Jobs are key to slowing Central American migration
Migration from Central America is primarily due to a lack of economic opportunities, but US policy, while beneficial, does not address the underlying reasons people leave their homes.
The United States and Mexico are in an excellent position to adopt trade reforms to leverage private sector investment to create jobs. In particular, sowing the seeds of foreign and domestic investment, especially in the garment industry, would create jobs, reduce poverty and contribute to economic growth.
Migration from Central America increased dramatically in 2019 and 2021, affecting Texas more than any other state. People are looking for economic opportunities. Yes, violence is a contributing factor, but much of gang violence stems from the lack of legitimate economic opportunities.
The US response has been welcome development assistance initiatives that are not sufficient.
Last month, the United States and Mexico announced the Planting Opportunities initiative focused on training programs and scholarships for Central American youth. And also, the White House announced that the call to action for private sector investment in infrastructure and training has reached $ 1.2 billion. The aim of these initiatives is to reduce migration from Central America.
Three changes would be of particular benefit to Texas, and the Texas congressional delegation should consider them.
1. Focus on exports.
The US-Mexico collaboration focuses on development assistance. Development assistance and training can help increase the supply of skills, but Central America also needs help on the demand side. The demand for labor comes from the private sector. The Call to Action investments will certainly have a very positive impact, but the small size of Central American economies means that their best hope for long-term economic growth comes from exports.
This is the model that East Asia followed. Over the past century, developing countries, especially in Latin America, have attempted to shut down their economies to promote domestic growth.
East Asia has tried a different strategy. Instead of a closed economy model, East Asia pursued export-led growth based on regional integration. Some economists have called it a flying goose model because the region’s major economies, such as Japan, have helped transfer older production technologies to neighboring countries which, in turn, have moved their older technologies. to other neighbors.
In this way, the entire East Asian region integrated and was able to achieve much higher economic growth than the developing countries that followed the closed economy model.
As the leading export state of the United States, Texas should take the same direction for Central America. Growing friction with China and calls to relocate or move production closer to home create an excellent opportunity for Texas to take the lead in economic integration.
Texas and Mexico are already tightly integrated, but significant amounts of production are based in China.
More and more companies are moving their headquarters to Dallas and other major cities in Texas. These companies are in a privileged position to explore the movement of production from China closer to home, including to Central America.
Texas companies have also developed into key industries that can take advantage of the opportunities offered by Central America. Today, global value chains (the interconnected stages from raw materials to final production and sales) are even more important to international trade than they were during the dramatic rise of Asia. ballast. The opportunity to reorient these global value chains is ripe due to the recent upheaval in global trade.
Public health measures aimed at limiting the spread of COVID-19, a declining supply of services and growing demand for goods have caused major disruptions for many supply chains. Meanwhile, sourcing from China has become more expensive, making Central America more attractive. But significant barriers remain.
2. Update trade rules between the United States and Central American countries.
For example, the United States’ current trade agreement with Central America, CAFTA-DR, is surprisingly restrictive. Take the example of clothing.
Clothing is a particularly important industry for developing countries because it is very labor intensive. Over the past 150 years, the clothing industry has been the launching pad for industrialization.
A report released in December by the Mosbacher Institute at Texas A&M University shows Central American production is being held back by rules of origin that limit the fabrics and materials that can be used for clothing in order to qualify for the agreement. Without changing the complex and restrictive rules that govern trade between Central America and the United States, those Central American countries that could benefit most from increased investment in their garment manufacturing capabilities will miss this opportunity.
As the garment industry attracts potential migrants from agriculture and informal employment to the formal economy, focus on policies to expand the production of garments linked to the supply chain in Central America offers tremendous promise to tackle the root causes of migration.
3. Upgrade technology to improve tax collection.
Another key way to promote private sector investment is to help Central American governments move from lagging to advanced technologies.
In addition to the trade deal, investors are concerned about the local rule of law, especially with regard to tax policies. Governments in Central America do a poor job of collecting taxes mainly because local businesses know how to avoid paying taxes and governments lack the capacity to overcome much of this tax evasion.
As a result, the primary target of most tax collection efforts are businesses and foreign investors. Texas-led innovation and technology can play a vital role in helping Central American governments transition to a digital bureaucracy, including tax collection.
In 2019, the Computing Technology Industry Association reported that Texas ranked first among the United States in terms of net tech jobs. Connecting Texas technology to Central American governments would increase transparency and confidence in the government’s tax collection systems.
Combined with revisions to the rules of origin, these changes could significantly increase foreign investment and economic opportunities for workers trained through the Call to Action and Planting Opportunities program.
Without these changes, however, the seeds sown by Planting Opportunities could fall on barren soil.
Raymond Robertson is Director of the Mosbacher Institute at Texas A&M University and Principal Investigator at the Mission Foods Texas-Mexico Center. He wrote this column for The Dallas Morning News.
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