[Senate Hearing 107-578]
[From the U.S. Government Printing Office]


                                                        S. Hrg. 107-578
 
              U.S.-MEXICAN RELATIONS: THE UNFINISHED AGENDA
=======================================================================

                                HEARING

                               BEFORE THE

               SUBCOMMITTEE ON WESTERN HEMISPHERE, PEACE
                      CORPS AND NARCOTICS AFFAIRS

                                 OF THE

                     COMMITTEE ON FOREIGN RELATIONS
                          UNITED STATES SENATE

                      ONE HUNDRED SEVENTH CONGRESS

                             SECOND SESSION

                               __________

                             APRIL 16, 2002

                               __________

       Printed for the use of the Committee on Foreign Relations


 Available via the World Wide Web: http://www.access.gpo.gov/congress/
                                 senate


                       U. S. GOVERNMENT PRINTING OFFICE
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                     COMMITTEE ON FOREIGN RELATIONS

                JOSEPH R. BIDEN, Jr., Delaware, Chairman
PAUL S. SARBANES, Maryland           JESSE HELMS, North Carolina
CHRISTOPHER J. DODD, Connecticut     RICHARD G. LUGAR, Indiana
JOHN F. KERRY, Massachusetts         CHUCK HAGEL, Nebraska
RUSSELL D. FEINGOLD, Wisconsin       GORDON H. SMITH, Oregon
PAUL D. WELLSTONE, Minnesota         BILL FRIST, Tennessee
BARBARA BOXER, California            LINCOLN D. CHAFEE, Rhode Island
ROBERT G. TORRICELLI, New Jersey     GEORGE ALLEN, Virginia
BILL NELSON, Florida                 SAM BROWNBACK, Kansas
JOHN D. ROCKEFELLER IV, West         MICHAEL B. ENZI, Wyoming
    Virginia

                                 ------                                

               SUBCOMMITTEE ON WESTERN HEMISPHERE, PEACE
                      CORPS AND NARCOTICS AFFAIRS

               CHRISTOPHER J. DODD, Connecticut, Chairman
BILL NELSON, Florida                 LINCOLN D. CHAFEE, Rhode Island
JOHN F. KERRY, Massachusetts         JESSE HELMS, North Carolina
RUSSELL D. FEINGOLD, Wisconsin       MICHAEL B. ENZI, Wyoming
JOSEPH R. BIDEN, Jr., Delaware       RICHARD G. LUGAR, Indiana

                                  (ii)








                            C O N T E N T S

                              ----------                              
                                                                   Page

Baer, M. Delal, Ph.D., senior fellow and chairman, Mexico 
  Project; deputy director, Americas Program, Center for 
  Strategic and International Studies, Washington, DC............    56
    Prepared statement...........................................    59
Enzi, Hon. Mike, U.S. Senator from Wyoming, prepared statement...     6
Ladik, Steven M., president, American Immigration Lawyers 
  Association, Washington, DC....................................    61
    Prepared statement...........................................    63
Larson, Alan P., Under Secretary of State for Economic, Business 
  and Agricultural Affairs, Department of State, Washington, DC..    17
    Prepared statement...........................................    18
Lebedev, Gregori, chief operating officer and executive vice 
  president, International Policy, U.S. Chamber of Commerce, 
  Washington, DC.................................................    50
    Prepared statement...........................................    52
Reyes, Hon. Silvestre, U.S. Representative in Congress from the 
  16th District of Texas.........................................     8
    Prepared statement...........................................    10
Shailor, Barbara, director, International Affairs Department, 
  American Federation of Labor and Congress of Industrial 
  Organizations [AFL-CIO], Washington, DC........................    44
    Prepared statement...........................................    46
Taylor, Hon. John B., Under Secretary of the Treasury for 
  International Affairs, Department of the Treasury, Washington, 
  DC.............................................................    22
    Prepared statement...........................................    24
Ziglar, Hon. James W., Commissioner, Immigration and 
  Naturalization Service, Department of Justice, Washington, DC..    26
    Prepared statement...........................................    29

                                 (iii)



             U.S.-MEXICAN RELATIONS: THE UNFINISHED AGENDA

                              ----------                              


                        TUESDAY, APRIL 16, 2002

                           U.S. Senate,    
        Subcommittee on Western Hemisphere,
                 Peace Corps and Narcotics Affairs,
                            Committee on Foreign Relations,
                                                    Washington, DC.
    The committee met, pursuant to notice, at 2:30 p.m., in 
room SD-419, Dirksen Senate Office Building, Hon. Christopher 
J. Dodd (chairman of the subcommittee), presiding.
    Present: Senators Dodd, Bill Nelson, Helms, Chafee, and 
Enzi.
    Senator Dodd. The committee will come to order. Let me 
thank all of our witnesses for being here today and 
participating in what I hope will be a worthwhile hearing, and 
one of a series we hope to hold from time to time on the issues 
affecting the hemisphere.
    I'm particularly pleased to have my colleague from the 
House, my good friend Silvestre Reyes, here with us today, who 
is the Chairman of the Congressional Hispanic Caucus. And it is 
an honor, Silvestre, to have you on this side of the building.
    Mr. Reyes. Good to be here, sir.
    Senator Dodd. I think I feel the hands of the former 
chairman here.
    Senator Helms. Good morning.
    Senator Dodd. Good morning. Thank you, sir. Thank you, 
Senator Helms.
    Senator Helms. That's the cutest baby you ever saw.
    Senator Dodd. Thank you, Senator Helms. I hope Grace heard 
that.
    Let me take a few minutes and make some opening comments, 
if I could, about this hearing. But also I want to make some 
brief comments as well about events over the past number of 
days in Venezuela that I think would be warranted.
    First of all, today the Subcommittee on Western Hemisphere, 
Peace Corps and Narcotics Affairs will hold the first in a 
series of hearings whose purpose is to assess the challenges to 
economic growth, democracy and the rule of law facing countries 
in the Western Hemisphere, challenges in some cases so daunting 
that they threaten fundamental institutions of democracy 
throughout the hemisphere.
    Among the questions that these hearings will focus on are 
whether existing U.S. policies are fully responsive to current 
circumstances that exist in the Americas, or whether those 
policies should be altered in order to better serve U.S. 
economic, political and national security interests throughout 
the Americas.
    In recent years the instability in the Balkans, the Middle 
East and South Asia, there has been a tendency for U.S. 
policymakers to neglect, in my view, some of our closest 
friends and closest neighbors, to be complacent that all is 
well in the Americas. How many times in recent years have we 
heard U.S. policymakers, both in Congress and elsewhere, at 
some point in the presentation about the state of this 
hemisphere, proudly announce that all but one of the nations in 
the region have democratically elected governments? It may 
sound like a cliche but my response to that observation has 
been that democracy is critically important, as is free 
markets, but that democracy is more than simply having a 
periodic election.
    We will not have sustainable democracy, in my view, in this 
hemisphere in the coming decade unless we do more to support 
and nurture serious governmental and civic institutions capable 
of protecting the rights of citizens and meeting their needs 
and aspirations. Events over the past few days in Caracas, 
Venezuela have no doubt called into question that complacency, 
at least temporarily. While all the details of the attempted 
coup in Venezuela are not yet known, what is clear is that the 
vast majority of governments in the hemisphere lived up to 
their responsibilities under the Inter-American Democratic 
Charter, and denounced the unconstitutional efforts to take 
power from a government which had been freely elected.
    I am extremely disappointed that rather than leading the 
effort to reaffirm the region's commitment to democratic 
principles outlined in the OAS charter, only belatedly did the 
United States join the OAS members to respond to the Venezuelan 
crisis. I would be the last one to defend all of the decisions, 
or even any of the decisions for that matter, and policies of 
President Hugo Chavez and his administration in Venezuela. But 
to stand silent while the illegal ouster of a government is 
occurring is deeply troubling.
    To take the similar statements--I may disagree vehemently 
with what you say, but I will defend with my life your right to 
say it. And that comes to democratically elected governments. I 
may disagree profoundly with the decisions those governments 
are making, but I think it's incumbent upon the greatest 
democracy in the world to defend democratically elected 
governments. And that is something that I'm terribly 
disappointed in, that we did not do in this case.
    Now I know that Secretary Powell obviously is extremely 
preoccupied with events in the Middle East, as he should be. 
But I would hope that in the future there would be more adult 
supervision of the policy formulation as it related to our 
hemisphere. And to President Chavez I would say simply this: 
You've been given a second chance, don't waste it. Live up to 
the responsibilities you assumed as the President of your 
country.
    It is not just Venezuelan democracy that stands at risk at 
this moment. Colombian institutions are under siege, both by 
drug traffickers and irregular para-military forces on the left 
and right of the political spectrum. Argentina's current crisis 
may be rooted in the near economic collapse of the country, but 
the impact on democratic institutions and the Argentine 
people's faith in their government institutions has been 
devastating.
    Central America is suffering as well from a decade of 
neglect. It is a region that we have allowed to slip quietly 
into despair. The nations of Central America have faced an 
astounding array of natural disasters, fever outbreaks and 
climatic misfortunes over the past several years. The nations 
of the Caribbean are also at risk, particularly in the country 
of Haiti where human misery is more pervasive than anywhere 
else throughout the Americas. Yet Haitian political leaders are 
unable to resolve their differences so that the Haitian people, 
the millions of them, can have a functioning government focused 
on their pressing needs of security, basic public health 
services, education, jobs, shelter and even something as simple 
as decent food.
    While many of the subjects that I've just mentioned could 
be the focus of today's first hearing on the state of the 
hemisphere, it seemed to me that it would be most appropriate 
to begin our review by focusing on the most important and 
promising of our hemispheric relationships, our relationship 
with Mexico and the administration of President Fox.
    It is no accident that President Bush made relations with 
the Fox administration a first priority of his new 
administration, and I commend him for it. The two leaders have 
met four times since President Bush assumed office last year, 
and both appear determined to make progress on a bilateral 
agenda.
    We share so much in common with our neighbor to the South. 
Many Americans have roots in Mexico. Our economies are 
interdependent. Mexico is the second largest trading partner, 
with bilateral trade flows exceeding $250 billion annually. Our 
borders are a beehive of activity, with more than 800,000 
individuals and 250,000 vehicles crossing the U.S.-Mexico 
border daily.
    More important than even our economic ties are our shared 
values, which allow us to remain close partners even when 
issues arise between us that are difficult to resolve. The 
U.S.-Mexico bilateral relationship is an extremely important 
cornerstone in fashioning a successful partnership with 
countries throughout the Americas. It is so important that we 
work at the relationship until we get it right, in my view.
    We all know that the U.S.-Mexican agenda is an ambitious, 
and a challenging one: migration, border security, drugs, 
trade, investment, energy and economic development and there 
are many others. But it is achievable and our success or 
failure to get it right will have direct bearing on our 
prosperity both in this country and in Mexico, especially in 
border communities whose lives, security and economic well-
being are inextricably linked.
    We are honored today to have with us the Chairman of the 
Congressional Hispanic Caucus, Silvestre Reyes, who represents 
the 16th District in Texas, the El Paso area, who can speak 
with firsthand knowledge about the importance of the U.S.-
Mexican relationship for border states, as well as the 
importance of finding the right solutions on issues to the 
bilateral agenda. President Bush and President Fox have 
established a strong relationship that should make resolution 
of even the thorniest of issues possible. It is my hope that 
the administration witnesses who are with us today, this 
afternoon, will continue--or rather outline the 
administration's plans for making progress on that agenda, and 
a timetable for doing so.
    At the core of that agenda is clearly the issue of 
immigration. With more than three million undocumented Mexicans 
living and working in communities throughout the United States, 
it is an issue that is just not going to go away. It is an 
issue that has implications for other topics on the bilateral 
agenda, not the least of those being U.S. security interests.
    Our public witnesses, representing organized labor and the 
business community, are but one more concrete demonstration 
that the U.S.-Mexican relationship is an important one, one 
where there is more commonality of opinion that disagreement. 
Making progress on the U.S.-Mexican bilateral agenda is 
extremely important at large. U.S. cooperation and assistance 
in consolidating Mexico's economic and political reforms will 
be an extremely important signal to other governments in the 
Americas. It will also enhance President Fox's authority as a 
regional leader and better enable him to work in partnership 
with the United States in confronting issues such as 
corruption, drug trafficking and terrorism, which threaten the 
integrity of governments throughout the region and undermine 
popular support for democratic institutions and values. One 
more reason, in my view, for placing Mexico first on this 
subcommittee's agenda.
    I look forward to hearing from all of our witnesses today, 
but first let me turn to my colleagues who are here, and I 
thank them for coming. Senator Chafee, who is my ranking member 
on this subcommittee and has been a valued member of it; 
Senator Helms, my former chairman and good friend with whom we 
have our disagreements, but always has a deep interest in the 
Americas and I've always appreciated it very, very well; and 
Senator Mike Enzi of Wyoming, who is here as well. So with 
that, Senator Chafee, we'll begin with you.
    Senator Chafee. Thank you, Mr. Chairman, it's a pleasure to 
be here and welcome the Congressman, also.
    Mr. Reyes. Thank you, sir.
    Senator Chafee. I know we have an aggressive agenda and I 
commend the chairman for, certainly with all the events around 
the world, looking south to our good neighbor Mexico, and then 
continuing down, as he said, in subsequent hearings to Central 
America and throughout the hemisphere, and foster good 
relations which more than ever are important to our country. So 
with that, I'll conclude my remarks and look forward to the 
testimony from our witnesses this afternoon.
    Senator Dodd. Thank you, Senator. Senator Helms.
    Senator Helms. Mr. Chairman, thank you very much. I feel 
obliged to suggest that the threats to Venezuelan democracy and 
to its constitution began long before the events of this past 
weekend. I personally would urge Mr. Chavez to make good use of 
his second chance and embrace a little more strongly the 
principles of democracy than he has in the past. I further 
suggest that one way for Mr. Chavez to demonstrate a new 
outlook would be to sever his very, very close relationship 
with Castro's Cuba. He may be surprised how fast things could 
improve if he would do that.
    Beyond that, Mr. Chairman, I just want to thank you for 
scheduling this meeting today. In my judgment it's one of the 
most important we'll have because what happens in Mexico 
directly impacts America, which makes our policy toward our 
neighbor to the south of the greatest importance. Members of 
this committee who traveled formally as a committee earlier to 
Mexico learned about that firsthand. And you may recall that we 
met jointly with the Foreign Relations Committee of Mexico, and 
we are now working on a return visit from them where they could 
have lunch with us. Thank you, Mr. Chairman, for calling this 
meeting.
    Senator Dodd. Thank you, Mr. Chairman, you made a good 
point. You did do something unprecedented by taking this 
committee down and we look forward to the Mexican delegation 
coming here. In the middle of May or thereabouts we'll have yet 
another inter-parliamentary meeting as we have had now--the 
oldest inter-parliamentary, continuous inter-parliamentary 
meeting with any other country in the world. And I'll be 
chairing it this time with the Senate side chairs when the 
meetings are in Mexico. And I extend an invitation to all 
members who are interested in participating. There have been a 
lot of important ones, but I think this could be one of the 
most important ones.
    Senator Helms. I agree with you, sir.
    Senator Dodd. Senator Enzi.
    Senator Enzi. Thank you, Mr. Chairman. I appreciate your 
holding this hearing and I would ask that my entire statement 
be included in the record.
    Senator Dodd. All the statements will be included.
    Senator Enzi. I am anxious to hear about the Immigration 
and Naturalization Service as well as border security and 
NAFTA, which are all of critical importance to Wyoming.
    I appreciate that Mr. Jim Ziglar is here today. He is an 
old college friend of mine, and I watched him from the time 
that he got the appointment until he'd been confirmed, and then 
shortly after that, watched the drastic changes in the world 
that had to change his priorities.
    We knew of a lot of paperwork problems that needed to be 
solved, that I told him about. I saw him chomping at the bit 
after doing extensive research in the southern United States, 
in Australia, in other countries around the world to be sure 
that he understood the job that he was going to have. And of 
course, September 11 changed the job that he got. And I 
appreciate the shift in priorities that he's done and all that 
he's been able to find out that many of us found to be quite a 
surprise.
    We do rely on people coming into the country to help out. 
In Wyoming we kind of have the three H's, the hoeing beets, the 
herding sheep and the helping at restaurants and lodging. 
Without help in those we don't have those industries.
    So, in connection with that though, we are concerned about 
those being allowed to cross our border and enter this country, 
and fear as to not only whether immigrants might take away U.S. 
jobs and drain health care and other programs, but also doing 
harm to us. So it is very important that we understand what is 
happening there, that we have enough agents, that the agency is 
allowed to work in a way that will be beneficial.
    On the controversy on whether to split up INS, I think that 
Mr. Ziglar and the administration are headed in a better 
direction with the original recommendation that the agency be 
left intact but divided into two separate divisions, and that 
its technology, reporting and enforcement systems be updated.
    I think we've learned a lot about that recently and know 
that there are some programs out there that will allow the 
interaction between all of the agencies that are necessary to 
do a good job on that.
    Finally, I need to comment just a little bit on NAFTA, 
because that's of prime concern to an agricultural state like 
Wyoming, particularly in the area of sugar beets. I've already 
mentioned the hoeing, but the sugar that results from them is a 
huge issue.
    One of the reasons that NAFTA passed is because some of the 
western Senators who had an interest in sugar beets voted for 
it based on a side letter that restricted some of the exports 
coming in from Mexico on that. Since that time, somehow, that 
side letter has been lost. I thought all of those things were 
preserved in the National Archives, but if it is it must be 
buried under the Constitution there. And with the loss of that 
sugar side letter U.S. producers are now trading on a playing 
field that has no referee. And that cannot be allowed to 
continue.
    We also have some difficulties with shipping meat. In the 
United States, unless you meet very strict constraints that 
only major packers can meet, you can't ship meat from one state 
to another. But Mexico and Canada are allowed to ship meat into 
the United States and across state lines just by filing a plan. 
That's not a fair and level playing field and we need to have 
that taken care of.
    So there are a lot of issues that we need to address and I 
thank you for having this hearing so we can address them.
    [The prepared statement of Senator Enzi follows:]

                Prepared Statement of Senator Mike Enzi

    Mr. Chairman, I am grateful for the opportunity today to welcome 
the distinguished panel of witnesses before this committee and hear 
them speak on our country's relationship with Mexico.
    I know we will be discussing many issues today, but I want to focus 
my remarks on the Immigration and Naturalization Service, some issues 
pertaining to immigration and border security, as well as NAFTA.
    With respect to the INS, the President knew reform was needed even 
before September 11. He picked the right man, Jim Ziglar, to accomplish 
the daunting task of reorganizing and updating the INS. I am pleased to 
see that Mr. Ziglar is one of the witnesses appearing before this 
committee.
    Today, one of the overwhelming tasks Mr. Ziglar faces is 
immigration and border security issues with Mexico. While we all want 
to continue friendly relations to the South, these issues are a large 
component of the Administration's discussions with President Fox. He is 
asking President Bush for some certainty for undocumented Mexican 
workers in the United States. At the same time, the President and Mr. 
Ziglar are facing even greater demands to protect our borders following 
the events of September 11.
    Folks in Wyoming as well as elsewhere are concerned about how to 
deal with this issue. In Wyoming, we have many immigrant workers who 
are hired mostly for agricultural jobs that others do not want. These 
include hoeing beets and herding sheep. In addition, those in the 
Wyoming tourism industry--in the lodging or restaurant industry--also 
hire immigrant workers. On the other hand, people in Wyoming are 
concerned about who is being allowed to cross our borders and enter 
this country. Now, the fear is not only whether immigrants might take 
away U.S. jobs and drain healthcare and other programs, but whether 
they are entering this country to harm us.
    It is important to understand that the problems we face with Mexico 
and Mexican immigration are just the tip of the iceberg. Before we can 
even begin to address Mexico specifically, we need a solution to the 
overall immigration and border security problems our nation faces.
    The INS has not been able to keep up. It has too few agents--only 
2,000 agents to deal with over 8 million illegal immigrants. The 
Director faces personnel limits, and he does not have the ability to 
fire employees. We all learned this in March when a Florida flight 
school received approved student visas for two of the dead hijackers. 
The Director was unable to fire those responsible for this fiasco.
    I am convinced, and I believe it is well documented, that the 
biggest underlying, problem facing the INS is its outmoded computers, 
and its overall, antiquated tracking system. One of the most egregious 
examples of the computer problems in the INS is the fact that its 
computer software and system in some parts of the agency are unable to 
communicate within other parts of the agency. Not only are the INS 
computer systems unable to communicate with each other, but they also 
cannot communicate with other law enforcement, Customs, and State 
Department systems. For instance, the INS and FBI fingerprint systems 
can't cross-reference fingerprints. Basically, the INS needs to be 
brought into the 21st century.
    But some members of Congress think the answer is to totally 
dismantle the INS and place its functions in two separate agencies 
overseen, by the Justice Department. Dismantling the INS is not going 
to provide any real solution.
    I think Mr. Ziglar and the Administration are headed in a better 
direction with the original recommendation that the agency be left 
intact, but divided into two separate divisions, and that its 
technology, reporting and enforcement systems, be updated.
    A part of the solution is passage of the Enhanced Border Security 
and Visa Entry Reform Act which is before the Senate today. This Act 
provides for the hiring of needed INS agents to track down unwanted 
aliens. It attempts to close the vast loopholes in the student-visa 
program. It allocates $150 million to modernize computer and 
information-sharing systems at the INS. With that technology, the INS 
fingerprint system could be designed to cross-reference fingerprints 
with other law enforcement agencies.
    The Act also requires the INS to fully integrate its data bases and 
systems with law enforcement and intelligence data systems. Under the 
Act, the Justice and State Departments would be required to issue 
travel documents, such as visas that are machine readable, tamper 
resistant, and have biometric identifiers. In addition, it requires INS 
and State Department to install equipment and software to allow 
biometric comparisons of travel documents at all U.S. ports of entry. 
It directs the INS to adequately staff ports of entry and mandates that 
all commercial flights and vessels coming into the U.S. provide 
manifest information prior to arrival. It would require border policing 
agencies to coordinate their activities. Finally, one of the things it 
does is direct the President to study the feasibility of establishing a 
North American National Security Program for the United States, Canada, 
and Mexico.
    While this Act is the first step in assisting the INS with Mexican 
immigration and border security issues, we also need to make sure that 
the delicate trade issues we have with Mexico are properly addressed. 
The North American Free Trade Agreement provides for the framework 
under which three member countries aim to coordinate improved access to 
fair and open trade opportunities. While the member countries have made 
attempts to open their borders to a free flow of goods, the NAFTA has 
provisions that have adversely effected Wyoming producers. Namely, 
Wyoming sugar beet producers view the NAFTA as a serious problem in 
Wyoming.
    In discussing the issue of sugar, Mexico argues that it is entitled 
to ship its net sugar surplus to the United States duty free under 
NAFTA, while the United States argues that a sugar side letter 
negotiated along with NAFTA limits Mexican shipments of sugar into the 
U.S. With the loss of the sugar side letter, U.S. producers are now 
trading on a playing field with no referee.
    If we are going to be a common market, we have to establish fair 
and documented guidelines, underwhich Mexico should decrease its 
subsidization of its sugar industry. The U.S. is ready to negotiate a 
new deal because the situation has changed in both countries since 
NAFTA was signed.
    Another NAFTA issue that has hit close to home is the allowance of 
beef shipments from Mexico and Canada, despite the fact that we 
currently prohibit the interstate shipment of state-inspected meat.
    I abhor the hypocrisy of preventing our own states--our domestic 
producers--from shipping meat to other Americans, while accepting meat 
products from other countries. Our American producers abide by and 
uphold their own state standards, which are comparable to the safety 
standards of the federal government. Often times, the beef imported 
from Canada and Mexico does not always meet our rigorous standards.

    Senator Dodd. Not at all, we appreciate your points very 
much Senator, and we thank you. Our first witness I've already 
referred to, my good friend Silvestre Reyes. And I mentioned 
not only is he a very fine Member of Congress representing the 
El Paso area of Texas, but my colleagues should know that the 
Congressman spent the good part of his adult life working 
directly on the Border Patrol of the U.S. Government for many 
years. He knows about these issues in a very, very direct way. 
And so he brings a great deal of knowledge as a Member of 
Congress, but his life experiences, having worked on the border 
as a patrol officer, really--it's worth listening to him. And 
we thank you immensely for being here, Silvestre, and look 
forward to your testimony.

   STATEMENT OF HON. SILVESTRE REYES, U.S. REPRESENTATIVE IN 
            CONGRESS FROM THE 16TH DISTRICT OF TEXAS

    Mr. Reyes. Thank you, Mr. Chairman. It's my pleasure to be 
here and thank you for inviting me, and ranking member Chafee 
as well and members of the committee. This is an important 
issue and the events of the weekend show how quickly things can 
change in Latin America.
    First and foremost, our Nation's relationship with Mexico 
has matured and progressed in the past few years, and I am glad 
that this subcommittee is focusing on the unfinished agenda 
between our two great nations. Just a few short years ago any 
hearing on Capitol Hill that focused on Mexico was sure to be a 
session filled with finger pointing and accusations focused on 
drug trafficking, money laundering and illegal immigration. 
Times have changed. The issues are still important and still 
require our attention, but we are working closely together.
    As I have said time and time again, our nations must work 
in an environment of cooperation rather than confrontation if 
we are going to succeed. Unfortunately, there are still many in 
Congress who would like to build a wall on our southern border. 
They believe that the best way to deal with the problems 
associated with migration, drugs and a host of border issues, 
is to put up a wall and pretend that the other side simply does 
not exist.
    The reality is that Mexico is our second largest trading 
partner, and we must engage our neighbors to the south if we 
are going to resolve many of our mutual problems. An example of 
what we have done to engage our partners can be seen in the 
area of drug certification. As you know, Chairman Dodd, you and 
I both introduced legislation last year to revamp the annual 
drug certification process. We both agreed that the annual 
process placed a terrible strain on our relationship with 
Mexico and was very counter-productive.
    As you know, the fiscal year 2002 Foreign Operations bill 
provided a 1-year waiver of the drug certification procedure on 
a global basis for all major drug transit and drug producing 
countries, and has required the President to designate only 
those countries that have failed during the previous 12 months 
to make substantial efforts to adhere to obligations under 
international counter-narcotics agreements. This is a positive 
step forward in my opinion, and I look forward to working with 
the members of this subcommittee to find a permanent 
replacement solution for the flawed certification process.
    We cannot speak of the U.S.-Mexico relationship without 
addressing the issue of migration. As you know, I spent more 
than 26 years with the Immigration and Naturalization Service, 
and I believe I have some real world practical solutions to the 
many migration challenges that we face. First and foremost, we 
must do a better job of deploying resources to our borders.
    We need additional Border Patrol agents on both borders. We 
need more inspectors to facilitate the flow of commerce while 
enforcing our laws. We need additional technology, like the 
Integrated Surveillance Information System [ISIS], which is 
capable of monitoring the border region.
    We must plug the holes along our borders and keep people 
from illegally entering the United States. I know that 
Commissioner Ziglar is seated here behind me this afternoon, 
and I know that he agrees with me on this very important and 
vital issue for the security of our country. The issue of 
legalization, or as some would call it, amnesty, has been in 
the news quite a bit lately. The word amnesty is used as a 
weapon by some and is thrown out to warn the country of what we 
are trying to do.
    Let me tell you, Mr. Chairman and members of the committee, 
what we are trying to do, we are trying to keep families 
together. We as a Nation must realize that there are millions 
of undocumented people living in this Nation. We failed to keep 
them out and now we must deal with them. They are members of 
our society and contribute to our economy. They pick our food. 
They wash our clothes and care for our children. These long-
time, tax-paying, law-abiding immigrants should be given some 
type of legal status.
    It is in the national security interests of this Nation to 
deal with this underground society that currently exists within 
our borders. We should provide these immigrants with some type 
of legal status, but do so only after a complete background 
check. No one that I know of who is advocating for legalization 
wants to legalize criminals and/or terrorists. We must find 
these people and they must be deported.
    This process of legalization will benefit both our economy, 
our national security, and most importantly will keep families 
together. President Bush and President Fox have been working on 
an agreement to ensure the safe, legal and orderly flow of 
migrants between our two respective nations. While most of us 
have been excluded from the discussions, it is our 
understanding that they are working on a guest worker program. 
I strongly believe that it is irresponsible and premature to 
develop a new guest worker program before we deal with the 
millions of hard working immigrants that are already present in 
our country. President Bush should focus on the immigrant 
families here in this Nation who need his help before he 
develops a new program to accommodate foreign workers.
    Immigration and trade are closely connected, especially 
along our border. As the members of this subcommittee know, the 
challenges along our Nation's border are very complex. Since 
first arriving in Congress I have advocated for a consolidated 
border inspection agency. Today, each port of entry has 
conflicting mandates. What we need is one person in charge with 
one set of operating priorities and one set of operating 
procedures.
    After working on the border for more than 26\1/2\ years, I 
believe that in order to effectively enforce our laws, while 
still facilitating trade, we must consolidate the United States 
Border Patrol, the INS inspections, the Customs Service, parts 
of USDA and the Coast Guard. Only then will we eliminate the 
jurisdictional spats that plague our current port management, 
and only then will we be successful in interdicting narcotics 
and other contraband, while working toward fulfilling the 
promises of NAFTA for the border region and for the rest of the 
Nation.
    There have been a number of proposals put forth in the 
Senate and the House, some of which exclude vital components of 
the very important system of port management. If we move a bill 
with only INS Inspections, the Customs Service and FEMA, we 
will do a disservice to this Nation and conceivably make things 
much worse. The last thing I would like to mention this 
afternoon on the issue of U.S.-Mexico relations is the INS.
    I won't spend too much time on this issue, but I would like 
to say that next week the House will vote on a bill modeled 
after my initial INS restructuring proposal first introduced 5 
years ago. I expect it to pass overwhelmingly and I urge all of 
you to move a similar bill on this side of the Capitol. 
Everything that I mention to you today, from legalization to 
guest workers to border management will require more from INS. 
Today, we know that they can't handle any more. In fact, they 
can't handle what they have on their plate currently.
    Commissioner Ziglar, despite his best efforts, I believe 
will fail with the internal reorganization plan that he is 
proposing. I have seen more reorganization plans in my 30 some 
years of dealing both in and out of INS, currently as a Member 
of Congress, than I can remember. The INS will only be 
restructured when Congress intervenes, and we will do so next 
week.
    Mr. Chairman, that is a start but it's important to note 
that this is an important issue for this country and our 
national security. So in conclusion, Chairman Dodd and Ranking 
Member Chafee, thank you for giving me this opportunity to be 
here this afternoon to share some of my thoughts with you. I 
look forward to answering any questions that you might have and 
again I thank you for this opportunity.
    [The prepared statement of Mr. Reyes follows:]

      Prepared Statement of Representative Silvestre Reyes (D-TX)

    Thank you Chairman Dodd and Ranking Member Chafee for inviting me 
to be here this afternoon. Our nation's relationship with Mexico has 
matured and progressed in the past few years and I am glad that this 
subcommittee is focusing on the unfinished agenda between our two 
nations. Just a few short years ago, any hearing on the Hill that 
focused on Mexico was sure to be a session filled with finger pointing 
and accusations focused on drug trafficking, money laundering, and 
illegal immigration. Times have changed. The issues are still important 
and still require our attention, but we are working together. As I have 
said time and time again, our two nations must work in an environment 
of cooperation rather than confrontation if we are going to succeed.
    Unfortunately, there are many in Congress that would like to build 
a wall on our southern border. They believe that the best way to deal 
with the problems associated with migration, drugs, and a host of 
border issues is to put up a wall and pretend the other side doesn't 
exist. The reality is that Mexico is our second largest trading partner 
and we must engage our neighbors to the south if we are going to 
resolve many of our problems. An example of what we have done to engage 
our partners can be seen in the area of drug certification. Chairman 
Dodd, you and I both introduced legislation last year to revamp the 
annual drug certification process. We both agree that the annual 
process placed a terrible strain on our relationship with Mexico and 
was very counterproductive. As you know, the FY2002 Foreign Operations 
bill provided a one-year waiver of the drug certification procedures on 
a global basis for all major drug-transit and drug producing countries 
and required the President to designate only the countries that have 
failed, during the previous 12 months, to make substantial efforts to 
adhere to obligations under international counter-narcotics agreements. 
This is a positive step forward and I look forward to working with the 
members of this subcommittee to find a permanent replacement for the 
flawed certification process.
    We cannot speak of the U.S.-Mexican relationship without addressing 
the issue of migration. As you know, I spent more than 26 years with 
the Immigration and Naturalization Service and believe I have some real 
world, practical solutions to the many migration challenges we face. 
First and foremost, we must do a better job of deploying resources to 
our borders. We need additional Border Patrol agents on both borders. 
We need more inspectors to facilitate the flow of commerce while 
enforcing our laws. We need additional technology like ISIS to monitor 
the border. We must plug the holes along our borders and keep people 
from illegally entering the United States. I know that Commissioner 
Ziglar is here this afternoon and I know that he agrees with me on this 
issue.
    The issue of legalization or ``amnesty'' has been in the news quite 
a bit lately. The word ``amnesty'' is used as a weapon by some and 
thrown out there to warn the country of what we are trying to do. Let 
me tell you what we are trying to do. We are trying to keep families 
together. We as a nation must realize that there are millions of 
undocumented people living in this nation. We failed to keep them out 
and now we must deal with them. They are members of our society and 
contribute to our economy. They pick our food, wash our clothes, and 
care for our children. These long-time, tax-paying, law-abiding 
immigrants should be given some type of legal status. It is in the 
national security interest of this nation to deal with the underground 
society that currently exists. We should provide these immigrants with 
some type of legal status and do so only after a complete background 
check. No one that is advocating for legalization wants to legalize 
criminals and terrorists. We must find these people and they must be 
deported. This process of legalization will benefit our economy, our 
national security, and most importantly, will keep families together. 
Mr. Chairman, I would like to insert for the record a copy of the 
Democratic Immigration Principles which outline the ideas of 
legalization and family reunification.
    President Bush and President Fox have been working on an agreement 
to ensure the safe, legal, and orderly flow of migrants between our two 
nations. While most of us have been excluded from the discussions, it 
is our understanding that they are working on a guest-worker program. I 
strongly believe that it is irresponsible and premature to develop a 
new guest-worker program before we deal with the millions of hard-
working immigrants already in this country. President Bush should focus 
on the immigrant families here in this nation that need his help before 
he develops a new program for foreign workers.
    Immigration and trade are closely connected, especially along the 
border. As the members of this subcommittee know, the challenges along 
our nation's borders are complex. Since first arriving in Congress, I 
have advocated for a consolidated border inspection agency. Today, each 
port-of-entry has conflicting mandates. What we need is one person in 
charge with one set of operating priorities and procedures. After 
working on the border for 26\1/2\ years, I believe that in order to 
effectively enforce our laws while still facilitating trade, we must 
consolidate the U.S. Border Patrol, INS Inspections, the Customs 
Service, parts of USDA, and the Coast Guard. Only then will we 
eliminate the jurisdictional spats that plague our current port 
management and only then will we be successful in interdicting 
narcotics and other contraband while working towards fulfilling the 
promises of NAFTA for the border region and the rest of the nation. 
There have been a number of proposals put forth in the Senate and the 
House, some of which exclude vital components of port management. If we 
move a bill with only INS inspections, the Customs Service, and FEMA, 
we will do a disservice to the nation and conceivably make matters much 
worse.
    The last thing I would like to mention this afternoon on the issue 
of U.S./Mexican relations is the INS. I won't spend too long on this 
issue but I would like to say that next week, the House will vote on a 
bill modeled after my INS restructuring proposal first introduced 5 
years ago. I expect it to pass overwhelmingly and I urge all of you to 
move a similar bill on this side of the Capitol.
    Everything I mentioned to you today, from legalization to guest-
workers to border management, will require more from the INS. Today, we 
know that they can't handle any more. In fact, they can't handle what 
they have on their plate. Commissioner Ziglar, despite his best 
efforts, will fail with the internal reorganization plan he is pushing. 
I have seen more reorganization plans in my more than 30 years of 
dealing with the INS than I can remember. The INS will only be 
restructured when Congress intervenes and we will do so next week.
    Chairman Dodd, Ranking Member Chafee, thank you for the opportunity 
to be here this afternoon to share some of my thoughts with you. I look 
forward to answering any questions you may have for me.

    Senator Dodd. Well thank you very much, Congressman. Your 
ongoing interest in the subject matter is tremendously 
valuable. As you pointed out in your testimony, your experience 
of 26 years on the border brings a wonderful practical 
consideration to these issues, and we're grateful to you for 
them. Let me just ask you a couple of quick questions if I 
could and then I'll let you get going.
    I think I heard you say, and I know you're testifying today 
both in your own capacity but also as Chairman of the Hispanic 
Caucus in the House, and so it's worthwhile for us to get a 
sense of how your colleagues from the Hispanic Caucus feel on 
these issues as well. But as I understand it when you're 
talking about the expanded guest worker program, that you or 
the Caucus would have a very difficult time accepting any guest 
worker program that did not include some mechanism, and there 
are a variety of suggestions here, but some mechanisms for 
legalization. Is that correct?
    Mr. Reyes. That is correct, Mr. Chairman. It is vitally 
important, as I mentioned in my testimony, that we recognize 
that there are millions of undocumented people living in our 
country. And it just makes sense that we have a mechanism that 
brings them, identifies them, gives them a legal status.
    It is important to note that these are people that are 
living in our neighborhoods, living in our communities, that 
are sending their kids to school, that are paying their taxes, 
and that are in every sense of the word part of our community. 
If we're going to move forward with a proposal to have some 
kind of program for guest workers, first and foremost the 
position of our Caucus is that we address a legalization 
program. Whether you call it legalization, regularization or in 
order to not get amnesty, it's important that we make that very 
careful distinction and take that very important first step 
toward what I think is a prudent issue of national security.
    Senator Dodd. And I agree with you. I think we all do. 
Second, you mentioned the certification issue and I am grateful 
to the administration for the position they took on this 
question of trying something new, suspending this--we're now 
going to try a different approach.
    I think most people have come to the conclusion, as you 
point out in your testimony, that this was not having the kind 
of productive results that we wanted to in seeking cooperation. 
So, we're looking for a more cooperative approach on this. But 
I wonder if you might comment what the suspension--there were 
many who said you suspend this stuff it's going to be an 
invitation to some of these drug traffickers to increase their 
activities. And it's been a brief amount of time since we've 
suspended the certification process, but I wonder, through the 
connections you have in your work, what the impact has been on 
the U.S.-Mexican bilateral counter-narcotics efforts since the 
suspension?
    Mr. Reyes. I think it's important that we recognize the 
efforts that President Fox and the Mexican Government are 
making to address some of these cartels. If anyone has been 
paying attention to the news they have seen that there has 
been, over the course of the last year, an increased activity 
in addressing the issue. Most recently, in the area of Tijuana, 
the Mexican Government conducted a sting where they arrested a 
significant number of--even members of the law enforcement 
community--and removed them to Mexico City and they're 
currently undergoing interrogation. But that's just the latest 
effort.
    We have seen a dramatic change in the policy that the 
Mexican Government has in addressing the issue of drug 
trafficking. It's a tough issue. Like our law enforcement 
agencies, drug trafficking organizations and cartels have a 
heck of a lot more money, don't have to worry about putting out 
bids for equipment, for night vision, for guns and for all of 
the trades. Plus, the corruptive influence that they have on 
both sides of the border is well documented.
    But I think it's important that we recognize the efforts 
that, in particular, the Mexican Government has made over the 
course of the last year since we suspended the certification 
process.
    Senator Dodd. I appreciate that, and we pointed out over 
and over again, of course, we talk about this issue in dealing 
with Colombia as well. I always find it somewhat ironic in the 
case of Colombia we may end up financing both sides of that 
conflict. We finance one, obviously, through our tax dollars 
and appropriations to assist a government trying to survive. 
And then, of course, through those who consume narcotics 
illegally, they end up funding the other side of the conflict.
    And if we could--we've been tough on a lot of these 
countries in seeking cooperation, but we're reminded painfully 
that if we didn't have the consumption levels we do here these 
operations would have no place to sell the stuff. So I'm 
pleased to hear you say that and I hope that continues. We need 
to work at this but my impression has been that the Fox 
administration has made a significant effort and with some 
success in dealing with this issue.
    With that, let me turn to my colleagues for any questions 
they may have for the Congressman.
    Senator Chafee. Yes, thank you, Mr. Chairman. Thank you, 
Congressman Reyes. I was wondering--talking about legalization, 
regularization, amnesty, whatever you want to call it, 
President Bush was outspoken on this issue last year--might 
have floated it as a trial balloon. We haven't heard too much 
about it since. What are the dynamics in the House? Any 
prospect of a favorable consideration if that were to come 
forward for some kind of a vote?
    Mr. Reyes. I think since the events of 9/11, obviously the 
priority that we had seen this issue take with the relationship 
between Presidents Bush and Fox, obviously took a back burner 
position to our national security and the fight against 
terrorism and all of those kinds of issues. But nonetheless, on 
the House side we continued to work and dialog with members of 
our inter-parliamentary group. Today there's a tremendous 
concern on the part of our Mexican counterparts, Senators and 
Members of their House, that the issue not be forgotten, that 
it be brought back to second tier or back burner status.
    We have some basic principles that we would propose on the 
House side, that we would make available to the subcommittee 
for your consideration, that deal with the things that I 
mentioned in my testimony: family reunification, a component to 
recognize the fact that if we're going to have a guest worker 
provision, then we have to address those who are already here. 
And it makes prudent sense from a national security 
perspective.
    But I think that if given the interest of the President and 
members of his administration, as well as the Mexican 
administration, I think we would have a good opportunity on the 
House side to pass a piece of legislation that we could, 
perhaps if not similar legislation on the Senate side, take to 
conference to again put this issue at the forefront of the 
relations between the United States and Mexico. It's the right 
thing to do. The climate is right for it.
    The Mexican Government and Congress have been very 
forthright in the dealings with us, in the fact that they want 
to be an integral part of any effort that deals with national 
security. Because, our national security is there interest as 
well. They want to be helpful. And I believe that doing--
prioritizing this issue and doing this kind of legislation on a 
priority basis, would certainly send that kind of message not 
just to Mexico, but to the rest of Latin America as well.
    Senator Chafee. Well, thank you very much. Keep up the good 
work you're doing in the Hispanic Caucus.
    Mr. Reyes. Thank you.
    Senator Dodd. Senator Helms.
    Senator Helms. Mr. Reyes, you made what is the best common 
sense argument I've heard. I've heard a lot of words since I've 
been in the Senate, particularly about what to do about the 
Mexican flood coming across the borders, et cetera.
    Down in North Carolina we have a man who is very 
successful. He is very much interested in our government's 
handling of this in a proper method so as to encourage 
friendship with Mexico, but not to be victimized by a flood of 
people who are unregistered and so forth. And I talked with him 
at some length. He served on the board of trustees at the 
University of North Carolina for many, many years and that sort 
of thing. He first says that it's absolutely essential for 
those who have come over the border to be registered as seeking 
citizenship in this country. They don't have to follow through 
with it, but they have to carry that identification card. Do 
you agree with that?
    Mr. Reyes. Well, you know, a lot of times citizenship and 
lawfully admitted permanent residency gets confused. I think 
you'll find that most--if we're talking about Mexicans--most 
Mexicans that are in this country want to get permanent legal 
status here, permanent residency. As you probably know, after 
you've been a permanent legal resident it takes 5 years to be 
eligible to become a U.S. citizen. We are seeing more--since 
the Mexican Congress changed the law that now protects their 
citizens abroad and they can own property in Mexico and all 
those things----
    Senator Helms. I'm aware of that.
    Mr. Reyes [continuing]. I think you'll see overwhelmingly 
more Mexican citizens wanting to become U.S. citizens. I agree 
that that would be something that would be, I think, 
commonsensical in addressing this issue.
    Senator Helms. I don't need to tell you, nor Commissioner 
Ziglar, that many employers in the United States welcome these 
people, but they're not treating them fairly. Now my friends 
says that there ought to be something in the law requiring a 
minimum wage and that they must be paid by check so that the 
payment can be a matter of record. And that those who have 
applied for citizenship or received their registration card, 
live in this country 3 years without any blemish on their 
record in terms of a violation of law, that they would be 
automatically considered for citizenship. But if they have 
trouble with the law then that's a different story. Do you 
agree with him so far with what I said?
    Mr. Reyes. I think it's important that when we talk about a 
legalization program there--and I mentioned it in my 
testimony--there be a way, concrete review process, and that 
there be a record check process. Because, we're trying to do 
two things. We're trying to accommodate a whole population 
that's here, and in most cases Senator, as you probably know, 
may have citizen children that are here. But yes, there should 
be a record and they should have a clean bill of health in 
terms of any legal activity or anything else. That is fair and 
I think most people will abide by that.
    Senator Helms. But they should, in your judgment, also be 
required to have that registration card or whatever, so that 
they are in the mix for becoming citizens of this country?
    Mr. Reyes. The law requires that. The law requires that an 
individual be a lawfully admitted permanent resident for 5 
years before they can apply, before they are eligible.
    Senator Helms. I understand that, but how do you--do they 
have identification cards?
    Mr. Reyes. Yes, they have what is commonly referred to as a 
green card. That's their proof that they've received an 
immigrant visa, that they've been legalized, regularized, or 
given amnesty, whichever the term may be that we deal with.
    Senator Helms. My friend is also, he's tremendously 
concerned about certain nefarious employers cheating these 
people. He said that ought not be permitted. Now what 
safeguards do we have allotted?
    Mr. Reyes. Well, in the law already are aspects of employer 
sanctions that were passed in 1986. And I think the only thing 
that has kept that from working has been lack of resources to 
INS and the fact that INS has not had adequate funding and 
adequate personnel to assign them in the interior of the United 
States. So absolutely we have to be clear that there is a role 
to play by the Department of Labor in making sure and ensuring 
that those that hire people, whether they're permanent 
residents or guest workers or whatever category, that they 
treat them fairly, that they comply with the law, and that they 
give them the kinds of benefits that are provided for in law.
    Senator Helms. But also that the employers must keep 
adequate records about how much they paid, they can demonstrate 
that they have, in fact, paid that much.
    Mr. Reyes. Absolutely.
    Senator Helms. That's already being done?
    Mr. Reyes. That's already provided in the law. You know, as 
often happens, any law is successful if you've got the people 
to force its compliance. We haven't had that up to now. In INS, 
most of the INS resources have been dedicated to the border 
regions. And we haven't had a priority in the interior and 
therefore you have these issues that crop up about employers 
that are unscrupulous, that they mistreat, that they don't pay 
adequate wages, don't give them housing, those kinds of issues. 
Those should all be addressed comprehensively in any piece of 
legislation. But in most cases, that already exists in the law.
    Senator Helms. You have given me great comfort. Let me ask 
you, and Mr. Ziglar can nod if he agrees. If I can persuade 
this gentleman to fly to Washington, would you and Mr. Ziglar 
meet with him and make sure the conditions that he believes are 
essential are being met? Would you agree to meet with him?
    Mr. Reyes. Senator, I will meet with whoever you ask me to 
because I appreciate the efforts you are making.
    Senator Helms. I think you will find it worthwhile. Mr. 
Chairman, thank you again for this hearing. This is most 
interesting and I'm encouraged by it.
    Senator Dodd. Thank you, Senator. Congressman, I thank you 
immensely. You're more than welcome to stay if you like and 
hear the rest of us. I know you've got a busy schedule.
    Mr. Reyes. Actually I'm in an Intelligence Committee 
hearing, so I will excuse myself.
    Senator Dodd. Very good, thank you once again, Congressman 
for being with us.
    I want to invite the next witnesses to come up as a panel 
if they would. I'll introduce them as they're taking their 
seats.
    The Honorable Alan Larson, who is Under Secretary for 
Economic, Business and Agricultural Affairs, Department of 
State; the Honorable John Taylor, Under Secretary of 
International Affairs, Department of the Treasury; and the 
Honorable James Ziglar, Commissioner of the Immigration and 
Naturalization Service. We thank you for being with us.
    Welcome, all three of you. I appreciate your presence here 
today. And a special welcome to the Commissioner, who when he 
was here in the Senate we almost had--we've been accused, the 
Democrats have been accused of delaying certain nominations 
from going forward. And I won't dwell on that point here today. 
Obviously we take issue with that charge, except with the case 
of one nominee, and that was the case of Jim Ziglar.
    There was actually a concerted effort here to deny a 
confirmation hearing to Jim Ziglar so we could keep him in the 
U.S. Senate. The affection for Mr. Ziglar is felt very strongly 
by all of us up here regardless of party. There's a deep 
affection of the Senate, the institution of the Senate, and the 
administration was truly fortunate to convince you to join 
them.
    I know you must have some second thoughts about whether or 
not you should have left the Senate, given the events of the 
last couple of months, but I'll tell you we think you're doing 
a great job. I know there's been a lot of accusations of 
various kinds, but I know Jim Ziglar and I think the 
administration is fortunate to have you in their service, and 
serving all of us in this country for that matter. So, you're 
always welcome here. I want you to know that.
    And I know Mr. Larson very well. I have a high regard for 
you as well, sir, and your work. Mr. Taylor, we thank you for 
being here.
    I'm going to turn these timer lights on. I want to have as 
much of your testimony as we can get, but you all know from 
previous experience these hearings can wander off and take more 
time than would be the case. So, I'll put them on and give 
about 6 minutes apiece or so and I don't--just as a warning to 
you to sort of wrap up if you can. Obviously your full 
statements will be included as part of the record. Any 
documentation you think we should have that would help us in 
this committee complete a full report on U.S.-Mexican relations 
would be most appreciated. So we'll begin in the order I 
introduced you, and Alan we thank you for being here.

STATEMENT OF HON. ALAN P. LARSON, UNDER SECRETARY OF STATE FOR 
  ECONOMIC, BUSINESS AND AGRICULTURAL AFFAIRS, DEPARTMENT OF 
                     STATE, WASHINGTON, DC

    Mr. Larson. Thank you very much, Mr. Chairman. I do have a 
statement for the record. Mr. Chairman and Senator Chafee, I 
really welcome the opportunity to testify today on our economic 
relationships with Mexico. Last September when President Fox 
visited, President Bush said, and I'm quoting, ``The United 
States has no more important relationship in the world than our 
relationship with Mexico. Each of our countries is proud of our 
independence, our freedom and our democracy. We are united by 
values and carried forward by common hopes.''
    Six years after NAFTA was signed Mexico held a landmark 
election that confirmed its democratic aspirations, resulted in 
a peaceful change from one party to another, and reaffirmed the 
commitment of Mexico to the rule of law. The mandate that 
President Fox has to lead Mexico has brought a break with some 
patterns of the past and has brought some new opportunities to 
build strong cooperative relations between Mexico and the 
United States.
    When Congress approved NAFTA in 1993 bilateral trade 
totaled about $81 billion. Just 8 years later two-way trade 
reached $233 billion. Mexico is now our second largest trading 
partner in the world, and we are Mexico's largest trading 
partner. There are some 2,600 American companies that operate 
in Mexico and the stock of U.S. foreign direct investment in 
Mexico stands at $35 billion.
    Since September 11 we've sought to develop a border 
infrastructure that fully provides for our security while 
permitting the rapid flow of legitimate goods and people. To 
this end, Presidents Bush and Fox announced last month in 
Monterrey a border partnership agreement that sets forth 
integrated infrastructure investment plans. Freer trade with 
Mexico has helped fuel growth in both countries. It has spurred 
productivity, stimulated higher paying jobs and has reduced the 
prices of consumer goods. And our close integration with Mexico 
has made each of us more competitive in the global economy.
    Mexico has been an active participant in negotiations to 
establish a Free Trade Agreement for the Americas. And in fact, 
the FTAA negotiations were moved to Puebla, Mexico in 2003. 
Mexico also adopted a leadership position within the World 
Trade Organization, and it will actually host the next WTO 
ministerial meeting. Mexico is playing a leading role in the 
Asia Pacific Economic Conference, and it will host this year's 
leaders meeting. And last month Mexico successfully hosted the 
U.N. Conference on Financing for Development.
    During the recent meeting in Monterrey, Presidents Bush and 
Fox unveiled a plan for Partnership for Prosperity. The 
partnership aims to attract private resources and expertise to 
support economic development in Mexico's less developed 
regions. I had the privilege of working on this initiative with 
Deputy Secretary of the Treasury Kenneth Dam, and with our 
Mexican counterparts. We put to work some of the best minds in 
Mexico and in the United States, business leaders, government 
officials, academics and key public sector agencies. And our 
objective is to forge a public-private alliance to harness the 
power of free markets in order to foster an environment in 
which no Mexican will feel compelled to leave his home for lack 
of a job or lack of opportunity. We're not seeking 
appropriations for this initiative. We will be monitoring 
results carefully to track whether the Partnership is 
fulfilling its goals, and we're going to report back to the two 
Presidents in 6 months.
    The interconnectedness of our economies extends to our work 
forces. Recently, the President of the AFL-CIO, John Sweeney, 
and the President of the U.S. Chamber of Commerce, Tom Donahue, 
spoke to the key role of immigrant workers in our economy, and 
they advocated regularization of illegal migrant workers. 
President Bush shares their appreciation of the value of 
migrant labor.
    The Fox administration, while keenly interested in the 
migration accord, also fully recognizes Mexico's strong 
interest in promoting job creation and domestic economic 
growth. Mexico has encouraged Mexican-Americans to return and 
to invest in Mexico. President Fox has also declared that 
trans-national crime and corruption are among the major threats 
affecting Mexico's national interests. Mexico is actively 
engaged with us on these issues. President Fox recognizes that 
as Mexico moves into the globalized world it must offer 
visitors and investors reasonable guarantees of security, of 
protection of their legitimate interests, and of recourse to a 
judicial system that honors the rule of law.
    Mr. Chairman, Mexico and the United States share a common 
economic destiny. We both live in a world that is still quite 
turbulent and quite dangerous. And that is why an effective 
foreign policy really begins in our own neighborhood, and in 
particular it begins with having strong relations with Mexico. 
Thank you.
    [The prepared statement of Mr. Larson follows:]

Prepared Statement of Hon. Alan P. Larson, Under Secretary of State for 
              Economics, Business and Agricultural Affairs

                u.s.-mexico bilateral economic relations
    I would like to thank Chairman Dodd, Senator Chafee and other 
subcommittee members for inviting me to testify today on a subject 
vital to U.S. interests--economic relations with our immediate neighbor 
to the south, Mexico. I also would like to make a special personal 
expression of my appreciation to the members of this committee for 
their support of the men and women of the State Department, Foreign 
Service, Civil Service, and Foreign Service Nationals.
    President Bush in September of last year told President Fox and the 
world that ``The United States has no more important relationship in 
the world than our relationship with Mexico. Each of our countries is 
proud of our independence, our freedom, and our democracy. We are 
united by values and carried forward by common hopes.''
    Although the world changed soon after those words were spoken, one 
thing did not change: our two countries' friendship and commitment to 
bolstering bilateral cooperation across the wide spectrum of our ties.
    Indeed, it is a remarkable neighborhood that we live in alongside 
Canada and Mexico. Our relations with Mexico and Canada--our North 
American neighbors and partners--are integral to our well-being and 
security as a nation. These relationships are grounded, in increasing 
measure, in shared values and perspectives on the world. We share a 
faith in democracy and the rule of law as twin pillars of sustainable 
governance, and a faith in open markets as the proven route to 
sustainable economic growth and development for our peoples and 
nations.
    Seven years after we signed the North American Free Trade 
Agreement, Mexico held landmark elections--elections which saw Vicente 
Fox, a businessman turned politician dedicated to the advancement of 
democracy, the rule of law and human rights in Mexico, win the 
presidency fair and square. Fox's mandate to lead Mexico into a new 
century has meant a break with its past and a new activism in its 
foreign policy which is reflected in a close, cooperative relationship 
with the United States.
NAFTA's Legacy
    When the Congress passed NAFTA in 1993, trade between the United 
States and Mexico totaled $81 billion. Our two-way trade hit $233 
billion in 2001. U.S. exports to our NAFTA partners have almost doubled 
since 1993. Mexico is now our second largest trading partner. Today, we 
export more to Mexico than to Britain, France, Germany, and Italy 
combined.
    With $638 million in goods crossing the border each day, our 
biggest challenge in the wake of September 11 remains to develop a 
border security infrastructure which keeps pace with the demands of 
travel and commerce. When Presidents Bush and Fox met in Monterrey in 
March they signed a Border Partnership agreement which highlights the 
need to develop integrated infrastructure investment plans to ensure 
the economic competitiveness of the border region is not impaired as 
the volume of trade increases. Our ``smart border'' plan will speed the 
legitimate flow of people and commerce while it filters out threats to 
our safety and prosperity.
    Given the volume of trade between the U.S. and Mexico, it is not 
surprising that we have some lingering trade disputes. I know you hear 
about them from your constituents. Fortunately, we now have the 
mechanisms to deal with those disputes through NAFTA and WTO 
international arbitration. We continue to vigorously defend our 
interests in these organizations. I believe that over time all of those 
disputes can be resolved through negotiation.
    Free trade between our countries and the resulting dramatic 
increase in trade helped fuel an extended period of economic growth in 
both the United States and Mexico. It spurred productivity, stimulated 
creation of higher paying jobs on both sides of the border and reduced 
prices for consumer goods. Close economic integration between Mexico 
and the United States has made each of us more competitive in the 
global economy.
    Investors have looked much more favorably at Mexico since NAFTA. 
Some 2,600 American companies have operations in Mexico. The stock of 
U.S. foreign direct investment in Mexico grew to $35.4 billion in 2000, 
an increase of 92 percent from 1993. U.S. investment in Mexico is now 
concentrated in the manufacturing and financial services sectors. 
American investors are anxious to expand to other sectors such as 
information technology, energy and agribusiness as those opportunities 
become available.
    I am particularly intrigued by the opportunities for growth and the 
expanding linkages of our economies that information technology offers. 
I have had the opportunity to speak with many Mexican and American 
businessmen about these prospects and all agree that as more Mexicans 
gain access to computers and the internet, e-commerce could be a 
tremendous boon to our cross-border relations.
    Most Mexicans, unfortunately, are currently on the far side of the 
digital divide. President Fox and his administration have launched 
several initiatives to close that gap including e-Mexico, a 
Telecommunications Social Fund and efforts to expand internet 
connectivity through the Gulf Horseshoe Project. I will be encouraging 
American firms to look at this growth market for the future.
The Global Economy
    I am pleased to report that Mexico has been a constructive 
participant in the negotiations to create an integrated hemispheric 
market through the Free Trade Area of the Americas (FTAA). The 
headquarters for FTAA negotiations will move to Mexico in 2003. We 
expect that in the years ahead Mexico will be the focal point of 
critical trade talks which will do much to shape the future of this 
hemisphere.
    At the same time as Mexico has strengthened ties with the United 
States, it also has reached out to new markets in the global economy. 
Following the success of NAFTA, Mexico has signed free trade agreements 
with 32 countries including an agreement with the European Union.
    Mexico has adopted a progressive leadership position within the 
World Trade Organization, helping to encourage other developing nations 
to embrace the benefits of trade liberalization. We worked closely with 
Mexican Economic Secretary Derbez in the crucial period leading up to 
Doha and we look forward to working together during the Doha round. 
Mexico will host the next Ministerial meeting of the WTO.
    Mexico also is playing a dynamic leadership role in the Asia-
Pacific Economic Conference (APEC). This year it will be the host 
nation for the APEC Summit, putting a special focus on development of 
small- and medium-sized enterprises.
    Mexico hosted last month the successful United Nations Financing 
for Development conference in March in Monterrey. Through its 
leadership, Mexico helped to ensure that a new consensus on development 
policy would emerge. This policy puts great emphasis on American 
values, including linking good governance to development assistance and 
emphasizing the vital role of trade and investment as engines of 
development.
The Partnership for Prosperity
    We took the opportunity of the U.N. conference in Monterrey to 
present to President Fox and President Bush a plan for ``Creating 
Prosperity through Partnership.'' Echoing the theme of the Monterrey 
conference, the plan is a prime example of how we are seeking to 
leverage private resources and expertise to achieve economic 
development.
    I have had the privilege of working on this innovative presidential 
initiative, along with Deputy Treasury Secretary Kenneth Dam and our 
Mexico colleagues. We were able to put some of the best minds in Mexico 
and the United States to work on this project. It was a very collegial 
effort, and we worked intensively with our Mexican counterparts. We 
collaborated with more than 100 U.S. and Mexican business leaders, 
government officials, academics and key U.S. government agencies, 
including the Overseas Private Investment Corporation (OPIC), Export-
Import Bank (EXIM), U.S. Agency for International Development (USAID), 
the U.S. Trade and Development Agency (TDA), and the U.S. Department of 
Agriculture (USDA) and their Mexican counterparts.
    In the Partnership, we have forged a public-private alliance to 
harness the power of free markets to foster an environment so that no 
Mexican feels compelled to leave his home for lack of jobs or 
opportunity. Will the Partnership effort stop the flow of undocumentetd 
migrants from Mexico? Of course not, nor is that its aim. Our 
Presidents do agree however, that we need to take urgent steps to 
foster growth, opportunity and job creation in regions where economic 
growth has lagged and where opportunities are so limited that migration 
is the only attractive alternative for an enterprising individual.
    The ``Partnership for Prosperity'' includes no new requests for 
appropriation of funds. We have mobilized the U.S. government resources 
already devoted to Mexico and linked up with private sector and non-
governmental organizations in the small business, housing, agriculture, 
information technology and infrastructure sectors. Some specific 
examples of the concrete steps we are taking include:
    Increasing investment in housing: The U.S. Treasury Department will 
coordinate provision of technical assistance to Mexico to encourage 
securitization of mortgages and creation of a secondary mortgage market 
in Mexico. Treasury will draw upon experts with experience in housing 
finance from private financial institutions, government-sponsored 
enterprises (like Fannie Mae and Freddie Mac and Ginnie Mae) and the 
U.S. Department of Housing and Urban Development (Office of Federal 
Housing Enterprise and Oversight and Ginnie Mae).
    Investing in infrastructure to boost commerce: The U.S. Trade and 
Development Agency will lead efforts to spur participation of U.S. 
companies in the development of Mexican infrastructure projects 
including ports, an air cargo facility and an expansion of Mexico's 
internet connectivity. The Trade and Development Agency signed a Master 
Grant with Nacional Financeria (NAFIN), Mexico's largest development 
finance institution, at the time of the bilateral meetings in Mexico 
last month. A similar grant is ready for signing with Banco Nacional De 
Obras y Servicios Publicos (BANOBRAS), Mexico's largest civil works 
loan agency. A grant also is ready for signing for the modernization of 
the Puebla Airport.
    Supporting small business development: The U.S. Small Business 
Administration and other U.S. financing agencies will work with their 
Mexican counterparts to generate small business development centers in 
Mexico. The agencies will work to broaden access to Mexicans interested 
in U.S. franchise opportunities.
    Lowering the cost of sending money home: Recognizing the important 
role Mexican workers play in the American economy, U.S. Treasurer 
Rosario Mann will work to highlight awareness of competitive products 
by promoting financial literacy and expanded use of the banking system 
by American Hispanics. Last year Mexicans and Mexican-Americans in the 
U.S. sent nearly $9 billion home to family and friends in Mexico, often 
at a high cost.
    These are only a few of the highlights. The Partnership includes 
many other activities. I will leave copies of the plan for the 
Committee to review.
    The Partnership recognizes that its goals will not be achieved 
overnight, but we believe these initial steps will build a strong 
foundation for long-term progress. To ensure that the Partnership 
continues to be dynamic and productive, we will monitor results using a 
management scorecard that will track how well the Partnership is 
fulfilling the vision and meeting its goals. We will report back to the 
Presidents in six months.
Outlook for the Mexican Economy
    The outlook for the Mexican economy is good. Despite a recession in 
2001, Mexico is expected to return to positive growth in 2002. Mexico 
continues to be distinguished as a ``safehaven'' among other emerging 
markets. Mexico in February 2002 received an investment grade rating 
from Standard & Poor's and now has an investment grade rating from all 
three major ratings agencies. Investors are seeing the benefits of 
Mexican integration into the North America regional economy.
A New Spirit
    The NAFTA legacy extends beyond a trade agreement. NAFTA represents 
a commitment by Mexico to modernize politically and economically and a 
commitment by the United States and Canada to support this great 
change. President Fox ushered in a new, more open economic environment 
in Mexico. The prevailing spirit is one of free enterprise and equal 
opportunity, in which entrepreneurship is rewarded and graft is 
punished. Mexico's closer ties to the U.S. economy mean that prospects 
for our futures are increasingly linked. As our business cycles have 
converged, predictions for an upswing in the Mexican economy this year 
depend on our own economic recovery.
Willing Workers and Willing Employers
    This growing interconnectedness carries over into our respective 
workforces. During NAFTA's first seven years, employment in Mexico grew 
by 25 percent, generating 2.7 million jobs while employment in the 
United States grew by 16 percent, generating 21.5 million jobs. Last 
week AFL-CIO President John Sweeney and U.S. Chamber of Commerce 
President Tom Donahue--two men who do not always see eye-to-eye--spoke 
out about the key role immigrant workers play in the U.S. economy and 
advocated the regularization of illegal migrant workers. President Bush 
recognizes the contribution made to our nation's economy by migrant 
workers and embraces the idea of matching willing workers with willing 
employers; but this needs to happen in a safe and legal framework.
    When Presidents Bush and Fox met in February 2001 in Mexico, they 
agreed to place the historically contentious issue of migration at the 
center of the bilateral agenda. They instructed their governments to 
begin high-level discussions to attempt to resolve the more difficult 
facets of migration. Secretary Powell, Attorney General Ashcroft, and 
Secretary Chao are the co-chairs of the U.S. side of the U.S.-Mexico 
High-Level Working Group on Migration (HLWGM). The first meeting of the 
HLWGM took place in April 2001. Since that time we have continually 
engaged the Mexicans on all aspects of the bilateral migration agenda. 
The administration has also consulted widely with Members of Congress 
and with representatives of Non-Governmental Organizations.
    The conversations about migration are on-going, both with the 
Government of Mexico and domestically within the U.S. There is no 
timetable for resolving the outstanding issues. The Mexicans are not 
simply interested in sending workers to the U.S. The Fox administration 
recognizes that the best way to resolve the issue of the outflow of 
workers is to promote growth and create well-paying jobs in Mexico. It 
has encouraged successful Mexican-Americans to invest in the Mexican 
economy and would tend to build ``circularity'' into any temporary 
worker programs.
The Battle Against Crime and Corruption
    In the 18 months since President Fox's inauguration, we have seen 
the Government of Mexico dedicate itself as never before to combating 
crime. Fox has declared transnational crime and corruption to be among 
the major threats affecting Mexican national security interests. He has 
mounted a serious campaign against drug trafficking interests and 
worked to root out corrupt elements from government, including judicial 
and law enforcement agencies. He faces an uphill struggle, given 
entrenched narcotrafficking interests and pervasive corruption, but has 
registered significant victories. Accomplishments include the firing of 
nearly 50 Tijuana-based customs officers on evidence, grounds of 
corruption, the arrest of drug baron Benjamin Arellano Felix, the 
arrest of several high-level members of the Gulf Cartel, and the arrest 
in early April 2002 of some 40 Baja California police officers, 
including the Tijuana Chief of Police.
    The U.S. and Mexico face a host of trans-border criminal threats 
that can only be addressed through close cooperation. Unlike previous 
Mexican administrations, Fox's has welcomed a higher level of 
cooperation with U.S. officials. Collaborative efforts on interdiction 
of drugs have been unprecedented, including a major joint effort that 
led in late 2001 to a multi-ton seizure of cocaine from a fishing 
vessel in international waters off the Pacific coast of Mexico.
    Mexico has taken these steps because it sees these scourges for 
what they are--threats to Mexico's own national interests. President 
Fox recognizes that as Mexico moves into the globalized world, it must 
offer its neighbors and investors a reasonable guarantee of security, 
protection of their interests and recourse in a judicial system which 
affords them the protection of the rule of law.
Conclusion
    Mexico and the United States share a common destiny. NAFTA has 
shown that free trade with our southern neighbor can create better jobs 
on both sides of the border, while putting both countries on a stronger 
competitive footing in the global economic arena.
    Deeper economic cooperation, such as the recently announced 
Partnership for Prosperity, offers additional means to strengthen each 
economy. At the same time, by working with President Fox to extend the 
benefits of economic development throughout Mexico, we can address some 
of the underlying conditions that tend to promote illegal immigration 
and crime.
    We live in a world that is still turbulent and dangerous. That is 
why an effective foreign policy begins with strong relations in our own 
neighborhood.
    Our relations with Mexico have never been better. We have the 
opportunity to deepen our cooperation in trade, investment, border 
security, law enforcement and immigration. In doing so both countries 
will become more prosperous and secure.
    Thank you very much.

    Senator Dodd. Very good. Thank you very much, Mr. 
Secretary. I guess we're going to go to--do I introduce you 
next. I'm going to go to John Taylor. I'll come back to you, 
Jim. Mr. Taylor.

   STATEMENT OF HON. JOHN B. TAYLOR, UNDER SECRETARY OF THE 
TREASURY FOR INTERNATIONAL AFFAIRS, DEPARTMENT OF THE TREASURY, 
                         WASHINGTON, DC

    Mr. Taylor. Thank you, Mr. Chairman and Senator Chafee for 
inviting me to this hearing on United States-Mexican relations. 
As you requested in your invitation letter, Mr. Chairman, I 
will focus my testimony on reform of the North American 
Development Bank [NADBank] and the Border Environment 
Cooperation Commission [BECC].
    Last month in Monterrey President Bush and President Fox 
announced a set of reforms to these institutions, and I'd like 
to just provide some details about those reforms and enter my 
testimony into the record. As you know, NADBank and BECC were 
set up back in 1993 with the purpose of providing for better 
infrastructure in the environment, especially in areas such as 
wastewater treatment. These two institutions have separate but 
quite related functions.
    NADBank's role is primarily to arrange for financing of 
projects, and BECC's role is to develop projects and to certify 
these projects. There have been accomplishments in the years 
since these institutions were set up. BECC has certified 57 
projects. NADBank has committed $353 million in EPA grant funds 
for many of these projects.
    Notwithstanding this activity, however, the performance has 
been inadequate and unsatisfactory in several dimensions. First 
of all, NADBank has approved only $23.5 million and disbursed 
only $11 million in loans to projects, despite having $405 
million in authorized paid-in capital. Second, the structure 
within which NADBank and BECC operate is not working 
efficiently. Work that is closely related is conducted by two 
separate organizations under the governance of two separate 
executive boards. Clearly this has related to duplication of 
effort, increased costs, and I think frequent 
misunderstandings.
    President Bush has recognized the need for serious reform 
in this area. He and President Fox, who also has recognized the 
need for reform or proposed reforms, discussed the subject on 
several occasions. And in September 2001 they agreed, and I'll 
quote, ``That immediate measures were needed to strengthen the 
performance of the North American Development Bank and its 
sister Border Environment Cooperation Commission to identify 
and fund environmental infrastructure projects on the border.''
    The result of this agreement was a set of recommendations 
which I would like to describe. First of all, one 
recommendation is to increase the amount of low interest loans 
that NADBank can provide, actually doubling from $50 million to 
$100 million. Second is to expand the geographic scope of 
NADBank on the Mexican side of the border from 100 kilometers 
to 300 kilometers. The geographic limit in the United States 
will remain, under these recommendations, 100 kilometers.
    Third, a more concerted effort will be made to certify and 
finance private sector environmental projects. And fourth, the 
two boards of these organizations will be replaced by a single 
board. The new board will have representation from the Federal 
Government, the border states and the public.
    As also part of this reform process, there will be a 
comprehensive business process review. That's going to be 
initiated in order to identify other ways to improve the 
performance of these institutions. I think with these reforms 
we can expect substantial improvement.
    First of all, the financial reforms will make NADBank 
financing more affordable and thus increase the supply of that 
financing. Second, the geographic expansion will give NADBank 
more opportunities to use its resources. Third, with the 
merging of the boards NADBank and BECC will be able to work 
more effectively together. And fourth, the private sector 
projects will enable a more efficient use of resources in many 
cases.
    To be sure, implementing these reforms is going to require 
a great deal of commitment by both of our governments. I am 
pleased that implementation efforts are already underway. The 
Environmental Protection Agency, the Department of State and 
the Department of the Treasury have already begun a planning 
process. I've seen implementation discussions begin myself, and 
we've initiated discussions with our Mexican counterparts to 
this end.
    We do intend to submit legislation to make some of these 
reforms happen, and I look forward to working with you and 
other Members of the Congress as we do this. I welcome your 
views, your suggestions and your questions about these ideas. 
Thank you very much.
    [The prepared statement of Mr. Taylor follows:]

 Prepared Statement of John B. Taylor, Under Secretary of the Treasury 
                       for International Affairs

    Chairman Dodd, Ranking Member Chafee, members of the subcommittee, 
thank you for the opportunity to testify on relations between the 
United States and Mexico. As you requested I will focus on. the Bush 
Administration's efforts to improve the performance and effectiveness 
of the North American Development Bank (NADBank) and its sister 
institution, the Border Environment Cooperation Commission (BECC).
    In Monterrey, Mexico, last month, Presidents Bush and Fox announced 
a set of reforms to strengthen these institutions' ability to serve the 
people of the United States-Mexico border region. Today, I would like 
to discuss these reforms in some detail and elaborate on why they will 
make these institutions more effective.
    I would note at the outset that these reforms should be viewed in 
the context of the Administration's broader initiative to improve the 
effectiveness the international financial institutions and to increase 
the value they deliver for the U.S. taxpayer. I look forward to working 
with the Congress on our broader international financial institution 
reform agenda, as well as on the reform proposals I will discuss with 
you today.
                nadbank and becc: origins and experience
    The United States and Mexico established NADBank and BECC in 1993 
for the purpose of helping border communities cope with the existing 
shortfall of environmental infrastructure and potential environmental 
pressures relating to the North American Free Trade Agreement in the 
U.S.-Mexico border region. The two institutions perform separate, but 
related functions in furtherance of their common mission. NADBank's 
role is to arrange financing for environmental infrastructure projects 
certified by BECC. BECC works with states and local communities to 
develop such projects for certification.
    During its seven years of operation, BECC has certified 57 
projects, with a total construction cost of $1.2 billion. During this 
same period, NADBank has committed $353 million in Environmental 
Protection Agency (EPA) grant funds for 37 of these projects.
    Notwithstanding this activity, the institutions' overall 
performance has been inadequate and unsatisfactory. NADBank to date has 
approved only $23.5 million and disbursed only $11 million in loans to 
projects, despite having $405 million in authorized paid-in capital and 
a total lending capacity of $2.7 billion.
    Experience has demonstrated that the NADBank-BECC structure does 
not work efficiently. Closely related work is conducted by two separate 
organizations under the governance of two separate executive boards. 
The results of this arrangement have included duplication of effort, 
increased transaction costs, and frequent misunderstandings. Many 
project sponsors and other stakeholders claim that the BECC-NADBank 
project approval process is overly complex, too time-consuming and 
duplicative, particularly (but not only) for small projects and those 
with private-sector sponsors. Especially frustrating for border state 
governments has been the overlap among federal, state, local and 
NADBank/BECC regulatory and environmental review requirements.
                         the reform initiative
    President Bush has recognized the need for serious reform. He and 
President Fox of Mexico, who had also proposed reforms, discussed the 
subject on several occasions and, in September 2001, they agreed that 
``immediate measures were needed to strengthen the performance of the 
North American Development Bank (NADBank), and its sister Border 
Environment Cooperation Commission (BECC), to identify and fund 
environmental infrastructure projects on the border.'' They called for 
a binational working group to consult with key stakeholders and to 
develop joint recommendations on strengthening the institutions.
    Members of the binational working group undertook broad 
consultations with state governments, local governments, national 
legislatures, non-governmental organizations and the public in the 
region. In the United States, the Treasury Department, the 
Environmental Protection Agency, and the State Department led the 
outreach efforts. An issues paper was distributed, including via 
internet, to Congressional staff, state and local governments, and the 
general public. Public hearings and meetings were held with state and 
local officials and Congressional staff.
    Comments received were seriously considered in developing the 
recommendations that were eventually endorsed by Presidents Bush and 
Fox in Monterrey last month.
    The key recommendations are as follows:
    Financial Instruments: To provide a greater level of financial 
flexibility so that its capital can be used more effectively, the 
governments have agreed to increase NADBank's ability to extend 
affordable financing. This will include doubling the size of NADBank's 
Low Interest Rate Lending Facility, from the $50 million level set in 
November 2000 to $100 million, and making $50 million of the Bank's 
paid-in capital available for grant financing.
    Geographic Scope and Financial Differentiation: To expand the 
capacity of both institutions to address important binational 
environmental needs, the geographic scope for BECC/NADBank operations 
in Mexico will be expanded from 100 km to 300 km from the border. The 
geographic limit in the United States will remain unchanged at 100 km 
from the border.
    To ensure that both institutions continue to focus on the priority 
environmental needs of the immediate border region, this geographic 
expansion will be coupled with a system of financial differentiation. 
Specifically, grant financing will be provided to the poorest 
communities located within the current border region of 100 km in both 
countries, and up to 25% of low interest rate lending may be made 
available for projects located between 100 km and 200 km in Mexico. 
Projects located between 200 km and 300 km in Mexico would be allowed 
to borrow at standard NADBank interest rates and receive normal 
technical assistance.
    Private Sector: To expand the tools available for financing 
projects that, among other things, prevent and mitigate industrial 
pollution, conserve water, improve air quality, and recycle and reuse 
wastes, a more concerted effort will be made to certify and finance 
private sector environmental projects.
    Organizational Structure and Process: To, improve functional 
coordination and operational efficiency between BECC and NADBank, the 
two boards of directors will be replaced by a single board. The new 
board will have representation from the federal governments, the border 
states, and the public. In addition, a comprehensive ``business process 
review'' will be initiated to identify ways to improve the overall 
project design, certification and implementation process.
    Support for Sectoral Reforms: Sectoral reforms aimed at enhancing 
the bankability of environmental infrastructure projects will be 
leveraged and supported both through technical assistance and policy 
reform conditionalities attached to project financing.
    It is also important to note that the Presidents agreed that BECC 
and NADBank will remain focused on addressing environmental needs in 
the border region. The institutions will also continue to implement the 
agreement reached in November 2000 to expand the institutions' 
environmental mandate into areas including water conservation, air 
quality, and renewable energy, in addition to the original focus on 
clean water, the treatment of wastewater, and the handling of solid 
waste.
            improved performance with the reform initiative
    We believe that these reforms will improve the performance of both 
institutions in several ways:
    First, the financial reforms will make NADBank financing more 
affordable and thus promote an increase in the Bank's project financing 
activities. The NADBank experience has demonstrated that its original 
financial framework is unsuited to the financing of environmental 
infrastructure in a region characterized by high rates of poverty and 
fundamental structural problems in the utility sector.
    Second, the geographic expansion will give NADBank more 
opportunities to use its capital resources and thus address a greater 
scope of important environmental issues that affect communities on both 
sides of the border. For instance, NADBank will now be in a better 
position to undertake projects in Mexico that improve water use 
efficiency over a broader geographic area, thereby increasing water 
supply in shared rivers.
    Third, NADBank and BECC should be able to work more effectively 
with the private sector on projects that will make economic development 
in the region more environmentally sustainable, which is a win-win 
proposition for both the environment and economic growth.
    Fourth, a single Board of Directors should improve coordination and 
accountability in NADBank and BECC and will provide unified, consistent 
policy guidance to the management of both institutions. The Board will 
have the capacity to enforce the imperative that the management and 
staff of the two organizations must work together as a team if their 
common mission is to be achieved. Membership on the Board will reflect 
a broad range of interests and, for the first time, non-Federal board 
members will have a role in the decision-making processes of both 
institutions.
                     implementation of the reforms
    Implementing the agreed reforms will require great commitment by 
both governments. I am pleased that implementation efforts are already 
underway. EPA, State and Treasury have begun planning a time line for 
implementation, and have initiated discussions with their Mexican 
counterparts to this end. Important steps include the launching of the 
business process review, drafting amendments to the BECC-NADBank 
Charter, and submitting the necessary legislation to the two countries' 
respective legislatures.
    As we proceed, we will continue to consult widely with stakeholders 
and interested parties. As these implementation efforts get underway, 
we will emphasize that management at both institutions continue to work 
hard to process new and existing project proposals to serve the urgent 
environmental needs of border communities. We will urge them, in the 
spirit of the reforms, to intensify their efforts to work together in a 
cooperative and collaborative manner.
    Before I conclude, let me note one extremely important point. It is 
imperative that the Senate act on President Bush's call to begin 
consideration of Trade Promotion Authority (TPA) by April 22. TPA will 
help complete both the Free Trade Area of the Americas and our broader 
multilateral trade agenda. Of particular importance to this 
Subcommittee is the renewal and expansion of the Andean Trade 
Preference Act (ATPA) that will likely be joined with TPA. A critical 
fact that is not well understood is that after ATPA expired, duties on 
products that would have qualified if not for the expiration of the 
program were deferred for ninety days. That deferral expires on May 16, 
at which time all of the duties deferred over those 90 days will be 
due. The Treasury Department estimates that duties were deferred on 50 
percent of the trade that would have been duty-free under the program. 
It will bring serious duress to U.S. businesses and our Andean partners 
if all of those duties have to be paid on May 16. And without question, 
TPA will be a great confidence-builder for the U.S. and the global 
economy. For all of these reasons I urge the Senate to expeditiously 
consider TPA.
    To sum up, I appreciate the opportunity to discuss NADBank reform 
and the U.S.-Mexico relationship with you today. We intend to submit a 
legislative proposal to Congress soon and look forward to working 
closely with you as we proceed to make these reforms a reality. I 
welcome your views, suggestions, and your questions. Thank you very 
much.

    Senator Dodd. Thank you very much, Mr. Taylor. We have been 
joined by our colleague from Florida. It's a pleasure to have 
you with us, Senator Nelson. And when appropriate, let me know 
if you care to make any comments. In the meantime, we'll turn 
to Jim Ziglar.

 STATEMENT OF HON. JAMES W. ZIGLAR, COMMISSIONER, IMMIGRATION 
AND NATURALIZATION SERVICE, DEPARTMENT OF JUSTICE, WASHINGTON, 
                               DC

    Mr. Ziglar. Mr. Chairman, Senator Chafee, Senator Nelson, 
thank you for that very warm introduction and welcome. Needless 
to say, I'm happy to be here. I have very fond memories of my 
days working up here in the Senate as your Sergeant-at-Arms, 
and given the events of the last 6 months they grow fonder 
every day. I also made some very close friendships that I 
forged during that time, and I will treasure those forever. So, 
it is nice to be back.
    I'm also very pleased to be here to talk to you about U.S.-
Mexico relations. Since I started this job now 8 months ago, 
I've visited about a dozen times with high-level Mexican 
officials, as has been the case with many others in the 
administration. And I can tell you from my perspective, I think 
the relationship with Mexico is excellent.
    In February 2001, as you know, President Fox and President 
Bush undertook in the Declaration of Guanajuato to work for the 
economic and social development of our border communities, to 
fight crime and to strive to create an orderly and safe 
environment at the border.
    The President charged the Attorney General, the Secretary 
of State, and later the Secretary of Labor, with co-chairing a 
high-level working group with their counterparts on the Mexican 
side. Since then, working through that mechanism, we've had 
very frank, comprehensive talks, and I think productive talks, 
between the folks on both sides on these very important 
subjects.
    In fact, the high-level working group met several times 
last spring and summer and made substantial progress. 
Obviously, what happened on September 11 altered the priorities 
of that working group, placing border security issues at the 
top of the list. However, I want to make the point that this is 
not to say that work has ceased on the migration issue. It has 
not.
    In fact, on November 20, the INS and the Department of 
State co-hosted a meeting of major folks from Mexico to restart 
or at least to continue these issues and to get them back up on 
the table in a very important way. And we've been doing that 
ever since. For example, at that meeting we agreed to work on 
streamlining the current temporary worker programs that we 
have, looking at the Department of Labor function, our function 
on the domestic side, and the Department of State function at 
the visa area out in the Consular offices.
    By the way, just as an aside, when Mike Enzi talked about 
the three H's, we have decided back here we're going to have a 
new visa. It's going to be called the H3E. That's the H3 Enzi, 
for the three H's in Wyoming.
    We have also in the course of our working with the Mexicans 
created conditions for a safer border. We have great interest 
in working with the Mexican Government to ensure that our 
common borders are safe and secure for people on both sides of 
that border. Both governments recognize that protecting the 
border includes protecting lives, particularly the lives of 
those people who are put in harms way by alien smugglers, whose 
interest is not protecting life but making a profit on alien 
smuggling. And our commitment to fulfilling this obligation is 
unwavering and it's shared by everybody, everybody from the top 
of our government here and the top of the government in Mexico 
out to our officers in the field.
    Our border safety efforts have been enhanced, frankly, 
through cooperative law enforcement efforts all the way across 
the border. A good example is the fact that the INS, working 
with Mexican officials out of our Mexico City district office, 
have put together an anti-alien trafficking task force that has 
been extremely effective in terms of breaking up anti-smuggling 
rings and prosecuting these people who engage in human cargo. 
Although our efforts in the law enforcement area are very 
positive, a lot more can be done in this particular area.
    One of the key objectives of a recent U.S.-Mexico trip 
before the President's trip to Mexico--and it was a trip on 
which I accompanied Governor Ridge--was to, in fact, work with 
the Mexicans to create a liaison mechanism on both sides of the 
border so that we could, in fact, have a safer and more secure 
border. The long border that America has with Mexico is a whole 
lot more than just a line drawn on the map. It's a way of life. 
If you've ever been down there, it's really a way of life for 
our populations and for the populations on the Mexican side.
    But, it is also a gateway to expanded opportunities, 
tourism, markets and education. Together the United States and 
Mexico can and will attempt to resolve the problem that we have 
with respect to bottlenecks at the border, and also those who 
chose to put themselves in harm's way by trying to come over 
the border in other than the regular way.
    President Bush and President Fox, as you know, met in 
Monterrey on March 22. On that trip the two Presidents agreed 
to a number of things, some of which have been mentioned here. 
But one of the things that they did do is to agree to some 
specific actions that are intended to serve our common human 
security and economic interests in the years to come.
    And these measures are designed to create a smart border 
for the 21st century, one that embraces technology and 
bilateral cooperation for humane, efficient and modernized 
management of our border. The action plan has three elements to 
it. First, is to create a border infrastructure that keeps pace 
with the growth and travel and commerce across that border. 
Second, it's a border that will provide for a secure flow of 
people. And third, it's a border that will provide for a secure 
flow of goods.
    We have been working quite intensely with our Mexican 
friends since that March 22 meeting. In fact, I've had four 
meetings with them and spent most of yesterday with the folks 
from Mexico working on the details of this 22 point plan. I 
won't go into the details of it, Mr. Chairman, I think you're 
aware of it. But I would say that it sets the stage for us to 
have a much more secure border that facilitates commerce and 
also facilitates security.
    Obviously we have a great interest in working together with 
the Mexican Government to ensure that our border is safe and 
secure and that commerce is facilitated. I think even a few 
years ago people would have been very surprised at the level of 
cooperation and the spirit of cooperation that exists today 
between our two governments on a lot of very sensitive and 
important issues. Our bilateral cooperation is at an all time 
high in many areas in this relationship. And under the 
direction of the President, the Attorney General and in my 
capacity as Commissioner of the INS, I can tell you that I am 
working very hard and will continue to work very hard in trying 
to achieve a safer, more secure border, a more humane border 
and one that recognizes the realities of our two cultures.
    Mr. Chairman, again, it's a real pleasure to be here. I 
look forward to your questions.
    [The prepared statement of Commissioner Ziglar follows:]

 Prepared Statement of Hon. James W. Ziglar, Commissioner, Immigration 
                       and Naturalization Service

    Mr. Chairman, members of the Committee, thank you for this 
opportunity to address the topic of U.S.-Mexico relations. Mr. 
Chairman, since I started this job a little over 8 months ago, I have 
met with high-ranking officials from Mexico more than a dozen times, as 
is the case for many other policy makers in the Administration. This is 
a vibrant relationship that has reached new levels under the leadership 
of President Bush.
    In February 2001, President Bush, along with Mexican President 
Vincente Fox, undertook in the declaration of Guanajuato to ``work for 
the economic and social development of our border communities, fight 
violence and strive to create a safe and orderly environment.'' 
President Bush charged the Attorney General, the Secretary of State 
and, later, the Secretary of Labor to co-chair a High-Level Working 
Group on Migration with their Mexican counterparts. Since then we have 
had likely the frankest, most comprehensive, and most productive talks 
ever between our two countries on this important subject. The High-
Level Working Group met several times last year during the spring and 
summer, making steady progress in these deliberations. Understanding 
the importance and industriousness of Mexican nationals whose 
contributions have helped fuel our economic prosperity over the past 
years, President Bush is looking to new ways to link willing workers 
with willing employers.
    The terrorist attacks of September altered the priorities of the 
High-Level Working Group, placing border security issues at the top of 
our migration agenda. This is not to say that work has ceased on the 
other agenda issues. It has not. On November 20, the Department of 
State and the INS co-hosted a High-Level Working Group meeting at which 
both countries acknowledged the need to re-order priorities while 
continuing with our work. We agreed to examine ways to streamline and 
improve existing temporary worker programs under U.S. immigration law, 
taking a close look at the current procedures of the Department of 
Labor and the INS that administer these programs domestically and those 
of the Department of State at the consulates where visas are issued. 
These programs, known by their alphabetic visa classification 
designations, are the H-2 programs. The H-2A program is for temporary 
agricultural workers while the H-2B program is designed for other, non-
agricultural workers. Currently, Mexican nationals receive more than 
50% of the H-2 visas issued by the Department of State each year.
    Similarly, we have pushed to create conditions for a safer border. 
We have a great interest in working together with the Mexican 
government to ensure that our common borders--and border communities--
are safe and secure.
    The Border Safety Initiative, first started by INS and our Mexican 
counterparts in 1998, has expanded significantly in the past year and 
is truly a binational effort. Both governments recognize that 
protecting the border includes an obligation to protect lives, 
particularly those of people put in harm's way by smugglers, who view 
money, not people's lives, as their chief concern. Our commitment to 
fulfilling this obligation is unwavering, and it is shared by everyone, 
from the top officials in Washington and Mexico City to agents in the 
field. Presidents Bush and Fox demonstrated their commitment at their 
first meeting last February in Guanajuato, when they pledged to 
increase the amount of resources devoted to border safety.
    Our border safety efforts have been enhanced through increased 
cooperative law enforcement efforts. Alien smugglers routinely expose 
migrants to risk by leading them into dangerous terrain and abandoning 
them when difficulties arise. The INS, through its district office in 
Mexico City, is working at an unprecedented level of cooperation with 
Mexican officials to dismantle smuggling operations and prosecute those 
who deal in human cargo.
    Though current cooperative law enforcement efforts are extremely 
positive, much more can be done in this area. A key objective for the 
recent U.S.-Mexico meetings in March, held prior to President Bush's 
trip to Mexico, was, in fact, to enhance cooperation with Mexico by 
enabling the United States to work with an established Mexican federal 
law enforcement presence across the border.
    We also recognize that Mexico is a transit country for many long-
distance migrants who seek to enter the United States and request 
asylum. As Mexico is signatory to the United Nations Convention on 
Refugees, the U.S. welcomes closer cooperation with Mexico on asylum 
issues. Together, the United States and Mexico must ensure that each 
migrant is afforded protection from persecution.
    Following the events of September 11, there has been concerted 
effort to build a regime of security cooperation between the U.S. and 
its southern and northern neighbors. This involves not only protection 
for our respective populations, but also the free, cross-border flow of 
legitimate goods and travel that helps drive our shared prosperity.
    We share a long border with Mexico and it is more than a line drawn 
on a map. It is a way of life for our populations residing in border 
communities. It is a gateway to expanded markets, tourism, and 
educational opportunities. Together the United States and Mexico can 
and will combine our efforts to avoid bottlenecks and congestion at 
legal crossings and discourage those who now choose to cross in 
dangerous areas. We must ensure a border that works.
                   president bush's trip to monterrey
    On March 22, Presidents Bush and Fox met in Monterrey, Mexico. On 
that trip, the two Presidents agreed to strengthen U.S.-Mexican 
cooperation by endorsing a series of specific actions intended to serve 
our common human, security, and economic interests in the years to 
come. These measures comprise important steps in the creation of a 
smart border for the 21st century--one that embraces technology and 
enhanced bilateral cooperation to ensure humane, efficient, and 
modernized management of the border that joins our peoples and our 
economies. We have one of the world's most dynamic and successful 
trading relationships, as well as enormous bonds of family and culture. 
We are committed to persevering in the establishment of a border that 
serves and supports, in the most effective ways possible, this 
extraordinary relationship.
    The action plan that our two nations have agreed advances three 
major goals: (1) creation of infrastructure that keeps pace with travel 
and commerce; (2) the secure flow of people; and (3) the secure flow of 
goods. Since March, we have met with our Mexican colleagues to develop 
the detailed plans to meet these goals and develop mechanisms to 
monitor progress. Allow me to describe these goals as they were agreed 
to by President Bush and President Fox:
1. Infrastructure that keeps pace with travel and commerce
    1. We will conduct a joint survey of infrastructure along our 
common border to identify bottlenecks that impede the movement of goods 
and people.
    2. We will develop integrated infrastructure investment plans to 
ensure that the economic competitiveness of the border region is not 
impaired as the volume of trade grows.
    3. We will conduct security assessments of critical infrastructure 
including bridges, dams, and power generation and transmission 
facilities and take steps to protect them from terrorist attack.
    4. We will upgrade the existing Border Group of the Binational 
Commission, and entrust it to carry out the necessary planning in our 
common border.
2. The secure flow of people
    1. We will develop and implement systems at ports-of-entry to speed 
the flow of bonafide travelers and, to that end, streamline and 
coordinate procedures at our common border.
    2. We will cooperate to identify individuals who pose threats to 
our societies before they arrive in North America.
    3. We will enhance our efforts to deter smuggling of third-country 
nationals.
    4. We will work to establish a joint U.S.-Mexico Advanced Passenger 
Information exchange mechanism.
3. The secure flow of goods
    1. We will implement a technology-sharing program to place non-
intrusive inspection systems on cross-border rail lines and at high-
volume ports-of-entry.
    2. We will develop and implement systems to increase security at 
key points of the supply chain that links producers and consumers.
    3. We will expand partnerships with the private sector to increase 
security of commercial shipments.
    4. We will develop systems to rapidly exchange customs data.
                               conclusion
    Mr. Chairman, we have a great interest in working together with the 
Mexican government to ensure that our common border is safe and secure. 
Even just a few years ago, many would have been surprised at the level 
of detailed discussion that is now taking place between the United 
States and Mexico on very important and sensitive issues. Our bilateral 
cooperation is at an all-time high in many areas of this modern and 
successful relationship. Under the direction of the President of the 
United States and the Attorney General, and in my capacity as 
Commissioner of the INS, I will continue to build on this achievement 
wherever possible, including in law enforcement, safety, migration, and 
public awareness of our laws. I look forward to working to develop 
further this excellent relationship, which can serve the interests of 
so many people on both sides of the border.
    Mr. Chairman, that concludes my prepared remarks. I would be happy 
to answer your questions at this time.

    Senator Dodd. Thank you very much, Commissioner. As I said 
earlier, I think you're doing a fine job under difficult 
circumstances. The world did change on September 11, but your 
budget hasn't changed yet. So you have to do a lot more things 
with the same amount of resources as in the past.
    I'll put a clock on myself here as well, so that we don't 
over-extend. What I'll do is just ask each various questions 
and try to get through. I'll give myself about 6 minutes, as 
well, and then we'll go back and forth if necessary, if we 
don't cover all the ground.
    Secretary Larson, just a brief answer from you because 
obviously the question could be the subject of a long day's 
hearing, and that is I'd just be curious in terms of the--and I 
think Mr. Taylor you may want to comment on this too even 
though I've focused on the banks with you--but I'm curious 
about how the Mexican economy is recovering from the 
consequences of the slowdown here in the United States. We're 
apparently getting back on our feet again, economically, but 
what is the outlook for the economy in 2002? If you'd give us 
sort of a quick snapshot. Either way, either one can start.
    Mr. Larson. I think the very quick snapshot is that Mexico 
has very much become an economy that's tied to ours. So their 
recovery, I think, will very much track ours as they export 
primarily to the United States. Their credit rating has been 
raised by one of the rating agencies recently, so I think they 
have a relatively positive outlook this year.
    Senator Dodd. OK, John.
    Mr. Taylor. I would just add that there is definite 
evidence of the Mexican economy picking up. And the recovery in 
the United States is certainly helping that. The investment 
grade rating is a real accomplishment for Mexico. I think 
that's something to be very clear about and it took a lot of 
important work on the policy side to get that. And I also note 
that their inflation rate is coming down and it's a good 
macroeconomic situation for growth going forward. So, the 
Mexican economy is on its way to recovery in my view.
    Senator Dodd. OK. Let me turn to--I want to ask both of you 
again another question dealing with this case: Hoffman Plastics 
Compound vs. NLRB. Are you both familiar with this matter? I 
assume you are.
    Mr. Larson. To some extent, yes, sir.
    Senator Dodd. Well you know, this was a very close call, 5 
to 4 decision by the Supreme Court overturning the NLRB's 
decision to award back pay to an illegal worker who had been 
fired illegally for having been involved in some unionizing 
activities. Now I'm abbreviating this obviously. The majority 
says--the Rehnquist opinion says that by allowing back pay you 
unduly encroach upon explicit statutory prohibitions critical 
to Federal immigration policy. The minority, four justices--
about equally decided--conclude that the ruling would actually 
create more incentives for companies to hire illegal workers. 
If you don't have to award any back pay and you can fire them 
at will, then it seems to be more of an incentive to bring 
people in.
    Now this has provoked--in fact, I've been told, I'd like 
you to comment on this--the unfortunate situation in which the 
Mexican Congress of course denied President Fox the opportunity 
to travel, which many Latin American countries--we don't want 
to see anything like that, I'm sure, the Bush administration 
and the Congress having similar provisions here at home. But 
nevertheless, that's the rule in these countries. To what 
extent did this decision cause or provoke the Mexican Congress 
to invoke that clause in their laws to allow them to deny 
President Fox an opportunity to travel.
    And what is the administration going to do about this? Are 
you going to propose anything? Are you going to stick with the 
ruling? Or, are you proposing possibly legislation to correct 
this situation.
    Mr. Larson. I think three quick remarks, Senator. First of 
all, it was a very--not only a very close call but a narrowly 
constructed decision, as I understand it. We have initiated 
consultations with the Mexican Government about the 
implications of the Supreme Court's decision for immigrant 
workers, and are talking with them about ways of exploring 
further bilateral cooperation. And the third point really is 
that we made very clear that it is the policy of the 
administration to make sure that there are not--there is not 
abuse by employers of workers in our country, whatever their 
status. And that is something that Secretary Chao spoke out on 
right away.
    Senator Dodd. Mr. Taylor.
    Mr. Taylor. I don't have anything to add to that, Senator.
    Senator Dodd. Well, this is a matter for the Judiciary 
Committee more, in a sense, than this committee. But obviously 
because it does impact on U.S.-Mexican relationships here, and 
I'm told that this had some bearing on the decision. There was 
a question of U.S. policy, questions which had something to do 
with the Congress' decision in Mexico.
    I think the committee would very much like to be kept 
abreast of what steps we're talking about taking here. We've 
got an inter-parliamentary meeting coming up, which the Senate 
chairs when we go to Mexico, and this is obviously going to be 
a subject of some discussion, I'm sure, when we get there. So, 
it would be tremendously helpful for us to get some further 
clarity from the administration of what steps if any we're 
likely to take.
    Commissioner Ziglar, the U.S.-Mexico Border Partnership 
Action Plan is a complicated proposal. But I wonder--a couple 
of questions here--and I'm watching the clock. I'll get one in 
here before the clock runs red.
    I wonder if you could explain this in a little more detail, 
the main points of this plan, No. 1. No. 2, they have 
sufficient funds to implement it. Not only this but also the 
proposed restructuring of the INS, after the implementation of 
the post-11, September 11 border reforms.
    It's a big question but I think it's a critical one here. I 
said somewhat teasingly, but also seriously as well, you're 
operating on last year's budget and to some extent the 
pressures are even greater on the INS to perform. And we're 
going to be asking you to do even more. So, I'm curious as to 
what the--where you are with the funding issues and how the 
plan itself would work in some detail?
    Mr. Ziglar. Well Mr. Chairman, with respect to the border 
action partnership, it has some major components to it. One of 
them is sharing information, both on the Customs side, the INS 
side, the peoples side, and then in a much broader sense 
sharing information that we get from advance passenger lists 
and things like that, so that we can detect situations where 
there may be terrorists or criminal aliens or others that are 
trying to come into the country.
    It also has an infrastructure component to it, and that is 
at the border synchronizing the way we operate at the border so 
that we have mirror-image operations on each side so that we 
don't have gaps, where we have a situation where people can 
take advantage of those gaps.
    Likewise between the ports of entry, we are working very 
hard to deal with things like the smuggling operations, 
enhancing those operations, also enhancing the border safety 
initiative so that we can protect people's lives while also 
interdicting them, as well as interdicting drugs. There are 22 
points to it, as you know. But the concept here is to focus not 
just at the physical border and making it a more efficient 
border for commercial purposes and a more secure border for our 
people, but it's also looking beyond the border and saying 
where is it that we can be of help to each other in protecting 
the security of our folks?
    For example, third party nationals, it's a real problem in 
Mexico because Mexico is a transit country to the United States 
for third country nationals coming in. We are working with them 
to help them identify those problems and help them, frankly, 
deport people that come into their country illegally trying to 
get here illegally. It's kind of a holistic, macrolook at our 
border and our border relationships in its biggest sense.
    The issue of money is always an issue at the INS. There's 
no question about it that the INS has more and more things 
thrown at it every day to do, at the same--fundamentally the 
same level of resources. For example, Congressman Reyes made a 
very good point about the interior enforcement mechanisms of 
the INS. We have only 2,000 special agents at the INS to do the 
entire interior enforcement operations. Everybody else 
fundamentally operates at the border.
    Two thousand agents to deal with smuggling, terrorists, 
criminal aliens, and then the presence of undocumented folks in 
here who don't represent any of those others, 2,000 is a drop 
in the bucket and yet, of course as you know, we're expected to 
do all of those things. And it is just not possible, so we have 
to prioritize the interior enforcement side of this. So I can 
tell you that at the border, some of the initiatives that we 
have in the action plan are not so capital intensive as they 
are cooperative relationships that we just need to build on. 
But it's clear, particularly with respect to the investments at 
the border, those are going to require a lot of capital.
    With respect to the restructuring plan, we have in the 2003 
budget a request for $45 million, I believe it is. We do have 
some funds currently, but it's a stretch to do all the things 
that I would like to get done in this fiscal year to move the 
restructuring along at the pace I'd like to. But, we're bound 
and determined to do it.
    Senator Dodd. Thank you very much. Let me turn to my 
colleague.
    Senator Chafee. Thank you very much, Mr. Chairman. Mr. 
Larson, you were testifying as to the Partnership for 
Prosperity presented to Presidents Fox and Bush in Monterrey. 
And as part of the Partnership for Prosperity, is it envisioned 
at all to have any kind of an initiative in environmental 
infrastructure?
    It would seem to me it would be a natural for our two 
countries to work together on some of the problems that Mexico 
has, whether it's wastewater treatment, solid waste management, 
clean air, some of the areas that perhaps we have wrestled with 
in the past that now we can work together on as partners. And 
Mr. Taylor testified as to the inefficiency and poor 
performance of the NADBank and the Border Environment 
Cooperation Commission and reconciling those two as to what we 
can do better as Partners for Prosperity, the title of the 
initiative, and also on the environment. It would seem to be a 
natural to me that the two of us could work together on that.
    Mr. Larson. Very definitely, Senator. The starting point 
for this initiative is really that, by facilitating more 
private investment and better cooperation between the citizens 
of our two countries, that we can accomplish a great deal. 
Mexico is a place that receives some $9 billion worth of 
remittances from Mexican-Americans in the United States, and in 
recent years has been getting $15 to $18 billion worth of 
foreign direct investment. So the issue, one of the issues has 
been how can the governments work with the private sector to 
facilitate the types of investments one would like to see?
    In the area of environmental infrastructure, for example, 
one of the working groups that we had was on infrastructure. We 
had both public and private sector people talking about what 
could be done to facilitate private capital moving into some of 
these projects. One of the things that they came up with was 
that mayors in Mexico typically serve for a very short period 
of time. They don't have a city manager concept there, and so 
there isn't as much capacity at the municipality level to help 
them plan for environmental infrastructure.
    And so one of the ideas that our experts gave us was to try 
to facilitate, through something like the President's Freedom 
Corp, the provision of city managers who are retired and 
perhaps could go and work with a municipality for a period of 
time to help them figure out how to structure their finances 
and their bidding processes so that they could attract 
investment in things like sanitation plants and other types of 
community infrastructure.
    Senator Chafee. Mr. Taylor, in your testimony you did talk 
about those areas that already are dedicated toward this trying 
to improve the environmental infrastructure, have failed. It 
seems to me the best way you want to start is have clean 
drinking water and somewhere to dispose of your waste water or 
your solid waste. And you did make recommendations to how we 
can improve those, but do you agree that that's something that 
as we work together that that's something of basic importance?
    Mr. Taylor. I certainly agree, it's very important. And 
what we want to do in improving the working of NADBank and BECC 
is to make that happen, make the cases where it hasn't been 
funded enough or the infrastructure is needed, make it work 
better. So that's part of the reason to expand further into 
Mexico in terms of the geographic limits, part of the reason to 
have lower interest rate loans, and part of the reason, of 
course, to have more grants. So I think it will all go in that 
direction and it will also take, I think, a careful monitoring, 
looking at what's happening from the Treasury and the State 
Department and the EPA to make sure this all happens correctly, 
focusing on the results.
    Senator Chafee. Very good. And Mr. Ziglar, the Congressman 
testified that there's going to be legislation that he expects 
to pass the House consolidating the INS--or consolidation in 
reference to some of our border policies. Have you had a chance 
to review that legislation? Can you comment on whether you 
favor it or oppose it?
    Mr. Ziglar. Senator, the legislation he's referring to is 
something called the Sensenbrenner bill that would divide--
create two agencies, legal entities; one a service, one an 
enforcement department, if you will, in the INS. The 
administration has not taken a position on the bill other than 
in some testimony I gave last week to point out some issues 
that were sort of macroissues in the legislation. However, I 
think Congressman Reyes is right, that it probably is going to 
pass and will be coming over here.
    Senator Chafee. Very good. And last, Mr. Larson, I was a 
mayor of my city and the most important thing for getting re-
elected or for returning is making sure that the basic 
services--starting most importantly probably with drinking 
water--were provided. So I think it's a terrific program, 
Freedom Corps, and trying to help some of these growing 
communities.
    Mr. Larson. Good.
    Senator Dodd. Thank you very much. Senator Nelson, we're 
delighted you're here with us.
    Senator Nelson. Thank you, Mr. Chairman. Mr. Ziglar, we've 
got the Border Security bill that has been on the floor, and 
one of the concerns--and if you would educate me what is the 
status--where we have a program for security with a number of 
swipe cards, but do not have the equipment to swipe it through. 
Educate me about that.
    Mr. Ziglar. That's with reference to something called the 
border crossing card, of which there have been about 5 million 
issued. They only use them on the southwest border. They 
replaced a card that had been in existence for about 30 years 
where people used it to come back and forth across the border, 
people that worked on the other side or they came over to visit 
family, or tourists or shoppers or whatever.
    These new cards have in them a biometric. They have two 
fingerprints as well as a digital picture and some information 
on it. Working with the State Department, like I say, we have 
replaced about 5 million of those cards, but we don't have 
readers to read those cards.
    And it has been a question of having the money 
appropriated, quite frankly. However, in the counter-terrorism 
supplement we did get $10.8 million to start the deployment of 
those. We will be putting in the first of those readers within 
a month or two.
    They will be not completely deployed until we make sure 
that the readers are going to work as they are advertised to 
work. But, once we get up to August, we will know whether we've 
got problems that need to be adjusted, and at that point we 
will start the full deployment across the southwest border. 
They cost about $6,000 per machine, so we're going to be able 
to deploy a lot of machines with $10.8 million.
    Senator Nelson. And what happens in the meantime, until you 
get the readers in place?
    Mr. Ziglar. Well, we are using the most common of 
biometrics, and that is taking a picture and looking to see if 
that's the right, same person. The border crossing card does 
have a picture on it and as people come across the border, and 
they've got the card, we can identify--our inspectors can look 
at it and determine whether or not the people are the same 
people.
    Senator Nelson. Which is the way it's been done for the 
last 30 years?
    Mr. Ziglar. Well, it wasn't even that good. I don't think 
the old cards even had pictures on them. It's better but it's 
not at its optimum, but it will be.
    Senator Nelson. And to what degree are we implementing this 
because of terrorists and to what degree are we implementing 
this new system because of illegal entry across the border?
    Mr. Ziglar. This system was actually mandated in 1996, well 
before September 11, and it was done for a number of reasons. 
One is that the old cards had become the subject of a great 
deal of fraud. They were just being passed around. And second, 
it was also because of the problem of illegal immigration that 
in 1996 the IRCA mandated that these cards be put into effect.
    Clearly after September 11 and the counter-terrorism 
supplement, the recognition that we needed to move this along 
more quickly was there, and that's why we got the appropriated 
money for the readers. I might add one other thing Senator, and 
that is that we will be marrying the readers with--or it would 
appear that we're going to do this--with our so-called IDENT 
system so that we will have a way of making sure that the 
people that come across truly are not people that are criminals 
or at least they're not in our records.
    Senator Nelson. That is they're hooked in with the FBI and 
the CIA?
    Mr. Ziglar. Well IDENT isn't currently, but we are in the 
process of marrying IDENT with IAFIS which would then get us 
access to the FBI. It's one of those things that grows.
    Senator Nelson. And over what period of time will that take 
place, until that's in effect so that somebody who is crossing 
that the Immigration Service may not know is suddenly a major 
wanted fugitive that's on the FBI list, that it would 
automatically pick it up?
    Mr. Ziglar. We are deploying the IAFIS system, which will 
be coupled with the IDENT system, now. We've got it up and 
running in a couple of facilities. We will have six more, I 
believe, within the next 30 days or so, and then we're going to 
continue to expand it out.
    What we're doing is we're picking, obviously, our busiest, 
most dangerous--what we consider our most dangerous spots to 
put it in first. And then we will move it out to the more 
remote locations. It's a question of the procurement and the 
deployment of it. And obviously as the good chairman points 
out, these things don't--money doesn't just fall off the trees, 
it has to be there for us to be able to do that.
    Senator Nelson. Well it sounds like we better get on the 
stick and give you the money. Under the present system, when 
would it first be deployed?
    Mr. Ziglar. Well, it's----
    Senator Nelson. I'm talking about the system where you 
would hook into the FBI.
    Mr. Ziglar. We're actually operating it now in two spots. 
We'll have six more in about 30 days, and we'll just keep 
moving it out.
    Senator Nelson. And under your present schedule, how long 
would it take for your entire southern border to be hooked in?
    Mr. Ziglar. The rollout of the six is really to make sure 
that this system works. So, we don't, my colleagues tell me, 
actually have an end date for the entire rollout of it. It 
depends on whether we encounter any big problems in this 
rollout and the integration of the system.
    Senator Nelson. Well then, what you're advising us is the 
question is not money, it's a question of implementation of 
what you have in the way of resources now.
    Mr. Ziglar. Well, it's really--we now know that this system 
is going to get deployed. It's just a question of tuning it up, 
making sure that it works effectively. So while it may not be 
money today, it's clearly going to be money as we go forward.
    Senator Nelson. Well, I'm just trying to get a grasp. Are 
we talking about a year, 2 years, 5 years until the whole 
system is up? How long are we talking about, 2 months?
    Mr. Ziglar. Well no, not 2 months, but I would suspect that 
all things being equal, probably 2 years to have it fully 
deployed.
    Senator Nelson. And one final question, Mr. Chairman, of 
five million cards that have been issued since 1996, what 
percentage--I take it these are people that frequently go 
across the border, that you've issued to--so what percentage of 
your frequent crossings, of the Texas to the coast border, does 
that five million cards represent?
    Mr. Ziglar. Senator, we get about 800,000 crossings a day. 
Now we don't clock how many of that five million and what 
percentage of that goes across, but I would have to guess that 
it's a fairly concentrated number that use it regularly, and 
then others that have had it for 30 years, they use it for the 
occasional once a month shopping trip over into the United 
States. See this actually operates as a visa, as a B1, B2 visa, 
so that people can get across the border because we do require 
a visa.
    Senator Nelson. Thank you, Mr. Chairman.
    Senator Dodd. Just to followup, Jim, I presume there's some 
way to track that so that you have some idea--people using the 
new card versus the old card, so that for purposes of testing 
the effectiveness of it, to iron out the kinks that the staff 
member indicated would have to be the case before you'd be able 
to predict with absolute certainty, before implementation. Am I 
correct in that? Are we----
    Mr. Ziglar. No one can use the old card anymore. The new 
card is the only thing that can be used now. As of October 1 of 
last year the old cards were not useable unless--we did have a 
transition period. If you had an old card but your new card 
hadn't been issued yet, but you had gotten into the queue for 
it, then we did an identifier on the old card until you got 
your new card. But now, with the swipe machines going up we 
will then be able to, at least in the secondary, we'll be able 
to identify who is coming across.
    Senator Dodd. I gather, because we prohibited the old cards 
from being used, this has created some real problems as well?
    Mr. Ziglar. Well you know, it's interesting, Mr. Chairman.
    Senator Dodd. That is we the Congress, but also in 
cooperation with the President.
    Mr. Ziglar. We thought--I remember the day that Congress 
did not pass an extension last year as they had before, and I 
remember going into work that next morning thinking oh boy, 
this is going to be one of those days, because I figured they'd 
have huge lines. And the fact is that while we did have some 
lines some places, it was nothing like we anticipated it might 
be. And it's now trailed off to the point that we really don't 
have a problem there.
    I know that in this Border Security bill there is a 
provision for the extension. We have not taken a position on 
that, but frankly I don't think it's necessary at this point. 
And in fact, it might even be confusing to people about the 
situation down there. So I'm not taking a position on this Mr. 
Chairman. I think it might actually be counterproductive to 
have it in there.
    Senator Dodd. All right. Those were excellent questions, 
Senator Nelson.
    Senator Nelson. Thank you.
    Senator Dodd. Let me jump if I can a bit to the NADBank. 
Mr. Taylor, I've got a series of questions I could raise with 
you about it. President Fox, you know, had sought to expand the 
size of NADBank beyond simply the environmental projects to 
include more broad-based assistance to infrastructure in order 
to create a climate for local investment. The Bush 
administration has rejected the notion of a broader scope for 
NADBank, and I wouldn't--I want to know--I guess the question 
is wouldn't such a move of a President Fox approach to this be 
more consistent with the goals we've talked about in the plan 
that Mr. Larson described in the Prosperity for Peace 
Initiative?
    Mr. Taylor. Well as you know, we've been working very 
closely with the Mexican Government, and President Fox and 
President Bush have discussed this. And upon looking at the 
situation we felt it would be most important to get NADBank 
working efficiently on what it is set up to do. In other words, 
make sure it's working well in the areas that Senator Chafee 
had indicated. And that's the direction where the reforms are 
headed at this point.
    And part of the creation of the activity that Under 
Secretary Larson has discussed, is really to look for other 
ways for the United States and Mexico to engage on these 
issues. And I think it's been very successful in doing that. So 
what we really--you could think of it as a two-track process. 
One was the NADBank reform, which I think is going along quite 
well, plus the activity and the whole wide range of things that 
Under Secretary Larson's been involved with.
    Senator Dodd. I understand that initially, to get it going, 
but it seems that what President Fox has talked about makes 
sense if not in the short term, at least in the longer term. Do 
you disagree?
    Mr. Taylor. Well I think we have to look into how this 
reform works in the institutions that we have at this point in 
time. And it very well might be that the activities that he may 
have alluded to are going to be worked out better in the 
Partnership for Prosperity. So I think it's very much let's get 
done what we plan to do now and then see what happens after 
that, Senator.
    Senator Dodd. Well in that regard, I mean I appreciate the 
points of unification of the boards, between the BECC and 
NADBank. Couldn't you make also a strong case that they ought 
to be merged organizationally, that you've got a lot of 
duplication here? You could overcome that, it seems to me, by--
the inefficiencies built in are just--by having one board, two 
organizations. Why didn't that happen?
    Mr. Taylor. Well, there were various proposals to deal with 
the improvements and coordination between the two 
organizations. And certainly merging the organizations was 
discussed and actually had quite a bit of discussion on 
consultation. And there's been a lot of consultation with the 
Mexican Government, with the border states, with the Governors, 
with the NGO's.
    But part of that led us to believe that we should try a 
different approach, which was to merge the boards rather than 
the organizations themselves. The boards will give the 
coordination and the direction that's necessary, I think, to 
drive the organizations to coordinate their activities better. 
So I think this will work well and it's more acceptable to the 
wide range of people that we consulted with.
    Senator Dodd. You're not ruling out the possibility to 
merge the organizations either down the road, are you?
    Mr. Taylor. Well I guess we've got a good proposal here and 
I think we're going to move ahead on that.
    Senator Dodd. Now you're going to submit some legislation 
to Congress authorizing some of the changes you've talked 
about. When is that going to come up here?
    Mr. Taylor. As soon as possible. That's necessary for the 
grants proposal as well as for the extension beyond the 100 
kilometers in Mexico. So we're working on that and will try to 
do that as soon as possible. Those are the two issues which we 
need legislation on.
    Senator Dodd. As part of the Partnership for Prosperity 
Initiative you indicated that you intended to use the 
experiences of Fannie Mae and Freddie Mac in order to create a 
secondary mortgage market for Mexico to facilitate home 
ownership. I wonder if you'd give the committee some indication 
or some of the details about this, and are Fannie Mae and 
Freddie Mac officials involved in helping craft such a 
proposal?
    Mr. Taylor. I think in this I'm going to ask Under 
Secretary Larson to address since that is part of the----
    Senator Dodd. I know, the Partnership for Prosperity.
    Mr. Larson. The answer, Senator, is yes, but if you'd 
permit me to just back up slightly. One of the fascinating 
things in the first outreach session that we had in Mexico was 
how many times housing came up as an issue, in an exercise that 
was focused on bringing foreign investment into Mexico. And it 
wasn't anticipated, it was something we learned about from 
talking to the experts. And it came up in several respects.
    One, was the fact that housing, of course, was a very 
important sector and this is one of the ways you can stimulate 
economic activity. Second was the fact that many small business 
persons use their home as a form of collateral for loans, and 
it was part of the issue of stimulating small- and medium-sized 
business in Mexico. Third, the absence of a well functioning 
mortgage market was something that was impeding the overall 
operation of financial markets in Mexico, and there was even 
thought that a well functioning mortgage market could attract 
additional capital into Mexico.
    For all of these and other reasons, this was seen to be a 
very fruitful area to explore further. And we did draw on 
officials from each of those organizations to get further 
advice as we carried this to the second stage. And then in the 
implementation, there are explicit plans for cooperation 
between those agencies and counterpart agencies in Mexico.
    Senator Dodd. Very good. I'd be interested in following up 
on that and how that's proceeding. I don't disagree with some 
of the conclusions, at least temporary ones, you've reached 
about the possibility of--or the effects of developing a 
secondary mortgage market could mean. It could be very, very 
successful.
    Jim, let me jump back and I'm going to--obviously there may 
be more questions. I'm going to leave the record open for 
people who have some additional questions. I know the quick 
answer to this next question might be, ``Well Senator, when is 
the Senate going to move?''
    I want to raise the issue of 245-I, which is a very 
important issue. I know the--where I think, based on some 
things I've heard today that we may actually be able to move on 
that legislation sooner rather than later. But there are 
obviously some principals involved who are not members of this 
committee who are pursuing that--but some indication that we 
may be able to get to that sooner rather than later. To what 
extent is this a priority of the administration on the 245-I 
proposal?
    Mr. Ziglar. Mr. Chairman I believe that the administration 
is very much committed to 245-I. Certainly I have been given 
every indication in my activities that this is a high priority 
item that we would very much like to see happen.
    Senator Dodd. I should point out, I suppose, sometimes we 
in Washington can start talking in these terms of just 
announcing letters and numbers. And what we're talking about 
here is a policy which would allow immigrants seeking permanent 
resident status in the United States to be able to do that in 
the United States rather than having to go back to Mexico and 
then come back in again, to sort of expedite the process.
    Second, Jim, I wonder on the immigration issues generally, 
the overall proposals--and we've talked earlier. You've heard 
some of the conversation about the guest worker programs. We've 
had this debate.
    We came very close a few years ago to actually having a 
pretty good compromise between the employers of guest workers 
and the constituency groups that very much are concerned and 
work with guest workers here. It got very, very close. Howard 
Berman, the Congressman from California, along with Senator 
Gordon Smith of Oregon had really come a long way to developing 
a proposal. The Congress went out of session and we didn't get 
it done.
    But I wonder if you might--this is such a critical issue. 
It's going to dominate and dwarfs almost every other issue we 
grapple with here. And so, I would be remiss if we didn't 
pursue this issue a little further here in this hearing since 
it's such a critical issue for both countries. Could you please 
kind of lay out where things are with regard to the broader 
immigration policy questions?
    Mr. Ziglar. Well, Mr. Chairman, there's no question that 
September 11 had an impact on what was, from my very limited 
view at that time--because I started on August 6 and got thrown 
right into the middle of the migration talks--and it was clear 
to me that things were moving along very nicely. September 11 
changed the dynamics of that. However, I can tell you that it's 
pretty clear to me that this administration, and the President 
specifically, still wants to find a way to deal with the host 
of issues that come under the rubric of migration.
    I know for a fact that there are a number of options that 
are being discussed on an inter-agency basis. You know, it's 
not just the INS. It's the Department of State, it's Labor, 
it's HHS, the whole group have a play in this, and there are a 
number of options being discussed.
    When we will reach a point of having something to advance 
to the Mexicans and to the Congress I don't know the answer to 
that. But I do know that it still has the support of the 
President and the White House and that we are still discussing 
how to reach that. And there are principles that the President 
has laid out, you know, over time. It has to be humane. It has 
to protect American workers. It's got to be fair. It's got to 
be flexible. Mexico has got to make a commitment on its side to 
work with us on other issues.
    I think there are some other things that probably need to 
be principles in this, looking at it maybe from an INS point of 
view. One is that it needs to be easy to administer, because it 
will be--talking about having a full load now, that will be a 
full load. It needs to be capable of being enforced, and it 
shouldn't encourage further illegal immigration. As you know, 
the President has used the supply and demand concept, at least 
with respect to the guest worker component of it.
    Senator Dodd. I wonder if you might--and I hear you very 
loud. I'm not going to--I'll use, make the point you made 
earlier. Obviously, look, this is a work in progress from the 
administration's perspective. And so nothing you say here am I 
necessarily going to take as some particular point of absolute 
certainty of inclusion or exclusion.
    But I wonder if you might just take--we had this discussion 
obviously with Silvestre Reyes coming up with the guest worker 
issue. And I wonder if you might just share with me, sort of 
debate a little bit on this issue, on the question of whether 
or not if we're going to have a guest worker program whether or 
not there is also to be included a road here for legalization. 
The people we're obviously implicitly or explicitly inviting to 
come to change beds in hotels, and to pick crops and to do 
other things--our economy doesn't survive without them.
    And so, we need the guest worker program. Now, to what 
extent are we prepared to say to people who come here, to 
provide us that kind of economic advantage that the guest 
worker does, that we're going to see to it in exchange that 
that guest worker has a chance to begin that process of 
legalization, either as for citizenship or permanent resident 
status, whatever it may be? Where are we on that, that critical 
point, that critical issue?
    Mr. Ziglar. Well let me talk in broad terms about that. I 
think it would be unrealistic to think that we could fashion a 
program that had only circularity to it, and that is the 
concept that people come in, stay a few years, leave, others 
come in, that sort of thing. It's clear that people come and 
they put down roots, and that they buy into our culture and 
contribute to our society and all of those sorts of things.
    And like other immigrants in the past, they aspire to be 
Americans. So in a very broad sense I think it would be safe to 
say that any program that attempted to deal with undocumented 
workers here now, in terms of their status as well as creating 
a guest worker program, would necessarily end up somewhere 
along the line creating a path to permanent residency, which of 
course then creates a path to citizenship. I mean, I think 
that's--I'm a businessman, as you know, Senator from my 
background. I try to deal with reality, and there are some 
realities about this whole situation. You've got 8 million 
people in this country who are undocumented and we need to do 
something about that.
    I thought Congressman Reyes had a very good point, and that 
is that we have an underground, sort of a somewhat transparent 
underground, but an underground in this country as a result of 
that. And it's an underground that could breed security 
problems. And it's something that we need to address. And I 
know the President is very concerned about this, as are others 
in the White House. And I am hopeful that we will have 
something to show for it.
    Senator Dodd. Well, there are a lot of very critical 
points. I was sort of stunned, I think many of us were, to 
learn, for instance, on students that come in--and sometimes 
the only people who know who these people are, to the extent 
they know anything, are the universities and colleges that 
accept them, as to where they are in the country. It's a 
wonderful thing they come here, but it's disconcerting in this 
day and age to know that nobody knows where these people are, 
what their status is as a result of that.
    Tell me what your views are with regard to this Hoffman 
Plastics vs. NLRB issue, where you had that almost equally 
divided court, on what the implications of that decision are? 
And I'm not going to ask you to write a law, but just in terms 
of your own reaction. As the INS Commissioner, do you see merit 
in the minority viewpoint of the four Justices that talk about 
this actually in some ways as a magnet for maybe some 
businesses to want to draw in people in illegal status?
    Mr. Ziglar. Senator, as you know I had the good opportunity 
to clerk at the Supreme Court in my much younger days, and I've 
learned unless I've read an opinion not to comment, because 
there are things in those opinions that the press doesn't pick 
up. So I haven't read this opinion. However, in a broad sense I 
am really--as you know at my confirmation hearings I talked 
about the notion of mistreating people who were here illegally. 
And that still offends me.
    Now we are, at the INS, we are taking some actions in 
places where we see situations that employers are not treating 
people well, through our work site. But we don't have the 
resources to do it in any kind of big way. But we have taken 
some notable actions in the last few months.
    I can understand the logic that this would cause--this kind 
of approach to it would cause employers to be less recognizing 
of the rights of people as human beings. I also think that--
again, without having read the opinion--that it probably makes 
a pretty good argument for our dealing with the situation of 
undocumented aliens in this country. Maybe you don't deal with 
it legislatively and back into it, maybe you deal with it from 
the top down instead of the bottom up.
    Senator Dodd. Well, I thank you for that. You've been very 
patient in time and I'm very grateful to all of you for coming 
up. Obviously we could have spent just at any one of these 
subject matters, a whole hearing. And obviously trying to cover 
a terribly complicated, arguably the most significant--or one 
of the most top two or three significant bilateral 
relationships--a couple of hours of hearings in an afternoon 
does not begin even to penetrate the layers that require it. 
But I hope just in the fact that we're having a series of these 
hearings--and as I said at the outset I really couldn't have, 
in my view anyway, begun a series of hearings without beginning 
with the one that is the most significant bilateral 
relationship. And also, in terms of the rest of the Americas, 
the administration of President Fox, Mexico's role is a 
critical one. And so, that's the reason we've begun this.
    So I'm grateful to the three of you. I've got another panel 
here of views I want to hear on many of these same subject 
matters. We've gone a little longer than I anticipated, but we 
thank you. We'll leave the record open for some additional 
questions. And I'm very grateful to you, Jim, for being here. I 
know there was some question about coming up, and I'm glad you 
did because it helps us in examining these policies a little 
more thoroughly.
    Mr. Ziglar. Like I said, I'm real pleased to be here 
anytime.
    Senator Dodd. Thank you.
    Mr. Ziglar. Thank you, sir.
    Senator Dodd. Thank you all. We've got four witnesses here. 
I'm delighted to have you before the committee. I'll ask you to 
join us at the table. Ms. Barbara Shailor, the director of 
International Affairs Department, AFL-CIO. I might point out 
that I was down at the AFL-CIO for coffee this morning with the 
president, John Sweeney, at about 8 o'clock. And I saw Barbara 
Shailor at that time. So it's almost not quite 12 hours later, 
but I know you've had a busy day. We ran into each other in the 
hallway, I should say.
    Mr. Steven Ladik, president of the American Immigration 
Lawyers Association, we appreciate Mr. Ladik being here. Mr. 
Gregori Lebedev, who is the chief operating officer and 
executive vice president of International Policy, U.S. Chamber 
of Commerce. We thank you, Gregori, for being here. And Ms. M. 
Delal Baer. Thank you, Ms. Baer, nice to see you again, the 
senior fellow and chairman, Mexico Project, deputy director, 
Americas Program, Center for Strategic and International 
Studies, a very well respected organization.
    And so let me thank all four of you for being here. I'm 
sorry that this has gone a little later than anticipated. I'll 
begin in the order I've just introduced you here. Ms. Shailor, 
we'll begin with you. I'll put the clock on like I did for the 
others, and if you can try and live within the timeframe, it 
makes it a little easier. But we thank you very, very much for 
being a part of this hearing, this first in a series of 
hearings on the Americas and the importance of this bilateral 
relationship. Ms. Shailor.

 STATEMENT OF BARBARA SHAILOR, DIRECTOR, INTERNATIONAL AFFAIRS 
   DEPARTMENT, AMERICAN FEDERATION OF LABOR AND CONGRESS OF 
       INDUSTRIAL ORGANIZATIONS [AFL-CIO], WASHINGTON, DC

    Ms. Shailor. Thank you very much, Mr. Chairman. And I also 
recall almost a year and a half ago you were urging president 
Sweeney to have his initial meeting with President Fox. And we 
had the opportunity to lay out some of the framework of this 
discussion at the World Economic Forum.
    Senator Dodd. You're right, I arranged that and we had 
breakfast with incoming President Fox. And I called him and 
asked if they'd be willing to meet with John Sweeney and they 
did. And we had a very, very--Jorge Castenada, the Foreign 
Minister, was there, and president Sweeney and President Fox. 
And it turned out to be a very, very worthwhile meeting.
    Ms. Shailor. It was an excellent meeting. We appreciate 
your leadership on this issue. We have stayed in very close 
contact with the new Fox administration. And as you know, our 
labor movements have a long history going back almost a 
century, but particularly in these last few months the AFL-CIO 
has continued our relationship with CTM and the expanding union 
movement in Mexico.
    On behalf of the AFL-CIO and the over 13 million working 
men and women of every race, ethnic background and immigration 
status, including many Mexican-Americans, it is very clear that 
workers want to improve their lives and the lives of their 
families. Workers here and in Mexico want to be treated with 
basic dignity and respect, free from persecution and harassment 
based on who they are or where they come from. These 
fundamental aspirations of the human spirit do not distinguish 
between workers based on their immigration status.
    The attacks of September 11 and their aftermath, including 
the increased fear of immigration and the greater burden placed 
on immigrants by the recession, have made it more important 
than ever to stand in solidarity with immigrant workers and 
their families. We must demand that they be treated with 
dignity and fairness, both on and off the job. Anything less 
diminishes America, its leaders, its people, and immigrants 
particularly deserve the attention that you and the committee 
are giving these issues.
    Let me point out a number of areas that I will expand on. 
But certainly the issues of utmost concern to the AFL-CIO focus 
on: Legalizing the undocumented among us who are working hard, 
paying taxes, and contributing to their community and the 
Nation; to replace employer sanctions and the failed I-9 
system, which has never served their intended purpose; and then 
in particular, to reform, not expand, the guest worker 
programs. And finally, from a trade union perspective, 
obviously to fully protect worker rights, including the freedom 
to organize a union for all workers regardless of their 
immigrant status, and stiff and meaningful penalties for 
employers who break immigration and labor laws.
    We feel strongly that without a meaningful remedy our 
rights and rules cannot be effective. So, as you have asked 
many of the former witnesses, we are deeply disappointed in the 
decision of the Supreme Court on the Hoffman case which 
invalidated the limited back pay remedy that the NLRB had 
crafted for cases in which undocumented workers have been 
unlawfully discharged. We believe the decision was wrong and we 
will work with others in the Senate to press for legislation to 
overturn this decision and pursue fundamental justice for all 
workers.
    And, we call on Presidents Bush and Fox to reinvigorate 
their discussions on migration as it relates to the United 
States and Mexico. We would hope that these discussions lead to 
a framework for a far-reaching migration accord, consistent 
with our principles, by the end of the summer. And ultimately, 
legislation should not be Mexico-specific. We need a 
comprehensive congressional act on an immigration package, and 
we would hope that that immigration package could follow 
sometime next year.
    It is important to note the special relationship between 
unions and immigrants. American workers and their unions are 
indebted to an earlier generation of immigrants who, in their 
determination to fight exploitation and abuse, founded the 
American labor movement. Today, growing numbers of immigrant 
workers once again are winning a voice at work by joining in 
the unions. Last year, 10 percent of all of union members were 
foreign born, roughly paralleling the percentage in the overall 
U.S. population.
    So to refer back to the specific issues on legalization, 
together with our coalition partners the AFL-CIO is dedicated 
to ensuring that the legislation to legalize undocumented 
workers who contribute to their workplaces and community, 
passes in this Congress. And we will work very closely with a 
expanding coalition on these issues. It is clearly unacceptable 
that upward of eight million people live and work in the 
country each day without the full protection of the law.
    In the workplace, employers may sometimes seek to polarize 
workers based on race, ethnic background and national origin. 
In the face of such a divide and conquer strategy, labor and 
employment laws are broken with impunity, wages and working 
conditions stagnate or fall, and worker progress overall is 
impeded. That's one of the reasons why legislation to address 
the recent Hoffman decision is so important, in addition to the 
broader immigration legislation.
    Also a broad legalization program must allow undocumented 
people from all countries to address their status. This point 
is particularly important in the context of the U.S.-Mexico 
discussions. We value and respect Mexican immigrants. They are 
hard working and deserving, but so are workers from Haiti, 
Guatemala, Poland, Canada and elsewhere. Limiting a legislative 
program to one nationality will only further divide us as a 
people and leave millions of workers and families without the 
legal protections they deserve.
    And wrapping it up rather quickly, the three other areas, 
reforming guest worker programs. Some policymakers have 
advocated a new guest worker program would be the answer. We do 
not agree with this.
    On reforming employer sanctions, these provisions have not 
worked and should be replaced with a more effective mechanism. 
And then finally on the issue of full workplace rights, we are 
working closely with unions in Mexico, in particular around the 
Hoffman case which has been mentioned many times, in 
formulating a position that we can bring back up to the 
Congress that shows the uniformity of commitment on both sides 
of the border.
    So, we look forward to working with you in the days and 
weeks ahead. And I know that president Sweeney particularly 
appreciates your determined leadership on this issue. Thank 
you, Senator.
    [The prepared statement of Ms. Shailor follows:]

Prepared Statement of Barbara Shailor, International Affairs Director, 
 American Federation of Labor and Congress of Industrial Organizations 
                               [AFL-CIO]

    On behalf of the AFL-CIO, thank you for the opportunity to be here 
today to discuss one of the most important issues we face as a nation 
and a people, our policies with respect to Mexico, focusing 
particularly on migration issues. Our nation's relationship with Mexico 
is of significant importance. Mexico is our neighbor, one of our key 
trading partners, and is by far our largest source of new immigrants, 
documented and undocumented, who make an important contribution to our 
economy today.
    The scores of unions that make up the AFL-CIO represent over 13 
million working men and women of every race, ethnicity, and immigration 
status, including many Mexican-Americans. And all of our workers want 
one thing: to provide better lives for their families. All of us want 
the opportunity to hold good jobs in safe environments, which pay a 
living wage and provide reliable health care and retirement benefits 
and a chance to better ourselves through education and training. And as 
much as anything else, workers here and in Mexico want to be treated 
with basic dignity and respect, free from persecution and harassment 
based on who we are or where we come from. These fundamental 
aspirations of the human spirit do not distinguish between workers 
based on their immigration status. Nor, we believe, should we.
    The attacks of September 11 and their aftermath, including 
increased fear and scapegoating of immigration and the great burden 
placed on immigrants by the recession, make it more important than ever 
to stand in unequivocal solidarity with immigrant workers and their 
families. We must demand that they be treated with dignity and 
fairness, on and off the job. Anything less diminishes America, its 
leaders and all its people, regardless of immigration status. And we 
must and can do so even as we make our borders more secure against 
people who want to harm us.
    We call on the Congress and the Administration to proceed with 
plans to:

   Legalize the undocumented among us who are working hard, 
        paying taxes and contributing to their communities and the 
        nation;
   Replace employer sanctions and the failed I-9 system, which 
        have never served their intended purpose;
   Reform, not expand guest worker programs;
   Fully protect workplace rights, including the freedom to 
        organize a union, for all workers--regardless of immigration 
        status--and stiff and meaningful penalties for employers who 
        break immigration and labor laws in order to exploit workers.

    It should be clear from my last point that we feel strongly that 
without a meaningful remedy, our rights and rules cannot be 
meaningful--and so we are deeply disappointed by the decision of the 
United States Supreme Court on the Hoffman case which invalidated the 
limited backpay remedy that the NLRB has crafted for cases in which 
undocumented workers have been unlawfully discharged by their employers 
in violation of national labor law. The decision was wrong. We will 
join with others and work with the Senate to press for legislation to 
overturn this decision and pursue fundamental justice for all workers.
    By allowing unscrupulous employers to unlawfully victimize 
undocumented workers without any economic consequence, the court's 
decision undermines the living standards and working conditions of all 
Americans.
    And we call on President Bush and President Fox to reinvigorate 
their discussions on migration as it relates to the U.S. and Mexico. We 
hope the discussions could lead to a framework agreement for a far-
reaching migration accord consistent with our principles by the end of 
the summer. Ultimately, legislative action should not be Mexico 
specific. We need comprehensive Congressional action on an immigration 
package. And we hope that package could--and should--follow next year.
    It is important to note the special relationship between unions and 
immigrants.
    American workers and their unions are indebted to earlier 
generations of immigrants who, in their determination to fight 
exploitation and abuse, founded the union movement and in so doing, 
improved working conditions and living standards for all working 
families. Today, growing numbers of immigrant workers are once again 
winning a voice at work by joining together into unions. Last year, 10 
percent of all union members were foreign born, roughly mirroring 
immigrants' share of the population overall.
    Legalization: The labor movement is increasingly concerned about 
the welfare of our undocumented brothers and sisters, as we are for all 
immigrant workers. The relationship between unions and their immigrant 
members is mutual: unions make a tremendous positive impact on the 
lives of immigrant workers and their families, and immigrant workers 
have long been a vital part of the union movement. As a growing part of 
the workforce and a growing part of unions, immigrant workers have 
courageously stood with U.S. workers, leading organizing drives and 
assuming positions of leadership on both the local and national levels. 
Together with our coalition partners, the AFL-CIO is dedicated to 
ensuring that legislation to legalize undocumented workers who 
contribute to their workplaces and community passes in the Congress.
    It is unacceptable that upwards of 8 million people live and work 
in our country each day without the full protection of the law. 
Undocumented workers and their families are constantly at risk of being 
preyed upon by criminals, dishonest landlords, or unscrupulous 
employers, by those who believe they can get away with breaking the law 
simply because their victims are immigrants. But, undocumented people 
are not the sole victims when these laws are broken: All of us lose 
some of our own legal protections when entire categories of people are 
denied theirs. This is especially true in the workplace, where 
employers may sometimes seek to polarize workers based on race, 
ethnicity or national origin. In the face of such divide and conquer 
strategies, labor and employment laws are broken with impunity, wages 
and working conditions stagnate or fall, and worker progress overall is 
impeded. That's why legislative action to address the recent Hoffman 
decision is so important.
    Also, a broad legalization program must also allow undocumented 
people from all countries to adjust their status. This point is 
particularly important in the context of the U.S.-Mexico discussions. 
The large number of undocumented Mexican workers is a consequence of 
the 2000-mile border and 300 year history our nations share. We 
recognize and cherish the bond and special relationship between our 
countries. And we value and respect Mexican migrants; they are 
hardworking and deserving. But so, too, are undocumented workers from 
Haiti, Guatemala, Poland, Canada and elsewhere. Limiting a legalization 
program to one nationality will only further divide us as a people, and 
leave millions of workers and their families without the legal 
protections they deserve.
    Reforming guestworker programs: Some policymakers have advocated a 
new guestworker program as the answer to the problems associated with 
our current failed immigration policies. We do not agree. Before there 
is any serious consideration given to a new guestworker program, 
immigrants who have been living in this country, holding jobs, paying 
taxes and contributing to their communities must be given access to 
permanent legal status.
    Beyond that, we are deeply troubled by the guestworker proposals 
some are advocating, which would lift restrictions on recruiting and 
hiring low wage, low skilled foreign workers, while conferring only 
limited protections on these workers and prohibiting them from seeking 
permanent residency. We recognize that some workers want to return to 
their native countries and should be able to do so, but any reforms of 
our temporary worker programs must include a path to permanent 
legalization.
    A new guestworker program built on the failed policies and models 
of the past cannot be the centerpiece of our national immigration 
policy. Analyses by DOL, GAO and others have found that despite 
employers' claims to the contrary, guestworkers earn less than their 
U.S. counterparts. Years of low wages facilitated by the bracero and H-
2A programs and easy access to undocumented workers have left U.S. 
agricultural workers with wages that actually fell during the last 
economic expansion, a time when virtually all other low wage, low skill 
workers saw their incomes rise. An INS report to Congress verified that 
even highly skilled H-1B visa holders in the IT industry earned less 
than U.S. workers in the same occupations. Guestworkers regularly face 
many of the problems associated with contingent employment: lower pay, 
no benefits and intentional misclassification of employment status.
    Guestworkers are tied to an employer or industry or occupation in a 
way that other workers are not. That alone makes them extremely 
vulnerable. While guestworkers are covered by most labor and employment 
laws, the nature of their tie to their employer makes these protections 
more fiction than reality for most. Hence, any guestworker program must 
include and protect all the workplace rights that U.S. workers enjoy. 
In addition, a new guestworker program based entirely on a worker's 
relationship to his or her employer, resulting in a system of virtual 
bondage for many, is unacceptable.
    Reform Employer Sanctions: The last legalization law enacted, IRCA 
in 1986, included provisions making it illegal for an employer to hire 
a worker without work authorization, imposing employer sanctions for 
violations of that law. These provisions have not worked and should be 
replaced with more effective mechanisms. Even though the object of 
employer sanctions was to punish employers who knowingly hire 
undocumented workers, and not the workers themselves, in reality, some 
unscrupulous employers have manipulated the program to violate federal 
and state labor laws and to discriminate against workers. The current 
situation not only harms all workers, but also those employers who face 
unfair competition from others who skimp on labor costs by hiring and 
then exploiting undocumented workers.
    I think no one will contest that employer sanctions have failed. 
They have not deterred the flow of undocumented workers into the United 
States, and almost no employer ever experiences a penalty or sanction. 
In 1999, the General Accounting Office reported that only 17% of lead-
driven cases resulted in any sanction or penalty against employers who 
had violated the law, and that INS collected only 50% of the fines that 
were levied. During the same period reviewed by the GAO, only 2% of all 
investigations resulted in a criminal penalty.
    In addition, both the GAO and the U.S. Commission on Civil Rights 
have documented that numerous workers, mainly Asian and Latino, have 
faced discrimination by employers who assumed the workers lacked 
legitimate work authorization because they ``appeared'' foreign or 
spoke with accents. In effect, a system designed to penalize one form 
of unlawful behavior promoted another.
    Although employer sanctions did not create the problems of 
exploitation and discrimination, they have contributed significantly to 
the inability of immigrant workers to enjoy and enforce the most basic 
of labor and workplace rights. Having failed to fulfill their central 
purposes and, indeed, having set back the progress of workers 
generally, employer sanctions must be replaced with laws that will 
work. We should increase criminal penalties for employers who knowingly 
recruit undocumented workers and participate in document fraud for 
business advantage. Moreover, to help ensure the new scheme works and 
to avoid the manipulation that characterizes the present system, it is 
essential that immigrant workers, who risk unfair deportation when they 
stand up for their rights, receive protections when they file well-
ground complaints against their employers.
    Full workplace rights: In theory, all workers, regardless of 
immigration status, enjoy most of the basic rights and protections 
under the nation's labor and employment laws. In reality, though, 
undocumented workers typically fall through and outside this safety 
net--a result that all too often occurs not by accident, but by design. 
The constant threat of deportation serves as a velvet hammer employers 
can wield not only to deny basic rights, such as the right to earn the 
minimum wage, but also to deter undocumented workers from filing 
complaints. And since most labor standards investigations are 
complaint-driven, employers deny rights and protections for 
undocumented workers with virtual impunity.
    In many instances, employers call the INS to report undocumented 
workers only after they get wind of organizing campaigns or labor 
standards complaints. Upon learning of organizing efforts or that 
immigrant workers have filed wage and hour, OSHA, or EEOC charges, 
employers who have shown no interest in complying with any other labor 
law suddenly become converted to the sanctity of the ban on hiring 
workers without work authorization. In a sense, employers determine 
immigration enforcement policy by alerting the INS whenever workers 
seek to exercise their employment and labor rights.
    Union organizers have faced this tactic when they try to organize 
workplaces that are comprised predominantly of immigrant workers. It 
takes a lot of courage for workers to come forward and openly fight for 
a voice at work through a union. Human Rights Watch stated in its 
report ``Unfair Advantage: Workers' Freedom of Association in the 
United States under International Human Rights Standards,'' that many 
U.S. workers ``who try to form and join trade unions to bargain with 
their employer are spied on, harassed, pressured, threatened, 
suspended, fired, deported or otherwise victimized in reprisal for 
their exercise of the right to freedom of association.'' The threat to 
immigrant workers is even greater: they risk not only job loss, but 
also possible deportation if they exercise their right to form a union.
    Instead of punishing workers, immigration and labor standards 
policies should specifically penalize employers who break the law and 
protect workers who uphold the sanctity of our legal system by pursuing 
their labor and employment rights. We need to ensure that all workers, 
regardless of their immigration status, are made aware of their rights 
and of the means to vindicate them. And immigrant workers should have 
specific protections against employers who try to use the workers' 
immigration status to block their efforts to form a union or to 
otherwise exercise basic workplace rights. Workers should be protected 
against deportation when they file a labor standards complaint unless 
the INS can prove that the deportation proceedings are in no way 
related to the workplace situation, and that the complaint was not 
filed in bad faith to avoid deportation. Agencies such as the 
Department of Labor should be required to keep confidential any 
information they learn about a worker's immigration status during an 
investigation or proceeding enforcing labor rights. The INS should be 
prohibited from proceeding with workplace investigations during a labor 
dispute. Finally, in order to better target investigations and 
enforcement, the Departments of Labor and Justice should be required to 
conduct a study of industries that employ undocumented workers, and the 
exploitation of undocumented workers by their employers.
    Of course, continued inadequate funding for labor standards 
enforcement will hamper the measures I have outlined above. Funding for 
labor protection activities has not kept pace with labor force growth 
during the 1990's. We must reverse that trend and fund these programs 
adequately, if we are to ensure full workplace rights and protections 
for all.
    We recognize that the issues we have discussed touch on just a few 
aspects of the U.S.-Mexico talks now underway. There are several other 
issues of critical importance. For instance, we believe that 
discussions on the well being of U.S. and Mexican workers should 
include a close examination of labor rights in Mexico and stronger 
enforcement of Mexican labor laws to protect the right to organize and 
other core ILO principles. For example the system of employer dominated 
unions called ``protection contracts'' severely restrict freedom of 
association. So far, these issues have been excluded from the Bush-Fox 
agenda.
                               conclusion
    Unions are playing an important role in bridging the gap between 
immigrant and non-immigrant workers. We know that the fortunes and 
futures of all workers in the United States--are linked: If 
undocumented workers have no practical choice but to accept substandard 
pay and working conditions, their U.S. counterparts will eventually be 
forced to accept such conditions as well. There is no protection for 
any worker when some workers have freedom to exercise their labor and 
employment rights and others do not.
    Unions have already begun the process of bringing workers together 
and encouraging open and frank discussions in the workplace and in our 
communities. We believe this dialogue fosters the respect and 
brotherhood necessary for our country to move forward, even as our 
demographics change. And we know that when we act to strengthen 
protections for the most vulnerable among us, we build a movement and a 
system that is stronger for all of us.
    We strongly believe that the U.S.-Mexico discussions on migration 
should reflect these principles, and we look forward to working with 
you as the process moves forward.

    Senator Dodd. Very, very good, and we thank you. We're 
going to talk about the Hoffman case with all of you here 
because I find it's an intriguing matter--hearing both 
arguments on either side of this. I realize obviously having a 
regulation or a statute is different than a constitutional 
amendment. But I know that constitutional protections apply to 
all people in the United States regardless of how they got 
here, in a sense.
    One may try and draw some distinctions, but it seems to me 
there as well, to be able to summarily--to dismiss someone 
illegally and then--you were willing to hire them, you weren't 
worried about their status when you hired them--and then gives 
you the right to illegally dismiss them and not have to bear 
any responsibility, back pay--is rather precarious when it 
comes to trying to discourage, using all the vehicles to 
discourage illegal immigration in the country. So, I will come 
back and I'll be asking others for their point of view on this 
as well.
    Mr. Lebedev, thank you for being with us.

   STATEMENT OF GREGORI LEBEDEV, CHIEF OPERATING OFFICER AND 
EXECUTIVE VICE PRESIDENT, INTERNATIONAL POLICY, U.S. CHAMBER OF 
                    COMMERCE, WASHINGTON, DC

    Mr. Lebedev. Mr. Chairman, thank you. On behalf of the 
three million member companies of the U.S. Chamber I appreciate 
the opportunity to comment today, not only on the spectacular 
success of the U.S.-Mexico partnership over the past decade, 
but on the unfinished agenda which we believe our two countries 
still face today. My observations this afternoon will address 
three major areas in the U.S.-Mexico relationship: trade, 
border management and migration.
    First, let me briefly highlight the dramatic revitalization 
in this critical relationship in recent years. The foundation 
of these improvements is, of course, the North American Free 
Trade Agreement. In the 8 years since NAFTA came into force, 
trade between the United States and Mexico has nearly tripled, 
as Ambassador Larson said, with bilateral commerce topping 
today about $245 billion.
    This explosion in U.S. trade with Mexico has allowed U.S. 
companies to generate hundreds of thousands of new jobs. In 
fact, NAFTA was one specific reason why the U.S. economy 
generated over 20 million new jobs in the 1990's. So, contrary 
to the politically distorted forecasts, there has been no giant 
sucking sound, just the noise of three nations working 
together, raising incomes and building a prosperous and shared 
future.
    However, one item that some Members of Congress believe 
ought to be placed on the unfinished agenda is the NAFTA 
Chapter 11. Critics of Chapter 11's investor state claims 
process argue that it gives foreign companies rights that are 
denied to U.S. firms. This is indeed an odd and quite upside 
down point of view.
    It is curious how these critics overlook the fact that the 
United States is by far the biggest beneficiary of the investor 
state claims mechanisms. Such provisions are included in over 
40 U.S. bilateral investment treaties around the world, for one 
very good reason. The United States is the world's largest 
overseas investor, with annual sales overseas surpassing $2.5 
trillion. This sum is roughly two and a half times our total 
merchandise trade.
    While foreign investors in the United States can count on 
our legal system to ensure due process, U.S. investors in too 
many foreign countries cannot enjoy similar security without 
effective treaty provisions and protections. It's that simple. 
Let me repeat this crucial point. The United States is the 
primary beneficiary of these protections against discriminatory 
treatment. Why the United States should want to re-write these 
rules is peculiar indeed, and the U.S. Chamber urges the 
Congress to think long and hard before making any changes to 
Chapter 11.
    Let me speak for a moment about secure and efficient 
borders, Mr. Chairman. Indeed, border management has become not 
just a buzzword in Washington, but an imperative in the wake of 
September 11. Economic activity at the border is tremendous. 
Over 800,000 people cross the U.S.-Mexican border every day. 
That includes 250,000 individual vehicles and over 12,000 
trucks.
    While we obviously must and will ensure our physical 
security and protect our country from the devastation that 
could be caused by another terrorist attack, we also must 
protect our economic security, and therefore ensure the 
continuation of legitimate travel and trade at our borders. In 
January the Chamber conducted a survey of local and state 
Chambers of Commerce on the Mexican border to assess the 
economic impact of the post-9/11 security measures. Not 
surprisingly, every locality reported significant delays 
immediately after the attacks. But, these delays have gone down 
as Customs and INS have been operating on 14 to 16 hour a day 
shifts. However, even with that effort, border crossings are 
still down by as much as 30 percent in some areas, and local 
economies continue to suffer.
    In response to this situation, the U.S. Chamber has created 
the Americans for Better Borders (ABB) coalition, and the 
Chamber and the ABB support S. 1749, which the Senate has been 
debating. While this bill is only a good first step, the 
Chamber also applauds the recent smart border agreement with 
Canada and the 22 point border accord with Mexico, which was 
announced during President Bush's recent trip to Monterrey. 
These are very important initiatives.
    Many in Congress and in the administration have also urged 
the creation of a new border agency to achieve the dual goals 
of improving security and facilitating trade at the border. The 
Chamber is supportive of all measures that would move toward 
these two goals. But, we do not encourage reorganization for 
the sake of reorganization. We're all well aware of the good 
work being done by the agencies toward improving border 
processes. We don't want to see those initiatives lost or 
derailed as otherwise necessary changes will occur. 
Consequently, the Chamber looks ahead to working with the 
Congress and the administration on any set of broad reforms on 
border oversight that might be proposed.
    Although the challenges of border management are enormous, 
arguably the biggest area of unfinished business in the U.S.-
Mexico agenda is migration. To be sure, it's undeniable that 
our legal and regulatory mechanisms have been largely out of 
step with this phenomenon, resulting in terribly unfortunate 
consequences. It's time for this country to initiate a 
fundamental and comprehensive change in our immigration system. 
As President Bush says, we need to make it legal for willing 
employers to get together with willing employees.
    The U.S.-Mexico migration discussions are the first step in 
this comprehensive reform, and the U.S. Chamber actively 
supports this process. Last Thursday, Chamber president and CEO 
Tom Donohue and AFL-CIO president John Sweeney and 
representatives of the Hispanic and religious communities 
renewed their call for comprehensive immigration reform in the 
course of the U.S.-Mexico dialog. Month-to-month changes in the 
unemployment rate have altered the fundamental reality that 
America's population is aging. In short, Mr. Chairman, we need 
to move forward in a comprehensive fashion to examine the whole 
range of immigration policies, including guest workers, the 
legalization of those who are currently gainfully engaged in 
this country, and a management system that will allow us to 
monitor those in this country to either facilitate their 
ultimate matriculation into our society or to help them return 
to their country of origin.
    [The prepared statement of Mr. Lebedev follows:]

 Prepared Statement of Greg Lebedev, United States Chamber of Commerce

    Mr. Chairman, thank you for allowing the United States Chamber of 
Commerce to submit this statement today. I am Greg Lebedev, Chief 
Operating Officer and Executive Vice President for International Policy 
at the United States Chamber of Commerce, which is the world's largest 
business federation. On behalf of our three million member companies of 
every size, sector, and region, I appreciate this opportunity to 
comment not only on the spectacular success of the U.S.-Mexico 
partnership over the past decade but on the unfinished agenda our two 
countries face today. My testimony will address three major areas in 
the U.S.-Mexico relationship: trade, border management, and migration.
                          a decade of progress
    First, I would like to survey the dramatic improvements in this 
vital relationship in recent years. The tremendous progress in U.S.-
Mexico relations over the past decade is a bipartisan success story. 
The first U.S. President named George Bush changed the relationship 
between our countries forever by proposing and successfully negotiating 
a completely new economic partnership under the North American Free 
Trade Agreement (NAFTA). Likewise, President Clinton deserves credit 
for his leadership in making the case for NAFTA's passage before the 
Congress and for standing by Mexico during the 1995 financial crisis.
    But more than his predecessors, President George W. Bush has 
signaled a new perspective on the U.S. relationship with Mexico, By 
choosing Mexico as the site of his first foreign trip as president, 
President Bush showed that Mexico and the other nations of the Americas 
would be a principal focus of his administration's foreign policy. 
Mexico's President Vicente Fox shares this commitment to finding new 
approaches to longstanding challenges.
    The key to the progress of the past decade is clearly the 
enormously successful North American Free Trade Agreement. In the eight 
years since the NAFTA came into force, trade between the United States 
and Mexico has nearly tripled, with bilateral commerce topping $245 
billion last year.
    The explosion in U.S. trade with Mexico has allowed U.S. companies 
to generate hundreds of thousands of new jobs. By one calculation, the 
boom in U.S. exports to Mexico alone generated over one million new 
U.S. jobs, to say nothing of new jobs created south of the Rio Grande. 
Indeed, NAFTA was one reason why the U.S. economy generated over 20 
million new jobs in the 1990s. There has been no giant sucking sound--
just the noise of three nations working together, raising incomes, and 
building a prosperous, shared future.
    Also, the NAFTA has boosted international investment. By 2001, U.S. 
companies had direct investments worth $35 billion in Mexico. Among 
emerging markets, the level of U.S. investment in Mexico is second only 
to Brazil (by less than $1 billion) and is more than four times the 
amount U.S. companies have invested in China. Partly as a result of 
this new flow of investment, Mexican sovereign and corporate debt is 
receiving investment grade ratings from international agencies, and 
Mexico has paid off all its IMF debts years ahead of schedule.
    After growing by nearly 8% in 2000, Mexico today has followed its 
northern neighbor into a recession, but it is a North American 
recession characterized by a contraction of less than 1% of GDP. It is 
not a classic Latin American recession, in which economies can contract 
by 5-10% of GDP. North America is moving toward a true single market.
                       nafta's unfinished agenda
    But more can be done to enhance the value of the trade and 
investment partnership Mexico and the United States are building. Our 
two nations took a step forward a year ago, when the U.S. Overseas 
Private Investment Corporation (OPIC) announced that it would offer 
long-term financing to small U.S. businesses investing in Mexico. This 
was a historic decision because OPIC support was not available to U.S. 
companies operating in Mexico until now. President Fox welcomed OPIC's 
announcement, which comes in response to strong demand by U.S. 
businesses to expand into the Mexican market.
    At present, OPIC is authorized to lend from $100,000 to $200 
million for small business projects in Mexico in which U.S. businesses 
have at least a 25 percent ownership interest. However, the business 
community is still waiting for an inter-governmental agreement to allow 
OPIC to provide a complete array of investment services to U.S. 
companies operating in Mexico. Over 140 countries around the world have 
signed such agreements with the United States, but outdated concerns in 
the Mexican Congress about such an agreement infringing on national 
sovereignty have made Mexico one of just a handful of countries where 
OPIC services are not generally available.
    It's time for to leave these antiquated views behind. Thanks to its 
free trade agreements with 32 nations, Mexico is already showing the 
world that free trade is an engine of prosperity. Outmoded thinking 
should not stand in the way of mutually beneficial trade and 
investment,
    One item that some critics of NAFTA believe ought to be placed on 
the ``unfinished agenda'' for further work is the NAFTA's Chapter 11. 
Even some members of Congress have criticized Chapter 11's ``investor-
state claims'' process, asserting that it gives foreign companies 
rights that are denied to U.S. firms. What these critics overlook is 
that the United States is by far the biggest beneficiary of investor-
state claim mechanisms. Such mechanisms are included in literally 
hundreds of bilateral investment treaties around the world and are an 
established and beneficial part of international commercial 
jurisprudence.
    Why is the investor-state claim process so important to the United 
States? First, because the United States is the world's largest 
overseas investor, with annual sales by overseas affiliates of U.S. 
companies surpassing $2.5 trillion, a level roughly two and half times 
that of our merchandise trade. While foreign investors in the United 
States can count on our legal system to ensure due process, U.S. 
investors in many foreign countries cannot enjoy similar security 
without effective treaty provisions. This is why such provisions have 
been included in 45 U.S. investment treaties with other countries. Even 
as we speak, U.S. investors in Argentina are invoking the investor-
state claim process laid out in the investment treaty between the 
United States and Argentina, to the great benefit of U.S. companies and 
workers.
    Let me repeat this crucial point: that the United States is the 
primary beneficiary of these protections against discriminatory 
treatment. Rules permitting investor-state arbitration grant U.S. 
investors access to an impartial, independent decision-making body when 
they make claims against foreign governments for breaking rules 
established in trade agreements and investment treaties. Why the United 
States should want to rewrite these rules is unclear, and the U.S. 
Chamber urges the Congress to think long and hard before making any 
changes to Chapter 11.
    An additional area where our two countries are just beginning to 
live up to the NAFTA's promise is cross-border trucking. The U.S. 
Chamber of Commerce was pleased last year when the Bush Administration 
and the Congress reached a consensus on legislation that will allow the 
United States to live up to its NAFTA commitments on cross-border 
trucking.
    Under NAFTA, the United States and Mexico pledged to liberalize 
cross-border trucking, but the United States retains full authority to 
inspect--and reject--trucks that do not meet U.S. safety standards. 
However, beginning in 1995, the Clinton Administration hid behind 
safety standards to deny Mexican trucks entry to the United States. 
That policy maintained a cumbersome, environmentally damaging, and 
costly system that has put a brake on further trade growth. With over 
80% of our trade moving by truck, neither country can afford to block 
our trucks at the border.
    In the wake of a NAFTA dispute panel ruling that unanimously found 
the United States in violation of the agreement, President Bush has 
pushed forward with plans to bring our country into compliance with our 
solemn commitments under NAFTA. The Department of Transportation has 
rolled out regulations that will allow the United States to do just 
that beginning in the second half of this year.
    Clearly, the time has come for our countries to open our borders to 
a modern cargo transportation system that will allow our economic 
partnership to reach the next level of success. We must insist that our 
countries make adequate--and smart--investments in border 
infrastructure to accommodate the ever-expanding volume of trade.
                     a secure and efficient border
    Border Management has become not just a buzzword in Washington but 
also an imperative in the wake of September 11. In many ways the 
renewed focus on the operations of our borders has been a boon--for too 
long policymakers in Washington have paid little attention to the 
functioning of our borders, or, when they did, it almost always dealt 
with stopping the flow of illegal immigration or contraband. Little has 
been done over the past decades to update our border management 
policies, border infrastructure or staffing to facilitate the millions 
of legitimate travelers and billions of dollars in legitimate trade 
that crosses our borders each day. Specifically, over 800,000 people 
cross the U.S/Mexico border each day. That includes 250,000 personal 
vehicles and over 12,000 trucks. Truck trade with Mexico amounted to 
$171.1 billion in 2000.
    As I stated in the first part of my testimony, under NAFTA, these 
border crossings represent a significant portion of our international 
trade and our domestic economy. While we must ensure our physical 
security and protect our country from the devastation that could be 
caused by another terrorist attack, we must also protect our economic 
security, and ensure the continuation of the legitimate travel and 
trade at our borders. We must remember that the terrorists also 
targeted our economy when they struck at our national symbols.
    In the wake of the September 11 attacks, our nation's ports of 
entry have been on a Level 1 Security Alert. This increased security 
has meant that commercial and passenger traffic at our nation's land 
borders has been subject to increased scrutiny. While this security is 
necessary, it has also resulted in significant disruptions to the 
normal course of trade and travel across our borders.
    In December, the Chamber conducted a survey of local and state 
chambers of commerce on the Mexican border to assess the economic 
impact of the post-9/11 security measures. Every locality reported 
significant delays immediately after the attacks. Delays have gone down 
since then as Customs and INS have been operating on 14-16 hour shifts, 
mounting uncountable overtime hours, and stretching resources to the 
limit. National Guard and local law enforcement have been called in to 
assist with managing the traffic flow. But even so, border crossings 
are still down as much as 30% in some areas and local economies that 
are heavily dependent on the border traffic are continue to suffer. We 
are gravely concerned that the current border situation is 
unsustainable in the long term,
    In response, the U.S. Chamber has created the Americans for Better 
Borders (ABB) coalition. The coalition brings together over 100 
regional business organizations, companies, and national trade 
associations representing manufacturing, hospitality, tourism, 
transportation, recreation and other industry sectors to work to ensure 
the efficient flow of exports and tourism across our borders while 
addressing national security concerns.
    The Chamber and ABB support S. 1749, the Enhanced Border Security 
and Visa Entry Reform Act, sponsored by Senators Kennedy, Brownback, 
Feinstein and Kyl, which we believe takes good, reasoned steps toward 
security while ensuring the continued flow of legitimate travel and 
trade. The House passed a version of this bill in December and we urge 
the Senate to do so as well.
    But this bill is only a first step. We cannot address our border 
security from our side alone. We must work in concert with our 
neighbors. The Bush Administration has acknowledged this need and has 
moved forward in a positive way to address border issues by engaging 
Canada and Mexico in the creation of ``smart border'' accords. The 22-
point accord with Mexico, announced during President Bush's trip to 
Monterrey last month, commits the United States and Mexico to moving 
forward on an expedited clearance program for shipments by firms that 
participate in enhanced compliance regimes, dedicated lanes for 
frequent border crossers with ``smart cards,'' and exploration of joint 
border infrastructure. This new agreement also provides a framework for 
future border cooperation and communication between the United States 
and Mexico.
    Many in Congress and in the Administration have also urged the 
creation of a new border agency to achieve the dual goals of improving 
security and facilitating trade at the border. The Chamber is 
supportive of all measures that would move toward those two goals, but 
we do not favor reorganization for the sake of reorganization alone. 
Any agency consolidation or reorganization should be undertaken with 
specific goals and outcomes in mind. We are also aware of the good work 
being done at the agencies now toward improving border processes, and 
we would not want to see those efforts derailed in the rush to make 
organization changes. It is a daunting challenge to reform both the 
procedures at our borders and their management oversight at the same 
time, and in an urgent manner. But let me say this clearly--when it 
comes to our borders we cannot afford to make mistakes. So we must 
think carefully about all such moves and gauge their impact before we 
undertake them.
    The Chamber can serve as a forum for bringing together lawmakers 
and policymakers with the private sector to accomplish these 
objectives. Later this month we will host a daylong forum with Members 
of Congress and representatives from business and academia to discuss 
cargo security and how to achieve the dual goals of security and 
efficiency. We would like to work with Congress and the Administration 
on any broad reforms of border oversight that might be proposed.
                  creating a legal migration framework
    Although the challenges of border management are enormous, arguably 
the biggest area of ``unfinished business'' in the U.S,/Mexico agenda 
is migration.
    The United States and Mexico share almost 2,000 miles of border in 
addition to cultural, historic, economic and familial times that go 
back generations. The links between our economies also extend to our 
workforce. These factors have resulted in the patterns of migration 
that have evolved over centuries. And yet our legal and regulatory 
mechanisms have been largely out of step with this phenomenon, 
resulting in terribly unfortunate consequences: millions of people 
living and working in the U.S. without legal status, but building our 
communities and economy; hundreds of people dying each year on our 
border trying to achieve the same American dream; and a thriving 
criminal underclass to take advantage of this system.
    It is time for us to seriously address this reality. We need 
comprehensive, fundamental change in our immigration system--not just 
more small band-aid fixes that create more problems than they solve. We 
need to make it legal for, as President Bush says, ``willing employers 
to get together with willing employees.''
    And once again, President Bush has shown leadership in this 
difficult area. He and President Fox announced in February 2001 the 
creation of a High-Level Bi-National Working Group on migration, and 
tasked these senior cabinet officials with developing a new immigration 
framework for the United States and Mexico. We have supported these 
discussions from the beginning.
    Last fall, in fact only four days before the terrorist attacks, 
U.S. Chamber President and CEO Tom Donohue testified before the Senate 
Judiciary Committee, along with AFL-CIO president John Sweeney and 
representatives of the Hispanic and religious communities to urge 
comprehensive immigration reform in the course of the U.S./Mexico 
dialog. And, last Thursday, these groups came together again for the 
first time since the attacks to renew their call for immigration policy 
reform. We continue to state reality: we need these workers and they 
are not going anywhere.
    Month-to-month changes in the unemployment rate have not changed 
the fundamental reality that America's population is aging and our pool 
of available workers is shrinking. According to the Bureau of Labor 
Statistics, by 2010 we will have 167.8 million jobs, a more than 15% 
increase from current levels. But our workforce is expected to grow 
only 12%, to 158 million, in the same period. And the median age of the 
workforce will be over 40 years old! We need to change our policies, 
make legal immigration the norm, and expand--not limit--immigration to 
meet our labor needs.
    New immigration policy must satisfy three important requirements.
    First, we need to address the need for employers to hire foreign 
workers legally when U.S. workers are not available. We need to allow 
employers to fill jobs quickly and workers to have the rights and 
dignity that come from having legal status.
    Second, we need workable temporary and long-term visas. We need to 
create new visas that go beyond seasonal needs and that have 
streamlined processes that do not create additional, unnecessary 
burdens. We also need to assure that everyone is playing fairly: 
offering the required wages, looking first within the U.S. and treating 
workers well. We need a system that is flexible to allow employers to 
train and promote these workers, to allow workers to find the best 
employers for them, and for both employers and employees to make the 
arrangement permanent, when both agree.
    And third, but possibly most importantly, we need to address the 
status of those who are already here and contributing to our economy. 
We believe that those who have already demonstrated their commitment to 
the United States by living here, working and paying taxes, should have 
a means by which they can earn permanent residence. There are many 
possible ways to accomplish this that are being discussed by the 
policy-makers; but we simply want to ensure that these individuals can 
continue their contributions to their employers and communities.
    Now there will be some who will say that in light of the terrorist 
threat against us, how can we propose such a broad expansion of our 
legal immigration system. The Chamber has been at the forefront of 
creating a security framework in which business can continue to operate 
and I would argue that immigration reform is fully consistent with our 
national security imperative.
    A regulated, structured immigration system will tell us who is 
coming to our country, where they are living, and assure us that they 
are not terrorists. We need to bring into the light hard working, 
upstanding immigrants who deserve protection under our laws, while 
exposing criminal gangs and terrorists that use the current system to 
their advantage.
    The relationship between the United States and Mexico cannot 
flourish with this large issue remaining unaddressed. As Tom Donohue 
said on Thursday to President Bush, President Fox and Congress: ``Do 
it. Work it out. And we . . . will be here to work with you. But don't 
leave this unfinished business.''
                               conclusion
    In conclusion, Mr. Chairman, the U.S. Chamber of Commerce believes, 
as the President does, that we have no more important relationship in 
the world than with our neighbors in Mexico, and we need to do all we 
can to perpetuate and strengthen that relationship, through increased 
trade, secure and efficient borders and a migration framework that 
meets the needs of both nations, And we look forward to working with 
Congress and the President to achieve those goals.
    Thank you, and I am happy to answer your questions.

    Senator Dodd. Very good, I thank you for your testimony. 
I've got some questions for you in a few minutes. Ms. Baer, why 
don't you go ahead.

STATEMENT OF M. DELAL BAER, PH.D., SENIOR FELLOW AND CHAIRMAN, 
 MEXICO PROJECT; DEPUTY DIRECTOR, AMERICAS PROGRAM, CENTER FOR 
      STRATEGIC AND INTERNATIONAL STUDIES, WASHINGTON, DC

    Ms. Baer. Thank you very much, Senator Dodd. Thank you so 
much for your leadership on these issues over the years. It's a 
tremendous honor to testify before you.
    Senator Dodd. Thank you.
    Ms. Baer. Mr. Chairman, if you were to ask me the question 
what are the two most important issues confronting the United 
States and Mexico today, I would answer without hesitation. 
First, we must make provision for the mutual security of our 
two nations. It is fundamental. And second, we must do all we 
can to support the consolidation of Mexico's new democracy. Let 
me begin with a few comments on security.
    The national interests of the United States and Mexico are 
complementary when it comes to homeland security. Millions of 
Mexicans and Mexican-Americans reside in the cities of the 
United States, for example, and they are as vulnerable to a 
terrorist attack as is any other U.S. citizen. A contagious 
bioterrorist attack, for example, would know no boundaries, and 
it would strike deep into the heart of Mexico as surely as it 
would strike into the U.S. heartland.
    The defense of our contiguous airspace, land, border and 
seacoasts is essential to the uninterrupted flow of our 
integrated trade and transportation systems. Mr. Chairman, I 
believe that there is a compelling rationale, for the first 
time in the history of U.S.-Mexican relations, for creating a 
partnership for security, an orderly framework for U.S.-Mexican 
homeland defense that would complement our efforts in the 
Partnership for Prosperity. The objective of such a framework, 
as I conceive of it, would be focused principally on matters of 
mutual homeland defense.
    Mexico and the United States, you know your history very 
well, have never had an institutionalized defense arrangement, 
as has the United States and Canada in the case of NORAD, for 
example. Yet surely, we should be thinking about air and sea 
defense cooperation. Guidelines are needed regarding hijacked 
civilian airlines which could cross international borders, 
overflight rights, and coordinated operations in emergency 
situations.
    A bilateral data base, for example, of shared flight 
pattern information is needed in order to be able to detect 
cross-border flight path anomalies. I also suspect that our 
grip is shaky on even such basic issues as the low flying 
illegal aircraft that regularly evade radar detection to cross 
the border. I applaud the steps mentioned by Jim Ziglar that 
have been taken with the signing of the 22 point bilateral 
agreement by Presidents Bush and Fox aimed at creating smarter 
and more secure borders. I would simply warn that the 
institutional capacity of Mexico to implement such accords is 
limited by the lack of resources, trained personnel and 
technology.
    You, Senator, were asking questions about whether or not 
the resources were sufficient for the INS to comply with its 
mission. And I have serious doubts about whether there are 
sufficient resources for our partners, with all of their best 
intentions, to meet their own missions as well. I'll just give 
you one example.
    According to the Mexican Government's figures as released 
by UNICEF, as of 1998 there were over five million Mexican 
children without birth certificates, which suggests how 
difficult it is for the Mexican Government to keep tabs on its 
own citizens, let alone those who would enter Mexico illegally.
    Senator Dodd. Enter the United States illegally.
    Ms. Baer. Pardon me.
    Senator Dodd. Enter the United States illegally.
    Ms. Baer. And into the United States, absolutely, but born 
in Mexico. Also illustrative is the ease with which one can 
acquire false birth certificates, military service cards and 
driver's licenses to create fictitious identities. The United 
States and Mexico, I believe, will have to apply immense 
resources, more than we currently are, and hands-on cooperation 
in order to effectively achieve our goal of secure borders.
    So, I am interested in your repeated allusion to the need 
for resources. My own intuitive suspicion is that there is a 
need for a serious infusion of resources on both sides of the 
border. We shouldn't be shy about making a compelling case for 
better defending our citizens. It's a controversial issue in 
Mexico. But making the case for a partnership for security 
would be the boldest thing to be attempted in the bilateral 
relationship since the passage of the North American Free Trade 
Agreement, which as you know required a revolution in the 
historic mindset of bilateral relations. And I think it's time 
to work toward another revolution in our mindset of bilateral 
thinking.
    Let me make a few comments on the consolidation of 
democracy and building prosperity. Obviously our security 
efforts will be in vain if it is not to defend freedom. The 
consolidation of Mexico's democracy is important to the United 
States and to building a community of shared values in North 
America, to which you alluded. In that context, Mr. Chairman, I 
am increasingly worried about the apparent difficulty of 
Mexico's new democracy to generate multi-party consensus on 
basic policy matters at home. Such difficulties could well 
impact Mexico's margin for maneuver abroad and in its 
relationship with the United States.
    At the end of the day it's not really clear to me what more 
the United States can do or should do to help Mexico 
consolidate its new democracy. It's clear to me what we 
shouldn't do. We shouldn't take sides in Mexico's partisan 
battles, I think that's elementary. Nor should we be in the 
business of designing our bilateral relationship with one eye 
on the partisan balance of Mexican politics. I guess I have a 
simpler vision, and that is offering hope to Mexico's poorest 
citizens might be one of the best things that we can do in the 
United States to help Mexico consolidate its new democracy.
    Presidents Fox and Bush have announced the deliberations of 
the public-private group called the Partnership for Prosperity. 
I believe that a vigorous commitment must now be made for 
providing resources to implement that partnership vision. Alan 
Larson mentioned that there is no appropriation envisioned for 
the partnership initiative. I wonder whether or not perhaps we 
should be thinking of that.
    I'm not a great believer in foreign aid, Mr. Chairman, but 
if it is managed with an eye toward triggering private 
investment, then perhaps it well may make some sense, and it 
would offer hope in Mexico and it would strengthen our 
bilateral relationship. I worked on the agricultural committee 
of the Partnership for Prosperity, and we ended up deciding 
that the United States and Mexico should facilitate partnership 
agreements between Mexico campesinos organizations and private 
investors. I think if we move energetically ahead on something 
like that we can touch the lives of thousands, and we can bring 
hope to many.
    In conclusion, I am concerned about the potential for 
growing impatience in Mexico with democratic institutions. I am 
concerned about the growing frustration in Mexico about the 
perceived absence of progress in bilateral relations. Mexico is 
a shining light in our troubled Western Hemisphere, but we 
shouldn't take it for granted. We have to deliver results.
    And let me conclude by citing Ecclesiastes, the famous 
passage: ``To everything there is a season, and a time to every 
purpose under heaven.'' Now is the season for the United States 
and Mexico to embrace the dual purpose of defending democracy 
and future generations of Mexicans and Americans from the 
depredations of global terror. Thank you very much.
    [The prepared statement of Ms. Baer follows:]

Prepared Statement of M. Delal Baer, Ph.D., Chairman and Senior Fellow, 
     Mexico Project, Center for Strategic and International Studies

    a partnership for prosperity and security--u.s.-mexico relations
    Mr. Chairman and distinguished Members of the Committee,
    Thank you for inviting me to share my views about U.S.-Mexico 
relations with the Committee. This hearing is especially timely. We are 
at a special moment in the history of U.S.-Mexican relations, and I am 
not convinced that we are doing all we can to meet the challenges 
before us.
    Mr. Chairman, if you were to ask me the question, ``What are the 
two most important issues confronting the U.S. and Mexico,'' I would 
answer without hesitation--first, we must make provision for the mutual 
security of our two nations and second, we must do all that we can to 
support the consolidation of Mexico's new democracy. Mexico's 
democratic transition and the tragic events of September 11 create a 
dramatic window of opportunity to build a new security relationship 
with Mexico at the same time that we help to advance Mexican social and 
economic development. We must work hard to build a Partnership for 
Prosperity at the same time that we build a new Partnership for 
Security.
U.S.-Mexico Homeland Defense
    Let me begin with a discussion of security issues. The national 
interests of the U.S. and Mexico are complementary when it comes to 
homeland defense. Millions of Mexicans and Mexican Americans reside in 
the cities of the United States, for example, and they are as 
vulnerable to terrorist attack as any U.S. citizen. A contagious bio-
terrorist attack, for example, would know no boundaries and which would 
strike into the heart of Mexico as surely as it would strike into the 
U.S. heartland. The defense of our contiguous air space, land border 
and seacoasts is essential to the uninterrupted flow of our integrated 
trade and transportation systems. Open trade must not create an open 
door for terrorists, and Mexico's interest in liberalized U.S. 
immigration policies depends upon closing loopholes that can be 
exploited by terrorists. In sum, it is hard to argue with the 
proposition that our destinies are linked by geography and that 
everything possible must be done to assure the safety of the citizens 
of both countries.
    Mr. Chairman, I believe that there is a compelling rationale for 
the first time in the history of U.S.-Mexico relations for creating a 
Partnership for Security--an orderly framework for U.S.-Mexican 
homeland defense. The objective of such a framework, as I conceive of 
it, would be to focus principally on matters of mutual homeland 
defense. Mexico and the United States never have had an 
institutionalized defense arrangement as do the U.S. and Canada with 
NORAD, for example, yet surely we should be thinking about air and sea 
defense cooperation. Surely we should be thinking about how to organize 
our homeland security together with Mexico and asking whether or not 
tripartite institutions involving Canada are appropriate. Guidelines 
are needed regarding hijacked civilian airliners crossing international 
borders, over flight rights and coordinated operations in emergencies. 
A bilateral database of shared flight pattern information is needed in 
order to be able to detect cross border, flight path anomalies. I 
suspect our grip is shaky on basic issues such as low flying, illegal 
aircraft that regularly evade radar detection to cross the border.
    I applaud the steps that have been taken with the signing of the 
bilateral agreement by Presidents Bush and Fox aimed at creating 
smarter and more secure borders. I would simply warn that the 
institutional capacity of Mexico to implement such accords is limited 
by a lack of resources, trained personnel and technology. According to 
the Mexican government's figures as highlighted by UNICEF, as of 1998 
there were over 5,000,000 Mexican children without birth certificates, 
which suggests how difficult it is for the Mexican government to keep 
tabs on its own citizens, let alone those who enter Mexico illegally. 
Also illustrative is the ease with which one can acquire apocryphal 
birth certificates, military service card and driver's licenses to 
create fictitious identities. The U.S. and Mexico will have to apply 
immense resources and hands on cooperation in order to effectively 
achieve our goal of secure borders.
    These are not easy issues, Mr. Chairman, and the mere mention of 
closer security relations is controversial in some Mexican circles. 
Recently, a political firestorm was touched off by the U.S. decision to 
create a Northern Command as a part of the post 9/11 restructuring of 
the U.S. Unified Command Plan. Some Mexicans mistakenly believed that a 
joint, U.S.-Mexico-Canada military command was in the making, while 
others suspiciously viewed the Northern Command as a hostile act 
directed at Mexico. Similar tensions could be seen when the Mexican 
Senate recently refused permission for President Fox to travel to the 
United States, citing an accumulation of irritations in bilateral 
relations and questioning new security-oriented initiatives.
    In light of these tensions, a strong articulation of our shared 
security interest should be made a priority mission of U.S. and Mexican 
diplomacy. Each country has an interest in guaranteeing its own 
homeland security, and this interest exists independently of the many 
other issues that are currently on the bilateral agenda, such as 
immigration or trade disputes. We should not be shy about making a 
compelling case for better defending our citizens. Making the case for 
a Partnership for Security would be the boldest thing to be attempted 
since the passage of the North American Free Trade Agreement, which 
required a revolution in the historic mindset of bilateral relations. 
It is time to work toward another revolution in bilateral thinking.
Consolidating Democracy and Building Prosperity
    Our security efforts will be in vain if it is not to defend our 
freedom. The consolidation of Mexico's democracy is important to the 
United States and to building a community of shared values in North 
America. In that context, Mr. Chairman, I am increasingly worried about 
the apparent difficulty of Mexico's new democracy to generate multi-
party consensus on basic policy matters at home. Such difficulties 
could well impact Mexico's margin for maneuver abroad and in its 
relationship with the United States.
    At the end of the day, it is not clear what more the United States 
can or should do to help Mexico consolidate its new democracy. It is 
clearer to me what we should not do. The United States should not take 
sides in Mexico's partisan battles. Nor should the United States be in 
the business of designing the bilateral relationship with one eye cast 
on the partisan balance of Mexican politics.
    Offering hope to Mexico's poorest citizens may be one of the best 
things that the U.S. can do to help Mexico consolidate its new 
democracy. Presidents Fox and Bush announced the deliberations of a 
private-public group called the Partnership for Prosperity during their 
last meeting in Monterrey, Mexico last March. A vigorous commitment 
must now be made to providing the resources for implementing the 
Partnership for Prosperity, whose mission is to stimulate private 
investment in the poorest, migrant-sending regions of Mexico.
    I am not a great believer in foreign aid, Mr. Chairman, but if aid 
is managed with an eye toward triggering private investment, as 
conceived in the Partnership for Prosperity, than it may well make 
sense. I participated in the agricultural session of the Partnership 
for Prosperity and can see an enormous potential for good. Let me give 
you one example. If the United States and Mexico reach out 
energetically to match up scores of Mexican peasant organizations with 
U.S. private investors, we can touch many lives and rapidly spread the 
seeds of hope in Mexico's poorest regions. There are similar 
opportunities for progress in the areas of providing technical 
assistance and funding for micro-credit and remittances programs in 
Mexico. Many of the strategic relationships that the United States 
sustains around the globe are accompanied by a commitment to provide 
development assistance as well as military or technical assistance. If 
we can provide resources to strategic partners such as Egypt, Israel 
and Pakistan, surely we can do so for Mexico.
    Finally, let me make one brief comment on immigration policy. 
President Fox has made a liberalized immigration policy in the United 
States a key objective of his foreign policy, a goal that is shared by 
many Mexicans across the partisan spectrum. Clearly, there is growing 
impatience in Mexico with the slow pace of bilateral discussions with 
the U.S. Yet, immigration is a very complex domestic issue in the 
United States, and the first obligation of U.S. policy is to the 
interests of our own citizens. I, for one, do not think that it is 
helpful to imagine that migration policy can be treated as a bargaining 
chip in some wider trade off with the Mexican government--I tend to 
believe that each issue on the bilateral agenda should be treated on 
the virtue of its own merits. And as an academic, I have the luxury of 
being dismayed at the partisan treatment of this important policy issue 
at the hands of politicians of all parties on both sides of the border.
    My own view is that we are most likely to make progress on 
migration policy if we take it one step at a time, building consensus 
along the way. For example, if a carefully conceived expansion of our 
temporary visa program can be designed to prevent visa overstays and to 
guarantee that false documents and false identities are screened out, 
than such a program should be moved expeditiously as part of an overall 
enhancement of bilateral relations.
    Mr. Chairman and Members of the Committee:
    I am concerned about the potential for growing impatience in Mexico 
with democratic institutions. I also am concerned about the growing 
frustration in Mexico with a perceived absence of progress in bilateral 
relations. Mexico is one of the shining lights in our troubled western 
hemisphere, but we should not take Mexico's democracy for granted. The 
excitement inspired by Mexico's democratic transition and the 
friendship between President Fox and President Bush has raised 
unrealistically high expectations about the potential for striking 
grand deals on everything from migration to energy. In addition, the 
events of September 11th have set a new and very high bar over which 
Mexico and the United States must now leap. We must find a way to 
deliver results.
    Let me conclude by citing the famous passage of Ecclesiastes--``To 
everything there is a season, and a time to every purpose under 
heaven.'' Now is the season for Mexico and the United States to embrace 
the dual purpose of defending democracy and defending future 
generations of Mexicans and Americans from the depredations of global 
terror.

    Senator Dodd. Excellent testimony, we thank you. Mr. Ladik, 
thank you for being with us. You are the last witness, but not 
the least witness.

 STATEMENT OF STEVEN M. LADIK, PRESIDENT, AMERICAN IMMIGRATION 
              LAWYERS ASSOCIATION, WASHINGTON, DC

    Mr. Ladik. Thank you, sir. Thank you very much. I am 
honored to be here today, Mr. Chairman, representing the 
American Immigration Lawyers Association. AILA appreciates this 
opportunity to express its views on strengthening U.S.-Mexican 
relations, and the unfinished agenda that the two nations face.
    I will focus my testimony today on the immigration aspects 
of this unfinished agenda, because immigration clearly is an 
important dimension of that agenda. Migration issues play a 
pivotal role in any discussion about the relations between 
these two neighbors. The United States and Mexico share a 
challenging history, a long common boundary, and an important 
trading relationship, reflected most recently by the North 
American Free Trade Agreement; and the shared responsibility, 
along with Canada, of enhancing this hemisphere's security.
    An agreement between the United States and Mexico on 
immigration matters will be groundbreaking for both countries. 
Through these talks the United States can achieve long needed 
immigration reforms that contribute to our national security, 
that reunify families and respond to ongoing worker shortages 
that remain a critical issue because of long term demographic, 
economic and education trends. These reforms need to be 
comprehensive in nature. We must align our immigration policies 
with our national security needs, while recognizing market 
forces and working to reunify families.
    It is our hope that President Bush and President Fox sign a 
migration accord that combines cooperation and enforcement and 
security with changes in U.S. immigration policy. Enforcement, 
security and U.S. immigration policy reforms must proceed 
together because each needs the others to succeed. It is only 
through such comprehensive reform that we can change our 
immigration policies in ways that enhance our security and make 
legal immigration the norm.
    The outline of such comprehensive reform would include a 
smart border agreement that would enhance the security of both 
nations and include joint enforcement efforts to reduce illegal 
immigration; an increase in the number of temporary and 
permanent visas for workers and their families coming to the 
United States so that our legal immigration system, by more 
closely tracking economic needs and family dynamics, will be 
more easily and effectively enforced; and earned legal status 
for hard working immigrants already here so that these valued 
workers are properly documented, can participate fully in their 
communities, and are eventually made eligible for permanent 
residence and U.S. citizenship.
    Past efforts at reform were partially successful at best, 
because they were not comprehensive. For example, the 1986 
amnesty while addressing one issue, legalizing the status of 
people already here, failed to address systemic problems such 
as the backlogs in family based immigrant visas and the absence 
of temporary and permanent business-based visa programs. We 
need to learn from our past and advocate for comprehensive 
reform this time around.
    What specifically would a comprehensive reform package 
include? No. 1, an earned adjustment for people in the United 
States without authorization. People who work hard, pay taxes 
and contribute to the United States should be given the 
opportunity to obtain permanent residence. This legalization 
would stabilize the work force of U.S. employers, encourage 
people to come out of the shadows to be scrutinized by our 
government, and allow immigrants to work and travel legally and 
be treated equally.
    Next, a new temporary worker program. Current immigration 
laws do not meet the needs of our economy for short and long 
term employees in those sectors currently experiencing worker 
shortages, and others that are expected to experience shortages 
when the economy rebounds. A new temporary program that 
includes full labor rights and protections would give workers 
the opportunity to work in areas of the country where they are 
needed, and would give employers experiencing shortages the 
work force that they need.
    Such a new temporary worker program would have many 
positive benefits for Mexico, because it has the potential to 
allow for the cross-border flow of Mexican workers between the 
United States and their home communities. Currently, Mexican 
towns and labor exporting regions are bereft of their working 
age males because border crossing is too dangerous. A visa 
program that allowed these workers to return to their homes 
would be of immense benefit to their families and their 
communities, and would help the Mexican economy greatly. Such a 
program would parallel the Mexican program that already exists 
with Canada, under which future program participation is based 
on current year compliance.
    Next, more legal channels for family and business-based 
immigration. Our immigration system has been characterized by 
long backlogs in family based immigration and long delays in 
business-based immigration. Illegal immigration is a symptom of 
a system that fails to reunify families and address economic 
conditions in the United States and abroad. Developing an 
increased legal migration flow will make immigration more 
orderly and legal. It also will allow more people to reunite 
with their families and work legally in the United States.
    Finally, adequate funding for these reform initiatives. 
Immigration reform must include adequate funding to implement 
reform. Unfortunately, and in all due respect, Congress 
frequently passes new immigration laws without including 
adequate funding. Such changes would make legality the norm and 
would ensure that immigration is legal, safe, orderly, and 
reflective of the needs of American families, businesses and 
national security. It is now time that we work with Mexico to 
develop and implement these needed reforms. Thank you.
    [The prepared statement of Mr. Ladik follows:]

Prepared Statement of Steven M. Ladik, President, American Immigration 
                          Lawyers Association

    Mr. Chairman and Distinguished Members of the Subcommittee:
    My name is Steven Ladik. I am honored to be here today representing 
the American Immigration Lawyers Association (AILA). I am President of 
AILA, the immigration bar association of more than 7,800 attorneys who 
practice immigration law. Founded in 1946, the association is a 
nonpartisan, nonprofit organization and is affiliated with the American 
Bar Association (ABA).
    AILA takes a very broad view on immigration matters because our 
member attorneys represent tens of thousands of U.S. families who have 
applied for permanent residence for their spouses, children, and other 
close relatives to lawfully enter and reside in the United States. AILA 
members also represent thousands of U.S. businesses and industries that 
sponsor highly skilled foreign professionals seeking to enter the 
United States on a temporary basis or, having proved the unavailability 
of U.S. workers, on a permanent basis. Our members also represent 
asylum seekers, often on a pro bono basis, as well as athletes, 
entertainers, and foreign students.
          introduction: immigration and the unfinished agenda
    AILA appreciates this opportunity to express its views on 
strengthening U.S./Mexican relations and the unfinished agenda that the 
two nations face. I will focus my testimony on the immigration aspects 
of this unfinished agenda because immigration clearly is an important 
dimension of that agenda. Migration issues play a pivotal role in any 
discussion about the relations between these two neighbors. The United 
States and Mexico share a challenging history, a long common boundary, 
an important trading relationship reflected most recently by the North 
American Free Trade Agreement (NAFTA), which has deepened the levels of 
economic integration and interdependence between the two countries, and 
the shared responsibility (along with Canada) of enhancing this 
hemisphere's security.
    An agreement between the U.S. and Mexico on immigration matters 
will be groundbreaking for both countries. President Bush and Mexico's 
President Fox were working together to produce such an accord just 
prior to the September 11 terrorist attacks. Those attacks only 
reinforced the need for such an agreement. I come before you today to 
both express my hope that these discussions accelerate and produce an 
agreement and to review the potential benefits of such an accord. I 
feel most comfortable in my capacity as AILA's President to focus my 
testimony on the benefits to the U.S. of such an agreement.
    The mere existence of these discussions has revolutionized the 
immigration debate. Direct talks between our two countries have 
internationalized the issue of immigration and broadened the 
discussions in Washington, D.C. Much is now on the table for the first 
time to offer us an historic opportunity to fix what has been long-
broken. Through these talks, the U.S. can achieve long-needed 
immigration reforms that contribute to our national security, reunify 
families, and respond to ongoing critical worker shortages.
    Most agree that our current immigration system has failed in many 
ways and needs to be fixed. It has not been reformed in many years and 
reflects neither current nor future needs. Many have lost their lives 
at our borders, trying to cross into the U.S., smugglers are profiting 
from this trade in human lives, and precious resources are diverted 
from enhancing our national security because our government, instead of 
seeking out those who would do us harm, is rounding up people who are 
drawn here to fill our labor needs. Employers in several sectors 
currently are unable to obtain the workers they need, and as the 
economy continues to improve, other employers will experience worker 
shortages. Furthermore, families remain separated for years due to 
bureaucratic processing delays and long backlogs, and hard-working tax-
paying people who contribute to our economy are undocumented and forced 
to live an underground existence.
    The United States needs to reform its immigration system to 
recognize the contributions that immigrants have made to this nation 
and their continued importance to our national well-being and to the 
enhancement of our security. These factors will only intensify as the 
U.S. continues to emerge from an economic slowdown and from the shadows 
of the September 11 terrorist attacks. President Bush views reforming 
our immigration policies as an opportunity rather than a problem and 
has put together high-level working groups in his Administration to 
develop a proposal with their Mexican counterparts. The President has 
pointed out that the ``relationship between the United States and 
Mexico is very strong, is very important, and it's growing stronger 
every day.'' Senator Tom Daschle (DND) and Representative Dick Gephardt 
(D-MO), the Democratic leaders of the Senate and House, respectively, 
have emphasized that ``fashioning strong relations with Mexico is vital 
to our national security,'' and have reiterated their strong support 
for ``comprehensive immigration reform'' and policies that ``must 
reflect our core values of family unity, fundamental fairness and 
economic opportunity.''
    The election of Mexico's President Fox has been essential in making 
these discussions possible. President Fox has made migration a priority 
on his government's agenda, has called Mexicans who have come to the 
U.S. ``heroes,'' and has been a forceful partner in the ongoing 
discussions. He has shed the Mexican government's traditional hands-off 
approach to the issue. In fact, just prior to the attacks, the Mexican 
government put forth a new comprehensive proposal consisting of five 
components: an earned legalization program for hardworking people 
currently in the U.S.; an expanded permanent visa program; an enhanced 
temporary worker visa program; border control cooperation; and economic 
development in Mexican immigrant sending regions. These five components 
point the way to the comprehensive reform that is needed is this area, 
and should be the foundation upon which the continuation of the 
bilateral talks between our government and Mexico is built.
             the need for comprehensive immigration reform
    The U.S. immigration system needs to be reformed in a comprehensive 
manner to meet our security needs, to reflect accurately the close and 
growing economic ties between the U.S. and Mexico, and to help families 
to reunify. Most would agree that our current immigration system is out 
of sync with reality. In fact, the status quo is unacceptable, 
especially in a post-September 11 world in which enhanced security 
becomes a central priority along with the need to balance these 
security demands with the continued flow of people and goods that keeps 
our economy strong.
    The Border Security and Visa Reform Bill, that we hope the Senate 
will soon pass, takes a first important step to change our immigration 
laws to help make us safer. But this bill, which includes urgently 
needed provisions, is by itself insufficient and needs to be fortified 
by the kind of comprehensive reforms the U.S./Mexico discussions can 
produce. These discussions offer us the opportunity to further align 
our immigration policies with our national security needs while 
recognizing market forces and family reunification goals.
    It is our hope that President Bush and President Fox sign a 
migration accord that combines cooperation in enforcement and security 
with changes in U.S. immigration policy. Enforcement, security, and 
U.S. immigration policy reforms must proceed together because each 
needs the others to succeed. It is only through such comprehensive 
reform that we can change our immigration policies in ways that enhance 
our security and make legality the norm. The outline of such 
comprehensive reform would include:

   A ``smart border agreement'' that would enhance the security 
        of both nations and include joint enforcement efforts to reduce 
        illegal immigration.
   An increase in the number of temporary and permanent visas 
        for workers and their families coming to the U.S. so that our 
        legal immigration system, by more closely tracking economic 
        needs and family dynamics, will be more easily and effectively 
        enforced.
   Earned legal status for hardworking immigrants already here 
        so that these valued workers are properly documented, can 
        participate fully in their communities, and are eventually made 
        eligible for permanent residence and U.S. citizenship.

    Aspects of such comprehensive reform were highlighted in the 
groundbreaking report issued last year by the Carnegie Endowment for 
International Peace and the Instituto Tecnologico Autonomo de Mexico. 
In this report, a high-level panel composed of equal numbers of Mexican 
and American experts issued recommendations on U.S.-Mexico relations 
with respect to migration and border issues. The report proposes a 
``grand bargain'' with the shared belief that ``migration from Mexico 
to the United States should be (a) mutually beneficial; (b) safe, 
legal, orderly, and predictable; and (c) that, over the long term, it 
should naturally decrease and stabilize at moderate levels.''
    Our immigration system needs to be reformed comprehensively so that 
legality is the norm, and immigration is legal, safe, orderly, and 
reflective of the needs of American families, businesses, and national 
security. Past efforts at reform were partially successful at best 
because they were not comprehensive. For example, the 1986 amnesty, 
while addressing one issue--legalizing the status of people already 
here--failed to address systemic problems such as the backlogs in 
family-based immigrant visas, and the absence of temporary and 
permanent business-based visa programs. We need to learn from our past, 
and advocate for comprehensive reform this time around.
A U.S./Mexico Immigration Agreement Will Help the U.S. Address National 
        Security Concerns
    Bilateral cooperation in enforcement initiatives that focus on 
illegal immigration, the opportunity for hardworking immigrants already 
here filling legitimate labor needs to earn legal status, a new 
temporary program for essential workers to fill identified labor needs, 
and more visas for workers and family members are initiatives that 
together will contribute to our security. Because our shared security 
needs create the additional impetus for Mexico and the U.S. to 
coordinate and cooperate, it follows that by encouraging and 
facilitating legal immigration, both countries will be able to focus 
their resources on terrorists and people engaged in smuggling, 
trafficking, and other criminal activities.
    Immigration reforms that legalize hard working people already here 
and that create a new temporary program also will help the U.S. 
government focus resources on enhancing security, not on detaining hard 
working people who come here to work or reunite with their close family 
members. In addition, reform that includes a new legalization program 
and a temporary worker program will encourage people to come out of the 
shadows and be scrutinized by our government. The legality that results 
from these initiatives will further contribute to our national 
security.
    That cooperation with Mexico is central to enhancing our security 
is evident in the recent action plan signed by Presidents Bush and Fox. 
During President Bush's April trip to Mexico, he and President Fox 
finalized a 22-point ``U.S.-Mexico Border Partnership Action Plan.'' 
This plan is a first step to reconcile post-September 11 security 
concerns with the need to keep commerce moving freely between the U.S. 
and its second largest trading partner. The ``smart border'' deal aims 
to facilitate the legitimate flow of people and commerce across our 
borders while screening out those who would threaten us. In a joint 
statement, Presidents Bush and Fox stated, ``We will build a border 
that protects our societies against those who would do us harm, and 
that truly serves the human and economic needs of our dynamic 
relationship. We share a vision of a modern border that speeds the 
legitimate flow of people and commerce, and filters out all that 
threatens our safety and prosperity.''
    Among other initiatives, the plan calls for the U.S. to pre-certify 
certain Mexican companies that would electronically seal their 
containers in Mexico and receive express treatment at the border. The 
plan also calls for a study of the possibility of creating express 
immigration lines at airports for people from the three NAFTA nations, 
and for Mexico and the U.S. to share information on those applying for 
visas to travel to either country.
    The two countries are also discussing: improved sharing of 
intelligence in order to thwart terrorists using Mexico to facilitate 
illegal entry into the U.S.; border crossing practices that facilitate 
and streamline the passage of legitimate people and cargo while 
identifying those that require more extensive screening; and 
intensified joint efforts to crack down on human trafficking.
    This type of bilateral effort to facilitate the safe and legal flow 
of people and commerce across our borders through the use of improved 
technology and international cooperation will aid us in our fight 
against crime and terrorism.
A U.S./Mexico Immigration Agreement Will Help the U.S. Address this 
        Country's Economic Needs
    Mexico is the U.S.' second largest trading partner (after Canada), 
with southern border communities a symbol of the interrelatedness of 
the two countries and economies. Since the passage of the NAFTA, levels 
of economic integration and interdependence have dramatically 
increased. However, this cooperation and coordination of capital, 
goods, and services stands in stark contrast to the massive enforcement 
efforts directed against employers and the legal restrictions faced by 
labor. The U.S. and Mexico cannot continue to be good partners on 
economic issues when a partnership does not exist on immigration 
issues. This contradiction is particularly harmful to the U.S. economy 
due to our nation's economic dependence on undocumented workers from 
Mexico and the demand for additional workers to meet labor shortages.
    Recent studies suggest that the current levels of undocumented 
migration from Mexico contribute somewhere between $154 billion to $220 
billion to the Gross Domestic Product of the U.S. Because these workers 
have become indispensable to the U.S. economy, it is vitally important 
that their status be legalized so they acquire the protections and 
rights that all workers in the U.S. should receive. Yet there are few 
opportunities for these workers to legalize their status. Current laws 
pose difficulties for employers as well. In my experience as a lawyer 
who practices in Texas, when the Immigration and Naturalization Service 
(INS) initiates work-site enforcement, U.S. employers, through no fault 
of their own, can lose 50 to 75 percent of their workforce. These 
employers usually are unable to replace these workers in a timely 
manner, getting no assistance from either the Texas Workforce 
Commission or the Dallas County Welfare Department. Finally, after 
about five months, employers are generally able to find employees to 
replace the ones they lost through INS enforcement efforts. In the 
meantime, however, assembly lines are shut down and businesses are 
incapacitated for months.
    This is no way to run a world-class economy. We must find a way for 
employers to get the legal workers they need, and for workers to either 
legalize their status or have a legal means, on a temporary or 
permanent basis, to enter the U.S. to take jobs for which they are 
needed. Mexicans have been coming to the U.S. for more than a century 
to work in both agriculture and the service sector, and this flow will 
continue regardless of the laws that Congress does or does not pass. 
The U.S./Mexico discussions offer us the opportunity to legalize this 
flow of needed workers so that we treat them, not as second-class human 
beings, but with the full rights and protections of our laws and legal 
system to reflect their many contributions to our country and economy.
    It is important to understand that our country's need for these 
workers will only increase over time. Our labor market will demand even 
more workers because this nation is facing the prospect of dramatic 
labor shortages. Notwithstanding the now receding slowdown, the U.S. 
will be confronting shortages that result from demographic realities: 
our society is aging, with insufficient replacements due to low birth 
rates. European countries are already beginning to experience the 
negative consequences of such an equation. The U.S. will be next if we 
do not reform our immigration system. And Mexico is key to any 
successful reforms we are to undertake.
    The Bureau of Labor Statistics (BLS) projects that the U.S. will 
create 17 million new jobs by 2010, 58 percent of which will not 
require a four-year college degree. The service-producing sector will 
add 20.5 million jobs with a total projected increase in the labor 
force of 17 million. Meanwhile, the U.S. is not producing enough new 
workers to sustain such growth and our current workforce is aging. By 
2010, the labor force ages 46-64 will have the fastest growth rate. 
More than 60 million current employees will likely retire over the next 
30 years. Testifying before a House Subcommittee in 2000, Dr. Richard 
Judy of the Hudson Institute said, ``After 2011, the year in which the 
first of the Baby Boomers turns 65, their flight to retirement will 
reach proportions so huge as, barring unforeseen increases in 
immigration and/or participation rates among the elderly, to reduce the 
total size of the nation's workforce.''
    The following are examples of sector-specific information on 
present and future labor needs provided by the Essential Worker 
Immigration Coalition (EWIC), a coalition, of which AILA is a member, 
of businesses, trade associations, and other organizations from across 
the business spectrum concerned with the shortage of both skilled and 
less skilled (``essential worker'') labor.

               From the American Health Care Association

    On February 18, 2002, the New York Times reported that more than 90 
percent of all nursing facilities do not have the number of staff 
necessary to provide good care. The U.S. Department of Health and Human 
Services recently reported that nursing homes currently need 181,000 to 
310,000 nurse aides (an entry-level position) to reach full staff 
levels. This number is expected to grow to over 800,000 by the year 
2008, as more baby boomers need long-term care. Nursing homes have 
hired over 100,000 people from the welfare roles, wages are higher than 
in the service sector generally, and the facilities generally provide a 
training and certification course (paying wages while attendees take 
classes) to become a Certified Nurse Aide (CNA).

             From the American Hotel & Lodging Association

    A recent report by the American Economics Group estimated current 
lodging industry employment at 1.9 million with projected growth to 
over 2.6 million in 2010, meaning that the industry will require more 
than 700,000 additional workers this decade.

                    From the American Meat Institute

    According to the BLS, the meat and poultry packing and processing 
industry employed more than 500,000 workers in 2000 (compared to 
235,000 in 1975), and is projected by BLS to employ more than 540,000 
workers, a 7.6 percent increase, by 2010. Most large meat and poultry 
packing plants are located in low-population, rural areas, which pose 
unique challenges to this labor-intensive industry. Not only does a 
labor shortage reduce productivity and efficiency in meat and poultry 
plants, it reduces capacity to buy and process poultry and livestock, 
hurting farmers as well.

                From the Associated General Contractors

    The December 2000 ``Insights in Construction'' Survey by AGC and 
Deloitte & Touche listed a shortage of skilled labor as the biggest 
challenge facing the construction industry over the next five years. 
The BLS recently estimated that more than 2 million workers will be 
needed in construction trades and related fields between 2000 and 2010 
due to job growth and net replacements for retiring workers.

    From the Building Service Contractors Association International

    Current employment in building services is over 1 million, and has 
grown steadily in the last year. According to a survey by the 
Association, all responding members reported they expect to increase 
employment in the next year, and all reported difficulty filling vacant 
positions. These vacancies have resulted in curtailment of seeking 
additional service contracts and expansion plans. Notably, these 
shortages are affecting an industry that employs anywhere from 40 to 99 
percent women and minorities.

             From the National Association of Home Builders

    Finding skilled workers has become increasingly difficult for 
homebuilders. Recent surveys of local homebuilder associations have 
consistently ranked labor availability as one of the most critical 
issues facing the industry. Other NAHB surveys have reported that the 
labor shortage has added 20 days to the time needed to build a single-
family home, significantly adding to its cost. According to BLS, over 
200,000 new workers are required by the industry each year to meet 
consumer demand for housing.

                From the National Restaurant Association

    Restaurants are the largest private-sector employer with over 11.3 
million employees. By 2010 the industry expects to employ an additional 
2 million workers. Labor shortages consistently poll among the top 
issues for restaurants/small business. According to the National 
Council of Chain Restaurants, workforce shortages, particularly in 
metropolitan areas, are among the most significant short and long term 
challenges to the industry.

           From the National Roofing Contractors Association

    The lack of qualified workers is the single biggest problem facing 
roofing contractors today. In a recent on-line survey of members, over 
50 percent responded that they could hire up to five additional 
employees right now if qualified workers were available. The BLS 
projects an additional 50,000 roofers will be needed over the next 
decade to keep pace with demand.

                   From the U.S. Chamber of Commerce

    The U.S. Chamber of Commerce's Center for Workforce Preparation did 
a survey of local chambers of commerce in the summer of 2001. Ninety-
nine percent of leading chamber of commerce CEOs reported workforce 
development as a priority issue among employers. Eighty percent of 
survey respondents listed a ``shortage of workers/low unemployment'' as 
a key workforce development issue in their community. For example, a 
representative from Chamber member Ingersoll-Rand, a multinational 
manufacturing company, testified in Congress in 2001 that one of its 
key workforce problems is finding workers for skilled trades, including 
welders, tool and die makers and skilled machinists, and that even 
though the company operates its own training facilities for these jobs, 
it cannot find enough applicants for the training.
    All of these facts point to one simple reality: developing a fair 
and effective immigration system is essential to our economy. The 
current discussion between the U.S. and Mexico provide a rare 
opportunity to address this country's economic needs and build a 
stronger, brighter future.
A U.S./Mexico Immigration Agreement Will Help the U.S. Address the 
        Urgent Need to Reunify Families:
    Through family-based immigration, a U.S. citizen or legal permanent 
resident can sponsor his or her close family members for permanent 
residence. However, the numerical limitations on many visa categories 
for both family-based and employment-based immigration force families 
to wait many years before they can be reunited legally. The current 
caps are unrealistic and run contrary to policy promoting family unity 
(as well as make it difficult for U.S. employers to secure able and 
qualified workers). For example, adult unmarried children of U.S. 
citizens must wait four and a half years before they can receive a 
permanent visa. Mexicans are especially impacted. Mexican family 
members of U.S. citizens or legal permanent residents in all of the 
visa categories must currently wait anywhere from 1-5 years longer than 
most other nationals for a visa to become available.
    The result is that families remain separated for many years, a 
situation that encourages illegality as families are forced to wait, 
sometimes for a decade, and during that period are not even allowed 
legal entrance into the U.S. as visitors.
    Two possible approaches to ameliorating the family immigration 
backlogs should be considered. First, the U.S. should consider 
exempting both Mexico and Canada from the per-country limits. These 
limits impose an artificially low ceiling on family immigration from 
Mexico, and are out of synch with today's reality. In light of the 
increasing interdependence of North American economies, there is no 
reason to continue to limit Mexican immigration to the same per-country 
quota imposed on countries in other more distant parts of the world.
    Second, the U.S. should consider exempting Mexico and Canada from 
the family preference system numerical limits. Doing so would free up 
family preference numbers and would help alleviate the backlogs in 
these categories for all foreign nationals.
    Comprehensive reform must support the reunification of families. 
Legalizing the status of hardworking people already in the U.S. and 
opening up channels for family-based immigration will help ensure an 
orderly process and legal flow and make legal that which in many cases 
has been illegal.
                   conclusion: what needs to be done
    To address our economic and security needs and to reunite families, 
any U.S./Mexico agreement needs to accomplish the following:

   Develop a Regularization Program for People in the U.S. 
        without Authorization: People who work hard, pay taxes, and 
        contribute to the U.S. should be given the opportunity to 
        obtain permanent residence. This legalization would stabilize 
        the workforce of U.S. employers, encourage people to come out 
        of the shadows to be scrutinized by our government, and allow 
        immigrants to work and travel legally and be treated equally. 
        Many have been here for years, are paying taxes, raising 
        families (typically including U.S. citizen and lawful permanent 
        resident spouses and children), contributing to their 
        communities and are essential to the industries within which 
        they work. In order to unite families and keep them together, 
        liberal and generous waivers must be made available for grounds 
        of admissibility and deportability. It is neither in the best 
        interests of the workers nor their employers for this situation 
        to remain unaddressed.
   Create a New Temporary Worker Program: Current immigration 
        laws do not meet the needs of our economy for short- and long-
        term employees in those sectors currently experiencing worker 
        shortages and others that are expected to experience shortages 
        when the economy rebounds. A new temporary program that 
        includes full labor rights and protections would give workers 
        the opportunity to work in areas of the country where they are 
        needed and would give employers experiencing shortages the 
        workforce they need. Current programs often have proven 
        unusable by both employees and employers, and do not 
        accommodate employers facing longer term, chronic labor 
        shortages. The framework for a new temporary worker program 
        must differ significantly from existing programs, and must 
        respect both the labor needs of business as well as the rights 
        of workers.
          The creation of a new temporary worker program would have 
        many positive benefits for Mexico because it has the potential 
        to allow for the flow back and forth of Mexican workers between 
        the U.S. and their home communities. Currently, Mexican towns 
        in immigrant sending regions are bereft of their working-age 
        male members because border crossing is too dangerous. A visa 
        program that allowed these workers to return to their homes 
        would be of immense benefit to their families and communities, 
        and would help the Mexican economy immensely. Such a program 
        would parallel the one already that already exists with Canada 
        under which future program participation is based on current 
        year compliance.
   Open Up Legal Channels for Family and Business-Based 
        Immigration: Our immigration system has been characterized by 
        long backlogs in family-based immigration and long delays in 
        business-based immigration. Illegal immigration is a symptom of 
        a system that fails to reunify families and address economic 
        conditions in the U.S. and abroad. To ensure an orderly future 
        process, it is critical to reduce bureaucratic obstacles and 
        undue restrictions to permanent legal immigration. Developing 
        an increased legal migration flow will make immigration more 
        orderly and legal. It also will allow more people to reunite 
        with their families and work legally in the U.S., and would 
        facilitate fair, equitable, and efficient immigration law, 
        policy, and processing. It is essential to make legal future 
        immigration that otherwise will happen illegally.
   Adequately Funding Immigration Reform Initiatives: 
        Immigration reform must include adequate funding to implement 
        reform. Congress frequently passes new immigration laws without 
        including adequate funding. Lack of adequate funding has 
        contributed to the long backlogs and ineffective, inefficient 
        and unfair services that currently characterize the Immigration 
        and Naturalization Service (INS). Whether funds are directed to 
        the INS or other entities to implement reform, any changes in 
        the law must be accompanied by adequate funding, in the form of 
        direct congressional appropriations.

    Senator Dodd. Thank you very much. I thank all four of you. 
Excellent testimony, very, very helpful to this committee in 
having a full discussion of the many issues that relate to the 
bilateral relationship, and your particular emphasis on a 
couple of them, I think, is particularly helpful. Let me--and 
I'll leave the record open--I wanted to raise some issues with 
you here, and if any of you want to jump in or raise any 
questions please feel free to do so.
    I raised the issue of Hoffman Plastics, Ms. Shailor, and I 
wonder if you might--what recommendations would you be making. 
I know my colleague, Senator Kennedy of Massachusetts, is 
talking about legislation to deal with the court's ruling in 
this matter. And I've raised this issue with other panelists, 
and obviously you all--particularly from the administration 
being advisedly cautious about expressing what legislative 
proposals they'd support.
    But it just strikes me that if you're, as I said earlier, 
if you're going to stay within the borders of the United 
States, we're going to say that some laws like this will only 
apply to people who work here, who have a legal status. In 
other words, the law does discriminate in that sense. It seems 
to me you're going to have--it raises some serious questions 
when you begin to move into other areas of law. It seems to me 
you start applying that same standard and you're going to run 
into some major, major problems. And I think it's been 
reflected in some of the reaction to this decision, in Mexico.
    So I'd like you to comment on that. And I'm going to ask 
you as well, Mr. Lebedev if you might, because clearly I'd like 
to hear the Chamber's sort of view on this because obviously it 
involves a business and a decision they made to one, hire this 
individual, and then to fire this individual. And I'm curious 
as to how you and the Chamber might react to this as well.
    Ms. Shailor. Well, I think on a basic trade union principle 
of international solidarity, the reality is when you undercut 
any one worker's rights you undercut all workers rights. And so 
in this particular situation, invalidating the limited back pay 
remedy, is one that is basically, you know, a hammer that 
unscrupulous employers can use when they realize there will be 
no effective penalty for their actions. And so I think this is 
symptomatic of hundreds of stories that we hear from organizers 
from all our affiliated unions who are dealing with immigrant 
populations, whether it be in organizing campaigns or 
representing them under collective bargaining agreements.
    So I think this has to be looked at very carefully by the 
Congress. I would say that our relationship with our Mexican 
trade union counterparts is essential in this regard so that 
we're speaking, obviously, with one voice in speaking with the 
Mexican Government as well as to our own Congress. But this is, 
as you well know, not unusual. We face this every day as we try 
and represent the rights of immigrant workers throughout the 
country.
    Senator Dodd. Mr. Lebedev.
    Mr. Lebedev. Unlike Jim Ziglar, I did not clerk in the 
Supreme Court, but I will subscribe to his general thesis that 
one should not comment extensively on a case that has not been 
read. But, I think the case highlights that employers in this 
country and members of the U.S. Chamber are fundamentally 
concerned about fairness in the workplace. And without speaking 
to the merits of a case with which I'm not specifically 
familiar, I think it goes to the very reasons that you're 
holding these hearings.
    You're putting a spotlight on the need for considerable 
reform in a system that creates circumstances, that creates 
contexts that high light, that we have not yet come to terms 
with the undocumented yet contributing worker. We do not have a 
regime that properly addresses either worker or employer needs 
and requirements and rights in the guest worker context. So I 
think if Hoffman does anything it highlights and should 
accelerate our thinking toward, as my colleague here said, a 
revolution in our thinking about how we come quickly to grips 
with a set of circumstances that each may be different but each 
is probably untenable in its own right.
    Senator Dodd. Well, that's a good point. You mention--you 
outline, rather, your vision of a guest worker program, and 
stated that the migrant workers, obviously as you just pointed 
out again, the ready worker, the ready employer, the ready 
employee, the ready worker, and that they're absolutely 
critical. I mean if you talk about sustaining economic growth 
in the United States and remove from that formula the guest 
worker, you cannot reach the conclusion we're going to have a 
sustainable economy. You're shaking your head in agreement.
    Mr. Lebedev. I'm shaking my head in agreement.
    Senator Dodd. Yes, so this is a critical element in terms 
of our sustained economic growth. And obviously American 
industry and business, to varying degrees, are dependent on 
these migrant foreign workers, guest workers to fill a variety 
of jobs. I guess the point--and I accept the last point that 
you made that you're going to have to deal with the underlying 
issues that Mr. Ladik and others have talked about. But in the 
interim period, it seems to me, while you're getting there, 
just as there is a necessity in recognizing the contribution of 
the guest worker, there must be a commensurate recognition of 
the rights of those workers. That their rights, their basic 
rights as workers be protected. And I wonder if you might just 
comment on that?
    Mr. Lebedev. We would fully agree. Without presumptuously 
prescribing a legislative response to the situation, I think 
that there are, as my colleague from the AFL-CIO would say, 
rights and responsibilities for both employers and employees. 
So, today, there are too many circumstances that create an 
uncertainty in the workplace, that create an ambiguity in those 
relationships, that create situations that are neither fair for 
individuals nor for the business purpose, and that don't create 
a harmonious productivity which is to the ultimate benefit of 
this country and the communities in which these businesses 
operate.
    So, indeed, I hardly know a businessman or woman who would 
argue for anything other than a workplace that has fundamental 
fairness, that respects the rights not just of workers, but of 
human beings in their interaction with those with whom they 
work.
    And so we encourage that sort of conduct across the board. 
But, in the same spirit, Mr. Chairman, we would still urge that 
the Congress look comprehensively at the context and the 
history of this whole matter. We don't look to individual 
businesses to do it but rather to create a framework for 
reform.
    Senator Dodd. I don't think you'll hear much debate about 
that. A related point that should be made here is what we're 
talking about, or at least I'm talking about, is the idea of 
guest workers filling voids, where it cannot be the present--
there are shortages that are not going to be, for whatever 
reasons, they're not going to be filled, rather than using that 
guest worker to depress the wages and benefits of potential 
workers where shortages don't exist. I think it's very 
important to make that distinction as well. If it's going to be 
used more for the latter, then it's going to run into a buzz 
saw of opposition. Whereas, I think in the former set of 
circumstances, there is a recognition, obviously, of the need. 
So, I'll make that point as well.
    Mr. Ladik, you made some, obviously sweeping comments here, 
and they're appreciated. I know that AILA does not entirely 
support the current extension of the 245-I program that is 
making its way through Congress because in your view it does 
not do enough for immigrants in the country. I wonder if you 
could speak to your position on this issue and outline what 
type of permanent extension of 245-I you would support.
    Mr. Ladik. Well, 245-I as it is now, it's kind of like the 
old hamburger commercial where 245-I is between the buns and 
when I open it my first thought is where's the beef? It has a 
retroactive date which in effect is going to reward a lot of 
people engaged in the unauthorized practice of law--Notarios. 
For instance, last summer I would go out to an electrical 
contractor who cared a lot about his employees in this 
situation and say, ``Steve, what can you do for them?'' I said 
well, 245-I expired April 30. I would be a crook if I took your 
money and started filing labor certifications for your workers 
now. I'm not going to rip them off.
    And at the same time you had the people engaged in the 
unauthorized practice of law, as I said, who would ``Oh yeah, 
245-I, you know, give me a thousand dollars for the fine and I 
will prepare your application.'' Well there was no application 
to be filed. Now, if this passes, ironically the guy who was 
giving bad legal advice last summer when there was no 245-I may 
be rewarded and look like he has a crystal ball. And I look 
like an idiot for following the rules.
    So as far as business-based immigration goes, it's kind of 
a hollow benefit. It will be a benefit for family based 
immigration because it will extend the date--you know, people 
who were confused about the law last April 30. It will give 
them--if they had the relationship as of last August--they will 
be able to benefit. I would, to answer your question, I would 
really favor a permanent extension of 245-I which would not 
result in these piecemeal programs that allow people engaged in 
UPL, an unauthorized practice, to play on the fears of people 
and get them in long lines where there's a panic situation.
    If you can't have a permanent extension, I would favor a 
reasonable extension from this day forward from 6 months to a 
year where there's time to educate the public. And then let 
businesses, like the companies I went and talked to, try to use 
the benefit for their workers.
    Senator Dodd. I appreciate your suggestions, and as well on 
the more comprehensive reform efforts. You realize though up 
here, there are such strong emotional feelings about these 
questions that it's--you see the difficulty we're going through 
even on a temporary 245-I. I mean, here you have the 
administration, I think most of the Congress, agreeing that 
even a temporary program makes some sense. But we still have, 
here it is now--we tried to get this through in December of 
last year and it's now the middle of April and maybe something 
might happen in the next few weeks, maybe May or so. But 
nonetheless, even on something which isn't terribly difficult, 
it seems to me to understand, we're having an awful difficult 
time moving along. So----
    Mr. Ladik. Mr. Chairman, I didn't want to sound ungrateful 
because we do appreciate----
    Senator Dodd. No, no.
    Mr. Ladik [continuing]. You're taking the leadership on it 
and for the benefit it does provide, but I think we have to 
honestly----
    Senator Dodd. I'm sure--I knew you meant that as well, but 
I also think that you're right. I think that in the end here--
sometimes because we deal with this on an incremental basis we 
end up creating the unintended consequence is what we do. It's 
like we kind of move them along in an uneven way so as we move 
one forward without moving forward in a comprehensive fashion, 
you create situations that can be, as you point out, you're 
rewarding those engaged in the illegal practice of law, in 
effect, for something that they did, in a way. So, that's a 
point worth making.
    Ms. Baer, I want to ask you a couple of things as well. I 
wanted to ask you because you're knowledgeable, comprehensive. 
I think some of your ideas are very creative that you've raised 
here. We saw on April 10 the arrest of some major figures from 
the Arellano Felix drug cartel that were sold information. 
There were policemen, including top officers in Tijuana and 
Tecate who were arrested. Do you think this is limited--that 
corruption is limited to the north, northwestern Mexico or is 
it more widespread?
    Ms. Baer. Oh no, I don't think it's limited to the north of 
Mexico at all. I think it extends throughout all of Mexico, the 
south where there is always the opportunity for border 
corruption, central highland states like Michoacan, Jalisco 
which had a history of being in drug routes. I think the 
problem is probably a national one and I laud the energetic 
activity of the current Attorney General of Mexico who as you 
know, was also a distinguished member of the Mexican military.
    The question that we all have to ask at some point, will 
Mexico's police force be able to stand on its own two legs 
without the military crutch. It's a question of institutional 
development and capability, and it also speaks to the question 
of resources and training. It's a long term challenge.
    Senator Dodd. You know you mentioned--and I found it 
somewhat creative. My first reaction, I'm sure the reaction of 
many would be to start talking about defense cooperation. You 
can just imagine the reaction you're going to get with 
something like that.
    But I think it's worth--maybe take the word defense out, 
and look for some other words. You might not sort of get the 
Pavlovian--Pavlov's dog response here with it. My first 
reaction is here's a country struggling to get an economic 
development program going.
    I mean, I have fought for years against the introduction of 
sophisticated military hardware in the region, not 
modernization, but sophisticated hardware, knowing what it does 
to budgets of developing countries. We're waging this again now 
as a result of Brazil's desire to bring in some sophisticated 
weaponry, and Chile and then Peru, and it gets complicated here 
and we're trying to sort this out. But my first reaction would 
be, and I'd like you to respond to it, at a time when President 
Fox is trying to marshall the resources to invest in the 
infrastructure of a country in order to get its economy 
functioning in such a way--and I don't think it's going to be 
done just in his administration, I think you're going to need 
successive administrations, over three or four, to have a 
continuum of policies. If there's a start and stop process I 
think it's going to be very difficult to do this over an 
extended period of time. So at a moment when we're trying to 
focus our attention on increasing economic opportunity, which 
is the underpinning of stabilizing democratic institutions, the 
idea of talking about an interchangeability in some defense 
cooperation strikes me as the kind of proposal that is apt to 
meet with rather significant opposition within Mexico.
    Ms. Baer. Well I think I was being deliberately 
provocative, Senator, in using the----
    Senator Dodd. Outrageous that you should do so.
    Ms. Baer. Simply because I think we need to at least begin 
the dialog and begin the process of thinking about these ideas. 
I personally believe that you need to do both. It's not a 
question of either/or. And in the case of other strategic 
relationships that the United States sustains around the world, 
there often is a sizable development assistance component that 
goes along with the U.S. strategic relationship. I'm not 
unalterably opposed to something along those lines.
    Obviously I'm throwing out a grand notion and we would have 
to be looking at baby steps in the beginning. I raised the 
model of NORAD and I think it's a reasonable model to think 
about simply because what we were doing in the case of NORAD is 
we are monitoring. A large part of NORAD activity is devoted to 
intelligence monitoring of air traffic and air movement.
    It's the sort of thing that we perhaps should be able to do 
with Mexico. It's a bilateral agreement which is not terribly 
threatening. But yes, of course, people will respond to it, but 
I think you can make a strong case that the defense of Mexican 
citizens requires a new security arrangement--you can't 
separate us, we're joined at the hip. Whether Mexico likes it 
or not, you don't have to love the United States to realize 
that Mexico's security is bound up with our security. And we 
might as well come to grips with that issue.
    There are some small things we can do. For example, we used 
to have a bilateral working group in which members of the 
defense community across the board would meet on a regular 
basis, defense to defense, to talk about a whole series of 
issues. That group, to my understanding, hasn't met for a while 
and that's a simple question of creating a forum for dialog.
    Senator Dodd. Well I appreciate your being provocative too, 
whether that's a good idea. Just quickly, just to get a--and 
I'll leave the record open because there are other questions I 
didn't raise with you, but if you just had to in a sentence or 
two or three--all of you bring some real knowledge about this 
bilateral relationship. I'll begin with you Mr. Ladik, how 
would you briefly describe the present state of affairs between 
Mexico and the United States? We've discussed a lot of 
different issues here today, but what would be your answer to 
that question if you were asked to describe the current 
bilateral situation?
    Mr. Ladik. Well, I'm very excited by it. I think last 
August we were extremely excited, and having looked at what's 
taking place in the last 6 months, and the strength of the 
dialog and the fact that we're 6 months from September talking 
about legalization and talking about temporary worker programs, 
leads me to believe that immigration as a benefit to our 
country, it has sunk in so deep that we all--we didn't pull 
away from it and that thanks to President Fox's foresight and 
President Bush for moving the debate along, and Congress. I'm 
amazed we're at where we are now and I'm very excited where 
we're going to be by the end of the year, I hope.
    Senator Dodd. Very good, Ms. Baer.
    Ms. Baer. Relations are excellent, but I think on the 
Mexican side in particular, people are awaiting results. I 
detect some mounting frustration on the Mexican side, and so I 
do hope we can generate some concrete achievements that we can 
point to in the next year, whether it be pilot programs that 
are begun under the Partnership for Prosperity or some movement 
on the immigration issue. At some point, the wonderful embraces 
have to be, as they say ``aterrizado'' they have to come down 
to earth in practical achievements.
    Senator Dodd. Mr. Lebedev.
    Mr. Lebedev. Allow me to echo the fact that we are all very 
enthusiastic about the current state of bilateral relations and 
the positive contributions that NAFTA has made. I think what's 
important and what should emerge, whether from 9/11 or however 
we choose to consider our path going forward, is that we have 
common borders, have increasingly common economies, we're going 
to have increasingly common cultures. And despite political 
issues in both Mexico and the United States, and views will 
always change politically, there is a transcendent relationship 
that cannot be ignored, and I think that's the real opportunity 
for both countries.
    Senator Dodd. Ms. Shailor.
    Ms. Shailor. And I would point to three particular areas at 
the AFL-CIO where our relationship with Mexico is greatly 
strengthened. One would be the reality that we elected for the 
first time our executive vice president, who is of Mexican 
descent. And so the whole dialog and discussion inside the AFL-
CIO on immigration issues, our relationship with Mexico, has 
been very deepened by listening to Linda describe over and over 
her experience as a young immigrant in this country.
    Second, as you well know Senator, our position on 
immigration has become sort of dramatically revised. We're 
working with organizations throughout the country. And then 
third, after many years we reopened our Solidarity Center 
office in Mexico City. Tim Beilly who is behind me was for many 
years, well these last 3 years, our Mexico City representative. 
So this interchange of U.S. unions going to Mexico, Mexican 
unions coming to the United States now takes place on a weekly 
and a monthly basis. And therefore, I think the understanding, 
despite our dramatic differences on the NAFTA integration 
model, we are working constructively to improve the integration 
model for the hemisphere. So I think we have a lot to look 
forward to, and again, we very much appreciate the leadership 
that you have taken on these issues.
    Senator Dodd. Thank you very, very much. This has been 
very, very helpful. And again, we touched on subject matters 
any one of which could have been the subject matter of several 
days of hearings, let alone a 3-hour hearing on a relationship 
that is tremendously important, tremendously complicated and as 
the expression in Spanish goes, you know, ``So far from God and 
so close to the United States.'' And I suppose the same could 
be said here from time to time as you talk about that 
relationship. But we're here and no one knows of any policies 
that would allow us to move.
    And so it is important that we stay at this and work at it. 
I know all of you do and for those reasons we're all very 
grateful and I am encouraged by your relatively positive 
outlook on where things stand today. As I say, we'll be having 
bilateral inter-parliamentary meetings, the oldest by the way 
in the United States, the continuous inter-parliamentary 
meetings that have gone on. I've been at them every year pretty 
much since I've been in Congress, and that's more than a 
quarter of a century. I remember my parents going on bilateral 
meetings in Mexico 40 years ago. And so it's certainly seen 
dramatic changes over the years, but getting closer and closer. 
In fact, the present Ambassador from Mexico to the United 
States, Juan Jose Bremer and I were sort of young first-term 
Congressmen meeting at inter-parliamentary meetings years ago 
when he was a member of the House of the Mexican Congress.
    So it's tremendously important that we maintain that 
interchange, that communication, which is essential. And I'm 
delighted to hear that those relationships exist as well with 
your various organizations. So with that, we'll leave the 
record open for members who want to raise some additional 
questions. I'm very grateful to all of you. And as I said, this 
is one in a series of hearings of examining U.S. relations in 
this hemisphere, and there's some very, very big issues that 
are outstanding. And this is a very troublesome time, in my 
view, in the Americas and we've got a lot of work to do. I know 
there are issues all across the globe, not the least of which 
in the Middle East as we talk.
    But the United States needs to be active and involved on a 
multitude of levels and a multitude of places. And that's the 
price of being a super power. And it's also the obligation of a 
great nation, to stay involved in the affairs, particularly of 
its own neighborhood. And so I am hopeful that we can energize 
some more comprehensive and deeper perspectives on these 
questions that we've seen in recent times. With that, this 
committee will stand adjourned.
    [Whereupon, at 5:23 p.m., the hearing was adjourned, to 
reconvene subject to the call of the Chair.]

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