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Mexico’s Economic Tie and Drug Crimes with U.S.


Dr. Juan Carlos Gachúz is a full-time professor in the Department of International Relations and Political Science at the University of the Americas Puebla (UDLAP). He received the Alfonso Caso Award from the UNAM and the MacArthur-Ford-Hewlett Fellowship to study at postgraduate level. He was Puentes Visiting Scholar at Rice University and he has also been visiting professor at the University of Monaco. He is a member of the International Studies Association (ISA), the Mexican Association of International Studies (AMEI) and a member of the Editorial Board of the Revista México y la Cuenca del Pacífico.

Mexico has a long-standing trade surplus with the United States, and unequal economic interdependence has also adversely affected Mexico’s domestic industrial development. The United States and Mexico have disputes over labor rights, agricultural trade, and environmental standards. In addition, the transnational drug crime situation in both countries is simultaneously worrisome. In response to these questions, the Centre conducted an exclusive interview with Professor Juan Carlos Gachuz Maya on Mexico’s economic relations with the United States and transnational drug crime, to find out his answers to the questions of whether there are prospects for deeper cooperation between China and Mexico and how Mexico’s current anti-drug cooperation mechanisms can be optimized to address drug crimes across the US-Mexico border.

Juan Carlos Gachuz Maya: Mexico’s Economic Tie and Drug Crimes with U.S.


Mexico's trade with the United States shows not only a deep integration but also a marked dependence on Mexican exports to the United States. According to data from the United States Trade Representative[1], trade with Mexico totalled an estimated USD 614.5 billion in 2019. Mexican exports totalled USD 358.1 billion and the US imports were USD 256.4 billion; the Mexico–United States trade accounted for 14.8 per cent of total US international trade and Mexico had a 101.7 billion trade surplus.

The US trade deficit with Mexico reached USD 101.7 billion in 2019. The very high trade deficit of the United States was one of the main reasons for the government of Donald Trump to promote a renegotiation of NAFTA and to establish a new trade regulation in North America with the new USMCA (United States-Mexico-Canada Agreement) and the T-MEC (Tratado entre México, Estados Unidos y Canadá).

There is, however, an important issue to explain the US trade deficit with Mexico and to analyze Mexico's trade surplus with the United States: intra-firm trade or re-exports. In regional trade exchanges, it is a common situation for goods to be shipped through regional hubs without further processing before final shipment to their ultimate destination. Intra-firm trade is present constantly in the bilateral trade of Mexico and the United States. Additionally, a large part of Mexico's exports come from US companies established in Mexico that take advantage of low labour cost production and low labour cost in Mexico and subsequently carry out re-exports to the United States, all as part of the same trade flow within a company[2].

Currently there is a marked dependence on Mexican exports to the US market, this, however, is not a new problem, since the 19th century, trade between the US and Mexico has been characterized by an increasingly marked dependence on Mexican exports to the US market. In the current context, the Mexican trade policy and the negotiation and signing of the United States–Mexico–Canada Agreement (USMCA) have prioritized the commercial relationship with the United States as the agreement is designed to guarantee the economic interests of the United States in a global context of the trade war. In this triangular trade exchange scheme, Mexico benefits by rising exports to the United States, but there are also disadvantages by increasing asymmetric interdependence on the US market and facing a growing trade deficit with China[3].

Exports from China to Mexico have also grown steadily in the last ten years and have significantly diversified but exports of manufacturing products stand out. However, the amount and growth rate of Chinese exports to Mexico is much higher. In 2019, the commercial exchange between Mexico and China reached a value of USD 100 billion. However, there is a wide disparity between Chinese and Mexican exports. The value of Chinese exports to Mexico in that year reached USD 93 billion while Mexico exported products to the Chinese market worth USD 7,136 million. As a result of the enormous asymmetry in the amount of exports from both countries, Mexico’s trade balance with China reports a huge deficit[4].

The diversification in the destination of exports to China and other important markets such as the European Union, Japan or South Korea would bring benefits to Mexico in terms of availability of new products, greater competition and trade and finally this could reduce the high dependence on Mexican exports to the US.

In this context, an industrial area that has great potential for Chinese investment in Mexico is the automotive sector. Mexico has positioned itself as the sixth-largest produces of vehicles worldwide and although investment in this area is concentrated on companies from the United States, Europe, and Japan, China's investment in the automotive sector offers a whole range of possibilities to enhance the development of the sector. The expansion of the Chinese automotive industry in Mexico encourages competition with other multinational companies and contributes to the existence of greater availability of models, brands, and price segments in the Mexican automotive market. China's FDI in the automotive industry in Mexico could increase the production capacity of the sector in Mexico and boost the sector's exports. Mexico has become one of the main manufacturing centres for the production, export, and sales of vehicles at an international level, even though the country does not have domestic automotive brands of mass production and the industry depends on the presence and performance of multinational companies[5].

The expansion of the Chinese automotive industry in Mexico encourages competition with other multinational companies and contributes to the existence of a greater availability of models, brands and price segments in the Mexican automotive market. China's foreign direct investment in the automotive industry in Mexico increases the production capacity of the sector in Mexico and represents a medium-term opportunity to increase exports of the item. The trade policy between the two countries has the potential for greater economic integration, but this requires new sectoral trade agreements in the sector to reduce tariffs and promote greater trade between the parties[6].

Criminal organizations in the border region have become binational and, in some cases, multinational in nature. These groups first gain control over national-level neighborhoods in strategic areas, and then expand to transnational illegal activity. Through their ties to TCOs (Transnational Criminal Organizations), both Mexican cartels and U.S. gangs distribute and move the drugs across the country, ensuring payment for and protection of the merchandise during the trip. Moreover, these links have allowed the highest-ranking members of Mexican transnational criminal organizations to continue operating in the U.S. without detection by law enforcement[7].

The extensive, damaging activities of transnational criminal organizations have led both the U.S. and Mexico to implement policies and bilateral initiatives to address the problem. The subject of transnational organized crime has long been part of the bilateral agenda shared between the two countries, particularly since the beginning of 2000. Perhaps the most important policy to fight transnational crime in the region is the Mérida Initiative (Plan Mérida), which was passed by the U.S. Congress in 2008. This initiative allowed the transfer of resources to Mexico and Central American countries with the objective of limiting the operation of criminal organizations. As part of this program, the U.S. has provided Mexico with about $1.6 billion in kind through the donation of aircraft and equipment, as well as the transfer of technology and training. These assets have been received in Mexico by the Ministry of National Defense, the Mexican Navy, the Federal Police, the Office of the General Prosecutor, the Tax Administration Service, and the National Institute of Migration. Among the goods provided are helicopters, surveillance aircraft, vehicles with scanners, and other inspection equipment.[8].

The Mérida Plan, however, demonstrated that a support program to combat drug trafficking by itself was not enough to face the problem of drug trafficking in Mexico. Paradoxically, some "advantages" of the globalization process have facilitated the operation and expansion of drug trafficking not only in Mexico but globally.

Globalization has brought about the need to reform the way in which institutions are structured and how they operate in different contexts. International cooperation among domestic institutions is no longer sufficient to face international challenges such as global crime. New institutional structures involving participation from states and non-state actors will be required to overcome global problems[9].

Globalization also calls for nations to set common legal principles in order to fight crime. States need to develop new alternatives of regional and global coordination. Bilateral coordination to harmonize some aspects of national legislations is one of the main challenges in the fight against transnational organized crime within the context of globalization[10].

In 2021, a meeting between the US and Mexico was held and it has the potential to structurally confront the problem of drug trafficking in both countries, that is with a binational approach. This derives from the High-Level Dialogue on Security (DANS) that was held in October 2021 and launches the "Bicentennial Understanding", through the installation of its respective working subgroups. The "Bicentennial Understanding" proposes a new shared vision of security and regional collaboration anchored in respect for the sovereignty of each country and the establishment of a comprehensive and long-term approach to guide bilateral actions in the future (Secretariat of Foreign Relations, 2021)[11].

The "Bicentennial Understanding” is based on four fundamental axes: 1) Fighting transnational crime, trying to limit its operations and moving away from the disarticulation approach of the Mérida Initiative; 2) Address the underlying causes, these are the economic ones, rejecting the warlike approach of the past cooperation agreement; 3) Address impunity and improve the justice system in Mexico; and 4) Act within a framework of respect for the sovereignty of both nations, perhaps the key word of this agreement, marking a clear line that follows the modifications to the National Security Law in Mexico, which limits the operations of agents of the Drug Enforcement Administration in Mexican territory. However, it remains to be seen what the true scope of the Bicentennial Understanding will be and how far it innovates in the action frameworks of its predecessor[12].

Regarding the actions planned by the two governments, according to the Joint Declaration, strategies are contemplated in the following areas:

a. To reduce “drug addiction and associated harms.”

b. Address the transportation and regulation of chemical precursors used to manufacture drugs such as fentanyl [which come from the People's Republic of China].

c. Create a Homicide Prevention Network for the exchange of best practices and community work with at-risk youth, with the possibility of creating a multidisciplinary homicide task force team to support the investigation and prosecution of high-impact crimes.

d. Fight arms trafficking from the United States to Mexico and expand binational cooperation against illegal trafficking and human trafficking.

f. Address cybercrime and promote security in cyberspace.

g. Strengthen forensic cooperation to help resolve the thousands of cases of disappearances in Mexico, fighting impunity.

All these actions are just a draft and compared to the “Iniciativa Mérida” are better structured and they show a closer collaboration to fight drug trafficking in North America, however, the official document of the “Bicentennial Understanding” has not been released yet and there are just hypotheses around its content.


[1] Gachúz (2021) Mexico’s Trade Relationship with China in the Context of the United States–China Trade war. Journal of Current Chinese Affairs. October 2021. doi:10.1177/18681026211038339

[2] Gachúz (2021) Mexico’s Trade Relationship with China in the Context of the United States–China Trade war. Journal of Current Chinese Affairs. October 2021. doi:10.1177/18681026211038339

[3] Gachúz (2021) Mexico’s Trade Relationship with China in the Context of the United States–China Trade war. Journal of Current Chinese Affairs. October 2021. doi:10.1177/18681026211038339

[4] Gachúz (2021) Mexico’s Trade Relationship with China in the Context of the United States–China Trade war. Journal of Current Chinese Affairs. October 2021. doi:10.1177/18681026211038339

[5] Gachúz, J., & Montes, M. (2020). The Automotive Industry in Mexico and China. Latin American Journal of Trade Policy, 3(6), 68 - 86. doi:10.5354/0719-9368.2020.57168

[6] Gachúz, J., & Montes, M. (2020). The Automotive Industry in Mexico and China. Latin American Journal of Trade Policy, 3(6), 68 - 86. doi:10.5354/0719-9368.2020.57168

[7] Gachúz (2019) “U.S.-Mexico Drug Trafficking: Globalization, Cooperation and Challenges”, Revista de Estudios en Seguridad Internacional, Vol. 5, No. 1, (2019), pp. 21-35. DOI: http://dx.doi.org/10.18847/1.9.3

[8] Gachúz (2019) “U.S.-Mexico Drug Trafficking: Globalization, Cooperation and Challenges”, Revista de Estudios en Seguridad Internacional, Vol. 5, No. 1, (2019), pp. 21-35. DOI: http://dx.doi.org/10.18847/1.9.3

[9] Gachúz (2019) “U.S.-Mexico Drug Trafficking: Globalization, Cooperation and Challenges”, Revista de Estudios en Seguridad Internacional, Vol. 5, No. 1, (2019), pp. 21-35. DOI: http://dx.doi.org/10.18847/1.9.3

[10] Gachúz (2019) “U.S.-Mexico Drug Trafficking: Globalization, Cooperation and Challenges”, Revista de Estudios en Seguridad Internacional, Vol. 5, No. 1, (2019), pp. 21-35. DOI: http://dx.doi.org/10.18847/1.9.3

[11] Secretaría de Relaciones Exteriores (2021). México y Estados Unidos dan inicio al Entendimiento Bicentenario. Gobierno de México. https://www.gob.mx/sre/prensa/entendimiento-bicentenario

[12] Manneto, F. (8 de octubre de 2021). México y EE.UU. sellan un plan de seguridad para fortalecer la lucha contra el narco y el tráfico de armas. El País. https://elpais.com/mexico/2021-10-08/mexico-y-ee-uu-escenifican-el-comienzo-de-una-nueva-etapa-adios-merida-bienvenido-entendimiento-bicentenario.html




Interviewer: Hou Yunxi

Editor: Xu Houkun, Wang Xuetong

2022.04.02



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