Immigration and trade are now at the forefront of the United States (US)-Mexico debate. By hearing the term NAFTA (North American Free Trade Agreement) many readers think that the economic relationship between US, Mexico and Canada is good with respect to economic integration. However, the process of political and commercial relations between Mexico and the US have been, and will always be, relations based on power imbalance. During the last years, the Mexico-US border is witnessing commercial and migratory conflicts like never before. In this perspective, Donald Trump is pledged to rewrite the NAFTA, and has referred to it as “one of the worst trade deals ever made”.

In addition to the economic dimension, the immigration issue between both countries was crucial in the 2106 presidential campaign of Trump. To understand and contextualize the immigration policy of Trump, it is important to analyze his election in a context of white supremacy. In his presidential announcement speech campaign, Trump threats towards Mexico have been increasing. For him, Mexico is the real border problem of US security. In June 2015, he mentioned that: “They’re sending people that have lots of problems and they’re bringing their problems”, he said. Additionally, he claimed: “They’re bringing drugs, they’re bringing crime, they’re rapists, and some I assume are good people, but I speak to border guards and they tell us what we are getting”. He promised that, as President Trump, one of his first actions would be to build a “great, great wall on our southern border, and I will make Mexico pay for that wall” (Time Staff, 2015). We will be discussing this in the next section.

Over the past three decades, international trade and immigration has risen in prominence as a tool within social phenomena. White and Tadesse (2010) present a view of immigration and international trade in a sense of cultural diversity. At the same time, they offer a detailed understanding about how immigrants increase trade flows by exploiting superior information regarding host country markets and home country markets and/or by acting as conduits that bridge cultural differences between their host and home countries.

Christina Boswell (2010) describes some additional characteristics such as “pull factors”, international migration and forced displacement. She notes that: “In the case of economic migration, push factors would typically include economic conditions such as unemployment, low salaries or low per capita income relative to the country of destination. Pull factors would include migration legislation and the labor market situation in receiving countries” (Boswell, 2010, p. 3).

It is important to bear that several researchers analyze the discussion of racism and white supremacy of Trump’s campaign under different approaches. According to Inwood the “Trump’s rise to political power in the context of a white counter-revolutionary politics that emerges from specific geographic configurations of the US racial state and historical trajectories of anti-Black racism” (Inwood, 2019, p.580). The view imparted on his campaign speech (and his presidency) may be further explored in order to shed light on his intention of racism and white supremacy policies (Harkinson, 2016), which will need to be considered later on.

Guess (2006) introduced another perspective, arguing that: “Racism by consequence then is reflected in differential educational opportunities, economic differentials between whites and non-whites, residential segregation, health care access, and death rate differentials between whites and non-whites” (p. 652). This is especially true if we consider the income and wealth gaps between white and nonwhite households and the decrease of the net government expenditures for nonwhite people.

By contrast, Feagin analyses the term white supremacy through another approach. He points out that

the term White supremacy emphasizes an ideology of White superiority and reflects the creation of “White” and “Black” identities by the White founders of this Nation. The all-encompassing phrase I prefer is systemic White racism. This phrase refers to the system of racist domination and oppression and its consequent racial inequality that has been created, maintained, and legitimized by those who subscribe to the White supremacy ideology. (Feagin, 2012, p.79)

Both the policies and ideology of the Trump administration have been shown in practice and in speech to a high degree of discrimination and have inspired violence such as El Paso shooting in August 3, 2019, that killed 22 people (Schaefer & Baldas, 2019). Recent events such as completion the border wall with Mexico, restriction of legal immigration, reducing the number of asylum seekers, is what Feagin (2012) called: “white racial frame”.

As we can see, added to the already white counter-revolutionary, Maskovsky (2017) presented a view of “white nationalist postracialism”. The basic philosophy behind this approach is “the paradoxical politics of twenty-first-century white racial resentment whose proponents seek to do two contradictory things: to reclaim the nation for white Americans while also denying an ideological investment in white supremacy” (Maskovsky, 2017 p. 433).

The research question is whether or not Trump's immigration policy contributes to reducing the deficit on the balance of trade, this is a question that is often missing in the literature. To overcome this problem, we analyzed approaches from different scholars. Girma & Yu (2002), Peters (2017), and Clausing (2019) document the importance of Free Trade Agreement (FTA) and the immigration issue. Hoppe (1998) has observed the existence of elastic substitutibility between immigration and FTA, where “(rather than rigid exclusivity): the more (or less) you have of one, the less (or more) you need of the other” (Hoppe, 1998, p. 224). As Papadimitriou points out (Kregel, 2019):

The rise of nationalist political movements and governments has been partly abetted by a sense of conflict between the forces of globalization and mounting demands for national sovereignty in economic affairs. Increasing global market integration creates unstable dynamics that constrain national policy space, while calls for international cooperation or global governance structures to address these dynamics can themselves reinforce the impression of an erosion of national control, heightening domestic backlash. (p. 3)

The US-Mexico bilateral economic and trade relationship are facing tensions during the Trump administration. The 3145 km border that both countries share has known historical episodes of war, invasion, immigration, among others. When each country reached their independence, the United States grew at an accelerated pace through technology, strategic planning regarding the unification of the country, where each State retained its sovereignty, freedom and independence (Article II of the American Constitution), meanwhile, Mexico experienced an accelerated growth rate during the decade of the 40's until the mid-seventies with the implementation of the Industrialization model via Import Substitution.

^[1] However, since 1970s’, Mexico experienced one of its worst crises in history, the well-known lost decade, where Mexican decision makers had to accept neoliberal measures, also known the Washington Consensus and the liberalization of trade by the International Monetary Fund (IMF) as an important condition to reestablish Mexico's economic growth. Thus, the results of these strategies contributed to Mexico being able to settle the debts it had with US institutions. In this context, Ocampo (2014) noted:

The debt crisis of the 1980s is the most traumatic economic event in Latin America’s economic history. During the “lost decade” that it generated, the region’s per capita GDP fell from 112 percent to 98 percent of the world average, and from 34 per cent to 26 percent of that of developed countries. (Ocampo, 2014 p.1)

At the beginning of the 1990s’, under the IMF’s recommendations, Mexico decided to apply a commercial policy and financial liberalization with the objective of increasing exports, moving from an Import Substitution Model (ISM) to one of Export Substitution (ES). These strategies had some positive impacts on almost all macroeconomic variables. Furthermore, this period is often called the “export miracle of Mexico”, due to the export growth especially to the US market. However, it should not be forgotten that net exports are lower than gross exports, since the inputs needed to import to produce goods to be exported are more expensive. In addition, it must be mentioned that the majority of Mexican exports to United States are labor-intense goods not capital-intense goods. According to labor theory, there is a degree of exploitation in a trade relationship between developed and developing countries. As Cohen (1979) notes in his proposal Labor Theory of Value and the Concept of Exploitation:

the exchange-value of a commodity varies directly and uniformly with the quantity of labor time required to produce it under standard conditions of productivity, and inversely and uniformly with the quantity of labor time standardly required to produce other commodities, and with no further circumstance. The first condition alone states the mode of determination of value tout court.

The rate of exploitation = surplus value

variable capital

= surplus value

value of labor power

=time worked - time required to produce the worker

time required to produce the worker. (pp. 340-341)

Table 1 Table 1 US trade deficit with Mexico (US million). United States Census Bureau, 2020.

The strategies applied during the first weeks of the Trump administration were the cancellation of the Trans-Pacific Partnership (TPP) and also requested Mexico and Canada to renegotiate the NAFTA (North American Free Trade Agreement) as corrective measures of the imbalances of international trade in the United States. Under this perspective, the central problems Atkinson (2015) identified were that advanced economies faced increased competition from countries where wages of unskilled workers are lower is that he also promised the construction of a wall to prevent the passage of illegal immigrants from Central America and Mexico to the United States. From a political realism perspective, we can say that the Trump administration considers power and threats as the main means to achieve ends of any kind. It is important to mention that within the scope of international relations, the concept of power has been transformed during the last decades by the urgent need to solve common problems between countries. The analysis of power has been debated by several academics such as: Nicholas J. Spykman (1942), Reinhol Niebuhr (1959), Hans Mrogenthau (1948), George F. Kennan (1951), and Henry A. Kissinger (1957) in the United States during the forties. During the middle part of the 20th century, the concept of power has risen his prominence raison d’être in the international sphere and play a crucial role in the nature of foreign policy, thus, the search of power is identified as the struggle for survival. Consequently, Spykman’s approach of power is one of the most relevant contributions in the foreign policy realism. In this regard, Spykman (1942) mentioned: In the last instance only power can achieve the objectives of foreign policy. Power means survival, the ability to impose once’s will on others, the capacity to dictate to those who are without power, and the possibility of forcing concessions from those with less power. Where the ultimate form of conflict is war, the struggle for power becomes a struggle for war power, a preparation for war. (p. 17).

Reinhold Niebuhr’s Christian realism sounds much like Spykman on the domestic socioeconomic situation in the United States. We must engage in political action and in the use of power against others for we “cannot be good unless we're responsible, and the minute we're responsible, we're involved in compromise” (McKeogh, 2007, p. 201).

The premises of the realist theory are: a) the State is the most important element within a system “centered on the States”, b) the division of internal politics in relation to foreign policy, c) within an anarchic environment, international politics is a power struggle and d) there are levels of capabilities between nation-states. In addition, Morgenthau’s (1948) tough-minded foreign policy realism considers that international politics, like all politics, is a struggle for power. Whatever, the ultimate aims of international politics, power is always the immediate aim. Statesmen and peoples may ultimately seek freedom, security, prosperity, or power itself. Niebuhr’s (1959) though-minded foreign policy realism.

Under the assumption of power, Strausz (1942) considers that the international politics is dominated by the search for power and that during the history of mankind, the states fought to ensure or increase their power. That is why Morgenthau (1948) said that power is “control over the mind and actions of other men”. Affirmation that Holsti also implies when mentioning that “power is the general capacity of a State to control the behavior of others” (Holsti, 1964).

According to the realist approach in international relations theory, it is important to note that power is a three-dimensional phenomenon, there are some key components such as military and non-military, and within the last category we find elements such as: levels of technology, population, natural resources, geographical factors, political leadership, form of government, etc. All these components form a force of capabilities that can be used to maintain order within the international system. However, the concept of power in the 21st century has to be redefined in both the political and economic spheres under the logic of "Dependent States” ^{[2] . In this regard, Select Committee on Soft Power and the UK’s Influence First Report (persuasion of power in the modern world) argues that:}

The ability of military force alone to secure a nation’s interests has been recognized as facing increasing challenges due to the scattered and dispersed nature of modern conflict and war, including by the defense communities in the US and UK. […] this trend has several causes, including “the moral force of the concept of self-determination”, “the growing power of the people’s voice”, “the increasing trend for moral and political legitimacy to reside in the wishes of the people of a particular locality”, “the openness and global comprehensiveness of economic exchange and opportunity”. (par. 30)

However, during the foreign policy realism period and the Cold War, two important events have shifted the political economy in Mexico. First, the end of fixed exchange rates, which is the end of the Bretton Woods system. With the deteriorating position of the dollar, the international monetary system was thus changed, at least de facto, from one based on fixed exchange rates to one based on flexible rates. In this way, the postwar system of fixed exchange rates had become a casualty of reckless American policies, high inflation, and increasing international mobility of capital (Gilpin, 2000). Thus, in order to control inflation, the US government decided to increase the interest rate and the same time the rise in debt burden of Latin American countries, especially Mexico.

The second event was “the lost decade 1980” in Latin America and the risk of political instability, as a result of the of the Import Substitution Model (which was prevalent in 60s and 70s decades) This period refers to a significant decline in real GDP, also characterized by hyperinflation and unemployment. As a result, Mexico found itself in a situation where it was impossible to pay the external sovereign debt.

Thus, the need for a dynamic structural adjustment. A solution was eventually found in the Brady Plan, which given the rejection of default employed the natural response to a Ponzi financing profile, i.e. borrowing more to meet outstanding financial commitments. The over-indebted Latin American countries sought to create conditions in which they could attract the additional borrowing required to meet debt service (Kregel, 2004). So, the shift of the Import Substitution Model to the Export Substitution Model was required. Both United States and the International Monetary Fund (IMF) adopted some strategies based on Washington Consensus (WC), but more importantly the widespread adoption of trade and financial liberalization of Mexico.

The Mexican economy needed to make some structural changes, major changes, in its economy structure in order to be competitive in the global market, which resulted in the application of a conventional (orthodox) model recommended by the IMF: “let capital flows and the economy will grow’’. In order to do that, it is important to have good market fundamentals, such as the implementation of contractionary fiscal and monetary policies. The objective of this has its starting point in the commercial and financial liberalization so that could help to reduce commodity dependence.

The above analysis on immigration and trade demonstrates that what the Trump administration is really seeking is not to protect American wages and to create a transparent process for immigration to America through RAISE and new merit-based legal immigration system, but to apply tariffs on countries such as Mexico, Canada and China in order to reduce the US trade deficit and prioritize the interest of the big business.

The immigration policy of the Trump administration contrasts forcefully with the interests of the farm sector which places the issue of undocumented workers in the center of immigration debate. Due to the farm sector’s heavy reliance on undocumented workers and the difficulty of this work there is considerable turnover in the agriculture sector, many undocumented workers start working in agriculture but move on to other sectors as quickly as possible (World Agricultural Economic and Environmental Services , 2014). In addition, in sectors such as agriculture, immigration is not a problem, but a solution to prevent not only the increase in food prices, but also to ensure exports of agricultural products. This situation forces the agricultural sector to constantly hire many undocumented workers. Furthermore, from the point of view of orthodox trade theory, it is unfeasible to think of raising wages in the agriculture sector to attract American workers without increasing inflation. From this perspective, we can say that undocumented workers play a crucial role in the farm sector of the US. Thus, the US trade policy under the Trump administration to impose tariffs on all imported goods from Mexico, is to protect large US enterprises and to make the rich richer and, at the same time, reducing the purchasing power of the US consumers. Evidence continues to show that instead of reducing the flow of immigration, tariffs will have some negative effects on the US economy in the middle run and would make immigration flows to the United States even worse in the long term. Immigration does not create trade deficits in the US economy. Therefore, as tariffs are increased, both the rate of inflation and unemployment will increase in the US economy. In addition to this, it has been estimated that the US economy would lose $41.5 billion in GDP for each year the tariffs are in place (Egan, 2019). Thus, the idea that the US economy is strong enough to sustain its economic growth while tariffs will hurt only Mexico is an underestimation that US is Mexico’s largest export market, making the two economies closely intertwined. Thus, the immigration issue should be understood in this context in a political economic framework.