The new Trump proposal (now under consideration by his administration) to get Mexico to pay for the proposed wall along the Mexican border through a 20% tax on Mexican exports to the US violates a range of international trade laws, and is apt to generate retaliation by Mexico. Mexico’s right to retaliate is assured by the WTO, and so would survive any attempt by the Trump Administration to cancel NAFTA. That retaliation could hurt important sectors of the US economy given that Mexico now absorbs about 15% of total US exports. But in addition to the harms from retaliation (and from the wall itself), the funding proposal is likely to backfire in at least five ways.
The incidence of the tax will fall heavily on and American firms at home that import from Mexico, American consumers, and American firms in Mexico that export to the US. US retailers will look to offset higher import costs by reducing other expenses, such as by shedding employees. So will firms that import inputs from Mexico for final assembly in the US. Here, too, pressure will mount to cut costs in ways that harm American workers. And for goods without immediate substitutes, like some agricultural goods, US consumers will be on the hook for a greater share of the tax. Despite appearances and Trump’s claims to the contrary, then, Americans will pay a substantial share of the costs for Trump’s wall. But don’t expect Trump to trouble himself with the basic math.
For Mexican exports for which there are ready substitutes, Mexican and US firms producing in Mexico will bear a greater share of the tax in the form of reduced revenues as they struggle to maintain their exports to the US. But very soon Mexican exports to the US will decline as US importers look to buy from other countries. The decline would of course reduce the expected revenues from the tax, and trigger other unintended effects (see #5, below).
President Trump will say that the tax will induce US companies producing in Mexico to relocate production and jobs back to the US. It is unlikely most will do so. If corporations in Mexico think the tax is likely to persist, they are more likely to move production to other low-waged countries than back to the US.
In fact, if the tax persists for even a year or two, it is much more likely to accelerate a trend already under way—the substitution of Chinese for Mexican goods in US markets. China has posed a serious threat to Mexican exports of high-skilled and medium-skilled manufactured products for at least a decade. The Trump tax will only accelerate the trend. And so Chinese leaders are apt to be even happier about the tax (and, also, about the Trump wall) than are Trump supporters in the US. It’s not at all far-fetched to argue that the primary beneficiary of the tax on Mexican exports to the US will be China,followed by a small number of other low-waged countries that will rush to exploit the opportunity created by increased Mexican prices in the US market.
The social impact in Mexico could be severe. Like most economic shocks, the tariff will hurt the most vulnerable communities rather than the administration of Mexican President Peña Nieto, who could very well begin to reverse his abysmal level of domestic support by standing up to Trump. To the degree that the Trump tax reduces Mexican exports, it can be expected to increase the number of financially desperate Mexican workers trying to enter the US—legally and illegally—and even push some displaced workers into illicit market activity. And so the Trump tax will undermine the very purpose for which it is intended—to reduce illegal border crossings—while harming working people on both sides of the wall.
George DeMartino is a Professor at the Josef Korbel School of International Studies, University of Denver
This blog was originally published on the Allegra Laboratory website. Find the original post here.
By: Rebecca Galemba
In the spring of 2007, when I was driving with Ramón (all names have been changed), a Mexican man who lives along an unmonitored road that crosses the Mexico-Guatemala border, we passed one of the newer, two-story homes. I commented that the house had its outdoor lights on all day. Ramón shrugged. “He won’t care. He’s rich”, he said. “He doesn’t care about the lights”. Ramón told me that the owner – Gerardo – used to be a pollero, or a human smuggler, who brought many people to the United States. But he stopped, according to Ramón, when “things became more complicated” and Mexico intensified immigration surveillance in the mid-2000s.
Other border residents also whispered that Gerardo used to be a pollero or coyote, another term used to refer to migrant smugglers. The whispers were usually followed by an assertion that he was no longer a smuggler. Now he just raised cattle. Prior to the late 1990s and early 2000s, many border residents provided Central Americans with rides into Mexico with little fanfare.
Mexico’s intensification of border policing and concerted securitisation of migration can be traced to the US-backed Plan Sur in 2001 to support US security concerns. The escalation of the drug war in Mexico in 2006, and Mexico’s implementation of the Southern Border Plan in 2014 in response to Washington’s outcries of a “surge” on the border in 2014, further intensified migrant policing.
Mexico has concentrated border surveillance on select, modernised border points of entry, as well as on ad hoc highway roadblocks to establish ‘belts of control’. However, migrant desperation, continued demand for cheap labour in the United States, and widespread official corruption and impunity has meant that heightened securitisation has not deterred migration. Instead, migrant smuggling at the Mexico-Guatemala border has shifted from more informal networks and local guides to higher-priced smugglers and criminal groups as human rights abuses against migrants increase.
How Gerardo became a smuggler
The first border residents, whether from the Mexican or Guatemalan side, who went to the United States in the 1990s all went with Gerardo. Miguel, a Guatemalan border resident, joined other young men from the Mexican side of the border. “We all went to the United States with Gerardo before he was a coyote”, Miguel said. They went to work on pine tree plantations in Alabama. Since Gerardo was the first to work at the plantation, he found work for others. At first each man used his own money to travel to the northern border, where they hired coyotes to help them cross the US-Mexico border.
Gerardo did not charge any of them and also worked on the plantation. Subsequently, Gerardo recruited his friends more formally under work visas through his employer in Alabama. The ironic twist was that the visas were for Guatemalans, and so the Mexicans purchased false Guatemalan papers in La Libertad or Guatemala City. Border residents believed that work visas were easier to acquire in Guatemala than in Mexico, after the end of Guatemala’s 36-year civil war in 1996. Due to fewer applicants, visas were also less competitive in Guatemala. When the visa process expired, people were still able to go north without documents, as the cross-border migration and work networks were by this point established. Later, Gerardo brought the same people from the same places to the same location. This time he charged, making him a coyote.
Yet the stories surrounding Gerardo’s role shift depending on the point in time and the interlocutor. “No, he wasn’t acoyote…they are from bigger cities”, one Mexican border resident said. “Some people say he is, but he was acontratista [contractor], since his boss in the US would send him here to bring others … they went with visas, which they bought in Guatemala”. Others mentioned Gerardo’s role as a labor contractor and coyote as one and the same; the only thing that changed was how he could bring people to the employer in the US. In other words, Gerardo was converted from a fellow migrant to a labour broker to a smuggler depending on changes in US immigration and visa processes, all the while continuing to provide his Alabama employer with Mexican and Guatemalan workers.
Some residents wonder how Gerardo made so much money, but others see him as someone who helped others regardless of whether they called him a fellow migrant, smuggler, or contractor. “He is the one who helped many people from here go to the US”, Gerardo’s cousin noted. “He helped the majority from this region. Since he was one of the first to go, he helped others to go with visas and then others as a coyote. But then he stopped … when it got more dangerous”.
When smuggling becomes a profession
As Mexico enhanced immigration surveillance and criminalised smuggling, and drug cartels expanded into human smuggling and preying on migrants, smaller-scale smugglers like Gerardo left the business. It became more dangerous to crossing through Mexico and more expensive to evade corrupt officials, checkpoints, and criminals. Locals preferred to go with local border guides and brokers since they trusted people with whom they shared social and kinship connections.
In recent years, border residents have had to search for smugglers in larger cities, those who may specialise in, or have deeper connections to, smuggling networks. Smugglers are increasingly necessary to helping locals navigate Mexico’s proliferation of immigration checkpoints.
Eduardo, a Mexican border resident, referred to how migrant smuggling transformed from a networking service to a more lucrative and risky business that locals increasingly associate with drug trafficking regardless of actual overlaps. He mentioned that Gerardo probably never made much money bringing people. Eduardo also used to “deliver” migrants to smugglers locally and occasionally to the northern border as a teenager. But, he told me, “[in those days] it was very little and it was different…easy…I barely made anything”.
Eduardo confided suspicions about Gerardo and his earnings that led locals to collapse migrant and drug smuggling together. Gerardo had a small horse track on his property in a region where horse races are often associated with drug exchanges. “That is where they do exchanges … it is all narcos”, said Eduardo. Eduardo suspected Gerardo was collaborating with people working in “drugs and pollos”. But, he said, “do not tell people where you heard that”.
Prior to Mexico’s intensification of migrant surveillance, smuggling migrants may have still been illegal, but it was a mundane, relatively benign aspect of border life.
Previously an activity that most residents engaged in to some degree, they have been pushed out of migrant smuggling by its increasing risk, price, and criminalisation under Mexico’s intensification of border policing since signing Plan Sur in 2001, and most recently, under the 2014 Southern Border Plan. In turn, the increasing criminality and corruption surrounding migration make border residents not only avoid it, but also fearful to even talk about it. Once a fact of border life, they no longer spoke about migrant smuggling, or talked about it as something they did in the past, or spoke about it quietly.
Just like the drug traffickers they knew passed through their community, they knew migrant smugglers used this route, but did not see or hear anything. As one border resident told me, “if drugs come through here, we don’t realise. They don’t bother us”.
At this particular juncture, border talk around human and drug smuggling alternates between silence and rumour as the landscape shifts. Rumour can help people living in a constant state of fear navigate uncertainty while it also serves to govern the movements of the vulnerable. At the Mexico-Guatemala border, alternating silences and rumours protect local residents while they also enhance the illicit aura around drugs and migration and perpetuate silence and impunity.
As Gerardo’s narrative demonstrates, the profile of the human smuggler is shaped by fluctuations in migration policy and policing. Nicholas de Genova critically examines immigrant illegality by pointing to how changing laws, rather than migrant and smuggler actions, produced “the legal production of migrant illegality”. By extension, to understand the evolution and fear of the criminal smuggler, we must become attune to the criminalisation of human mobility. The criminalisation and uneven policing of boundaries has shaped and structured the strategies of those seeking to evade them, as well as created and altered the constellations of actors who serve as brokers at the disjunctures between borders, their incomplete enforcement, and human mobility.
Rebecca Galemba (PhD Brown University), is an anthropologist and has been a Lecturer at the Josef Korbel School of International Studies since 2012. Learn more about the Latin America Center.