MEXICAN FOREIGN POLICY:MEXICO AND NAFTA

Jorge A. SchiavonProfessor and Director

International Studies DepartmentCentro de Investigación y Docencia Económicas (CIDE)

Université d’eté sur l’intégration et les relations transfrontalières nord-américanes,

Université de Sherbrooke, August 16-20, 2010

Structure of the PresentationI. A general view of Mexico’s foreign policyII. Transformation of Mexican foreign policy

DomesticCauses

International

III. Special relation with the USIV. NAFTA

ALWAYS COMPARE TO CANADA (VERY SIMILAR)

I. Mexico’s Foreign Policy

Survive (and benefit) from hegemony (U.S.)Leadership in Latin America: area of influence (Central America), balancing (Brasil, in South America), and third border (Caribbean)Multilateral activity (legalistic and variable)Limited relations with Europe, East Asia, Middle East, Central Asia, Africa and South Pacific.

I. Mexico’s Foreign Policy

Mexico in the world (rule of 10s)GDP: +1,000,000 million USDPopulation: + 100,000 millionGDP p.c.: +10,000 USD (unequal)Between 10-15 place worldwide (territory, population, GDP, trade): G-5, G-20Territory: 2,000 million sq. km.US Border: 3,000 k.m.

I. Mexico’s Foreign Policy

North America (geography and economics)Canada, U.S. and MexicoNorth American Free Trade Agreement (NAFTA)Security and Prosperity Partnership (SPP)

Latin America (history, culture, language)Latin-American conceptGRULAC, Ibero-AmericaOAS, FTAA, Rio GroupNAFTA, Mercosur, Andean Pact, CACM, Caricom, G3, bilateral

I. Mexico’s Foreign Policy

Foreign policy definition:

State’s public policy towards the exteriorMain function:

Protect independence Maximize sovereigntyand territorial integrity = (internal, external,

(Dictionary of Diplomacy) absolute, and equality)

In democracy, it must represent and defend theinterest of the majority = welfare (politicalstability and economic development)

I. Mexico’s Foreign PolicyMexico has always understood by sovereignty, the power to maintain its territorial integrity and to define its domestic policies in a free, autonomous and independent way, with no pressure or external interference (especially from the US),

its form of governmentits domestic policiesits foreign policy

I. Mexico’s Foreign PolicyUS is the most important international relation for Mexico.

The rest of the bilateral, regional, hemispheric, multilateral and global relations are tied directly or indirectly to this relation.

To understand Mexican Foreign Policy it is fundamental to understand its bilateral relation with its northern neighbor.

When we talk about relations with Latin America, Europe, or Asia, of participation in international or regional organisms, of the definition co concepts such as sovereignty, nation, principles, interests, of negotiation on topics such as security, trade, investment or immigration, the obliged reference of Mexico’s international relations has always been, and is, with the United States.

I. Mexico’s Foreign Policy• The level of attention to the relation with the US has

always been really high; on the contrary, the relations with other countries, regions, and international organisms are varied, inconsistent and selective, for which one cannot really talk about general policies towards Latin America, Europe, Asia, or regional or global organizations (such as UN, OAS, IMF, or WB).

• Mexico tries to use these relations to balance, diversify, and neutralize the negative effects of the concentration in the relation with the US.

There is a lack of an explicit and sustained will to project Mexico’s power at regional and global level; even in its natural area of influence, Central and Latin America, the Mexican participation has been limited and selective in time and space.

Given its limited relative power in front of other world powers, the participation of Mexico in multilateral organizations tend to have a legal nature, trying to defend the value of international law over the power and use of force in the international system (asymmetry of power vis a vis U.S.).

I. Mexico’s Foreign Policy

History: surviving asymmetry1848, 1898, 1945, 1989, 2008?

Penetration of U.S. systemExecutive diplomacyAdministrative diplomacy (Bi-national Commission)Parliamentary diplomacy + lobbyLocal diplomacy (Consulates)Diaspora diplomacy (IME)Regional diplomacy (NAFTA)Societal diplomacy (MNC, NGOs, academia, family)

I. Mexico’s Foreign Policy

II. Changes in Mexican Foreign Policy

International system: globalization and interdependence

Domestic system: economic opening, structural reforms, democratization and decentralization

II. Changes in Mexican Foreign Policy

According to the Constitution, Mexico is a democratic system: presidential, strong bicameralism (symmetric and incongruent chambers), and federal, in other words, in terms of institutional division of powers, it is one of the cases with the highest degree of division

In terms of foreign policy, in the Mexican political system, the sovereign power is shared by the three branches of government (conduction / revision and approval/ application)

II. Changes in Mexican Foreign Policy

70 years of PRI hegemony = one of the most centralized in the worldMerger between federal Executive and Official Party Mexican president = main actor with enormous meta-constitutional powers (presidentialism)

Indisputable leaderWhose party had majority in both legislative chambers and controlled all state governments (until 1989)Highly disciplined party

II. Changes in Mexican Foreign Policy

Executive

Legislativo

1. Constitutional

division of powers

2. L

egis

lativ

e di

visi

on o

f pow

er

6. D

ivis

ion

of p

urpo

se b

etw

een

cham

bers

8. D

ivis

ión

de p

ropó

sito

en p

artid

os

4. Party fragmentation

3. Federal division of

power

7. Division of purpose between

government orders

5. Division of purpose between powers

II. Changes in Mexican Foreign PolicyVariable 1982 Erosion starts 2000

Constitutional division of powers

Presidential No institutional change Presidential

Legislative division of powers

Strong bicameralism (symmetric and incongruent

chambers)

No institutional change Strong bicameralism (symmetric and incongruent chambers)

Federal division of powers

Federalism No institutional change Federalism

Attributions in the conduction of foreign policy

Conduction by the executive (with analysis of foreign

policy, ratification of treaties, ambassadors, and consuls by

the Senate, and absences from national territory by Congress)

No institutional change Conduction by the executive (with analysis of foreign policy,

ratification of treaties, ambassadors, and consuls by the

Senate, and absences from national territory by Congress)

Fragmentation of parties

Low fragmentationNEP Deputies: 1.720NEP Senators: 1.032

Fragmentation increases in elections 1988

Medium fragmentationNEP Deputies: 2.769NEP Senators: 2.786

Division of purpose among

powers

Unified governmentPresidency: PRI

Absolute majority in chambers: PRI

PRI looses presidency in 2000

Divided governmentPresidency: PAN

Absolute majority in chambers: no party

II. Changes in Mexican Foreign PolicyVariable 1982 Erosion starts 2000

Division of purpose among chambers

Legislative unityPRI Deputies: 74.8%PRI Senators: 98.4%

PRI looses majority of deputies in 1997 and of

Senators in 2000

Legislative DivisionPRI Deputies: 42.2%PRI Senators: 46.1%

Division of purpose among levels of

government

Unitary governmentGovernors from PRI: 100%

PRI looses first state government (Baja California) in 1989

Juxtaposed governmentGovernors for PAN: 25.0%

Division of purpose among parties

Total disciplineDiscipline Index:

Nearly 100%

Indiscipline starts in PRI and PAN in Zedillo’s

administration (electoral reform and Fobaproa)

Declining disciplineDiscipline Index:

80-90% approximately

CONDUCTION OF FOREIGN

POLICY PREDICTION

TOTAL CONTROL BY THE EXECUTIVE (WITHOUT QUESTIONING OR THE

PARTICIPATION OF THE LEGISLATIVE OR THE

STATES)

EXECUTIVE CONTROL (WITH QUESTIONINGS AND

INCREASING PARTICIPATION OF THE LEGISLATIVE AND THE

STATES)

Special relation with the US

0.0

10.0

20.0

30.0

40.0

50.0

60.0

70.0

80.0

90.0

100.0

1975 1980 1985 1990 1995 2001

Porce

ntaje

Año

EXPORTS AND IMPORTS ACCORDING TO THE REGION OF DESTINY AND ORIGIN, IN TERMS OF TOTAL MEXICAN EXPORTS AND IMPORTS

AMÉRICA DEL NORTE % ImportaciónAMÉRICA DEL NORTE % ExportaciónAMÉRICA LATINA Y EL CARIBE % ImportaciónAMÉRICA LATINA Y EL CARIBE % ExportaciónUNIÓN EUROPEA % Importación

Special relation with the US85% of exports70% of imports2/3 of FDI30 million Mexicans in US

15 million born in Mexico7.5 million illegal

25,000 million USD remittances3,000 k.m. borderTijuana-San Diego: most important international crossing

Special relation with the USPriority in Mexican foreign policy = containment of US hegemony

Priority in US foreign policy towards Mexico = stability and security of southern border

Since the end of World War II, the US-Mexico relations have been characterized as a common interest on minimizing frictions and privilege cooperation for the solution of bilateral affairs.

Special relation with the US

This has resulted in a “special relation” between the two countries that has allowed wide margins of autonomy to Mexico in its management of its internal and external policies in moment of international stability, but at the same time, it has required discrete alignment with the US in moments of crisis.

Special relation with the US

0

10

20

30

40

50

60

70

80

1985 1989 1994 1999

Perc

enta

ge

Year

Coincidence in voting with the United States in the United Nations General Assembly

Mexico Canada United Nations

Source: G. González (2001)

23

NAFTA OBJECTIVES

Free trade area (goods, services and capital); no CET or migration

Increase competitiveness

Lock in economic reforms at domestic level (before andafter NAFTA):

% of GDPOil vs manufactures

Regional vs open integration / one vs. many FTAs

24

Huge increase in exports

Mexico is the third most important exporter and importer vis a vis the US:

+ 600 % increase in less than 20 years

44.4

241.7

*Cifras preliminares para 2008 Fuente: Secretaría de Relaciones Exteriores con datos de Banco de México

Exportaciones de México a EE.UU. y Canadá1990-2008

(Miles de millones de dólares)

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

*

Exp. Petroleras Exp. No petroleras

25

FDI

Inversión Extranjera Directa (IED) en México(acumulada 1994-2008, miles de millones de dólares)

18 veces desde 1994

15 , 1 2 4 , 73 4 , 8

4 9 , 06 1, 4

7 5 , 29 3 , 2

12 2 , 914 6 , 6

16 2 , 918 6 , 4

2 0 1. 02 2 8 , 8

2 5 5 , 92 7 3 , 5

1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008

* Para el año de 2008 la inversión extranjera directa esta reportada hasta el mes de septiembre

26

Inflación promedio anual (2000=100)

0%

5%

10%

15%

20%

25%

30%

35%

40%

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006

México EE.UU.

Fuente: OECD

Convergence

27

Country risk

0

100

200

300

400

500

600

700

800

900

1000

1100

1200

01/0

4/20

08

09/0

6/20

07

05/1

1/20

07

01/1

6/20

07

09/1

8/20

06

05/2

3/20

06

01/2

6/20

06

09/2

7/20

05

06/0

2/20

05

02/0

4/20

05

10/0

7/20

04

06/1

4/20

04

02/1

8/20

04

10/2

0/20

03

06/2

4/20

03

02/2

7/20

03

10/2

9/20

02

07/0

3/20

02

03/0

8/20

02

11/0

7/20

01

07/1

0/20

01

03/1

4/20

01

11/1

4/20

00

07/2

0/20

00

03/2

4/20

00

11/2

9/19

99

08/0

2/19

99

04/0

7/19

99

12/0

8/19

98

08/1

1/19

98

04/1

6/19

98

Pun

tos

base

sob

re U

ST

Méx

ico

(EM

BI+

)

Fuente: JP Morgan

28

Agriculture

COMERCIO AGROALIMENTARIO Y PESQUERO MÉXICO-MUNDO(Millones de dólares)

Exportaciones = XExportaciones = X Importaciones = MImportaciones = MFuente: Banco de México

00

1,0001,0002,0002,0003,0003,000

4,0004,0005,0005,0006,0006,000

7,0007,0008,0008,0009,0009,000

10,00010,000

11,00011,00012,00012,000

13,00013,000

14,00014,00015,00015,000

16,00016,00017,00017,000

19801980 19811981 19821982 19831983 19841984 19851985 19861986 19871987 19881988 19891989 19901990 19911991 19921992 19931993 19941994 19951995 19961996 19971997 19981998 19991999 20002000 20012001 20022002 20032003 20042004 20052005 20062006

Adhesión de México al GATT

TMAC 1980TMAC 1980--19861986X: 4.7%X: 4.7%

M: M: --12.6%12.6%

Acuerdos Bilaterales

TMAC 1986TMAC 1986--19941994X: 5.3%X: 5.3%M: 22.7%M: 22.7%

TMAC 1994TMAC 1994--20082008X: 10.6%X: 10.6%M: 7.1%M: 7.1%

18,00018,00019,00019,000

20072007 20082008

29

Mexico is the second exporter to the US

Fuente: Secretaría de Economía con datos de Banco de México.

Exportaciones de México a la región TLCAN (millones de dólares)

* Agroalimentarios es la suma de los agropecuarios y los agroindustriales. ** Cifras en el año de 2008 acumulado (enero-octubre)

1993-2008**286%

188%

566%

0

2.000

4.000

6.000

8.000

10.000

12.000

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

*

Agroalimentarias Agropecuario Agroindustrial

Agroalimentario

Agropecuario

Agroindustrial

30

Net importer of grains

Balanza comercial agroalimentaria con Estados Unidos y Canadá, 1990 – 2007 1/

(millones de dólares)

-662 -723

-1763-1565

-2571

-413

-1958

-1447

-2021

-1427

-1816

-3068-2963

-2773

-2420

-2045-1884

-678,7

-3500

-3000

-2500

-2000

-1500

-1000

-500

01990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007

Años

Valo

res

1/ Cifras disponibles a junio

Fuente: Secretaría de Economía con datos de Banco de México.

31

Evaluation of NAFTA

Has changed face of Mexican economic model anddevelopment strategy

Lightning rod effect: positive and negative

Trade concentration with US (dangerous)

Macro and microeconomic consequences (growth vsinequality)

Renegotiation impossible: it has already happened

Limited to goods, services and capital; next step?Compatible with other FTAs and global liberalization?

Between Regions and countries• 51% believe more attention to

Latin America is needed

• 24% consider Europe a priority

• Asia does not exist: only 3% think Mexico should give it more attention, and 38% that the economic competition in this region is a big problem for Mexico

• Have more favorable opinion regarding European and Asian countries than for their Latin American neighbors

Mexico and America

• Mexicans do not want to be part of the north or the south, but the bridge between them.

• Believe that there will be further economic and political integration with the North America (67% y 61%) y and with Latin America (72% y 64%)

• Don’t want Mexico to act as a leader n the region, but as equals (59%)

• A minority prefer regional leadership from Mexico (22%)

Jorge A. SchiavonProfessor and Director

International Studies DepartmentCIDE

jorge.schiavon@cide.edu

Contact: