner won the White House and used tariffs on Mexico’s exports to the United States to fund the project. This prospect has been raised by no less than former Mexican President Vicente Fox, who told the Associated Press, “Let’s suppose he establishes tariffs, just imagine. We put tariffs on the (hundreds of billions of) dollars that the United States sells to Mexico.’’
It seems that in his golden years, Fox has forgotten that the United States buys nearly 80 percent of Mexico’s exports annually. So that export-dependent economy is going to antagonize its best customer by far? And at a time when sluggish world growth means that no other markets could possibly substitute for America’s? Rotsaruck with that.
Fox also ignores the huge share of U.S. goods exports to Mexico (at least half in 2015) that consists of capital equipment and various other industrial inputs – i.e., the building blocks of Mexico’s export-focused manufacturing base. Talk about cutting off one’s nose, etc. And although it’s true that Mexico could find other suppliers, its own demand for such machinery, equipment, and materials would practically vanish if its access to the U.S. market was lost or greatly reduced.
Equally silly was the op-ed in yesterday’s Times by Williams College economist Will Olney, who argued that if America could overcome the (formidable) legal, financial, and logistical obstacles to financing the wall a la Trump, the plan could harm the United States as much as Mexico. Unfortunately, the two main reasons he provided hold no water.
First, according to Olney, paying for the wall by effectively halting Mexican immigrants’ remittances back home could prevent these immigrants from helping their relatives “invest in education, start businesses and get out of poverty.” As a result, “withholding this money may actually encourage immigration to the United States.” But what seems to have slipped Olney’s mind is that regardless of more adverse economic conditions in Mexico, migrant flows from south of the border logically wouldn’t change once the wall was built because migrants would…face a wall.
Olney would have been better advised to note that bigger migration flows could be expected while the wall was still incomplete. But there’s a fly in this ointment, too: Even though Mexicans have been streaming to the United States legally and illegally for many years, and sending money back home, the impact on Mexican poverty seems unimpressive. For half the country’s population is still classified as poor.
More nonsensical is Olney’s claim that “Banning remittances could also reduce incentives for the best and brightest immigrants to come to the United States. Without the opportunity to provide for their family and friends back home, many talented immigrants might choose to move elsewhere. “ But no one is talking about banning or curbing remittances to any country other than Mexico. And there’s no shortage of the best and the brightest from elsewhere knocking – legally – on America’s door.
Moreover, even remittances to Mexico wouldn’t be banned forever, or even for very long. Under Trump’s plan – which calls for banning remittances only from illegal U.S. residents from Mexico – all restrictions would be lifted once a “one-time payment of $5-$10 billion” to finance wall construction is made by Mexico’s government.
Trump’s wall-financing proposal may indeed founder on many of the aforementioned legal, financial, and logistical obstacles – like keeping track of wired money transfers, and distinguishing between those that will be permitted those singled out for blocking. And the wall itself may prove unfeasible for similar reasons. But it’s also quite possible that these barriers can be overcome – and that Trump’s critics don’t mainly object to the wall because it can’t work, but because it can.