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Hearing of the Senate Foreign Relations Committee Subject: The US and Mexico: Immigration Policy and Policy and the Bilateral Relationship - Part III

Location: Washington, DC

Hearing of the Senate Foreign Relations Committee Subject: The US and Mexico: Immigration Policy and Policy and the Bilateral Relationship - Part III

MR. STEPHEN E. FLYNN: (Continued from Part II)
To put this thing into context, I think we really need to step back and be mindful of that, which is why I was delighted to hear that your committee was convening this hearing, is to bring the breath to this issue, versus a narrow law enforcement or purely judiciary question. It really is one that is crowned in the depth of our relationship, not with just U.S.-Mexico, but within the broader hemisphere and certainly within the continental context, U.S.-Canada, U.S.-Mexico.

I would say, you know, one of the clear realities of 9/11 that we're still having a great difficult time-a great deal of difficulty with, as a nation, coming to grips with is that this new form of warfare is the use of catastrophic terrorism directed at the nonmilitary elements of our power. When you're a nation that spends more than the next 30 nations combined on the conventional military capability, which is what our nation will do this year, it really only means another possibility for the future of warfare: that our future adversaries must go asymmetric. And the asymmetric reality is to exploit these open global networks, of which our trade and travel network is one of the more prominent, or target those networks in the goal of creating mass economic and societal disruption.

And the irony here is that many of our efforts to deal with this problem within terms of a narrow homeland context, particularly a focus on the border, has had the effect of making our border regions more chaotic, and in that context creates more of a fertile ground for potentially terrorists and certainly criminals to exploit. There's something which I call the hardened border paradox. The hardened border paradox is, as we make efforts to secure this line in the sand, what we end up doing, because there is needs obviously for that border to be permeated for legitimate purposes, for trade and travel and so forth, we end up in the case of immigration specifically creating essentially a demand for a very sophisticated organized criminal network that helps to evade those controls.

Because we're not dealing with the broader issues of immigration within this overarching context, we are dealing with it primarily at the border, we have created the coyote trade, which has become an enormously lucrative business, which has a lot of assets to spread corruption along the border. Because we harden the border in terms of a lot of-the extent to which we manage often the inspection regime, without integrating it within how our infrastructure has been developed and operated there, we have created things like the drayage industry in Laredo, which is the most fertile place for organized crime to operate. And it operates that way because it makes no sense for a long-haul truck to connect with a long-haul truck anywhere near the border because of the chaos of the border.

So we end up with these mom and pop trucks with truck drivers with 300 percent turnover rates that are paid $750 a load, regardless of the road-the length of the time of their journey. This environment is obviously a very difficult one to police, but the hardened border paradox, as we look at the narrow chaos at the border, we put more controls in place as in the aftermath, and the result ends up that we end up fueling the conspiracy to get around this and creating what, again, is a real problem in the post 9/11 world, the opportunity for very serious characters, in the form of al Qaeda kinds of networks, to exploit these very networks to bring their ultimate threat to our nation.

The terrorists are clearly positioned to exploit this environment, as we know, but there is also, I guess, another issue that I would raise here which is in the public health side. Another very daunting challenge we know in the homeland security issue is the risk of a bio-threat. And one of the presumptions of our public health community is that when somebody gets sick, they will come and ask for help. That's basically the guts of our warning system to deal with that problem.

However, when you have eight to 10 million undocumented folks who are often in the places where potential-in our urban areas, not just our rural areas-where these folks may be infected and when they are afraid to essentially come in contact with our public institutions, I would suggest that this is another factor that is going to potentially haunt us down the road to the extent that that bioterrorist threat persists.

The reality is, of course, we often use the term of art in the national security world in this thing, we talk about draining the swamp. And a lot of this has been directed toward the illicit organizations that are out there, in terms of their money trails, as well as the kinds of environments in which they operate in. But there's another part of that swamp that makes it possible for illicit players to hide in, and it is an entirely disconnected, nonsensical immigration policy that makes it virtually impossible to police.

And to the extent to which we are very concerned about the asymmetric threat, that terrorists will exploit our trade and travel lanes in order to cause the kind of horror we saw in 9/11, we should be coming foursquare in front of this immigration issue, embracing as a first priority from a security perspective. And in so doing, though, we need to recognize that ultimate resolution is not at the border, though the border will always play a role. It has to be ultimately grounded in a broader effort within both our continental contexts, within the global network.

So how do we mange these networks in such a way to continue to facilitate the good while improving on a means to manage the bad? That must be done in a layered, systematic way throughout the networks, not a narrow, myopic focus at the border or narrowly within our homeland. Thank you very much, Mr. Chairman. I look forward to hopefully answering your questions.

SEN. LUGAR: Well, thank you very much, Dr. Flynn, for three very, very important issues which we'll try to continue in our discussion, as well as for the rest of your paper.

Dr. Papademetriou.

MR. DEMETRIOUS G. PAPADEMETRIOU: Thank you very much, Mr. Chairman. I tried. Thank you. Thank you very much, Mr. Chairman. I thank you for the opportunity to appear before your committee.

I'll talk a little bit about the U.S.-Mexico relationship initially in the context of migration. Then I will say something about sort of thinking in the bigger-outside of the box, as you called it earlier, with regard to the NAFTA and what it is that perhaps we can expect from that relationship, beyond sort of the standards of trade and economic relationships. Then I would like-I'd say a few things about how one conceptualizes and goes about putting together, piecing together comprehensive immigration reform. And in the context of saying that, I will also say a couple of things about the Craig-Kennedy legislation, the ag jobs legislation that you heard of, and then I'll return to Mexico and suggest a few things if you don't mind.

Mexico and the United States, with regard to migration and many other things, have completely intertwined. In fact indivisible, inseparable. The relationship goes back more than a hundred years. About a third of all of the foreign-born people in the United States are indeed Mexicans. About one-sixth of the annual legal immigration flow to the United States comes from Mexico. About three-fifths, about 60 percent, of the best estimates that we have of illegal immigration, unauthorized immigration, are coming from Mexico. Incidentally, about 23 percent in addition to that comes from Central America and some other parts of South America, suggesting that about 80 percent of the total flow perhaps comes either from Mexico, and part of it also through Mexico.

And entire economic sectors in the United States are now dependent-I'm not saying relying on-dependent on the kind of labor that hardworking Mexican workers and other Central Americans provide. Of course, no one relies more heavily on Mexican and Central American workers than U.S. agriculture, perishable crops. There almost 100 percent of the workforce is Latino Hispanic, and at least 75 percent of it is undocumented, unauthorized. So regardless of how we think about Mexico, regardless of what it is that we do with regard to immigration, Mexico will always be the big elephant in the room that we can not ignore.

But also Mexico is a NAFTA partner. And I would like to help us here perhaps to think of NAFTA in larger terms, not just as an opportunity for greater trade and greater investments in Mexico, for that matter, within the space. But as someone has already said, and that's the problem of coming last, as an opportunity for greater, deeper American integration. We can sit down. I think reasonable people can really think through what that might mean.

And it is also a vehicle, NAFTA is, for identifying and addressing issues of common interest, but more importantly, for taking joint responsibility for fixing these issues, for positive outcomes with regard to these issues. And the border issues, terrorism, but also migration, is sort of a natural for this kind of understanding of NAFTA. And together with Mexico and Canada, perhaps we can start thinking of NAFTA as a vehicle towards a safer North America, a more competitive and more prosperous North America and more democratic and rule of law-based North American and North America that is better socially developed.

How should we be thinking about comprehensive immigration reform. If you would allow me, I conceptualize a bit as a three-legged stool. And, you know, the beauty and the problem with putting together three- legged stools is that you have to be very accurate about, you know, the length and everything else of each of the legs. And I suggest that if we want to have stable immigration reform, perhaps putting it differently, immigration reform that will last-because we can have quick and dirty, or for that matter very lengthy and not particularly well-conceived immigration reform legislation that is going to bring us back to the Congress two or three or four years down the road, seeking to fix it again.

So I've tried to see, you know, with the experience of the last 10, 20, 30 years, you know, what it might take in order to come up with something that perhaps has an opportunity to last a while. And I felt that three things would be required. The first one would be to have-to give an opportunity to people here who are an unauthorized, undocumented illegal resident, whatever your preference is, for those people who are here illegally to actually earn their new legal status. So reasonable people can sit around the table and try to figure out what those criteria would be. They should be tougher, rather than looser, and should give people an opportunity to work hard toward obtaining or achieving that new status in the future, two or three years later on, rather than on the basis of what they may have done in the past two or three years.

The second one is we have to enforce our immigration and related laws better. This is not about putting more money there, although money will also be required, deploying forces perhaps more successfully in methodological terms, and that will also be required, but I'm actually asking for nothing less than a from the ground up rethinking of what laws we're being asked to implement. Because fundamentally, my conclusion from looking at these issues over a long time now is that some of the ideas that we introduced in the mid-1980s may have looked fine at the time, but 20 years later it might be time for us to rethink them. I'm asking for a zero-based policy review of these ideas.

The third one, we have to take into account future demand for immigrants, for family members to reunify with their close family members and for employers to have people that they-employees that they value well. So we're going to have to do something about truly expanding immigration numbers in all sorts of different ways: temporary, permanent, work visas, family visas.

Finally, I wanted to sort of plug ag jobs. It's a bill that-and I've been listening to the government witnesses now. This is the third time I've testified. Three times in the past month on this. And I'm always stunned by the fact that really they're not saying anything much different than what is included in ag jobs. But yet I have yet to year a government witness basically saying, we will support ag jobs. Ag jobs may not be the model that we will ultimately follow in immigration reform, but it is certainly one model that makes sense. It has been negotiated in a painstaking way, and it makes sense, considering the exceptionality of the U.S. agricultural sector.

Finally, back to Mexico. Anything we do with regard to all of these people who are here will have a disproportionate effect on people from Mexico. Sixty percent, probably more. We've been surprised before in our estimates. Also, most of the things that we tried to accomplish in terms of our security, in terms of keeping the wrong kinds of things from coming into our country, et cetera, et cetera, can be achieved much better when we work with our contiguous partner countries in the NAFTA than by ourselves.

Second, anything with regard to any future worker scheme, temporary workers, or whatever you want to call it, inevitably the lion's share of those visas will go to Mexico. Mexicans have the employer relationships, they have the networks, et cetera, et cetera. Why not begin to think together with Mexico about that part of it.

And, finally, since Mexico inevitably is going to be the principal partner, directly or indirectly, in whatever it is that we do on immigration, why not starting to talk to them in a systematic way immediately? Thank you, Mr. Chairman.

SEN. LUGAR: Well, thank you very much, sir.

Let me introduce now Dr. Valenzuela. I've mentioned the Aspen Institute conferences and he has been a tremendous resource to members of Congress. And I appreciated very much your testimony here. I look forward to your testimony here this morning. Would you please proceed.

MR. ARTURO A. VALENZUELA: Thank you. Thank you very much, Mr. Chairman. This one is tested. I notice it works. I appreciate this opportunity, Mr. Chairman, to appear before the committee, and I want to commend you for this hearing today.

As you know, Mr. Chairman, over the last two decades the relationship between the United States and Mexico has grown in visibility, scope, complexity, becoming one of the most important bilateral relationships that the United States has in the world. Mexico's growing importance for the United States is a reflection of fundamental changes that have taken place in Mexico and in the world economy, changes that have accentuated the integration of both countries.

In 1950, Mexico was a semi-authoritarian, largely rural country of 25.8 million people with a life expectancy of 49 years and only half of its population literate. Today, Mexico is an overwhelmingly urban competitive democracy with close to 100 million inhabitants, a life expectancy of 69 years and a literacy rate of 87 percent. It is the eleventh most populous country in the world, with an economy that ranks among the fifteen largest.

With the approval of the North American Free Trade Agreement, Mexico became the third largest export market for the United States and an important destination for U.S. direct investment. U.S.-Mexico trade is now $232 billion, three times what it was before NAFTA. And of course we know that the long 2000-mile border, the busiest in the world, has over 340 million legal crossings a year, suggesting the growing integration of border communities.

Mexico accounts also for 25 percent of the significant increase in foreign-born residents of the United States, the largest share of that category that any country has had since 1890, when Germans accounted for 30 percent of all residents born abroad. In turn, Mexican migration is the driving force behind the surge of the Latino population in the United States, which at 37.4 million has become the largest minority in the country, over 60 percent of whom are natives of the United States. It is estimated that about 66 percent of the total Latino population, that is about 25 million, are of Mexican origin. Mexicans also constitute the largest number of immigrants who entered the country illegally, perhaps as many five million of an estimated seven to eight million undocumented workers.

Employment in the United States has been an important outlet for Mexico's population, whose per capita income is a fifth of that of its neighbor to the north, and has 40 million citizens living in poverty.

Mexico in turn has supplied labor in critical areas of the U.S. economy at a time when the population is aging in the United States and the United States faces the imminent retirement of the baby boom generation. But growing integration also poses numerous challenges including illegal immigration, unfair trade and labor practices, law enforcement problems, narcotics trafficking and environmental, health and security concerns and many others.

It's important to stress that while Mexico commands far greater attention it is not central today to U.S. foreign policy priorities and imperatives. Rather, policy towards Mexico is driven in fits and starts by a myriad of domestic factors. It is a policy that is often diffuse, fragmented and contradictory, spread across numerous government agencies with little overall coordination and focus.

The very institutionalization of the relationship which helps to routinize it and manage it more fully in its complexity has also the unintended consequence of balkanizing Mexico policy, losing sight of the overall national security and foreign policy priorities of the United States. With the overall engagement with Mexico being largely positive, it is also true that United States policymakers have not fully assimilated the implications for the United States of the profound changes taking place in Mexico and their relevance to fundamental U.S. interests. In an uncertain and dangerous world, Mexico also needs to be conceptualized first and foremost in security and strategic terms. This means taking seriously the implications of the ongoing political, economic and social transformations taking place south of the Rio Grande.

It's important to remember, Mr. Chairman, that not too long ago, in 1988, the election in Mexico was deeply flawed and in 1994 we saw several assassination attempts. Political institutions have lagged behind in Mexico the rapid changes that have taken place in the Mexican economy and society, and account in part for some of the failures of the Fox administration to advance needed economic, social and political reforms, including critical reforms in tax policy, energy, education and justice and broader reforms of the state. It's not an exaggeration, Mr. Chairman, that Mexican politics is today facing a serious stalemate. In particular, Mexico's inability to implement energy reform and fiscal reform in a country where tax revenues account for only 12 percent of the national product has severely hampered the country's ability to become fully competitive internationally.

Now, it's not hard to articulate why the relationship with Mexico is of such vital interest. A prosperous and stable Mexico is essential to the well being of the United States. A failed Mexico on the other hand, of course, would present enormous challenges to the United States. Now, the relationship with Mexico needs to be based, it's absolutely clear, on trust. But also mutuality of interests that are not held hostage to disagreements in other areas. The souring of the promising U.S.-Mexican dialogue initiative by the Bush administration because Mexico did not go along with U.S. preferences in the U.N. Security Council regarding the war with Iraq is a case in point. It sent a message the U.S. views progress on bilateral issues with Mexico as concessions that are subject to Mexico agreeing with U.S. foreign policy priorities, rather than an essential step that also advance U.S. interests.

Now, what should be the general thrust of U.S. policy towards Mexico? To the credit of Presidents Bush and Fox in the early conversations that they had, they identified two key neuralgic areas for both countries in the years ahead, issues that are both intimately related. The first is the vast asymmetries in the standard of living between the two countries, and the second is the problem of migration and labor mobility.

Now, the Partnership for Prosperity, which speaks of the issues of asymmetries, was signed by the two presidents and did reflect a new emphasis. It does respond to Mexico's urging that the U.S. and Canada take a leaf out of the European experience where large investments were made by the richer countries in the poorer countries of the European Union, such as Spain and Portugal, that were also primarily labor exporting countries. The problem, Mr. Chairman, to date is that the Partnership for Prosperity includes no real tangible commitment from the United States. Private investment, a central feature of the scheme, can only work with substantial public investment and the Bush administration has been long on rhetoric and short on substance regarding real efforts to support Mexico.

On immigration, both presidents signaled at the beginning of the Bush administration that they were prepared to break the mold and seek genuine immigration change. It is clear the U.S. economy has benefited enormously from migrant labor, and yet U.S. immigration laws, rather than protecting American jobs, tolerate a two-tiered labor market, one with no labor rights, poor working conditions, insufficient wages and no rights to organize. High level conversations between both countries centered on accomplishing-this is at the beginning-on accomplishing two objectives: instituting a temporary worker program that would permit large numbers of Mexicans to come to the United States to work on a short term basis, permitting greater circulation of labor back and forth. And these programs would expand the very limited ones geared today to agricultural workers.

The second objective that was discussed at the beginning of both administrations was to find mechanisms to regularize the status of illegal workers in the United States, with options of placing them on a path towards citizenship. Now, unfortunately, that conversation-that fruitful conversation came to an end. And it's not true, Mr. Chairman, that immigration reform was set back by 9/11. Already before the terrorist attacks, opposition from conservative circles in the Republican Party had led the president's political advisors to caution against any real progress in this area.

Now, I'm pleased that President Bush, in hosting President Fox at his ranch in Crawford earlier this month, seems to have signaled that he wants to get the administration's Mexico policy back on track. And the president's speech calling also on immigration reform is encouraging me because it puts this issue at the center of the national debate. Unfortunately, the president's speech indicates that the White House has backed away from the fundamental tenets of immigration reform that was discussed at the beginning of their conversations. Tenets that pointed to immigration reform in the right direction.

Rather than seeking a two-track policy that would expand temporary worker programs on the one hand and provide for regularization of the status of immigrants already in the United States with a path to citizenship on the other, the administration has opted for an ill defined temporary worker program that would include those seeking temporary employment in the United States, and those already working in the country without proper documentation.

And, Mr. Chairman, such a program will simply not work because it is based on faulty assumptions. The most serious is that undocumented immigrants in the United States, many of whom have worked here for many years and have families in this country, would be willing to sign up for a temporary worker program that might force them to return to the country of origin after a limited time period. And with no concrete guarantees that their status in the United States could be made permanent, there would be then few incentives for them to participate and to come out of the shadows.

A realistic reform would recognize the contributions that these immigrants have made to the American economy and provide them with a legal path towards regularization of their status and citizenship should they choose to do so. A temporary worker program with a clear timeline and no specific limitations on size is also based on faulty premises, because it assumes that workers will come to the United States for a finite period of time and then return to their homeland. If businesses are willing to hire in the United States despite legal restrictions barring them from hiring undocumented migrants, and workers face the reality of unemployment back home, they will continue to pursue employment opportunities in this country. A mechanism for adjusting status is essential for any temporary worker program.

It's also critical that workers in temporary worker programs be fully covered by U.S. labor laws. In that sense, Mr. Chairman, I think that the bipartisan legislation along the lines that Senator Hagel has presented and discussed earlier is a far better and more sensibly conceived package than the ones that have been outlined by the president, even though he has not spelled them out completely.

In concluding, let me return and finalize my remarks by simply going back to the thrust of what I said at the beginning. Even the best conceived immigration reform proposals will not solve the inexorable population and social pressures that stem from the reality of contiguous societies with vast differentials in living standards. Mexico will continue to export workers to the United States as long as U.S. wages levels are higher and jobs are available.

The United States can no longer take Mexico for granted and while managing the complex and broad agenda involving two nations with 400 million inhabitants, the United States must not lose sight of the fact that Mexico is an essential partner that must successfully meet the challenges of building democracy and creating a better life for its citizens. And this requires, Mr. Chairman, a U.S. foreign policy with vision and leadership that sees Mexico in broader strategic terms and is willing to expend the energy and resources to ensure that Mexico can become a full partner in the North American community. Thank you very much.

SEN. LUGAR: Well, thank you very much, sir. Let me start the questioning, and we'll once again have a seven minute period and we'll rotate and hopefully not tax the patience of our witnesses by too lengthy and inquiry. But what you've all said is tremendously important. I wanted to recognize-Dr. Flynn, I noted three ideas here that are worth all of our exploring, and that is this idea that when someone gets sick, people anticipate the person will come in for treatment.

We identify illness as well as potential epidemics in this way, and the suppression of that idea could be ominous, leaving aside these overall macroeconomic or immigration issues we're talking about. And likewise in our intensity of focus on security with regard to 9/11 by hardening of the border regime we may have led not to the creation of a coyote industry, but certainly to an increase in such divisive means, quite apart from the very interesting transportation and trucking situation in a practical way. So the sorting out of how this is to be done is critically important because of all the side effects that come with it.

And then finally an important implication of this hearing, that immigration has to be looked at as important in terms of our own security given the nature of the war against terrorism, whether it be al Qaeda cells or allied situations, non-governmental groups, very small groups of people. To the extent we do not know who is in our country if not identified correctly, have an invisible population by our own law, why obviously we create great hazards. So it seems to me those three points, regardless of how we come out on some other issues, really need to be felt by each one of us in the Senate and hopefully by the administration.

Let me just say, Dr. Valenzuela, your opening comments are an excellent tutorial on Mexico, just the statistics themselves are important for each one of us to understand the dimensions of the population size, 11th largest country from 100 to 110 million people. The figure you gave of 40 million people in dire poverty, some would say is even larger than 50 million or half of the entire population of the country. But even then with the employed wage levels that approximate in terms of income maybe one-fifth, 20 percent, of the average wage levels and income in our country, an enormous disparity.

Now, this leads-I'll play the devil's advocate for a moment-some skeptics about this kind of a hearing, this kind of a dialogue to say as a practical matter, how, given this huge disparity, this huge population, not 100 million-let's just say 50 million people who are in dire poverty, if not in hopeless conditions still dream of something happening in their lives. And for those who are young and want to make something happen for them and their families, so as a result they take great risks. Perhaps hundreds of thousands, maybe millions.

Now, regardless of how we structure our immigration policy with regard to those who are in our country now undocumented, quite apart from those who may be on the way even as we speak, whether it is a hard line policy or a soft line policy and so forth, some Americans would say given the huge number of people and the huge amount of hope that is here, the population of the United States is likely to expand rapidly. Some would say, well, as a practical matter it will anyway. You're all sort of missing the point that in fact these things happen. The pressures are so great, and we witness this, and so you just sort of cope with this. But the critics do have a point: in essence, how do we maintain basic institutions in our country, whether it be public schools under great pressure, hospital and clinic facilities?

For example, in my state-and I've been visiting during the last recess another one of the Success For All programs in inner city Indianapolis. And here there are a number of students in that near southeast side school who are from Mexico, and they're recently arrived. As a matter of fact, the turnover in that school is 75 percent of the entire student population in the past year. So that even the Leave No Child Behind situation has a difficult thing testing who was there last year and whether there was progress, because a whole different group of people are here this year. And we again in a practical way face these problems.

Now, the fact is that these students are learning English so they are learning to read. A lot of good things are happening in their lives, and so on a humanitarian standpoint you are delighted that that is the case. But you also see that the public school system lacks money. It's not unusual for an inner city public school system.

The state of Indiana is running a billion dollar deficit. I suppose Connecticut doesn't have one that big, but it's bordering on this in terms of state support. And suddenly there are many more young people who are in the schools or in institutions. So one thing we've talked about today is, well, what can we do with the Prosperity for Mexico program that we talked about? And comment is made, well, it's there but not much emphasis by our government, quite apart from private industry and from the Mexican side sometimes great suspicion.

I've deliberately mentioned Pemex because I know that this creates great vibes and difficulty, but still in reality Mexico needs revenue for their government to offer services, to have things that they want to do. In other words, we really have to, if we are good friends, be in a position to be able to advise each other on how we have better democratic institutions, better economic prosperity if we are serious about the gap changing and the pressures that this puts upon immigration. Otherwise, I suspect senators will be having a hearing very similar to this a decade from now with a different group of people, but many of the same problems exacerbated by everything that has happened in the previous 10 years.

What, in terms of a macro policy, advice can you give? Maybe all of the above, that you do the prosperity project, you try to be humane in immigration, identify who's in the country. But just in a broad scope of this hearing, give us some more good counsel. Would you start?

MR. VALENZUELA: Should I start?


MR. VALENZUELA: Yeah. Well, I tried to stress, Mr. Chairman, that the key for us is to understand that the United States has fundamental interests with Mexico, but we need to look at Mexico from a strategic point of view and not just simply get lost in the multiplicity of the issues of the bilateral relationship. And what do I mean by look at it in a strategic way? We need to understand that Mexico is going through a very complex transition. It's a political transition that is not fully complete. There are still a lot of questions about how Mexico is going to address that. You know, the first government in a long time that has been fully democratically elected is now facing significant difficulties. And so Mexico is a country that is right on our border, 100 million people, it's going through a difficult process of transition. The United States cannot ignore that.

Now, I happen to believe that the glass is half full, not half empty. I think that the progress that has been made in Mexico is extraordinary. If you compare it with many other places in Eastern Europe and others that went from a one party state to a competitive democracy, it's really on the right track. But it's in our fundamental interest to address the two prongs I think of the relationship. One is the immigration issue and the other one is the question of the asymmetries between the two countries.

And on the asymmetries between the two countries, the Mexicans are correct when they point to the fact that-how do the Europeans handle this sort of thing? When they looked at the whole process of European integration, they realized that there were some countries that were significantly poorer than the other countries and that it was in the interest of the Germans and the French and the other countries in fact to bring the others up. It's extraordinary what's happened to Spain and what's happened to Portugal and what's happened to the other countries. I believe that Mexico really can become more competitive.

It's got huge challenges. Competition is the critical challenge for Mexico. It has to become more competitive in the international global environment of today.

This means more resources in infrastructure, it means more resources in education, and it means more resources across the board. And where are we with those sorts of things? We can spend-with all due respect, Mr. Chairman, if we can spend $87 billion on a project of reconstruction in one part of the world, let's pay some attention to our own hemisphere and the challenges that we face in our own hemisphere.

SEN. LUGAR: Dr. Flynn?

MR. FLYNN: Mr. Chairman, if I may point out one of the sort of unintended consequences of our struggle with our immigration policy in terms of how it works and how our enforcement efforts have sort of confounded it is that issue that you raised about the illegal population putting pressure on these institutions. And what we know now from watching this over time, it's the case that Senator Craig made. You know, what we did in terms of 9/11 is we didn't just try to lock people out, but we locked people in.

As the border has become harder and became harder throughout the late 1980s and throughout the '90s, instead of having seasonal labor, young men basically or middle aged men coming up, working a time, going home with their remittances and basically that's where they want to live, that's where they want to bring the fortune back, the costs of getting across the border got too high so they had to bring in their family because they couldn't go home. And then we put the pressure on the social institutions that flow from that.

So it's not to say given the overall demographic trends, given the paucity of economic opportunities that this trend of whole families moving across the border won't continue, but it's clearly an outgrowth of our effort to harden the enforcement tier that has created the demand for bringing in dependants into the country and keeping them here, even in many cases when they prefer to go home, at least for portions of the year. So there is this-that issue is in a twine that's sort of narrow.

At a more macro level I'd raise-and sort of this whole basic notion of moving beyond the border and investment we're making along the border, is really the issue of transportation infrastructure. There's little question that Mexico is woefully behind in building the kind of transportation systems it needs to have a fully integrated marketplace to make sure those jobs can stay there and people can stay there and work

There's an opportunity, I would suggest, under the notion of security is if we build a big development in the transportation area as we call it, intelligent transportation systems, knowing where trucks are. We do this in our easy pass designs and so forth. One of the opportunities are some of the DOT, Department of Transportation legislation or the 21st Century Transportation Equity Act talks about building this-the whole ports to plane corridor, the I69 NAFTA highway. We basically often stop at our own edge of our own border and then you get into very rugged size on the other side.

You can imagine, I think, advancing an improvement of that infrastructure, building a single inspection station, it doesn't have to be at the border, put it someplace where it makes more sense, not at the base of a bridge or in a busy area. Have Canadians, Americans and Mexicans working side by side. The kind of thing you have at the base of the Channel, both sides of the English Channel. You declare sovereignty where each country can enforce their laws in one place. Then you start getting out of sort of the small truck and other kinds of industries that cause a lot of environmental damage that are not fully registered.

So we can think more imaginatively if we're willing to do the kinds of things of really putting a blank sheet on integration and the opportunity that presents. We built our transportation systems to go West, young man, they're east-west. Both on the Canadian and the U.S. are particularly, now our economic relationships increasingly pivoting on a north-south, but none of the infrastructure has been adapting for that. That has to happen even if we didn't have security issues, because of the nature of where our economies are going. But when we build new infrastructure, just like it makes a lot more sense to build a home handicapped accessible in its design instead of trying to do it afterwards, we can basically begin to think about how we can integrate these concepts of management within those developments.

But we have to get out of this very narrow, prescriptive and balkanized approach to dealing with these issues within our government, and see these connections. I get frustrated seeing the Department of Transportation efforts to improve this here with no security link. And then have, now with the new Department of Homeland Security weigh in and introduce new requirements and protocols that can upset the whole queuing and everything else as associated with the transportation side. It becomes almost impossible.

You get a 10 year environmental impact statement process to develop upgraded facilities on the border, but when the border is congested you get mass pollution. I mean, we need to take a fresh slate at really looking at a way in which these zones are managed and look at how they're integrated in the broader context and we need to do it now because the stakes are-transcend even our security concerns, they're really about this vital relationship that we should be trying to advance.

SEN. LUGAR: Those are excellent suggestions.

Dr. Papademetriou?

MR. PAPADEMETRIOU: Thank you, Mr. Chairman. I'd like to think, perhaps in trying to respond to your question, in three different ways. The things that Mexico can best do primarily on it's own. The things that we can do and we should do, primarily on our own and then the things that we need to do together. And we know the things that Mexico can do. They fall under the overall rubric of good governance and that includes improvements in terms of political governance and Arturo Valenzuela has told us about some of the improvements that have been made there and they are indeed phenomenal.

There have been great improvements in terms of economic governance, they are not there yet but they're in the right sort of path, and then the third one is social governance, and here is where the Mexican government has an extraordinary difficult path yet to cross. And the things that we have to do better is we have to really think about our laws, whether they are immigration laws, whether they are labor laws, how good are they? What are we trying to protect? Are they really accomplishing the things that we think that they're accomplishing?

At no point in any immigration reform proposal are we going to sort of sit back and play dead. I don't think that even the extremist that perhaps often associated in a derisive way in conversations with the Wall Street Journal viewpoint about open borders and all that, at any point suggest that we should just sit back and enjoy it. But we have to have regulations that make sense and we have to implement whatever it is that we write in the books. So if we need to rewrite what we have in the books, let's do so.

And finally, the things that we do together. We must do these things together, migration is one of them. The partnership for prosperity is another one, we have to have impetus of that significant investments on the part of the government provide. Somebody has to lead, the private sector will follow, will increasingly perhaps be responsible for the lion's share over time of investments, but in the start up phase we're going to have to commit some money. Because we need to address not 30 or 20 or 15 or 40 million abjectly poor Mexicans. That is not really the threat.

What you have to change, or for that matter the issue of trying to bring the wage levels, you know, at some sort of a greater complementarity. What you have to change is the expectations that poor Mexicans with an opportunity to the United States, the calculation that they will make. The calculation has to change from my God, there is absolutely no other alternative, I'll take whatever chances are necessary including several hundreds of them dying, I'll pay coyotes or organized syndicates any amount of money because I've got to make it to the other side.

Calculation only needs to change to something that says, you know what? I hear that some opportunities, you know, a new factory is coming up, the educational system is getting any better, all of these remittances that we don't pay attention to that 13, 14, 15 possibly $20 billion that's real money that goes back to Mexico. We can think perhaps of multiplying this through smart kinds of investments. So we have to just change the calculus at the level where decisions are made and the entire literature in migration tells us that the decisions are made at the level of the family or the household.

And with regard to the security issue, you know, we are so fixated on the border. If this was a budget hearing you would have heard that the president is asking for another half a billion dollars for security issues. We now spend somewhere between, it's difficult to sort of now take it out of this border and immigration, but together this part of the homeland security budget is going to be over $10 billion. I wonder, often, what would $300 million investments strategic smart investments in Mexico per year might do, and whether in the long term, and I don't mean after we're all dead, but in the next five or 10 years, this kind of sustained investment might indeed begin to make a difference in people's lives to the point where the calculus at the individual and family level may change. Thank you, sir.

SEN. LUGAR: Very helpful.

Senator Dodd?

SEN. DODD: Well, thanks very much, Mr. Chairman, again for the hearing. As I'm sitting here I kind of regret we didn't have you come on first, because I think it's invariably what happens with second panels is the administration witnesses and others leave the room and I think not only have we benefited from your testimony, but I think the administration could have benefited tremendously from hearing all three of you talk and in the ways in which I think this hearing could be most instructive and helpful and so I thank all three of you very, very much for your ideas and thoughts.

And just a couple of my own as I was listening to you and raise them, I think, Arturo, one statistic I don't think you shared with us, is the age of the Mexican population today as the number of people, the 100 million who are under the age of 18 or so. Do you recall what that is? I know it's staggeringly high.

MR. VALENZUELA: It-that's correct. And, you know, when you look at the demographics of both countries, you know, our concern over Social Security and what's going to happen to the baby boomers and who's going to pay for our retirement, who's going to be working to cover that is being answered as we speak right now by the movement of a younger labor force into the United States.

And it reminds me-your comment also reminds me of the comment that Senator Lugar made about school kids and there are a lot of immigrants who come into the United States who may not have had much education but who got their education, also, in Mexico. We're benefiting from the fact that even if it was very, very poor or maybe very inadequate, nevertheless we have people who are bricklayers and others who have substantial amount of training that they've got elsewhere and we benefit from that as well.

SEN. DODD: Well, it's very important you note that. Obviously in the demographic explosion and the urbanization of Mexico are two very important-because we have a tendency to look at this from a two dimensional perspective, that is, U.S. versus Mexico and within Mexico itself you're watching the same phenomena. That same calculus that a family has made about taking the risk of crossing a border with all the dangers inherent in that, have earlier made the decision to leave Chiapas and these other areas and to move into the greater Mexico City area which I think has a population of some 25 million, some number like that. It's a staggering number, I think this is the largest city in the world or certainly near the largest.

So they've already demonstrating already their concerns about the ability to have much hope where they are. Getting beyond even this-the immigration issue. I kept on thinking we still-we're still unfortunately trapped in this-less so, but still trapped with the paternalistic notion, the concessional idea that you mentioned, Arturo. And it is-we fail yet to understand the critical importance to us of the well-being of Mexico from both an economic, political and social standpoint and we've yet to break through that unfortunately.

And I don't-it isn't just this administration, it seems to have been an inherent problem that goes on year after year after year. And until you break that mentality to somebody it's awfully difficult to start talking about the concepts that all three of you have raised here. And I-maybe we're doing some of that here today.

Part of me-I, you know, I'm a supporter of creating the Homeland Security office and so forth and I-but I had great hesitations in my own mind, may have expressed them, I'm not sure I did but I wish I had if didn't, about lumping all these agencies together. The very fact that we've taken the INS and thrown it into the Homeland Security Office says volumes about where our heads are when it comes to this issue. Instead of understanding, immigration is being far more broad based subject matter than the issue of security. I don't minimize the importance of security, but by putting in under that umbrella, then you look at this issue through that prism and as you do, then your judgments are colored in terms of how we deal with these larger questions. It ought to be the basis of a bilateral relationship here.

And I think certainly the asymmetrical points you make about Europe, I think of-you mentioned Portugal, you mentioned Greece, Ireland certainly-to watch what happened in Ireland. Today the wealthiest, the most expensive country in Europe and certainly the fastest growing economically until recently, was the Irish economy, the Celtic tiger that just took off, because there was an investment made by the European community to do what? Exactly what Dr. Flynn talked about, infrastructure. Roads, transportation networks and so forth. The Internet-the Internet highway that made it attractive for foreign investment to come in. They made themselves appealing and thus are now making a contribution.

Ireland used to-I'm not -- 10 years ago 40,000 young people left Ireland every year to come here, to go England, to go to France for their economic prosperity and future. That was their calculus. Today, Ireland has the problem of immigration coming in, and it didn't take long, it turned very quickly. Now, the difference is obviously in a country of four million people and a country of 100 million and all the other issues. But nonetheless it's an example of what can happen when you change the calculus and how things are looked at.

So I find myself, sort of here we are, we're talking remittances which is a great thing but it just-you know, as if somehow the continuation of the remittance program is really the ultimate answer here. Registering people and so forth, the cost associated with that. Someone brought up the issue of budgets, can you imagine, no one raised the issue and it's hard to do it here, I don't know how to calculate it but just the cost of registering people and so forth. Instead of going at the issue of how do you create economic growth to such a degree that that-the calculus that the individual family makes is going to be at least tempered by the fact that there may be other opportunities.

I'm tremendously grateful, I'm glad I could stay around and listen to the three of you share your thoughts and I'd like to figure out some way to make them available to people in our own committee here. I know they're loaded with paper and so forth but, I know you're questioning me, you look around you don't see the number of people here, but you've made a significant contribution to this debate and I'm, once again, very grateful to the chairman for elevating this debate and discussion.

I don't really have any questions unless you have any final comments, the three of you want to make, but I think you've all brought very, very solid ideas to the table. And I, for one, am very, very grateful to hear them. I want to invite you to our intra- parliamentary meeting. We're going to be meeting in Mexico this year and I may be getting back in touch with the three of you and see if there isn't some opportunity maybe for you to come and address this intra-parliamentary group as well on some of these ideas. Thank you, Mr. Chairman.

SEN. LUGAR: Well, thank you very much, Senator Dodd, apropos of your comment it might be useful for us to circulate to our members the statements of our witnesses so that they have the benefit of those, their staffs may have made those available but we might take that additional precaution that there's at least an opportunity to emphasize the remarks you've made. There'll be a full record of the dialogue among senators who are here who are raising questions or making comments with you. And we did have at one point or another by my count, 10 senators in the hearing this morning, which is significant. You know, 10 percent of the whole Senate at least is involved, some of it for only short periods of time, but nonetheless sensitized to the issues that we have. And they are important ones and I'm sure we will return to them.

But we thank each one of you for the special care you gave in your statements as well as in your additional responses and thoughts. They've been helpful to us, hopefully to our administration and to the dialogue of the American people who have heard this hearing by other means. And we thank you for coming and look forward to inviting you again. With that, the hearing is adjourned.

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