[Senate Hearing 115-769]
[From the U.S. Government Publishing Office]




                                                        S. Hrg. 115-769
 
                  THE U.S.-MEXICO RELATIONSHIP: ADVANCING 
          SECURITY AND PROSPERITY ON BOTH SIDES OF THE BORDER

=======================================================================

                                HEARING


                               BEFORE THE

                        SUBCOMMITTEE ON WESTERN
                       HEMISPHERE, TRANSNATIONAL
                       CRIME, CIVILIAN SECURITY,
                        DEMOCRACY, HUMAN RIGHTS,
                       AND GLOBAL WOMEN'S ISSUES


                                 OF THE

                     COMMITTEE ON FOREIGN RELATIONS
                          UNITED STATES SENATE

                     ONE HUNDRED FIFTEENTH CONGRESS


                             FIRST SESSION



                               __________

                             MARCH 29, 2017

                               __________


       Printed for the use of the Committee on Foreign Relations
       
       
       
       
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             U.S. GOVERNMENT PUBLISHING OFFICE 
 39-933 PDF            WASHINGTON : 2020
                        
                         
                         
                         


                 COMMITTEE ON FOREIGN RELATIONS        

                BOB CORKER, Tennessee, Chairman        
JAMES E. RISCH, Idaho                BENJAMIN L. CARDIN, Maryland
MARCO RUBIO, Florida                 ROBERT MENENDEZ, New Jersey
RON JOHNSON, Wisconsin               JEANNE SHAHEEN, New Hampshire
JEFF FLAKE, Arizona                  CHRISTOPHER A. COONS, Delaware
CORY GARDNER, Colorado               TOM UDALL, New Mexico
TODD YOUNG, Indiana                  CHRISTOPHER MURPHY, Connecticut
JOHN BARRASSO, Wyoming               TIM KAINE, Virginia
JOHNNY ISAKSON, Georgia              EDWARD J. MARKEY, Massachusetts
ROB PORTMAN, Ohio                    JEFF MERKLEY, Oregon
RAND PAUL, Kentucky                  CORY A. BOOKER, New JerseyQ02

                  Todd Womack, Staff Director        
            Jessica Lewis, Democratic Staff Director        
                    John Dutton, Chief Clerk        



              SUBCOMMITTEE ON WESTERN HEMISPHERE,        
       TRANSNATIONAL CRIME, CIVILIAN SECURITY, DEMOCRACY,        
            HUMAN RIGHTS, AND GLOBAL WOMEN'S ISSUES        

                 MARCO RUBIO, Florida, Chairman        
RON JOHNSON, Wisconsin               ROBERT MENENDEZ, New Jersey
JEFF FLAKE, Arizona                  TOM UDALL, New Mexico
CORY GARDNER, Colorado               JEANNE SHAHEEN, New Hampshire
JOHNNY ISAKSON, Georgia              TIM KAINE, Virginia





                               (ii)        

  


                          C O N T E N T S

                              ----------                              
                                                                   Page

Rubio, Hon. Marco, U.S. Senator From Florida.....................     1
Menendez, Hon. Robert, U.S. Senator From New Jersey..............     4
Richardson, Hon. Bill, Former Governor of New Mexico, Santa Fe, 
  New Mexico.....................................................     6
Noriega, Hon. Roger F., Visiting Fellow, American Enterprise 
  Institute, Washington, DC......................................     8
    Prepared statement...........................................    10


                             (iii)        

  


THE U.S.-MEXICO RELATIONSHIP: ADVANCING SECURITY AND PROSPERITY ON BOTH 
                          SIDES OF THE BORDER

                              ----------                              


                       WEDNESDAY, MARCH 29, 2017

                           U.S. Senate,    
 Subcommittee on Western Hemisphere, Transnational 
                         Crime, Civilian Security, 
                         and Global Women's Issues,
                            Committee on Foreign Relations,
                                                    Washington, DC.
    The subcommittee met, pursuant to notice, at 10:23 a.m. in 
room SD-419, Dirksen Senate Office Building, Hon. Marco Rubio, 
chairman of the subcommittee, presiding.
    Present: Senators Rubio [presiding], Flake, Gardner, 
Menendez, Udall, Kaine, and Shaheen.

            OPENING STATEMENT OF HON. MARCO RUBIO, 
                   U.S. SENATOR FROM FLORIDA

    Senator Rubio. This hearing of the Subcommittee on the 
Western Hemisphere, Transnational Crime, Civilian Security, 
Democracy, Human Rights--you guys know the committee--comes to 
order. It is a long title. We have got the longest name of 
anybody. The subcommittee comes to order. We just spent too 
much time talking about the title of the committee.
    The title of this hearing is the U.S.-Mexico Relationship: 
Advancing Security and Prosperity on Both Sides of the Border.
    We are going to have one panel testify today. It will 
feature the Honorable Roger Noriega, Ambassador and Visiting 
Fellow at the American Enterprise Institute, and the Honorable 
Bill Richardson, former Governor of New Mexico, among other 
important positions that he has held. Of course, both have 
impressive careers in this field, and we are fortunate and 
grateful to them for being with us today. We look forward to 
your testimony.
    Today we will discuss a topic that I believe is both timely 
and important, and that is how we can continue to advance the 
deep economic, security, and people-to-people ties between the 
United States and Mexico that have proven to be vital for the 
wellbeing of both of our respective nations.
    I recently joined my colleagues in introducing a bipartisan 
resolution to reaffirm the importance of bilateral cooperation 
that advances our Nation's national security and economic 
interests and underlines the strategic partnership between the 
United States and Mexico. And I urge all of my colleagues to 
join us in supporting this bipartisan resolution.
    Earlier this week, I welcomed Mexican Ambassador Gutierrez 
to his new post in Washington, DC. He has been on the job now 
for about 3 weeks, and I extended my sincere and strong desire 
to work together on the challenges and on the opportunities we 
both share for our respective countries.
    To this end, it is my hope that to address common 
challenges, including counterterrorism and counternarcotics, we 
can advance security cooperation between the United States and 
the Mexican militaries, law enforcement, and intelligence 
communities. Improving security also requires a judicial system 
that investigates and prosecutes crimes.
    As indicated in the State Department's 2016 International 
Narcotics Control Strategy Report, Mexico remains a major 
transit point for illegal drugs destined for the United States, 
as well as an originator for both heroin, marijuana, and 
methamphetamine. And I note that, by the way, not as a negative 
slight against Mexico because on the other side of that 
equation the transit point is to the United States and it is 
our consumption problem that is an equal part of that problem.
    We should also note that the Mexican Government has 
increased its public and national security budget to more than 
$15.4 billion with an aim to combat and prevent organized 
crime.
    Under the Merida Initiative partnership, Congress provided 
nearly $1.5 billion from fiscal year 2008 to 2016. This 
assistance also addresses human rights, the rule of law, and 
public security.
    However, drug trafficking and related violence in Mexico 
continues to pose a significant problem to Mexico's security 
and to its economic development. The DEA notes that Mexican 
criminal networks transport the bulk of their goods over the 
southwest border through ports of entry using passenger 
vehicles or tractor-trailers. In passenger vehicles, the drugs 
may be held in secret compartments, while in tractor-trailers, 
the drugs are often commingled with other legitimate goods. 
Less commonly used methods to move drugs include smuggling them 
through cross-border underground tunnels and on commercial 
cargo trains, small boats, and ultra-light aircraft.
    Mexico is also experiencing an alarming surge in poppy 
cultivation and heroin production. According to the U.S. Office 
of National Drug Control Policy, 28,000 hectares of opium poppy 
were cultivated in Mexico in 2015. That was up from 17,000 in 
2014, a 64.7 percent increase. Virtually all of Mexico-sourced 
heroin is consumed in the United States, and Mexico is 
reportedly the source of more than 90 percent of the heroin 
seized in the United States. That is up 50 percent from 2012.
    Additionally, new synthetic opioids like fentanyl that are 
substantially more powerful and deadlier than heroin are 
increasingly being produced and trafficked into the United 
States through Mexico using precursor chemicals from China.
    We are all, I think, committed to supporting the work of 
law enforcement agencies on both sides of the border to counter 
the increase in cross-border trafficking of heroin and fentanyl 
and to fight transnational criminal organizations. But this 
must be done with the support and the attention of both 
nations.
    Senator Markey and I have introduced the INTERDICT Act, 
which would provide U.S. Customs and Border Protection with 
better tools to detect and stop fentanyl coming into the 
country.
    As neighbors, we need to tackle security challenges 
together. Our nations share a border of nearly 2,000 miles, but 
we also share a long history of cooperation and a mutual desire 
to see peace and prosperity through Central and South America. 
Both countries have worked jointly to further advance and 
protect democracy as well as to support democratic institutions 
in other parts of the western hemisphere, as best evidenced by 
yesterday's vote at the OAS in which Mexico stood strongly on 
behalf of freedom and democracy in the region.
    We cannot talk, of course, about our relationship with 
Mexico without mentioning the North American Free Trade 
Agreement, NAFTA, and our deep economic ties across the border. 
According to the U.S. Trade Representative, the U.S. exports to 
Mexico and Canada are responsible for more than 3 million 
American jobs, and both countries purchase more American goods 
and services than any country in the world. However, according 
to information published by the Census Bureau, the trade 
deficit with Mexico went from a surplus to a deficit, and it 
has continued to grow since NAFTA went into effect.
    The current administration has signaled its intention to 
modernize this agreement. We need to ensure that our trade with 
Mexico is free but also fair.
    For example, Florida's agriculture community--some segments 
of it have been harmed in the past by Mexico's ability to 
supply the U.S. market with produce in large quantities and at 
prices that are often below production costs. This is 
particularly true for our tomato growers and our strawberry 
growers. This past weekend, I was in the Tampa Bay area. I 
visited the Florida strawberry fields, and I heard about the 
challenges our farmers have faced from unfair competition. 
These are issues that Secretary Ross and our Trade 
Representative will have to address as changes are considered. 
If done correctly, I think the efforts to modernize NAFTA can 
produce significant economic and strategic benefits for all 
three countries.
    In addition to these challenges, we also have the issue of 
immigration and of border security. While the rhetoric on the 
subject is sometimes heated, both of our nations have a 
responsibility and an interest in stemming the flow of illicit 
activity crossing the U.S.-Mexico border. We often think of 
this issue in terms of America's southern border. We also need 
to be cognizant of the pressure Mexico faces along its own 
southern border due to migration from Central America and 
through Central America.
    For our two nations, this is not simply a question of how 
we can improve our border security. We need to think and act 
strategically to advance policies that advance democracy, 
security, and economic prosperity throughout the entire 
hemisphere because when people feel confident in the future in 
their home countries, they do not have to migrate to the United 
States illegally, at least not at the levels we have seen 
throughout the decades. We need to work with our Mexican 
partners to enhance their ability to police and defend their 
own southern border, which is an entry point for many migrants 
who seek to transit through Mexico, more often than not, on 
their way to the United States.
    As I stated earlier, the U.S. and Mexico have a long 
history of cooperation. As Senators Cornyn, Flake, Udall, and 
others representing border states will tell you, our two 
countries are intertwined by history and by shared interest in 
the future. Our people have worked together and interacted for 
generations. Many Americans of Mexican descent have achieved 
great success in business, sports, arts, medicine, politics, 
just to name a few. And it is in our mutual interest to 
continue to work together to ensure economic opportunities and 
strengthen our security on both sides of the border.
    I look forward to hearing from both of our witnesses about 
this critical relationship.
    And with that, I turn it to the ranking member, Senator 
Menendez.

              STATEMENT OF HON. ROBERT MENENDEZ, 
                  U.S. SENATOR FROM NEW JERSEY

    Senator Menendez. Thank you, Mr. Chairman. There was much 
of what you said that I agree with you on, and I appreciate you 
holding this second hearing of the Western Hemisphere 
Subcommittee on a critically important bilateral relationship.
    I want to thank both of our ambassadors for being here, and 
my good friend, Bill Richardson, for traveling here today. I 
greatly appreciate that and his knowledge particularly of this 
relationship.
    It would be a gross understatement to say that Mexico is a 
critical ally, partner, and most importantly, neighbor of the 
United States.
    Now, over the past few months, Mexico and the United 
States' relationship with Mexico has been in the spotlight. And 
I would like to start by outlining some facts. And while I am 
sorry I have to make this clarification, let me be clear that 
these are factual facts that reflect the truth.
    The United States cannot effectively manage our southern 
border in a way that protects, serves, and benefits Americans 
without collaboration and cooperation from the Mexican 
Government and the Mexican people. Since 2007, more Mexicans 
have been leaving the United States to return to Mexico than 
have been arriving from Mexico. In fact, between 2009 and 2014, 
there was a net exodus of 140,000 Mexican migrants back to 
Mexico.
    As a geographic transit point since 2014, Mexico has 
experienced the same surge in unaccompanied minors and 
undocumented migrants from Central America that we have here. 
Mexico intercepts around 150,000 Central American migrants 
seeking to come to the United States. In fact, the United 
States and Mexico are working together to find the best 
solution for addressing these children and families fleeing 
violence and poverty.
    The United States and Mexico have a nearly $600 billion per 
year trading relationship in goods and services that is overall 
fairly balanced. And in fact, the United States actually has a 
trade surplus in services of about $10 billion. After Canada, 
Mexico is the most important trading partner. They are the 
second largest trading partner export market with Mexicans 
consuming more than $240 billion of U.S. goods. Mexico plays a 
distinctive role in U.S. trade overall due to the unique nature 
of integrated supply chains. Around 5 million jobs in the 
United States depend directly on bilateral trade with Mexico, 
largely tied to our export market.
    Now, during his campaign, our current President rallied 
crowds around the ridiculous idea of building a wall along the 
entire U.S.-Mexico border and the more ludicrous proposition 
that Mexico would somehow pay for this wall. I will start by 
noting that the last time a nation tried to wall itself off in 
East Berlin in the 1940s, that did not turn out so well. Beyond 
ludicrous, this rhetoric, along with its outrageous and 
misguided admonishments, including that all Mexicans are 
rapists and drug dealers, have in fact undermined American 
national security and undermined good will that Mexicans have 
towards the United States, not just our political leaders, but 
our citizens as a whole. To anyone with a faint understanding 
of foreign policy or the history of Mexico, some of whose 
territory now comprises a large chunk of the southern part of 
the United States, the idea of having Mexico pay for this idea 
is nonsense.
    As Mexico gears up for its own elections in 2018, paying 
for the wall has driven a growing movement of nationalism that 
could see political leaders emerge who harbor negative views of 
the United States.
    Now, the President seems to be trying to find ways for 
Americans to pay the $8 billion to $25 billion this project 
could cost. And recognizing the infeasibility of his own 
campaign promises, the President is now seeking ways for 
American taxpayers to pay for the wall. That does not come as a 
shock to me, but I was genuinely surprised to learn that of all 
the funding sources President Trump plans to pay for the wall 
by using elements from other homeland security programs, 
including cuts to the Coast Guard, airport, port security, and 
most astonishing of all, by charging a special increase on 
homeowners flood insurance premiums, something that I can 
assure you I will fight tooth and nail, having lived through 
Super Storm Sandy.
    Many of the challenges facing the United States, including 
eradicating the scourge of drugs like opioids and fentanyl, 
combating the drug traffickers who bring them into this 
country, securing our borders in a responsible way that serves 
the interests of our entire population cannot be effectively 
confronted, let alone solved, without cooperating and 
strategically planning with Mexico.
    In fact, since the 1980s, the United States and Mexico have 
built effective strategies that improved the lives and national 
security of Americans and Mexicans. This cooperation was 
formalized largely through the Merida Initiative, built on 
trust and the principle of shared responsibility that has 
served as the basis of this productive relationship for 
decades. We rely on Mexican cooperation for critical 
intelligence sharing, counterterrorism, and counternarcotics 
trafficking operations.
    Foreign aid to Mexico that this administration is seeking 
to reduce by drastic and draconian measures contributes 
directly to programs that help Mexican law enforcement and 
immigration authorities address their southern borders and 
migrants from other countries. Our economic development support 
directly aids Mexicans' purchasing power which often goes to 
U.S.-made goods. Higher levels of economic development and 
education in Mexico lead to less pressure for emigration and 
generally more stable and resilient communities that are able 
to stave off poverty and criminal networks who seek to exploit 
it.
    That Mexico, with all of its national pride, would allow 
for the extradition of El Chapo Guzman speaks volumes about not 
only the skill that their forces have developed but also the 
trusting relationship we have fostered.
    While no country is perfect, Mexico's police and military 
with investment, training, and cooperation of the United States 
have made incredible strides in protecting their population and 
combating drug traffickers. We need to continue and expand 
these efforts, particularly to support judicial and governance 
reforms that will help Mexico tackle the root causes fueling 
criminal networks and drug trafficking.
    The bottom line is that Mexico and Mexicans have the most 
direct impact on Americans in their daily lives than just about 
any other country in the world. It is vital to our national 
security and to our continued peaceful prosperity in the 
northern part of the western hemisphere that the United States 
and Mexico continue strengthening our relationship and forging 
new areas of cooperation and growth.
    I look forward to hearing both of your testimonies and 
engaging in a dialogue with you.
    Thank you, Mr. Chairman.
    Senator Rubio. Thank you, Senator Menendez.
    Just as a side note, my understanding is next week there 
will potentially be working coffee with the foreign minister of 
Mexico. He was saying Mexico. So I got to work that in there 
too.
    And the second is that my understanding is that late in 
April, a delegation of Mexican Senators will be traveling here 
as well. And I hope my colleagues take an opportunity to attend 
both of those gatherings. It is really important to establish 
those bonds, both with our counterparts in the Mexican Senate 
and also with the foreign minister.
    Thank you both for being here. Governor Richardson, thank 
you. I look forward to your testimony.

   STATEMENT OF HON. BILL RICHARDSON, FORMER GOVERNOR OF NEW 
                  MEXICO, SANTA FE, NEW MEXICO

    Ambassador Richardson. Thank you, Mr. Chairman and members 
of the subcommittee. I am not going to enunciate the friendship 
I have had with those outstanding three members of the 
minority. And, Mr. Chairman, I have always respected you and 
your knowledge of Latin America and your excellent Spanish, 
which I hope you try to match Senator Menendez.
    Senator Rubio. It is not as good as Senator Kaine's, but we 
are both working on it.
    [Laughter.]
    Ambassador Richardson. Mr. Chairman, this is a very 
important hearing, and I am glad you are focusing on the U.S.-
Mexico relationship. I have been involved with this issue as a 
governor, as somebody who grew up part of my life in Mexico, as 
a Congressman, as Energy Secretary. I have never seen the 
relationship in such bad shape as it is today. It is in 
tatters, and steps need to be taken to better--one of the most 
important relationships we have I think among the top there 
countries that the United States has--I will not name the 
others, but it is obvious--I think Mexico is one of those. And 
I am extremely concerned that we are heading into a period 
where the issue of paying for the wall, the building of the 
wall, the NAFTA negotiation, the threat of an import tax, the 
deportation--and I commend Senator Menendez. I know you did an 
event a couple of days ago on that issue. Eleven million 
potential deportations.
    The government-to-government relationship is shaky, but I 
worry about the relationship between the American people and 
the Mexican people. There is resentment. They feel insulted--
the Mexican people. I spend quite a bit of time there. My 
sister lives there. And I am concerned. And I think it is 
important that in the course of the hearing, Ambassador Noriega 
and I might have some suggestions on what to do about it.
    My worry is that what we have is a Mexican election coming 
up. And I think it is 16 months. But the election really starts 
in 5 months with state elections. And what we want to do is 
find ways to deal with the problem issues that affect the 
relationship. On the wall, my hope is that other alternatives 
are looked at. I know in the Senate and the House, there is 
great concern about funding the wall. I hope that is abandoned. 
I hope the import tax discussion ends. The NAFTA negotiations. 
Yes, I think the U.S. NAFTA relationship needs to be 
modernized, but I think an acceleration of those negotiations 
needs to take place. Otherwise, they are going to head into 
these negotiations into the Mexican election period.
    I would also add that--echoing the views of all of you, and 
that is that we have transnational issues affecting the 
relationship. The best way to deal with transnational threats, 
whether it is health, whether it is terrorism, whether it is 
immigration, whether it is crime is together. And Mexico and 
the United States need each other, and I see us heading into a 
situation where the government-to-government relations needs to 
be revitalized but very, very soon.
    I think the statistics are very strong. You asked me to 
focus on some of the issues relating to security and strategic 
issues. There is an extraordinary level of collaboration 
between the U.S. and Mexico to address terror threats and 
capture dangerous criminals. You mentioned El Chapo. Every 
airline passenger who arrives in Mexico is vetted against the 
U.S. criminal and national security database. Heroin addiction 
is epidemic in the United States, and we rely on Mexico's 
cooperation in allowing DEA agents to operate on the ground.
    I think as Senator Menendez mentioned, on immigration, net 
migration to the U.S. is negative. Not a single terrorist act 
has been committed in the United States by anyone that entered 
via the Mexican border. Mexico has cooperated with the U.S. by 
deporting hundreds of thousands of Central American migrants 
bound for the U.S. I have some views on that. I think we have 
got to be careful, especially with families and children.
    But across the board, on the economic front, we trade 
approximately five times as much with Mexico as we do with 
Great Britain. Five times as much. Mexico is our third largest 
trading partner. Mexico is our second largest export market. 
And Mexicans buy more American goods than Japan, Germany, South 
Korea, and Great Britain combined--combined. Mexico buys more 
from the U.S. than China, Japan, and the UK combined. And 
additionally, the two NAFTA countries, Canada and Mexico, 
represent 30 percent of all U.S. trade, 35 percent of our total 
exports. So on the domestic side, 23 states in the United 
States count Mexico as their number one or number two export 
market. In 2015, foreign direct investment from Mexico in the 
U.S. was $52.5 billion.
    I think those most concerned with the NAFTA negotiations 
and with the breakdown in trade are agricultural people. I know 
there are issues in Florida, but if you look at Midwest corn, 
$2.5 billion in exports could be jeopardized. Auto plants, 
food, across the board.
    I will cite one statistic. Six million American jobs depend 
on U.S. trade with Mexico according to the U.S. Chamber of 
Commerce. But most importantly and to put our trade deficit 
with Mexico into perspective, 40 cents of every dollar's worth 
of goods imported from Mexico is made in the United States.
    So in conclusion--and I am sticking to my 5 minutes here. I 
see this thing glaring at me, and I will observe it because I 
think the best questions can come in a dialogue.
    When I was Governor of New Mexico, the State of Chihuahua 
was our partner. And Senator Udall knows these issues well. 
NAFTA created a lot of jobs along our border, good jobs, good 
high paying jobs. But the cooperation that I had with the 
Governor of Chihuahua on issues relating to crime, on issues 
relating to heroin addiction, issues relating to immigration 
was exceptional. And the worry that I have is the border 
states, the 12 border states, because we are talking about four 
on the U.S. side and eight on the Mexican side, have tremendous 
cooperative relationships on security, on trade, on drug 
interdiction, on extradition that would be jeopardized.
    So my hope is that in the next few months, the sooner the 
better, I think this subcommittee can play an important role 
because I see right now the executive branch is not necessarily 
coordinating the best they should on the relationship. I think 
this subcommittee can play an important role in bringing an 
institutional framework of the U.S.-Mexico relationship where 
the State Department and the Commerce Department take the lead 
in the relationship, perhaps with your intervention, and not 
the White House. I think this is a relationship that is too 
valuable to let drift away into domestic politics.
    So I thank you, Mr. Chairman. I thank members of the 
subcommittee. And I appreciate your time.
    Senator Rubio. Thank you, Governor.
    Ambassador Noriega?

 STATEMENT OF HON. ROGER F. NORIEGA, VISITING FELLOW, AMERICAN 
              ENTERPRISE INSTITUTE, WASHINGTON, DC

    Ambassador Noriega. Thank you. Good morning, everyone.
    Mr. Chairman, Ranking Member, members of the committee, it 
is an honor to be with you this morning to discuss the 
importance of Mexico to our prosperity and security and its 
potential importance in terms of foreign policy interests of 
the United States as, Mr. Chairman, you referred to Mexico's 
leadership really on the Venezuela question at the OAS. And I 
commend you for calling out those countries that could not find 
their way to work with the United States and other democratic 
countries vis-a-vis the narco dictatorship that is taking shape 
in Venezuela.
    It is really vitally important--and I agree with the 
Governor here--that Members of the U.S. Senate, U.S. Congress 
generally, and other stakeholders in this relationship speak 
out to explain the vast mutual benefits that derive from our 
economic partnership with Mexico, as well as from our 
cooperation to confront drug trafficking and to secure our 
border. Both sides can do more to realize the full potential of 
NAFTA and of our law enforcement cooperation. But it is 
precisely why a respectful dialogue is essential as we expand 
and deepen those ties.
    It is well known, as others have referred to already this 
morning, that Mexico is the United States' second largest 
trading partner after Canada and the third largest two-way 
trading partner behind Canada and China. But not many realize 
that our $530 billion two-way trade with Mexico is more than 
that of Japan, Germany, and South Korea combined. And when you 
back out the crude oil exports from these trade figures, 
Mexico's two-way trade with the United States actually edges 
out Canada to make it our largest trading partner.
    Much is made of the $60 billion trade deficit with Mexico. 
However, the U.S. trade encompasses integrated cross-border 
supply chains or production sharing. As a result, 40 percent of 
every dollar of Mexican exports is actually U.S. content. Five 
million American jobs depend on trade with Mexico, 14 million 
on NAFTA more generally. And Mexican companies have invested 
$16 billion in the U.S. economy, $3.7 billion in manufacturing.
    There is no doubt that NAFTA has been a success for all of 
the three countries participating. It has fueled momentum 
behind the modernization that has encouraged Mexico to 
strengthen its democratic institutions and diversify its 
economy, all of which make Mexico a more cooperative and stable 
neighbor.
    As good as that cooperation on cross-border issues is 
today, it could be better. The United States needs Mexico to do 
more to promote border security to protect our citizens from 
drugs and terrorism. Mexico's role on border security really is 
critical, as has been stressed today. Our country cannot 
formulate an effective anti-drug strategy, including a plan to 
confront the opioid crisis, without intense support of Mexican 
authorities who are the last line of defense against illegal 
drugs and immigrants bound for our southwest border.
    In recent years, not many folks would realize, the Mexican 
migration authorities have interdicted 560,000 persons, mostly 
illegal immigrants from Central America who are headed for our 
border. That is a half a million people who did not have a 
chance to test our resources on that border.
    In any case, Mexicans should not allow themselves to be 
distracted from the important reform agenda that is essential 
to building its own modern prosperous nation. Mexico would be 
better if it were to exercise the political leadership 
internally to take on corruption, which fuels criminality, to 
modernize a criminal justice system that unfortunately today 
sows insecurity, to adopt fiscal responsibility and tax reform 
measures, to undertake meaningful energy sector modernization, 
and to adopt a host of measures that will make itself more 
competitive in the world. Until these things happen, Mexico 
cannot take full advantage of the trade or attract the capital 
that it needs to build a more modern economy.
    It is interesting that in recent months, Mexicans have not 
overreacted. At least the Mexican officials have not 
overreacted to the anti-Mexican rhetoric. Instead, they have 
looked to open new channels, more serious dialogue, more 
reflective based on information about the important 
relationship that we have because I think they realize that 
those who stand to gain from bad relationships between the 
United States and Mexico are those same people in Mexico who 
disparage the economic relationship and nationalists who 
criticize cooperation with U.S. law enforcement and migration 
authorities.
    Mr. Chairman, Americans must admit that many of Mexico's 
security woes and instability is a direct result of being on 
the threshold of a nation with an insatiable desire for 
dangerous illegal drugs. We should be trying to make its anti-
drug mission easier, not complicating the ability of that 
government to cooperate with the United States.
    Finally, American stakeholders in the United States' 
bilateral relationship, particularly businesses that rely on 
the integrated supply chain and those whose jobs depend on 
Mexican partners and investors, must do more to explain the 
tangible and substantial benefits of ties with Mexico and to 
advocate a more constructive engagement and mutually respectful 
dialogue between our two great nations.
    Thank you very much, Mr. Chairman.
    [The prepared statement of Ambassador Noriega follows:]

           Prepared Statement of Ambassador Roger F. Noriega

    The American Enterprise Institute (AEI) is a nonpartisan, 
nonprofit, 501(c)(3) educational organization and does not take 
institutional positions on any issues. The views expressed in this 
testimony are those of the author.
                               key points
    President Trump's rhetoric about Mexico obscures the 
disproportionate importance of Mexico to U.S. prosperity and security. 
The economic partnership and security cooperation with Mexico is not a 
problem, it's a solution.

   Mexico is the United States' second-largest export market (after 
        Canada) and third-largest trading partner (after Canada and 
        China), with a two-way trade that amounts to $530 billion (more 
        than Japan, Germany, and South Korea combined).

   If oil is taken out of the equation, Mexico would surpass Canada as 
        the United States' second largest good trading partner. 
        Mexico's two-way trade with the United States would stand at 
        $511 billion and Canada's at $505 billion.

   Mexico is the fourth largest source of foreign crude oil imported 
        by the United States.

   Mexico is the top buyer of U.S. corn (27% of the country's exports 
        representing $2 billion). Mexico is the world's No. 1 importer 
        of U.S. dairy products. A disruption or loss of that market 
        would be devastating to U.S. agriculture.

    NAFTA is an indisputable success story for both the United States 
and Mexico.

   It has helped companies build a mighty North American market, 
        contributing to U.S. global competitiveness.

      U.S.-Mexico trade encompasses integrated cross-border supply 
        chains and ``production sharing,'' in which 40 cents of every 
        dollar of Mexican exports are U.S. content.

      Five million U.S. jobs depend on trade with Mexico; 14 million 
        depend on NAFTA.

   NAFTA has fueled momentum toward modernization that has encouraged 
        Mexico to strengthen its democratic institutions and modernize 
        and diversify its economy--all of which makes Mexico a more 
        cooperative and stable neighbor.

    As good as cooperation on cross-border issues is today, it could be 
better. The United States needs Mexico to do more to promote border 
security to protect our citizens from drugs and terrorism. That is less 
likely to happen if U.S. officials peddle half-truths and hurl threats 
that undermine mutual confidence.

   The United States cannot formulate an effective anti-drug 
        (including opioids) strategy without receiving more support 
        from Mexican authorities who are the last line of defense 
        against illegal drugs bound for our southwest border.

   In recent years, Mexican migration authorities interdicted 560,000 
        persons, mostly illegal immigrants from Central American 
        countries, headed for our border.

    Misinformation and distortions undermine the effort to build an 
even more robust economic and security partnership. Thus far, White 
House advisors and their Mexican counterparts appear to have 
established a more serious and mutually respectful dialogue.
    Mexicans should not allow themselves to be distracted from an 
important reform agenda that is essential to building a modern, 
prosperous nation. Anti-Mexico rhetoric is a destructive and costly 
distraction.
    Those who stand to gain from a return to overheated rhetoric are 
populists in Mexico who disparage the economic relationship and 
nationalists who criticize cooperation with U.S. law enforcement and 
migration authorities.
    Americans must admit that many of Mexico's insecurity woes are the 
direct result of being on the threshold of a nation with an insatiable 
desire for dangerous illegal drugs.
    American stakeholders in the U.S.-Mexico bilateral relationship--
particularly businesses that rely on the integrated supply chain and 
whose jobs depend on Mexican partners and investors--must do more to 
explain the tangible and substantial benefits of ties to Mexico and to 
advocate for a more constructive engagement by U.S. authorities.
                              introduction
    During his candidacy for the U.S. presidency, Donald J. Trump 
tapped into American anxiety about lost jobs and illegal immigration to 
garner popular support. That anxiety is very real, but candidate Trump 
offered a questionable diagnosis and impractical remedy. Unfortunately 
for Mexico, his rhetoric singled out that country as a scapegoat, 
accusing the government of taking advantage of the United States in the 
North America Free Trade Agreement and saying that it ``forces many bad 
people into our country, . . . including drug dealers and criminals of 
all kinds.''
    In the ensuing months, experts and journalists have systematically 
disproven these accusations. However, significant damage has been done 
to Mexico's economy and American credibility as a security partner. 
Twenty years ago, such animus from a key U.S. political figure, let 
alone a one who waged a successful bid for the presidency, would have 
been met with a nationalistic backlash. Instead, the Mexican government 
and much of the political class has sought to minimize the damage--
recognizing that their country's fate is tied inexorably to North 
America.
    In recent weeks, the White House advisors managing the relationship 
have established a more serious and constructive dialogue. However, 
President Trump has not disavowed his most negative comments about 
trade with Mexico and illegal Mexican immigrants, of which there are 
11-12 million living in the United States today; nor has he dropped his 
insistence that our neighbor to the south will pay for a 2,000-mile 
border wall that experts say could cost as much as $20 billion.
    It is important to acknowledge that, if the President continues to 
bash Mexico to placate his political base, one of the United States' 
most important bilateral relationships is at risk. Although the damage 
so far can be measured in the value of the Mexican peso and the anxiety 
of Latin American immigrants, also at stake are billions of dollars in 
two-way trade, millions of U.S. jobs that depend on an integrated 
cross-border supply-chain, and essential cooperation against illicit 
drugs and a potential wave of illegal immigrants.
                mexico's contribution to u.s. prosperity
    Mexico is the United States' second-largest export market (after 
Canada) and third-largest trading partner (after Canada and China), 
with a two-way trade that amounts to $530 billion (more than Japan, 
Germany, and South Korea combined), according to the office of the U.S. 
Trade Representative. USTR reports:
    U.S. goods imports from Mexico totaled $295 billion in 2015, up 
0.2% ($667 million) from 2014, and up 73% from 2005. U.S. imports from 
Mexico are up 638% from 1993 (pre-NAFTA). U.S. imports from Mexico are 
up 638% from 1993 (pre-NAFTA). U.S. goods exports to Mexico in 2015 
were $236 billion, down 1.6% ($3.9 billion) from 2014 but up 97% from 
2005. U.S. exports to Mexico are up 468% from 1993 (pre-NAFTA). U.S. 
exports to Mexico account for 15.7% of overall U.S. exports in 2015. . 
. . The top import categories in 2015 were: mineral fuels ($70 
billion), vehicles ($55 billion), machinery ($20 billion), special 
other (returns) ($14 billion), and plastics ($11 billion).
    However, these data not take into account the ``production-
sharing'' that is integral to the robust cross-border manufacturing 
between the two countries; as a result, about 40 percent of Mexico's 
exports actually is U.S. domestic content being re-exported into the 
U.S. market. That simple fact means that the $60 billion trade deficit 
figure cited repeatedly by President Trump is misleading.
    Mexico also is our fourth largest source of foreign crude oil, 
according to the U.S. Energy Information Administration.
    An article published in Foreign Policy just this week offers a 
strong refutation of the suggestion that the lost of millions of U.S. 
jobs can be attributed to NAFTA:\1\
    From 1994 to 2000, after NAFTA was enacted but before the 2001 
recession and the reduction of investment restrictions in China, U.S. 
manufacturing employment rose from 16.8 million jobs to 17.3 million. 
While estimates vary, research suggests NAFTA had a modest but positive 
effect on the U.S. economy. A 2014 study by U.S. International Trade 
Commission economists found that NAFTA slightly increases national real 
wages and employment in the U.S. machinery and metal industries, while 
slightly decreasing employment in the sugar and apparel sectors.
                mexico's contribution to u.s. security 
                (illegal drugs and illegal immigration)
    Mexico benefits materially from its proximity to one of the world's 
most dynamic markets and its partnership in NAFTA. However, the country 
also pays a high price for being located in the heart of the transit 
zone through which tons of illicit narcotics and illegal immigrants 
flow to the U.S. border. Mexico sits between the largest consumer of 
illicit drugs (the United States) and the largest producers of cocaine 
(Colombia, Peru and Bolivia). It also borders Central American nations 
that are the source of an influx of illegal immigrants.
    Transnational organized criminal networks--which no country can 
confront on its own--attack the already weak institutions in Mexico in 
order to carry out production on the doorstep of the U.S. market and to 
move product (and currency from illegal sales) through Mexican 
territory. Successive Mexican presidents have implemented policies 
aimed at disrupting these drug-trafficking organizations, but the 
result has been a decade-long bloodbath that has cost more than 100,000 
deaths to the ensuing violence.
    Criminal organizations operating in Mexican territory have become 
the top producers of methamphetamines and heroin. In fact, 90 percent 
of heroin consumed in the United States is produced in Mexico.\2\ Far 
from ``forcing'' these criminals over the U.S. border, Mexican 
authorities and innocent civilians have paid a very dear price for 
trying to interdict these criminals and their contraband and to 
dismantle their operations.
    The opioid epidemic in the U.S. is fueling this production. 
``According to the Department of Health and Human Services, More people 
died from drug overdoses in 2014 than in any year on record, and the 
majority of drug overdose deaths (more than six out of ten) involved an 
opioid. Since 1999, the rate of overdose deaths involving opioids--
including prescription opioid pain relievers and heroin--nearly 
quadrupled, and over 165,000 people have died from prescription opioid 
overdoses.'' \3\
    The State Department's 2017 International Narcotics Control 
Strategy Report, using figures from the office of Mexico's Attorney 
General, quantifies Mexico's anti-drug seizures in recent years. From 
April 2014 to September 2015 (most recent figures) ``Mexico reportedly 
seized 1,346.4 metric tons (MT) of marijuana (a 45 percent increase 
from the same period in 2013 to 2014), two MT of opium gum (a 43 
percent increase), 26.5 MT of methamphetamine (a 74 percent increase), 
10.2 MT of cocaine (a 183 percent increase), and 272 clandestine 
laboratories (a 90 percent increase).'' ``Mexico also reported seizing 
653 kilograms (kg) of heroin from April 2014 to September 2015, an 
increase from 455 kg during the previous reporting period, between 
December 2012 and April 2014.''
    Regarding illegal immigration, candidate Trump excoriated U.S. 
authorities for failing to protect the U.S. border with Mexico. A wave 
of unaccompanied minors crossing the border in the summer of 2015 
exacerbated the impression among the American people that illegal 
immigrants are crossing into the United States with impunity. 
Unfortunately, Mr. Trump failed to make a distinction about the 
national origin of recent arrivals, fueling the incorrect impression 
that Mexicans are pouring across the Rio Grande.
    The March 28 Foreign Policy piece by Messrs. Blackwill and Rappleye 
reports that ``net migration from Mexico to the United States has been 
negative since the 2008 recession. . . . Most exiting immigrants were 
undocumented. The number of apprehensions of Mexican migrants at the 
U.S. border fell from 1,637,000 in 2000 to 188,000 in 2015, reaching a 
low level not seen since 1969.''
    On the other hand, Mexican authorities continue to play a 
significant role in quelling the 2015 crisis. Between October and April 
2015, Mexico apprehended 92,889 Central Americans. In the same time 
period, ``the United States detained 70,226 `other than Mexican' 
migrants, the vast majority from Guatemala, Honduras and El Salvador,'' 
according to a report in U.S. News and World Report in June 2015.
    As the United States confronts this quadrupling of opioid abuse in 
recent years, it must be able to count on the Mexican government 
deploying law enforcement resources to its southern and northern 
borders and adopting other measures to interdict illegal activity. 
Rhetoric that treats Mexico as a scapegoat comes dangerously close to 
sabotaging crucial political support and law enforcement cooperation on 
the Mexican side, without which the U.S. border would be overwhelmed.
                        populism and nationalism
    To the extent Mexicans are disoriented by unhelpful rhetoric, they 
may become more vulnerable to a populist of their own. Andres Manuel 
Lopez Obrador (known commonly by his initials, ``AMLO'') has made a 
career of fanning populist and nationalist flames. For example, he has 
blamed NAFTA for causing more poverty and inequality in the country and 
attacked presidents for welcoming U.S. law enforcement cooperation.
    As Mayor of Mexico City, Lopez Obrador was responsible for 
increasing the debt of the city by 400%. When he left office, the 
city's debt increased to $4.3 billion (exchange rate of 2006). In that 
same period, poverty increased from 9.9% to 10.3%.
    In 2006, AMLO ran for the presidency, losing in one of the closest 
elections in Mexico's modern history. After losing, he refused to 
accept the results of the election and launched nationwide protests, 
which paralyzed Mexico City's most important thoroughfares for almost a 
year, causing billions of dollars in losses. In 2012, sought the 
presidency for a second time, losing by a wider margin to current 
President Enrique Pena Nieto. Again, AMLO rejected the results and 
initiated nationwide protests.
    In 2013, he opposed Pena Nieto's education reform, sponsoring 
riots, especially in the States of Michoacan, Guerrero, Oaxaca and 
Chiapas. These riots caused billions in losses and were responsible for 
serious acts of violence and looting. In 2014, AMLO launched his own 
party, Movimiento Regeneracion Nacional (MORENA), signaling his 
intention to wage another campaign for the presidency in 2018. Last 
year, he proclaimed himself the ``antisystem'' candidate.
    The United States is among the greatest beneficiaries of a Mexico 
that is democratic, stable, and cooperative. Any sensible U.S. 
diplomatic strategy toward Mexico should avoid rhetoric and 
confrontations that divide the two countries and strengthen the hand of 
politicians who would undermine democratic capitalism and positive 
bilateral relations with the United States.
                        mexico's daunting agenda
    The United States should hope that Mexico's political leaders will 
take steps to invigorate their nation's economy so that it contributes 
even more to a healthy and dynamic North American market with greater 
advantages over competitors in Asia and Europe. Anti-Mexican rhetoric 
in the United States is a distraction from a daunting agenda of reforms 
that Mexico must undertake to build a safer and more prosperous 
country--and an even better neighbor.
    When President Enrique Pena Nieto came into power on December 1, 
2012, he proposed to increase public spending to jumpstart the economy. 
Four years into the Pena Nieto administration, public spending has 
increased by 16.2%. In 2012, public debt was 34.3% of gross domestic 
product (GDP) and last December reached 50.5% of GDP, according to data 
from the Ministry of Finance and Public Credit (SHCP). This spending 
has not jumpstarted the economy, reduced poverty, or improved public 
security.
    According to the Economic Commission on Latin America and the 
Caribbean (ECLAC), from 2010-2014 poverty in Mexico increased 2.9%. In 
the decade from 2006-2016, Mexico's economy grew a meager 2.4%. In 
recent years, the 60% decline in oil prices and 20% reduction in oil 
production have generated losses that amount to 5% of the country's 
GDP.
    When the energy reform was enacted in 2013, it failed to attract 
sufficient private capital because of the decline in the world prices 
of oil. More recently, however, companies have started to invest 
through the bidding rounds. So far, Mexico has received investments for 
$70 billion, and there are already 80 companies from 18 countries with 
contracts for the development of electricity and oil projects. Mexico 
needs to continue to attract more companies and capital if it wishes to 
recover lost ground. In fact, according to Pablo Zarate, member of the 
Mexican Association of Hydrocarbons Companies (AMEXHI), Mexico needs to 
attract investments of $26.6 billion a year to reach the goals of the 
International Energy Agency, which estimates that Mexico can reach 2.8 
million barrels by 2040 if it adopts a serious energy sector reform.
    Mexico's currency, the peso, has lost significant value as a result 
of bad economic policies and international factors, primarily the anti-
Mexico rhetoric of the Trump campaign. In 2016 alone the peso lost 
nearly 20% of its value. This trend is not expected to improve this 
year.
    In terms of foreign direct investment Citibanamex has reduced its 
2017 forecast by a third from $35.8 billion to $25 billion. According 
to a report in the Financial Times, a bank research note predicted, 
``The main feature [of 2017] will be uncertainty and therefore weak 
investment.'' The bank predicted ``a shift from manufacturing to 
extractive industries (oil and gas) and electricity, gas and water, 
among others.''
    Corruption costs Mexico approximately $17.3 billion a year, which 
represents 9% of the country's GDP. According to Transparency 
International's Index of Corruption for 2015, the country ranks 95 out 
of 168 countries.\4\
    In Mexico today, more than 50 organized crime organizations 
continue to operate with impunity, often engaging in ultraviolent 
action that terrorizes the population. The frontal assault against 
powerful crime syndicates, which started in earnest under President 
Felipe Calderon in 2006, left smaller but functioning cartels. 
Unfortunately, federal and local authorities have been unable or 
unwilling to adapt in order to thwart the smaller and less organized 
splinter groups that emerged after the Calderon offensive.
    Pena Nieto began his 6-year term deemphasizing the ``war on 
drugs,'' failing to produce a comprehensive security strategy for his 
first year in office, and resorting to ad hoc measures as violence 
flared up repeatedly in subsequent years. Kidnappings have increased 
79% since Pena Nieto took office, according to a January report in La 
Opinion summarizing 2016 statistics. Homicides were up by 255% in 2016 
in comparison to 2015. Extortion increased by 30%.
    According to the Global Impunity Index, Mexico ranks second in the 
world on its ranking of countries impacted by impunity. The Index noted 
that only seven of ten crimes are reported in Mexico, of which only 
4.46% reach a sentence phase. For every 100,000 inhabitants there are 
3.5 judges, less than one-fifth the average in most developed 
countries. Prisons remain understaffed at 20 guards per 100 inmates; 
the average in most developed countries is 47 per 100.
    Until Mexico's political class takes on corruption that fuels 
criminality, modernizes a criminal justice system that sows insecurity, 
adopts fiscal responsibility and tax reform, undertakes meaningful 
energy sector modernization, and adopts a host of measures to make 
itself more competitive, it cannot take full advantage of trade or 
attract the capital it needs to build a modern economy.
    There is no agenda more important to Mexico than addressing the 
serious security challenges, impunity, and economic malaise that it is 
facing today. The rhetoric of President Trump may add to the burden, 
but it is a distraction from the country's real problems.

------------------
Notes

    \1\ ``Fact Checking Trump's `Alternative Facts' About Mexico,'' by 
Robert D. Blackwill and Theodore Rappleye, March 28, 2017.
    \2\ ``State Department: At least 90 percent of heroin destined for 
the U.S. comes from Mexico,'' The Washington Examiner,'' by Joel 
Gehrke, March 2, 2017.
    \3\ Fact Sheet, Opioids, U.S. Department of Health and Human 
Services.
    \4\ ``Corruption Costs Mexico 9% of GDP,'' Forbes.

    Senator Rubio. Thank you both.
    I will just begin with an observation, and then I am going 
to start turning to the members here so they can get their 
questions in. Various of them have other engagements, and this 
is an important hearing for them.
    So let me say I have heard all the facts and figures about 
NAFTA, and so there are winners and losers in any arrangement. 
So if you are a corn farmer in Iowa, NAFTA has been very good 
for you. If you are a dairy farmer in Upstate New York, NAFTA 
has been very good. If you are a tomato grower or a strawberry 
grower in Florida, it has been more complicated and more 
difficult. And so that is the dynamic that we have internally 
and it is important to reexamine that.
    But here is the broader question that I have. Irrespective 
of whether that is a legitimate or not complaint, I think there 
are legitimate complaints about the way NAFTA has impacted 
certain sectors of our economy. That would be true on the 
Mexican side as well.
    But the Mexican people are a proud people. We talk about 
nationalism. There is nationalism in every country in the world 
and that includes Mexico. And here is the broader observation 
that I have.
    We forget that Mexico is not just a democracy but a vibrant 
one. Its leaders are elected. And if they find themselves in 
the crosshairs of heated rhetoric that inspires a nationalist 
response, leaders have to respond to that reality internally in 
their country.
    The bigger concern is the impact it is has on the broader 
politics of Mexico and creating a space--I am not going to 
mention anyone by name. I am not here to give anyone free 
publicity. But imagine for a moment a candidate in Mexico who 
has made a career of fanning populism and nationalistic 
sentiments, who is also anti-NAFTA, who has attacked Mexican 
presidents in the past for cooperating with the United States 
on law enforcement and all these issues we have talked about. 
And imagine that person, someone like that, being able to take 
advantage of all this rhetoric to be elected in that democracy. 
And suddenly we find ourselves with an Hugo Chavez type leader, 
not in Venezuela, which is, of course, tragic, but right on our 
border, something we have never faced in the modern history of 
this country.
    Obviously, it is up to the Mexican people to decide what 
future they want and who they are going to vote for in the 
upcoming presidential race, and we should not try to influence 
that in one way or another other than ensure that we try to 
strengthen our relationship.
    But describe for a moment that situation internally in 
Mexico, what it could lead to, and what would it be like for 
U.S. policy. What will this hearing look like in 2 to 4 years 
if a leader like that assumes the presidency in Mexico 
partially by capitalizing on some of the rhetoric we see here 
in the United States.
    Ambassador Richardson. Well, Senator, you make an excellent 
point. This is why the timing on NAFTA, which is so critical I 
think to both countries, the NAFTA negotiations happen sooner 
or later because the Mexican State elections are in 5 months, 
and you want--the presidential election, as I said, I think is 
several months later. But it rolls into the presidential 
election. You want to eliminate the U.S. being a vibrant issue. 
You want to eliminate the statements made in the presidential 
race and the policies that have been initiated and dealing with 
the issue of NAFTA sooner than later.
    This is what I would suggest. I think that, one, the United 
States needs to move on the 90-day consultation period. Now 
that the health care debate is over in the Senate and the 
Congress, move forward to renegotiate NAFTA sooner than later. 
And it does need to be modernized.
    First, the rules of origin. I think this is a new era.
    Secondly, there was no digital trade in 1993. I happened to 
be the Democratic whip in the House when NAFTA was being 
debated, and things have changed enormously.
    Number three, Mexico has had an opening on energy reform. 
Some of those energy issues I think need to be discussed.
    Issues related to manufacturing.
    You know, you mentioned Venezuela, and my colleague, Roger 
Noriega, is an expert on Venezuela. The danger, if there is an 
abrogation of NAFTA, is China has invested $30 billion in 
Venezuela. $30 billion. And they are going to take over the 
vacuum if NAFTA and the United States and Canada do not reach 
an agreement. There is potentially a geopolitical threat too.
    So I think, Mr. Chairman, what you want to do is--you know 
how important these elections are. You want to get the issues 
resolved in a way that they do not give impetus to any one 
candidate. And the U.S.-Mexico relationship is right now very 
fragile.
    Ambassador Noriega. Yes, Mr. Chairman, I certainly agree 
that some of the rhetoric, the ill-informed characterizations 
of our relationship with Mexico and that Mexico has taken 
advantage of us somehow under NAFTA or that Mexico is forcing 
literally--that was the word used--forcing criminal elements to 
come over the border and to prey on our people has a very 
serious and negative impact on the relationship between our two 
peoples. And most folks on both sides of the border understand 
that that is not true, and that kind of rhetoric does not 
really reflect the nature of our mutually respectful 
relationship among family members in certain ways.
    Certainly when the Mexicans reflect on NAFTA, they probably 
have a long list of issues that they would like to take up with 
us. And my guess is that those negotiations would carry on in a 
quiet way for 4 or 8 years, however long it takes. And in the 
meantime, decisions that the United States makes arbitrarily or 
unilaterally to go beyond the framework of the agreement of 
NAFTA would be a great relief to every Washington law firm that 
trades in trade law, and there would be tons of disputes. I do 
not think it is a short-run exercise. I think they can maybe 
lay the groundwork for these kinds of discussions, set up 
working groups between our two countries once we actually have 
people who can be on our side of the table in those 
discussions. But it would be a very complicated, drawn-out 
process.
    But I think it is important to note also--and I am sure 
really everyone here would probably agree with this--the 
anxiety among the American people about lost jobs, about 
illegal immigration is a genuine anxiety that has been tapped 
into. The problem we have to face as a country in a bipartisan, 
really non-partisan way is how do we address that anxiety for 
our mutual benefit. And I think there has to be an essential 
understanding that in global trade you can find win-wins 
generally in trade agreements, and that is tough work. But it 
makes sense in terms of improving stability in the world, in 
this case economic activity and health and prosperity on our 
borders. We can knit together mutually beneficial arrangements. 
That makes a lot of sense. So trade agreements generally are 
important, but we have to find ways to address that anxiety of 
the American people that they have not worked in our interest. 
And part of that in the short run is better information that 
tells the truth about the mutual benefits.
    Senator Rubio. Thank you.
    Senator Menendez?
    Senator Menendez. Thank you, Mr. Chairman.
    Thank you both for your testimony.
    Would you both agree that the principle of shared 
responsibility laid out in the Merida Initiative is a principle 
that we should continue to try to engage with Mexico?
    Ambassador Richardson. The answer is an overwhelming yes, 
Senator. I think the cooperation on extradition, on drugs, on 
cartels should be enhanced. I know that Congress budgets 
several billion dollars for this, but I think it is important 
that it not just be reestablished, but you know, what has 
happened since the time period of December and January, some of 
these visits and some of this cooperation, military 
cooperation, has stalled. You know, the Mexicans are kind of 
waiting to see what is going to happen with the import tax, 
with the wall, with deportations, with the bilateral 
relationship with NAFTA. There are some instances where these 
joint visits, just joint cooperative agreements have been so--
--
    Senator Menendez. So shared responsibility should be a 
mutual goal I would think.
    Ambassador Richardson. Absolutely.
    Senator Menendez. Ambassador Noriega?
    Ambassador Noriega. Absolutely.
    Senator Menendez. Now, if you want to renegotiate NAFTA, a 
negotiation in and of itself implies that there are multiple 
parties, in this case Canada as well. So you cannot ultimately 
unilaterally--you could move out of NAFTA totally if that is 
what you think is--I do not advocate, but if that is what you 
think is the right way. But that is shared responsibility to go 
ahead and renegotiate in a way that would benefit the three 
countries involved. If you want to do a better job on stopping 
the flow of narcotics, which ultimately comes through vehicles 
into the United States, not by humans trafficking across the 
border, you have shared responsibility. If you want to deal 
with the question of the Central American migration, Mexico 
could just say, you know what? We are not going to do anything. 
Let them go all to the border and let the United States handle 
it. But they actually engage in trying to mitigate that. And I 
think we need to mitigate the root causes that cause people to 
flee Central America and come northward, violence, economic 
oppression, gangs, and others. But Mexico could stand back. You 
need shared responsibility.
    So it seems to me, following on the chairman's question, 
that I get real concerned that--of course, it is the people of 
Mexico who will decide what their future is and who leads them. 
But inadvertently when comments are made in the United States 
by its leaders that ultimately are incendiary about Mexicans, 
it drives the poll numbers of its right wing candidate--I 
mean--excuse me--of its left wing candidate in a way that is 
ultra nationalism. So if shared responsibility is our goal, the 
last thing you want to do is to drive the Mexican people to 
someone out of resentment, not out of hope, that ultimately 
will not engage in shared responsibility at the end of the day.
    And so how do we get the Trump administration to engage in 
the principle of shared responsibility? What would you advocate 
that we try to do here from the Senate to try to make that the 
continuing cornerstone of our relationship?
    You know, we as a country often seek to engage other 
countries to have more liberalized economies, to end state-
controlled entities. Mexico has taken a number of proactive 
steps over the past several years to privatize state-owned 
companies, making them more open to productive trade 
relationships. But I could see the reversal of that if you end 
up with a leader who says, you know, that was the United States 
urging us to do that, and they are not our friends anymore.
    So how do we get to the principles of being able to cement 
that essence of shared responsibility that was laid out in the 
Merida Initiative?
    Ambassador Richardson. Well, Senator, what the Senate and 
the Congress do is followed in the U.S. and Mexico. You guys 
are with the appropriations. You may have to look at NAFTA 
again if there substantial changes. So you have a major role.
    You also have the pulpit role, the bully pulpit role.
    What I would do in this shared responsibility is, number 
one, I think--and this is related to your question. One, I 
mentioned the NAFTA issues. I would also throw in worker 
protection. I think NAFTA needs a little stronger worker 
protection mechanisms.
    But number one, I would have President Trump invite 
President Pena Nieto to a visit in the U.S. The relationship is 
in bad shape. That is very important, President to President. 
Give him a state visit. That symbolism is very important. 
Sending a message, treating Mexico as an equal partner, not as 
a subordinate.
    I mentioned two others. Let the State Department--they have 
a lot of good Mexico experts--let the Commerce Department be 
the central focus of negotiations with Mexico on NAFTA, on 
issues relating to trade, issues relating to commerce, across 
the board. Let the Commerce and State Departments lead the 
interagency process. Keep it out of the White House.
    I am very concerned about this channel that the foreign 
minister and the President's son-in-law have established. You 
forget the State Department. I mean, the foreign minister of 
Mexico came here, did not even go to the State Department. I 
think that is a mistake. Institutionalize the relationship. I 
think you are able to do this as the Subcommittee on Western 
Hemisphere affairs.
    Number three, I mentioned on NAFTA trigger the 90-day 
consultation period to get the negotiations going. Press the 
executive branch to do it. Find ways to limit this populist, 
nationalism, and anti-Americanism that could become part of 
bilateral negotiations.
    And then there is the area, stop talking about the import 
tax. Stop talking about border taxes. We are not going to win 
that war. Mexico can retaliate against us on unfair trade 
practices.
    Again, I mentioned Midwest corn. Do we want Mexico to 
punish Midwest corn, which is a $2.5 billion export? Talk to 
American farmers. They are in Mexico all the time. They have 
benefited from this free trade.
    You know, these are the not doable right away. I would 
forget about this wall. It is unworkable, sends a terrible 
message. It is not going to work. Most of the illegal 
immigration that comes in in containers is from Central 
America, smuggled. Deportations. Focus on the criminals in 
deportation, not have blanket--there are people in New Mexico 
and our border states and Colorado that are being deported I 
believe unfairly.
    So, Mr. Chairman, the long-range issue--and you all have 
worked on this--is comprehensive immigration reform. A path to 
citizenship but also stronger border security. No question 
about that. Data collection, technology, cooperation with 
Central American countries.
    Mexico needs to do more to take care of their own people 
economically on the border. No question. More to deal with the 
cartel violence, more to deal with the corruption issues.
    I think President Pena Nieto is a very skilled politician, 
but I think he needs to engage directly in these negotiations. 
When he came into office, he did energy reform, education 
reform, political reform. He needs to personally take charge of 
a bilateral relationship that only I think a president can 
handle at this stage.
    Senator Rubio. Thank you.
    I am going to turn to Senator Gardner in a second.
    Two points that I think are important to raise.
    One is that lost in this NAFTA discussion is the emergence 
of the Mexican middle class. That has actually grown 
exponentially over the last 20 years and has been a benefit to 
the United States.
    And the second point, before I turn to Senator Gardner, is 
just an editorial point is in the business world, when you want 
to get into a negotiation with another business, you take a 
maximalist position, really tough, because the higher you 
start, the better your ultimate outcome could potentially be.
    In the political world, there are consequences to taking a 
tough line at the start of a negotiation. And that is what both 
Senator Menendez and my questions were geared towards is the 
impact of a tough line. You think you are staking out a really 
good starting point. It strengthens you in a negotiation. But 
it has an impact on a democracy that is not applicable in the 
business world where it is only about dollars and cents.
    Ambassador Richardson. I think, Senator, to that excellent 
point, I would just add on NAFTA, if we delay and not try to 
fix these problems sooner than later and it gets into a Mexican 
election, we, the United States, lose leverage by delaying. So 
it reinforces your point.
    Senator Rubio. Senator Gardner?
    Senator Gardner. Thank you, Mr. Chairman.
    Thank you, Governor Richardson, as well as Ambassador 
Noriega. Thank you very much for the opportunity to be here 
today to learn from you and to talk about this incredibly 
important issue.
    As a Coloradan, I think some of the statistics are very 
compelling. Forty-eight percent of all Colorado goods that are 
exported--we are a strong export state, about $8.5 billion 
exported from Colorado just a few years back. Forty-eight 
percent of all of our goods exported from Colorado were 
exported to countries that were involved in the Trans-Pacific 
Partnership negotiations. Two-hundred and sixty-five thousand 
Colorado jobs are related. Of the some 750,000 trade-related 
jobs in Colorado are related to TPP countries.
    And if you get further into the relationship we have with 
our NAFTA trade partners, the numbers are even more compelling. 
Since the passage of NAFTA, the approval of NAFTA in 1994, 
Colorado`s exports to Mexico and Canada have increased over 300 
percent since it was concluded.
    If you look at free trade agreements alone, between 2003 
and 2013, Colorado trade with FTA nations increased nearly 40 
percent through that decade.
    The challenge we have in this country, of course, is the 
macro/micro argument. If you look at the macro numbers in 
Colorado and you can say that we added thousands of jobs or 
increased trade 300 percent, that is a great macro argument to 
make. The micro argument that some factory town can make in the 
Midwest or perhaps Northeast United States is that the factory 
closed and they lost 20 jobs. So while Colorado may have added 
thousands of jobs, their small town lost 20 jobs. So it is a 
difficult argument that we have to make, that this is a macro 
benefit and how do you make sure that even at the micro level, 
it is understood.
    So I appreciate the chance to have this discussion. The 
United States is unique around the world, and a strong 
relationship with Canada and Mexico are the envy of the world 
in many cases with strong nations on our borders that are 
partners, not foes. And too many times you can look around the 
globe at conflicts that begin by nations that conflict with 
each other on the border, and not only does it lead to 
decimation of one nation, but both nations. And I think our 
interest, of course, is a strong North America, a strong 
partnership between Mexico and Canada and making sure that we 
have a rising tide in every nation around the globe, but 
particularly in North America. The better Mexico does, the 
better Canada does, the better we do. And so this opportunity 
gives us a chance to have that discussion. I appreciate that.
    So I wanted to talk a little bit about a couple of things. 
What does the process--just a technical question on the 
process. If NAFTA is, quote/unquote, reopened, renegotiated, 
what role does Congress play in any discussions or decisions 
that are made as a result of that opening?
    Secondly, just a couple on the Merida Initiative. Which do 
you believe have shown the most promising results so far?
    So either one of you could take those two questions.
    Ambassador Richardson. On the NAFTA issues--and, Senator, 
by the way, one statistic that I wanted to just mention to you 
because it involves Colorado and New Mexico. Nearly 20 million 
Americans travel to Mexico every year, while an average of 14 
million Mexican tourists visit the U.S. every year, spending 
more than $10 billion. And I would like you to share a little 
of those tourists that go to Colorado with us in New Mexico. 
You are getting a little too much of a lion's share.
    Senator Gardner. I was going to say. They are skiing. I do 
not know what they are doing in New Mexico. They are skiing in 
Colorado.
    [Laughter.]
    Ambassador Richardson. I think the process has to be, 
Senator, look, you are intimately involved. NAFTA--I was 
around. I think I am the only human being around when this 
passed in the 1990s. I was the Democratic whip. And it was a 
bipartisan effort, by the way, in the House and the Senate. 
Newt Gingrich was the Republican whip and I was the Democratic 
whip to get the votes. And it was 1993, and Congress had to 
approve.
    I think it depends on the scope of the changes to NAFTA 
whether it comes back. If they are considered technical, it 
might not. But you are going to have a role regardless.
    What first has to happen is 90-day consultation period. 
That has to be triggered by all sides. And I think Mexico is 
concerned that the U.S. has not triggered that. It has not 
happened. The Secretary of Commerce said it is going to take a 
year. Before you arrived, I mentioned the danger of waiting a 
year. I think the negotiations need to keep going.
    But if you get into issues like I mentioned, rules of 
origin, which I think you need to do, especially manufacturing 
to protect a potential Asian intrusion into North American 
manufacturing, rules of origin, digital trade. You might have 
to look at it again. And I think that would be constructive if 
that happened.
    Ambassador Noriega. So, Senator, also adding to this, the 
U.S. public law would have very specific expectations of the 
administration pre-consulting with the Senate Finance Committee 
and the House Ways and Means Committee if they were to look at 
significant changes in that agreement and keep you informed 
along the process, and then finally very intense discussions, 
consultations before they were to bring any agreement back. But 
I think those would be sort of long-term objectives.
    Perhaps the two countries, two leaders could make sort of 
broad statements indicating what is on the table to initiate 
this process. But I think that the negotiations would be very 
technical at the working level and would be sort of a very low 
profile exercise, I think which would be helpful.
    And I wanted to just comment, Senator, that your very 
positive way of looking at this relationship and the benefits 
from trade generally is really extraordinarily helpful and 
constructive that Mexicans hear this and then frankly the 
American people hear this. But I also understand how difficult 
it must be to go to a town hall and to explain these issues.
    Senator Rubio used an expression that was running through 
my head this morning thinking about this. It is not all dollars 
and cents. I was in Colombia yesterday, and we have to 
understand that these agreements are not just about trade. Yes, 
we want them to be positive, produce tangible benefits for our 
economies, but they are also used to fortify our partners and 
our allies and our friends, in this case a neighbor. And 
certainly we can point to trade tripling since NAFTA was passed 
or, in point of fact, fivefold trade among our countries since 
NAFTA was passed. And that is a positive macroeconomic good. 
But it has also fortified Mexico's move toward representative 
democracy. It has cemented its commitment to the rule of law to 
where they are a partner with us in addressing this 
transnational organized crime.
    Mexico, yes, derives a lot of benefits from its proximity 
to the United States, right on the threshold of the most 
dynamic and robust economy in the world. But it also is the 
transit zone for drugs and other things making its way to this 
market. And the friction that results, as Mexican authorities 
try to stop those things, generates a lot of heat. And there 
are hundreds of thousands of Mexicans dead today that were not 
5 or 6 years ago precisely because Mexican authorities decided 
to stop that flow.
    There are some people in Mexico--and some intelligent 
people--who say that the United States should step aside--I am 
sorry--Mexican authorities should step aside, and if the 
Americans want their cocaine or their heroin, they should have 
it, but why should Mexican people pay a price in very serious 
terms for standing with us and fighting these drugs.
    And part of that is the relationship which is cemented by 
an agreement like NAFTA where we knit that North American 
market together so that, by the way, we are more competitive 
economically with our real competitors in Asia and Europe. 
Being able to have that intimate, integrated relationship 
benefits us in broad ways as well, and having a good ally in 
fighting drugs is really indispensable.
    Senator Gardner. Mr. Chairman, I see I am out of time.
    Last year, I had the opportunity to visit Mexico, visit the 
foreign minister. And I would love to continue our conversation 
on the Merida Initiative because it was something I would like 
to follow up.
    Senator Rubio. Thank you.
    Senator Udall?
    Senator Udall. Thank you very much, Chairman Rubio.
    Let me just say, though, Senator Gardner, we do everything 
we can as those skiers move from Mexico through New Mexico to 
keep them as long as we can. We have extended our ski areas--
extended the opening. So we are going to do everything we can 
to keep them from going to Colorado.
    Governor Richardson and Ambassador Noriega, wonderful to be 
with you here. And this has been an excellent discussion.
    I think one of the points that you have made that I think 
is very important is treating Mexico like an equal. And I think 
what we have seen in this relationship with the President and 
the President of Mexico is that has not been the case. It has 
been a very kind of condescending approach. And I know we were 
all shocked at where President Trump has taken U.S.-Mexico 
relations, calling Mexican immigrants rapists and murderers, 
insulting their leadership, and threatening to send U.S. troops 
south of the border to fight cartels, demanding to build an 
expensive and unproductive border wall, and to extort Mexico to 
pay for it, threatening to rip up NAFTA, throwing our border 
economies in chaos.
    For those of us in New Mexico and other border states, this 
is really beyond belief. And this approach is completely and 
totally inappropriate for a neighbor, for an ally, and a nation 
which we share many common bonds.
    Now, before the wall became a campaign issue, the United 
States and Mexico had already taken strong measures to address 
security. The U.S.-Mexico 21st century border management has 
allowed the two countries to work together on the issues of 
security and tracking risky shipments, while also allowing 
trade to increase. And I am wondering what both of you think. 
With groups such as this, the Chamber of Commerce, the Council 
on Foreign Relations have endorsed these bilateral security 
programs. Do you believe that expanding these programs would be 
more beneficial than building an unproductive and expensive 
wall?
    Ambassador Richardson. Well, the answer again is an 
overwhelming yes. I think both of these studies that you cited, 
one the Merida agreement--I think the Mexicans were concerned 
with some of the--they considered some of those measures a bit 
intrusive. But, nonetheless, I think they have been resolved--a 
lot of those problems. So, yes, the Merida Initiative I believe 
should be continued. It involves helicopters, military 
cooperation, cartels. Look what Mexico did right after our 
election. They sent El Chapo. They extradited him. They 
continue with these extraditions. You mentioned a number of 
statistics that are so important.
    On expanding the relationship, I think because of the 
rupture that has taken place and the relationship in such bad 
shape, I think additional measures are needed, strengthening 
bilateral ties in areas like education, scholarships, medical 
technology. You know, our border--Senator Udall, you have done 
a lot on our border to enhance ties at ports of entry, the 
cooperation on endemic diseases at the border, which are a big 
problem, environmental issues, clean air. I worry about the 
climate change issue now being deemphasized with, as you know, 
a border that needs strengthening.
    But I think you hit the nail on the head. The United States 
and Mexico--we are bound together by geography, by trade, by 
family, by culture, by affinity. You have got several million 
Mexicans that are in the United States that are voters, that 
are the growing Hispanic community. And then you have got the 
11 million that are worried about deportation. It is a very 
tense situation. They are scared. This is not America.
    And we mentioned the economic ties. U.S. and Mexico 
economies--they do not compete with each other. We complement 
each other. We make each other more competitive in the global 
market.
    And across the board, let me just say something about some 
of the immigrants that are in all of our states. They are not 
violent criminals. They are patriotic. They want to work. They 
are hardworking. They make enormous contributions to the 
American economy. I mean, what is going to happen to the 
security, restaurant business, agriculture, construction. Some 
of these industries might collapse. I think, Senator Udall, an 
article in New Mexico in the Albuquerque Journal yesterday 
basically said that the New Mexico economy is dependent on 
immigrants. It is dependent. It would seriously be harmed if 
all of a sudden that disappeared.
    So in conclusion, we need each other. We need to work with 
each other, not fight. And the first step is to not just end 
some of this rhetoric but take specific steps that in the area 
of geopolitical, soft power, geopolitical issues relating to 
our shared interests, we need to work together. And that is not 
happening.
    Ambassador Noriega. May I just jump in real quickly, 
Senator? I am one of those--and I suspect Governor Richardson 
is as well--who sees the border as where our two nations are 
joined, not where they are divided. And if you take the U.S.-
Mexico economy along that border, 100 miles on either side, it 
would be in and of itself one of the top 10 economies in the 
world. And so how do we make it safe for people on both sides 
for commerce on both sides? And there is all sorts of sort of 
private sector cooperation, as well as government cooperation, 
which will fortify the relationship in terms of security and 
opportunity to prosper.
    Senator Udall. Thank you.
    And let me just finish by saying, Governor Richardson, you 
really set an example as Governor as to how to work with 
Mexico, both with the states and with the Mexican federal 
entity. You traveled a lot there. You were a real presence. And 
I think that is the kind of cooperation that is needed.
    And one of the things that I did as State Attorney General, 
I remember when there were issues about the judiciary and their 
police, we would loan them prosecutors. I mean, they were open 
to ideas. And they have done a lot of reforms, and they have 
made great strides there.
    So I think there is a much better approach than this 
accusatory approach that they are using--that the President is 
using.
    So I thank you both. It has been a very good discussion, 
and I am hoping that Senator Kaine is going to ask you some 
questions in Spanish.
    [Laughter.]
    Senator Rubio. All right. Senator Kaine?
    Senator Kaine. Welcome. And thanks, Mr. Chair, for doing 
this great hearing. [Spanish spoken.]
    Senator Rubio. Very good Portuguese.
    [Laughter.]
    Senator Kaine. Sadly I am now up against a hard stop. And 
so all I am going to get to do is ask two questions, and then 
my staff are going to be here for the answers because I have to 
depart.
    I do want to say particularly to Governor Richardson, when 
he was a youngster and he got his first job at the State 
Department, he worked for my wife's dad. My wife's dad was the 
congressional liaison for Secretary Kissinger after he had been 
Governor of Virginia. And Bill, as a young staffer, worked for 
my father-in-law. And my kids, because they had a father-in-law 
who was Governor and a father who was Governor, they think 
people in politics are completely uncool. But Bill Richardson 
is the only politician they have ever met that my children 
thought was cool.
    [Laughter.]
    Senator Kaine. So I am going to start right there. Here are 
my two questions: one for Governor Richardson and one for 
Ambassador Noriega.
    So, Governor Richardson, I would like you to talk about 
this border adjustment tax proposal. You had a bit of it in 
your testimony, but I would like you to kind of walk through, 
if you would, because I think it is important that it be on the 
record in this hearing how you think it might affect the U.S.-
Mexico commercial relationship.
    And then second, Ambassador Noriega, you had a wonderful 
point in your written testimony. Quote, on page 3, Americans 
must admit that many of Mexico's in security woes are the 
direct result of being on the threshold of a nation with an 
insatiable desire for dangerous illegal drugs.
    I am on the Budget Committee too. We are contemplating a 
budget proposal that slashes public health funding, that 
slashes funding for opioid treatment. What would the effect be 
on the security situation in Mexico if America backtracks on a 
commitment to public health treatment of the insatiable desire 
for illegal drugs that we have.
    And I apologize for not being able to stay, but you have 
got the best part of me by having my staffers listening to 
those two answers, if you would not mind.
    Ambassador Richardson. And, Senator, I know you are on your 
way out, but what you did not mention is when I worked for 
Governor Linwood Holton. He is a Republican, moderate 
Republican. So I started my career working for Republicans. I 
have since come to my senses.
    [Laughter.]
    Ambassador Richardson. No. I am just kidding. But he was a 
wonderful human being. And I appreciate your kind words. So I 
will give a good answer now that you are leaving.
    [Laughter.]
    Ambassador Richardson. I just think this border tax, this 
import tax would be a disaster for U.S. economic relations with 
Mexico. The main reason is Mexico would retaliate. I mean, the 
Secretary of the Economy, Ildefonso Guajardo, has said we will 
retaliate on the $2.5 billion corn from the Midwest. You do not 
want a trade war. It does not make sense. It would hurt both 
countries, a possible violation of NAFTA. I think that should 
be taken off the table.
    Initially I think it was put in there as a way to pay for 
the wall. But that should be totally taken off the table 
because, I mean, we have all outlined the commercial 
relationships that exist today between the United States and 
Mexico across the board, the statistics that show that Mexico 
is our third largest trading partner. In other words, Mexicans 
buy U.S. products, goods more than any other country. So to 
have a retaliation in the area of food, of auto parts would be, 
I think, something very shortsighted that would make American 
consumers pay more.
    So that would be the effect of a border or an import tax 
besides ruining I believe a very productive bilateral 
relationship in these areas where we have, Senator Menendez, a 
shared interest, cartel cooperation, security cooperation, 
immigration cooperation, endemic disease, environmental issues, 
issues relating to extradition, to the DEA, across the board.
    Ambassador Noriega. Well, if I could just follow up on the 
issue of the drug cooperation. Obviously, both countries are 
both impacted, as I mentioned before, by transnational 
organized crime attacks, already weak institutions in Mexico 
and the inability of the state, at least at the federal level, 
to deal effectively with that, and at the state level, a lack 
of political will. The previous President of Mexico, Felipe 
Calderon, initiated a frontal assault against these organized 
crime organizations and managed to splinter them. But you did 
not have the kind of coherent comprehensive strategy sustained 
by him or, for that matter, certainly by his successor to deal 
with the splinters that were left over.
    Also, Mexican institutions are too weak. They do not have a 
sufficient criminal justice system, either prosecutors, prison 
staff to deal effectively. So a very few crimes that are 
actually reported. Only 5 percent of the time will you actually 
see where it reaches the stage of a sentence being handed down. 
So with all due respect to Mexico, because this is internal 
affairs, for it to get its arms around this criminality, they 
have to make a serious commitment to that kind of criminal 
justice reform and fighting corruption, which is endemic.
    And I think it would be important for this committee also 
to review the strategy under Merida because if you take the 
pillars that they have laid out there, we have really fallen 
far short of any of our objectives. And it is fair to say we 
need to renovate that and also consult with the Mexicans about 
what more we can do to attack transnational organized crime 
using asymmetrical tools like the OFAC sanctions to go after 
the drug kingpins. When Senator Coverdell, the former chairman 
of this subcommittee, drafted the drug kingpin designation act, 
he had Mexico in mind, not Afghanistan where most of this is 
taking place. And so I think it is an asymmetrical tool because 
these guys are not in the drug business for pharmacology. They 
are in it for the dollars. And it is one thing for this 
activity to be taking place overseas or maybe we cannot do much 
about it. But when they traffic in our American dollar and use 
our financial system to launder the resources, we should be 
more effective in going after them.
    Senator Rubio. Ambassador Noriega, you mentioned the 
institutions--criminal justice reform capability increase is 
one of the things that the Mexican Government does want to work 
more closely with the United States on.
    But the other good news in sort of institutions is the 
Mexican Navy. The Mexican Navy has been an extraordinary 
partner and liaison to the United States. They have proven not 
just capable but willing of confronting many of the challenges 
that are going on. In fact, they have taken on increasing law 
enforcement responsibility. And there are opportunities there.
    Now, Mexico is not destitute. They can afford to buy a lot 
of this equipment, but there are sales and other technologies 
we can make available to them on air-to-ground communications, 
on additional training for helicopter maintenance. That really 
goes a long way towards increasing the Mexican Navy capability. 
That liaison relationship with the Navy of Mexico is a 
phenomenal relationship, and it is one of the institutions that 
I hope we will continue to work closely with.
    Senator Shaheen?
    Senator Shaheen. Thank you, Mr. Chairman.
    And thank you both for being here. Governor Richardson, it 
is nice to see you again.
    I just wanted to respond to both of your focus on the 
economic relationship between Mexico and the United States, 
because as Governor, I took a trade mission to Mexico because 
that is what the businesses in New Hampshire wanted. And you 
think about a trade relationship with the southern states that 
border Mexico, but that relationship is throughout the country. 
And in a northern state like New Hampshire, there is a great 
deal of interest in Mexico and in our trade arrangements with 
Mexico. And that has been enhanced by NAFTA. So I think it is 
important to point out that, as you all have suggested, it is 
not just with part of the United States, but the whole country 
benefits.
    I want to go back to the question about what happens with 
the drug wars because in New Hampshire we have the second 
highest overdose rate in the country. It is from opioids, from 
heroin, from fentanyl which is now causing a huge impact on the 
heroin and opioid issue in the state and the death rate.
    So as we think about cooperation with Mexico, about the 
Merida Initiative that you all have referenced--I think you 
referenced it, Ambassador Noriega--what would potential cuts 
that we are hearing about for the State Department--and we have 
not seen detail on the proposed budget cuts from this 
administration. But what would cuts like that do to that 
initiative and to the efforts to combat trafficking of deadly 
drugs and chemicals?
    Ambassador Noriega. I must say that Mexicans are already 
asking themselves why they are still in this fight when they 
see drugs being legalized in the United States, not to take a 
position on that subject. But the fact is they are asking that 
question even just the marijuana, but why are we in this if the 
Americans do not have the resources behind the fight or are 
actually changing their public laws to minimize criminality--or 
decriminalize I should say. So that is where we are in the 
discussion.
    In terms of the cooperative agreements that we have and the 
material resources that we provide, the training, technical 
advice, money to fuel these activities, it is really essential. 
It shows a level of commitment whether we are going to be 
engaged in a serious way because they are running serious risks 
by engaging with us. And they do have alternatives, which is 
let the drugs through.
    The other thing is we have to show a commitment, a 
rhetorical commitment at the presidential level against the 
consumption of drugs here. It has made an impact in the past. 
And unfortunately, we sort of let our guard down in terms of 
speaking out against those things. And the people think that 
they are engaging in sort of, quote/unquote, recreational drug 
use, are sowing mayhem and chaos up and down our continent. 
When unaccompanied minors are throwing themselves over the U.S. 
border, part of that is that their agricultural economies and 
their societies in general have been decimated by criminality 
sown by this trade in these illegal drugs.
    The Mexicans are going to--you know, they are concerned 
about their own consumption problems too. So I think they are 
going to carry that fight forward.
    But I think it is very important that the United States do 
two things: sit down with them and other consumer and producer 
countries, and have a serious discussion about an overall 
strategy. And one of the things they are going to want to know 
is why do we insist on this kind of coercive strategy. I have 
been a hawk on this for a long, long time from when I worked 
for Congressman Ben Gilman on the House side and even 
criticized the Mexican Government in the past for not doing 
enough. But I think we owe them serious answers about a 
strategy that says that we should apply all the resources to 
interdict drugs instead of looking at other ways of dealing 
with the market.
    Senator Shaheen. Thank you.
    Ambassador Richardson. Senator, I remember when you made 
that delegation trip to Mexico. I think I was Secretary of 
Energy.
    Senator Shaheen. I think that is right.
    Ambassador Richardson. And you wanted to do some energy 
cooperation. And I went to see you. And I commend you for that 
effort.
    You know, on the heroin addiction, the opioid, I know how 
big an issue it is in New Hampshire. I spent some time in the 
Northeast recently. And I think that what is needed there is 
the joint programs with Mexico to continue. We know that heroin 
addiction, opioid addiction is growing in the United States. 
But we allow Mexico's cooperation to permit DEA agents to 
operate on the ground in Mexico and extradite these drug 
dealers and dangerous fugitives to the U.S.
    Now, I think your specific question was on the budget. I 
think the Homeland Security budget--some of this would be under 
Homeland Security. It would not be under the State Department, 
which I hear is maybe a 40 percent cut. I hope that does not 
happen, and you can stop that.
    But my last point is I think the economic relationship, 
NAFTA, has created a Mexican class that did not exist before. 
You know, Mexico today graduates more engineers than Germany 
does. So this is an evolving economic country that is getting 
stronger on the educational side, which is so important.
    But I wanted to make you recall that visit. I think we were 
in southern New Hampshire. And you were just going to Mexico 
and you went.
    Senator Shaheen. That is right. Thank you. And we had a 
great trip, and we brought back lots of business.
    Senator Rubio. While Senator Flake is just arriving--I know 
he has got some questions--I want to make two points.
    You talked about the Mexican middle class, and I mentioned 
that earlier as well. And that is an important development. In 
addition to expanding their markets, the ability--I think it 
really does strengthen both sides of the country.
    But the broader point I would make and I have discussed 
with people in the Mexican Government the issue of migration--
it is of growing concern to them because they are largely a 
transit point. But when people are unable to enter the United 
States, as is the case now, for example, for a number of Cubans 
who transited through Central America, through Mexico to try to 
get to the border, they now have become a responsibility on the 
Mexico side to house migrants and others who are coming through 
the country. So they have a shared interest with us in dealing 
with the migratory issue, particularly because they are a 
transit point for tens of thousands of people who are coming 
through the country, and if they cannot ultimately get into the 
United States, obviously wind up staying in Mexico and becoming 
a burden to them as well. So I do think there is the 
opportunity to work in partnership with them on the issue of 
their southern border and the broader point of migration.
    Senator Flake?
    Senator Flake. Well, thank you, Mr. Chairman. I wish I 
could have been here for more of the discussion. I appreciate 
you scheduling this hearing.
    As the Senator from Arizona, I obviously see firsthand the 
benefits of our relationship with Mexico. On the economic side 
alone, Arizona exported more than $8 billion worth of goods and 
services in 2016. $8 billion. Trade with Mexico supports tens 
of thousands of jobs in Arizona. Arizona obviously benefits 
when shoppers from Mexico come to Arizona as well. And NAFTA 
has enabled a number of U.S. industries to become more 
competitive on a global scale with our supply chains being 
integrated with Mexico.
    A ``Wall Street Journal'' article from a few weeks ago 
noted that nearly 60 percent of the 17.5 million light vehicles 
sold in the U.S. last year were assembled within the so-called 
auto alley that runs from the Great Lakes to the Gulf of 
Mexico.
    Obviously, the talk of renegotiating NAFTA--or first they 
talked about tearing it up and then renegotiating. That 
obviously has an impact, just the talk of it. And I am 
concerned about that.
    With regard to Mexico, I would just like to ask the 
question, Mr. Noriega, do you believe that just--has there been 
any impact with the rhetoric about renegotiating NAFTA in terms 
of decisions made by companies to locate or trade patterns? Is 
there a problem just by talking down our trade relationship?
    Ambassador Noriega. Well, I certainly think there is a 
problem with that and even the idea of being able to muscle 
certain companies into not relocating their plants. You know, 
there are Mexican investors who invest in the United States as 
well. What if the Mexican Government were to turn around and 
say you cannot create jobs in Michigan, for example? A company 
names Rassini is a Mexican company that makes the brakes for 
the Tesla and has a new contract with Ford. That is a Mexican 
company with Mexican engineers and Mexican technology that is 
contributing in the long run to our economy.
    The big winner, if were to, quote, tear up NAFTA, would be 
China right here in our back yard. Not only does NAFTA make us 
more competitive vis-a-vis China, but the Chinese are fully 
prepared to move into Mexico and to use Mexico as a platform 
and all of its workers and the industrial base that our 
relationship helped create to then export Chinese products to 
the United States or to the rest of the world and to our 
natural market in Latin America. There is literally a case in 
recent days of a Chinese investment to make automobiles in 
Mexico for export into Latin America.
    So that agreement, obviously, as you know really better 
than almost anyone around because of your home state, is good 
for our interests, and the idea of sort of opening it up to 
renegotiation--it has had an impact in terms of the value of 
the Mexican peso. In the last 16 months, the Mexican peso I 
think has dropped 20 percent in value. It has a real impact on 
the lives of folks. And it is really sort of a shame that we 
sow these kinds of doubts among our very best partners.
    Senator Flake. Well, thank you.
    Ambassador Richardson. Senator, you made a very good point. 
Mexico has free trade agreements with 40 countries--40 right 
now. They would all love to take advantage of the exports that 
might be lost if we abandon NAFTA. I think that is a very 
serious problem that we have got to address.
    In addition to that, China would be the main beneficiary.
    I did not mention this in my comments, but what we also 
did, which I think was shortsighted, although I seem to be a 
minority in my own party and everywhere, is one of the first 
steps that was taken in the new administration was canceling 
the Trans-Pacific Partnership. That is 11 countries. That 
involved Mexico. That involved Peru. That involved Canada. I 
think it was a terrible mistake. China is going to fill that 
vacuum. We do not want a NAFTA diminishing or a NAFTA 
derailment or a delay in NAFTA for other countries to move in.
    You know, I am just going to give one example. China, that 
does not have a trade agreement with Mexico, would step in. 
Days after the President talked about a Ford plant canceling 
the opening of a factory in Mexico, a company called JAC, a 
Chinese automobile manufacturer, announced that it would be 
opening its first plant in that country. So there is movement 
that unless we move fast, we are going to hurt ourselves. And 
we are going to hurt Arizona and New Mexico and Colorado and 
Florida and New Hampshire. You know, 23 states. You mentioned 
your statistic with Mexico. Twenty-three states out of our 50--
the number one export market is Mexico, almost half. So this is 
an economic security issue too.
    Senator Flake. If you will indulge for just a minute.
    Let me talk for a second about the trade deficit. People I 
think get too hot and bothered about a trade deficit with 
Mexico. Our total trade deficit with Mexico is about $50 
billion, mostly having to do with the energy sector where we 
have a lot of trade deficits around the world. But people will 
point to that and say that is the reason we need to renegotiate 
or retool this relationship when prior to NAFTA, 1993, I think 
total trade with Mexico was about $60 billion. Now it tops $500 
billion. But we have a persistent trade deficit largely because 
of energy of only about $50 billion.
    Is there too much fixation on a trade deficit?
    Ambassador Noriega. I think there is for two reasons. One 
is if you back the energy number out, Mexico actually is our 
largest trading partner, and the deficit is smaller as well.
    But the other thing is that because of these integrated 
supply chains that you know very, very well, really among the 
three countries, not just between Mexico and the United States, 
as it happens 40 percent of Mexico's exports is actually U.S. 
content that is folded into the final product and then exported 
out to the world or, frankly, re-exported to the United States. 
So that exaggerates the story.
    Senator Flake. Thank you.
    Thank you, Mr. Chairman.
    Ambassador Richardson. You know, Senator, just another 
point. Brazil and Argentina have already approached Mexico on 
the corn crop if NAFTA or an import tax is initiated. So we 
would lose there.
    But on the energy, I know this is a big issue for you. 
Mexico has energy reform. So it is permitting American 
investment for the first time. And I think that is good for 
both countries. There is a potential solar and wind opportunity 
for American companies in Baja, California right near you for a 
new grid, a solar and wind grid that I think would happen. But 
the potential for cooperation on refineries, on 
interconnectivity with Mexico's grid is very important. A 
growing market for U.S. energy exports to Mexico was $20.2 
billion in 2016, and the value of U.S. energy imports from 
Mexico to us is $8.7 billion. So we are doing pretty well.
    Senator Flake. Thank you.
    Senator Rubio. And just as an aside or just to note 
sometimes how these things are more complicated than they 
appear at first blush, Mexico has 13 free trade agreements 
encompassing 45 countries. By comparison, the United States has 
14 free trade agreements with 20 countries. So what that means 
is Mexico basically has free trade access to 60 percent of 
global GDP in a tariff-free environment. So if you are thinking 
about making something and it says even if 40 percent of the 
content is U.S.-made and it says ``made in Mexico,'' you have 
access to 45 countries through free trade, compared to only 20 
for the current United States standing. And that is something a 
lot of people do not realize.
    Yes, their labor costs are lower and they actually have 
very high skilled labor for the labor cost differential. But 
one of the advantages that they have is that they have free 
trade with 45 markets comprising 60 percent of global GDP. That 
is an incredible advantage that they have built for themselves, 
quite frankly, and expanding, according to what you pointed 
out. I do not think we have pointed to that enough. But it is 
one of the drivers that moves people to say I want the final 
product to say ``made in Mexico'' because again I have access 
to 45 markets, 60 percent of global GDP. If it says ``made in 
the USA,'' I only have 20 countries that I can send that to, a 
significantly less percentage of global GDP.
    So when we are talking about some of this free trade stuff 
and undoing some of it, we are almost in many ways cutting off 
our nose to spite our face in regards with Mexico and the 
comparative advantage that they have built.
    Yes, Senator Shaheen?
    Senator Shaheen. Thank you, Mr. Chairman.
    I just have one more follow-up question because I heard 
you, Governor Richardson, on NPR this morning talking about 
coming today and talking about our border security. You were 
talking about the proposal to build a wall along the border 
with Mexico. And I would just ask you. I have been down to our 
southern border. I have seen that there are better ways for us 
to address illegal immigration. I wonder if you could just 
speak to that again about what you think is a better way for us 
to be dealing with the illegal immigration that we are seeing 
in this country.
    Ambassador Richardson. Well, first, Senator, my 
observation, you get up pretty early because that was very 
early. I had just come in from New Mexico. So I commend you for 
getting up that early and listening to me. I did not think 
anyone listened, but several very educated members of your 
staff mentioned the same thing.
    The wall is a huge mistake. It is a geopolitical mistake. 
It is unworkable. It is going to cost $50 billion. Mexico is 
not going to pay for it.
    You know, most of the illegal immigration coming into the 
United States right now is from Central America. People are 
smuggled in in containers. It is not through a wall.
    A wall is also a symbol of rejection, that we are saying to 
Mexico, you are not welcome. Our immigrants--and I have said 
this before you came--are hardworking. They are patriotic. They 
want to be part of the American dream.
    And so I think the first step has to be--and I think you in 
the Senate can do this. You could not fund that wall. Mexico is 
not going to pay for it. Just find other ways to deal with 
border security. Data collection, technology, maybe some of the 
drones. If you went to the border, some of those work. Increase 
Border Patrol agents, increase Customs people, cooperation 
between states. I know you cooperate very well with Canada.
    You know, Mexico, when I was Governor, a lot of the border 
governors--and we do need to reinvigorate the border governors. 
This is not necessarily U.S.-Mexico. It is kind of dormant. I 
do not think they have met in a couple years. I think that 
makes a lot of sense for border governors, U.S. and Mexico, to 
start meeting again. It is because of this hostility that has 
happened.
    Ambassador Noriega. Let me just jump in, if I could.
    One thing we have not said explicitly here but which we 
would all understand is how do you stop illegal immigration. 
The most effective way is economic development. It is NAFTA, 
quite frankly. And that is why you have a net negative 
migration of Mexicans out of this country. And the increase, on 
the other hand, is what? Because Mexico's average wage is now 
about 60 percent of our wages. And the theory always was for 
decades that if we got to 60 percent, they would stop coming. 
And guess what? It happened.
    Now, we have to turn our attention downrange to Central 
America where these countries, particularly the Northern 
Triangle countries, are decimated by criminality. And some of 
your staff I know have visited the border, and they will tell 
you there are more things that Mexico can do to help on that 
border. But one thing we need to do with Mexico, with other 
countries is help the Central Americans deal with the 
insecurity issue but, first and foremost, really unlock the 
economic potential to create jobs so people can stay in their 
own homes.
    Senator Shaheen. You are absolutely right, and we also need 
comprehensive immigration reform in the United States.
    Ambassador Richardson. Right. You know, on that, Senator, 
you are absolutely right. Border security, yes. A path to 
legalization. That is needed. Realistically, you should do it, 
but I do not know if it will happen. But just one statistic. 
Between 2009 and 2014, according to the Pew Center, which is 
very respected, on the immigration issue, there was a net loss 
of 140,000 Mexican nationals that left the United States to 
return to Mexico, bringing Mexican immigration to the U.S. to a 
current net of 0 percent.
    So let us not be in search of a problem. Let us focus on 
the security issues. People say do not say legalization for 
citizenship. I am going to say it. I think if you look at what 
the Congress has pushed forward in the past, President George 
W. Bush, a path to legalization. It takes about 11 years. You 
got to pay back taxes, pay a fine if you are here illegally, 
embrace American values, many conditions before it happens. And 
I think that is the most sensible route.
    Ambassador Noriega. I think I would be remiss if I did not 
raise one point, and this is an important one in terms of a 
discussion of immigration. The 2015 crisis on the border was 
driven in large part by a misunderstanding in Central America 
over the President's DACA decision. And so we have to be super 
careful because think of the tragedy of hundreds of thousands, 
tens of thousands at least, of young folks making their way up 
through Mexico to reach our border because we have created this 
expectation. And that is just too high a human cost to pay.
    I am totally supportive of the idea of immigration reform, 
to modernize all of that. But let us face it. If you are a 
Central American, Central America is pretty nice place to live, 
to grow up, to raise your family. And they will do that, of 
course, if they have economic opportunity. And that is 
something where we can play an indispensable role.
    Senator Shaheen. Thank you, Mr. Chairman.
    Senator Menendez. [presiding]: The chairman had to leave, 
but let me close by saying a couple of things and then we will 
close the hearing.
    First of all, I appreciate and I hope that our friends in 
Mexico got a very clear sense that there is a bipartisan 
different view about the U.S.-Mexico relationship than that 
which is expressed by the administration. I am very heartened 
to hear Republicans and Democrats alike show a deep knowledge 
of the incredible importance of the relationship. And for 
whatever challenges we might have in terms of issues that we 
want to mutually pursue, that there is a better way. And so I 
am really heartened by the remarks made by my colleagues here 
today.
    I just want to make one observation. We got something that 
is impossible these days to get in the United States Senate on 
controversial issues, 68 votes for a comprehensive immigration 
reform. Senator Flake was part of the Gang of 8, as I was. And 
68 votes is tough to get. But it had more border security than 
even being proposed by the administration without a wall. It 
had a very tough, long, arduous pathway to legalization, but it 
had one. And it was scored by the CBO with some of the most 
outstanding numbers I have ever seen in my 25 years in 
Congress. Growth in GDP as a result of the reform, growth in 
wages for all Americans, reduction of the national debt as a 
result of revenues that would be derived, employment levels 
that would rise. I have never seen a score on a single piece of 
legislation that was so positive across all the denominators. 
So I hope we can at some point get back to that.
    I would just say that I am not sure that I agree with you, 
Ambassador, that DACA was the driver. I think that violence in 
Central America, the gangs, the narcotraffickers. If at the end 
of the day your choice is to stay and die or flee and possibly 
live, even if you are caught, you are going to make that 
choice. And so I think the flow started well before the 
President's DACA pronouncements. But I still think today those 
are the critical issues that we need to deal with in our 
Central American policy so that we can deal with this.
    So on behalf of the chairman with our thanks to both of you 
for some incredible testimony, I need to close.
    Ambassador Richardson. If I could just amplify on your 
excellent remarks. I read the paper this morning.
    Senator Menendez. Actually we can go on forever. I am just 
kidding.
    [Laughter.]
    Ambassador Richardson. And we have two experts here because 
both of you work on a bipartisan way.
    I saw the President saying that he wanted to talk to 
Democrats now after the health care issue. I am glad.
    I think Democrats and Republicans on comprehensive 
immigration and U.S. relations with Mexico can forge some 
sensible policy. So I urge you on the Mexico issue to get 
involved, to put your voices and your appropriations strength 
on behalf of a relationship--I am going to say it again. We 
kind of danced around it. I know the peso is getting better. 
There are some NAFTA talks. And I think both business 
communities need to get involved, especially the Mexican 
business community that knows these issues well. We need to 
cool this relationship down and get it straight again because 
it is one of our most important.
    And I hope the President reaches out to all of you here and 
to people like Matt McLarty and Jim Jones Democrats that have 
handled--Noriega--he told me something about his political 
affiliation that surprised me. But he has been a leader in the 
Republican Party on Latin America. You know, to reach out to 
people that may not share his view.
    Senator Menendez. Well, thank you.
    On behalf of the chairman, let me thank both of you for 
some incredibly important, enlightening testimony. It has 
really helped the process here, the debate, and the insights.
    The record remains open for 48 hours.
    And with that, the hearing is adjourned.
    [Whereupon, at 12:08 p.m., the hearing was adjourned.]