This column has recently addressed U.S. problems with China. Now we’ll discuss things closer to home – with some similar but more benign and resolvable issues. 

Mexico is the third-largest U.S. trading partner after China and Canada and America’s second-largest import market after Canada. With a population of 129,000,000, Mexico is the most populous Spanish-speaking nation in the world and third-most populous country in the Western hemisphere. Mexico’s GDP is $1 trillion (6% of the U.S.), and the country has a per capita GDP of $17,750 (30% of the U.S.). Total U.S. 2017 exports to Mexico were $144.6 billion and imports were $223.4 billion. U.S. oil and gas imports have steadily declined since 2011 and dropped from $39.9 to $9.8 billion in 2017.

The Congressional Research Service estimates that fully 40% of U.S. imports consist of U.S. value-added content. This aspect of U.S. imports helps sustain industry jobs but has the negative effect of taking away other U.S. jobs and depresses the wages of low-skilled workers. As a summary, Mexico has the 11^th-largest economy in the world in terms of GDP, with 82% of their exports going to the U.S.

All of this describes a reasonable relationship between the countries but still one needing improvements. A Heritage Foundation study said that Mexico’s economic freedom score is only 64.8, ranking it 63rd in the world and 12th among the 32 countries in the Americas. Remember that the center-left Institutional Revolutionary Party governed Mexico for 70 years until 2000, when it was defeated by the center-right National Action Party. The Democratic Revolution Party just gained national control in the July 2018 presidential election, with a 53% victory margin for new six-year-term President Andres Manuel Lopez Obrador (AMLO), who takes office in December. There are deep and valid reasons for this public expression, and it deals with growing concerns that affect industry and lives on both sides of our border. The key word here is “corruption.”

Analyses by Investopedia cite some indicators. A World Bank study found that the average income in countries with high corruption levels is one-third that of low-corruption nations. The former has infant mortality rates threefold higher and literacy rates 25% lower than peers. Corrupt nations are characterized by a disproportionately small middle class and a big divergence between upper- and lower-class living standards. The public has little confidence in the legal system. Government revenues from taxes are inefficiently allocated – in Mexico it was 19.6% of GDP in 2013, the lowest among the 34 OECD countries. There is disincentive for foreign investment, and the cost of education increases while quality decreases.

A bright spot for Mexico appeared May 18 with the creation of CONAMER, a national regulatory improvement commission. The organization’s intent is to combat corruption, enhance growth and free trade and spur job creation. Although AMLO is a perennial leftist candidate, he promised to roust out the political mafia that has run the country and to end the growing violence that shakes Mexico. Know that AMLO won 30% more votes than his nearest competitor among the nation’s 89 million eligible voters casting ballots. He has said things that resound well with the public and could spell the difference between his success … or could lead to more of the same. AMLO said, “We are not against businessmen. We are against corrupt politicians.” Since drug cartels have taken over many police forces and penetrated portions of the national military, the words from this leftist reformist politician could be very significant for Mexican citizens, their national economy and, as a result, America’s relationships with Mexican industry.

It is important to understand that great improvements in Mexican government operations and suppression of the corrupt features of their economy should (and probably will) cause re-examination of NAFTA. That the new president is a leftist is of no concern as long as he and the Mexican government make desperately needed changes and improvements. America should see the road to a “yes” or “no” answer within the year. Industry in the U.S. needs to pay attention.