Foreign Policy Inbox: U.S.-Mexico Relations

SCOTT MALCOMSON: Welcome to today's meeting. CFR members around the nation and world are participating in this meeting via teleconference. It is on the record. Please completely turn off -- not just put on vibrate -- your cell phones, BlackBerries and all wireless devices. And welcome, again.

I'm Scott Malcomson with the New York Times Magazine. On my left is Shannon O'Neil, Douglas Dillon fellow for Latin American Studies at the council. She is also -- she travels to Mexico every couple of months and is working on a book about Mexico. And the other person here is General Barry McCaffrey. He was in charge of drug control policy in the Clinton administration. He is frequently on television as a commentator on security matters, and most important, for our purposes, he has recently returned from Mexico.

I just wanted to start by -- either one of you, whoever wants to go first -- as described in your report, General, the security situation in Mexico, while maybe never all that great, has become truly awful in the last couple of years. Under President Calderon there has been an enormous effort -- military effort to combat drug cartels, and partly as a result, the level of violence has become truly Baroque over the last 12 to 16 months, and I'm wondering, first of all, if you can just kind of discuss why you think that's happened. What's changed to make it reach that level?

BARRY R. MCCAFFREY: Well, let me -- first of all, Scott, thanks very much for moderating the panel. And Shannon is not only a nice Irish girl, but a recognized international expert on Mexico. And many of you in the room, and certainly those listening, you know, have spent their lives studying and interacting with the Mexicans, and I would sort of, you know, hesitantly put my credentials on the table that the principal reason I write and speak about Mexico is I love and admire the people, the culture, the food, the music, their tremendous businessmen -- if they're friends, they're the best friends to have in the world. They've got, you know, leadership that -- and I mean this honestly -- their senior leadership are better educated, better dressed and better looking than ours -- (laughter) -- as a general rule. You know, you deal with the minister of finance, who has a Ph.D. from MIT, and they're multilingual and they're just remarkable people.

So I've had a lifelong sense of identity with their challenges and problems, and I tell people I'm a friend of Mexico. So that's sort of a going-in bias. And I just participated briefly on a panel, international panel, to talk to the Mexican senior leadership, principally Secretary Luna, about drug crimes and the challenges they face, and I wrote a paper -- we're going to mostly have an interaction, but I just would put that in front of you to consider. Read through the report I wrote. I write these reports as a professor at West Point, and I get them out on the net, and you may find some things of utility in there.

And, by the way, that report was probably badly received by some of the Mexican leadership. Their ambassador to the United States, Arturo Sarukhan, is one of the most brilliant people I've ever met. He's a gifted foreign service officer, diplomat, and really understands the Americans. I just had lunch with him last week to try and make sure he understood that my purpose, my agenda, is to energize the U.S., not Mexico, to get us engaged, to have us committed to do something significant. Mexico matters. I don't need to tell this group that, but most American chambers of commerce, I have to explain -- 100 million of them -- you know, they run our agricultural system, meat packing, day care centers, construction. There is no border between the two countries -- they're vitally important to us -- and drugs is part of that, drugs and criminal conduct.

So I do suggest that -- I think what's happened in Mexico that's different -- and Shannon will have an informed viewpoint on this. I've been working with Mexico very -- or watching it as closely as I could for perhaps 15 years. What has changed, I think, is Zedilo started them toward democracy. A thousand years from now Mexican kids are going to study Ernesto Zedilo. And Fox sort of moved the ball along, and now you've got this guy, Calderon, in there, with this tiny victory, political victory, and he said, one of the things I'm going to do is create a modern democratic state with the rule of law. I'm going to regain control of the streets. And he did that in the face of what are arguable four huge drug cartels, and he reached for the tools at hand and he confronted them, and it's turned into a war. It's worth fighting over drugs. It is worth doing it. You know, pick a number you believe -- some of the numbers we've tossed around in here -- you're an expert on money laundering. I don't know what it is; I know it's a multi-billion business.

So they're fighting over it and they're breaking up the big cartels. So suddenly you've got these -- you know, when you deal with the minister of public security of Mexico -- and this guy's first class, a man of integrity and courage, and so is their president, so is the attorney general, Mora, but when they pull on the lever of an institution, it doesn't work. It doesn't work. And there's only 6 percent of their law enforcement are federal cops anyway. Most of them are municipal and state, and some of them are incompetent, badly trained, badly resourced. They're no life insurance for -- there's no medical care, there's -- it's just institutions that need to be built.

So the people don't like it. You know, I think there's still 65-percent support levels, probably, for Calderon and his campaign to recreate the rule of law, but that's down from maybe 85 percent a year ago. And people are getting murdered -- thousands of people being murdered. In my report I use provocative language -- squad-sized units of the police and army, abducted, tortured to death, decapitated and left as demonstrations in front of Mexican institutions, and that the narco-criminal enterprises now are being run, by the way, by the third level. The killers are in charge, not the businessmen, and they're pretty sophisticated people. They're much better-equipped and energized than the local and state police.

So Calderon reached for the one tool he had that he knew was disciplined and would respond to his orders: the Mexican army. And the U.N. just denounced him a couple of weeks ago, a U.N. body report. Mexico is in extremis. They've fighting back, their leadership is sound, but it is a perilous situation.

So the final message is, and we're involved in it. You know, this is 2,000 miles of barely marked border, and that criminal enterprise is in 295 major U.S. cities, and we've got to be supportive. The Merida Initiative was $400 million a year and a lot of political guff -- bad public rhetoric. Afghanistan is $2.4 billion a month and Iraq is $12 billion a month. So where are our priorities? Wake up. Pay attention. Get engaged. Treat these people with respect and understand it's a 25-year problem.

MALCOMSON: Shannon, could you talk a bit more about some of the political aspects and also -- and the likely policy suggestions?

SHANNON K. O'NEIL: Sure. I agree with everything Barry said, and just adding on to what you said, there's sort of two big structural reasons why we've seen increased violence, really not just in the last two years but over the last couple decades -- the last 10 years or so at least, and one is a changing of the drug market and drug transit in general to the United States and Latin America. So, in the 1990s a lot was coming up from Colombia. It would come up through Mexico but would come up through the Caribbean in the '80s, into the '90s. Some of those areas were shut down by U.S. policy, by cooperation with those nations. So drug transit moved in different ways and it moved through Mexico. So part of it, there's just more money and more drugs coming through Mexico so more violence associated with it.

The second issue, which is one Barry gets on, is actually democracy, and the democratization of Mexico has opened up this hole that's been filled, really, by violence. And Mexico -- drugs have been moving through Mexico for decades. This isn't something new that it's going through, though some of the paths, as I mentioned, are different. But before, the way the drug trade worked, it was much more controlled from the central government in many ways, and there's a good amount of evidence that it was actually controlled by PRI and by PRI leaders. And as all of you know, but really to remember, is that the PRI political party controlled Mexico for 70 years. It was a one-party state. And so that meant not just the presidency didn't change but the Congress didn't change, and bodies like the judiciary, like law enforcement, were all part of the political system.

So, for 70 years the judiciary -- the police never worked the way we think of a judiciary police working, sort of an independent check and balance on the other three branches of government. It was part of this political apparatus. So we get to 2000; we get an opposition president in; we get the full transition to democracy. We see competition come into the executive branch, we see it come into the legislative branch, but there needed to, and still needs to be, a real creation of an independent judiciary, this third branch of government that is so important for electoral democracy, for representative democracy.

And so that has been a big challenge for both the Fox and Calderon governments, to actually create these institutions, just what Barry was talking about. But add to just the problem, how do you train judges, how do you train police? How do you train them to do the types of roles that you need to do in an independent judiciary? You have this other force, which is billions and billions of dollars, actively trying to manipulate, to subvert an independent judiciary, an independent police. So that has been a real challenge and has led to this increased violence. Those are two big structural reasons.

And then the short-term reasons -- ones that Barry did mention here -- are, you know, Calderon came out of the gates swinging, basically. Crime and drug violence was going to be one of his big issues, and he brought in the military, and so there was a reaction back by the drug cartels. And also what you also touched on is that Calderon -- Fox before him, but Calderon has also extradited many of the leaders, has actually been successful in capturing many of the head leaders, but then that means down at the next level there has been a lot of fighting out, who will control the new routes and how that's going to work.

So a lot of the killings, you know, which reached almost 6,000 this last year, are really between these cartels or within the actual cartels on fighting out for the territory. So there's both of these sort of longer-term structural things going on plus these shorter-term aspects of the actors involved that have led to increased violence in the last several years.

So your question on policy -- so where does the U.S. --

MALCOMSON: American policy.

O'NEIL: American policy, yes. I won't -- American policy. So a big aspect of American policy is the Merida Initiative. And this is a big step up. Before last year the United States provided less than $40 million a year to Mexico. You know, compare that to Colombia, which has been getting about $500 million a year for a decade almost. Merida stepped it up. It's about $400 million. A lot of it goes to -- especially this first year -- to military equipment, to helicopters, to airplanes, to strengthening databases, to providing other scanning equipment, things like that. And this is important. It's necessary and it shows that the United States realizes this is a serious problem, not just for Mexico but for the United States, and is a step in that direction. But this is only a first step, and I agree with you -- say this is only $400 million, and compared to the amount of money that's coming out of the U.S. to the drug cartels because of what we buy here, it's miniscule. I mean, no one knows exactly what the drug market is, but most of the estimates are at least $20 billion going back across the border.

And what's interesting is one way the United States could help Mexico, policy-wise, rather than $400 million from Congress -- which we know is hard to get through on a good day, and particularly with the recession coming in will be incredibly difficult in the coming years as we try to reauthorize this money for the coming years -- there's two things the United States could do. One is the money. Money -- you know, here in New York, in other cities around the U.S., people go buy drugs, it gets shipped south. It's wired, it's sent by car, it's sent by bus. It's agglomerated and then put in the back of cars, put in the back of trucks, and just shipped physically over the Mexican border, and then as money laundered into banks it sometimes ends up back in the United States. I mean, we, since, 9/11, have developed a very sophisticated system in terms of following terrorism money and counterterrorism. Much of that effort needs to be put into following the drug money. There's some effort there but more resources need to be put that way. That's one thing the United States could do.

The other thing the United States could do to get our own house in order, which would help the Mexican government probably more than that $400 million, is to deal with the gun issue, because 90-plus percent of the guns that the drug cartels are using today against the Mexican state, against the Mexican law enforcement, and against citizens there come from the United States, and they're bought often along the border, whether in gun shops along the border, in gun fairs and gun shows along the border, and we're not enforcing our own laws. I'd say, A, you can't sell to foreign nationals, or, B, you can't sell to straw men who are then -- straw buyers who are then going to give them to the foreign nationals, or they're just selling them under the market, not even a pretense of checking who these people are.

So those are two big issues to clean up our own house, enforce our own laws that would help Mexico go a long way to fighting this battle.

MCCAFFREY: I might add to that one. The only negative push-back I've got on that report was from the gun nuts of America, who are outraged that I would imply that you could buy automatic weapons in the United States in bulk and send them south. And I've, again, gone to the ATF and DEA and they said that's precisely what's happening. By the way, I say that as a gun nut myself. You know, there are so many guns in my house, if it ever catches on fire the fire department would have a two-block radius sealed off.

Now, one caveat on that, however. The astonishing thing to me, listening to Mexican law enforcement, they've seized, what, 25,000-and-some-odd weapons -- a division-sized, battlefield-level seizure of weapons. The AK-47s, the Glocks I think get bought here. Texas, Arizona, New Mexico, elsewhere, I think you can buy them in bulk -- semi-automatic. You change the thing and you end up with an automatic weapon. Why the ATF hasn't had the resources yet to do a decent computer system is beyond me.

But the other thing that you're seeing them seize is heavy-caliber machine guns -- 40-millimeter grenade machine guns, the most modern variants; thousands of military hand grenades and RPGs. And I believe you could walk out the front door of CFR and within minutes buy an illegal weapon, but if you gave me $200,000, I doubt I could get a military hand grenade in this country, and they're seeing thousands of them. So it's not just cross-border, although that may be illegally transiting Miami free trade zone, that kind of thing, but there's obviously an Eastern European, Chinese -- this is not old stuff from El Salvador; this is brand new military hardware. So the poor local police are out-gunned, out-equipped.

MALCOMSON: The drop over a year from 85 percent to 65 percent that you described in terms of polling results, support in Mexico for the government's policies on this, what's your -- both of you -- what's your assessment of -- I mean, A, to what degree is this a policy of the cartels to deliberately undermine public support? And, secondly, what do you think the chances are, if it is on that basis, that it can succeed, that eventually the government will have to say, well, we just -- the price is too high; I can't get reelected if I keep doing this?

O'NEIL: Well, it's interesting on that. Calderon's -- when people are asked, do you support Calderon's fight against the drug cartels, the vast majority, in the high 60s, says, yes, we support him and we're glad he's doing it. When you ask them, do you think he can win, the number is much, much lower. So they're glad he's trying to do it, but they actually don't think that they're going to see success out of it.

MALCOMSON: Is that cultural Nihilism at some higher level or --

O'NEIL: Well, who knows? (Laughs.) Maybe it's a reality check on -- you know, they're glad finally a politician is standing up and trying to take on the drug cartels in a real way, they feel, but -- you know, really they're a bit pessimistic on the outcome.

But it's been interesting. You watch the elections, you watch what's happened over two years in Mexico; across all political parties, everybody is against the drug cartels, is against the violence. You don't have the sort of accommodation side, at least on the national level. I mean, when you get down to a local level, there is accommodation, either because it's in the -- well, mostly because it's in the self-interest of the politicians, either that they are benefiting, they're being enriched by their relation with the drug lords, or they would like to stay alive. You know, in Mexico people talk about you get either the money -- you get money or lead; that's your choice. And the drug cartels offer that, and particularly at the local level where you have very weak law enforcements where they don't have resources and many of them have been given this choice, you know, think about what choice you would make if you and your family were living in a place.

So that's part of the issue with this polling. I mean, part of the issue why Calderon's polling numbers have come down recently, it's not just the violence side; it's also the economy in Mexico has been sinking quite rapidly. It's tied to the U.S. economy, so people are losing their jobs, people are uncertain about their futures. That's a big issue as well. And things like remittances -- big part of many households' incomes -- have also been falling. So falling poll ratings have a lot to do with that as well.

MCCAFFREY: You know, there's a -- some of the older political science people in the room will remember Gabriel Almond's "Civic Culture," a classic of his work, and five political systems, and one of them was Mexico, and what always stuck in my mind as I watch Mexico over the years -- and, Scott, it's back to your point -- I forget his entire typology, but there were several ways in which he analyzed how people view their own political system. And there were two dimensions of that -- the degree to which you have trust in it -- I think it was the effective, if I remember, measurement -- and the other one, the degree to which you like it, and it was the affective measurement. And I think it was the U.K., it was Germany, it was, you know -- but Mexico was one of them. And on the Mexico side, it had, hands-down, if I remember -- it was off the charts on high levels of endorsement of my government -- I love it, its flag, its culture, the revolution, what it stands for -- and the least level of confidence that it would do the right thing. So it's a real problem. It's a dichotomy, and they're hypersensitive to outside criticism, but outside the country there is a widespread belief, you know, that maybe this guy can't pull it off.

Now, also -- and actually I think Shannon made this point more effectively -- when you look at Mexican families, I mean, these are -- it's interesting the stereotypes in the United States about Mexico. Mexicans, in just my assessment, are intensely hard workers, are incredibly loyal friends, have huge levels of personal courage and issues, both physical and moral, are incredibly spiritual people, are on and on, but it stops at the family or the business, or maybe the village. And, by the way, the army has picked up on that. The army is a very strong institution, not just by Mexican standards but by sort of comparative standards, but other than that I think people look and say, we can't trust the state government, the city government, the state police. They don't think they can pull it off.

So now in fear they'd like to go back and say the drugs is a Gringo problem. These people are just transiting to the U.S. Leave it alone. The violence will go down and we'll live through this. But of course the problem is -- something I was telling them 10 years ago -- if you handle drugs, you will use them. Your children, your employees, your cops, they'll generate these, you know, malignancies of corruption in government and violence, and that's what's happening in Mexico. So you look at drug use in Mexico, which is still, we think, lower than the U.S. We're probably 7 percent past-month drug use; I think they're probably 5 percent, but it's doubled in a decade and it's tripled among women, and it's doubled among young people.

So they're now seeing huge arrays of social dysfunctional behavior, to include in their families because they've got kids who are using methamphetamines. If you make methamphetamines, stick them up your nose, you're going to like it. It's going to have a tremendous impact on your brain function. And that's happening, so suddenly you've got derelicts who are dangerous and tweaking personalities, and Mexico, again, is now seeing the problem that we have in the crack cocaine epidemic that hit us in the 1980s. Remember what New York was like when crack cocaine hit the streets? It was brutal.

MALCOMSON: I think I've got enough time for one more of my own questions before I open it up, and I wanted to take a little bit off of drugs. There was a moment, which I'm sure everyone here remembers, when President Bush and Fox were -- it was a sort of cowboy boot kind of moment between the two countries and things were going to go on to a new relationship, and that kind of went off the rails after September 11th, but to what extent do you think there is an expectation within Mexico of another chance to really dramatically improve the relationship between the two countries, and to what extent do you think there might be interest in and commitment to that in Washington with a new administration?

MCCAFFREY: Well, you know, I have been pretty critical on the Bush administration. There was a good argument in several different areas -- foreign policy, defense policy, research policy -- that it may have been the worst administration in the history of the country. And I say that as a nonpartisan critic of public policy. On Mexico they actually had some pretty good speeches. You know, Bush gave a great speech prior to the last election. John McCain gave a great speech before he realized it was the third rail of Republican politics and scurried off and hid, with good reason. I mean, if you're the mayor of Phoenix, Arizona, you wake up in the morning; a huge amount of the problems you're facing are based on Mexican single males with guns and drugs in your city. And the ranchers are sick of this, the frontier people, millions crossing the frontier.

So Bush actually -- I think his heart was in the right place. Had 9/11 not happened and had we not gotten involved in some of these other inanities, he might well have done pretty well on it. And now I think -- and this is no particular insight with this group -- I think there's euphoria over the Obama administration, you know, this brilliant, reflective, beautifully educated, thoughtful, open dialogue, transparency in government. So I think there's a pretty high expectations.

But in this case, in Mexico, one of our problems, I think, is -- stand on either side of that border -- and, by the way, Shannon I know wouldn't disagree with this -- if you're within 25 miles of the border, you like each other a lot and you're not too sure you like either capital. But as you look at the Mexicans in sort of an objective, critical, I'm a Martian looking at a phenomenon, or look at the U.S. government, our policy has been arrogance and ignorance. It's astonishing. You know, I tell people, if you're a dad or an Army company commander or a businessman, you can't stand up in public and excoriate people and then privately ask them to do difficult things. It doesn't work. So why would we think that's going to work on Mexico?

And then, conversely, on the other side of the border, there's been an enormous level of hypocrisy and public rhetoric. You know, Mexico does try and protect their southern border -- mass movement in Guatemala, El Salvador across the frontier, jobless -- they don't want to deal with that but there's a constitutional right, as you know, to emigrate, so you can cross the border with basically the assistance of Mexican authorities. And if you raise the subject of -- almost any subject with Mexican authorities, the first thing you want to do is to talk about an immigration policy. You know, Caribbean, you've got to talk about banana policy. I used to say, I don't do bananas, you know; I do drugs. (Laughter.)

So we have a problem on respectful civil dialogue, and Calderon has gone a long way to change that. It is amazing what he has done. Extraditing 86 people? God, I think that would have brought down the government if we -- we couldn't extradite pedophiles out of Mexico for years, and then we finally got pretty good criminal cooperation, criminal law, but not drugs. So Calderon put his own life and his government's life on the line.

O'NEIL: Well, drugs in this issue are going to dominate the relations, at least for the next couple years, but there are other issues there, and as Barry just said, for the Mexicans, migration is the big issue. That's what they feel the big issue is. Now, you look at Washington today, you look at the things on the Obama administration's plate, it's unlikely this year; next year migration is going to be the focus. But it is something that's incredibly important to the Mexicans.

But I do think it's -- it's not sort of these big issues of drugs and migration, but I think there are a couple areas where we could see a lot of U.S.-Mexico cooperation that are positive-sum things. I mean, the problem with migration, at least the way it's portrayed in both presses, both the Mexican and the U.S. press, is that it's a zero-sum game. If the U.S. lets in more Mexicans, if it opens up more Mexicans, then the U.S. somehow loses, at least for some parts of the U.S. population, and in Mexico, if Mexico doesn't get an agreement where it's fairly liberal access to the United States, then Mexico loses. So it's a difficult issue to resolve because somebody seems to lose, at least for parts of their political population.

But there are areas where we could work together. I mean, one issue is the United States, Mexico, all the countries in the world are entering a more multilateral space, and that is going to be important going forward. We've seen it with the financial crisis. We've moved from a G7, even to a G7-plus-5, to a G20 world focus on how we resolve the financial crisis. Well, Mexico is part of at least those latter two and could be a real voice in helping push forward a new financial architecture that could be quite important. And, you know, they have a voice. They're from the south or from, you know, a different area, but they have a lot in agreement with the United States. So that's one area where the United States and Mexico could work closely together in important bodies on the future of the world.

Another area where there's a lot of agreement between Obama and the Calderon administration is on climate change, and we have climate change negotiations coming up. Kyoto is reaching the end of its run, we have Copenhagen coming up, and both the Obama government and the people they put in on that side of things, in the energy and environment, and the people in the Calderon government, and Calderon himself, care a lot about this issue. So it's another area that's a positive sum for the two countries to work together. And of course drugs, migration are going to stay on the agenda, but here's some other things to add to the agenda that could make the cooperation deepen.

MCCAFFREY: I just want to add to that, though. The immigration policy -- you know, normally if there's more than four people in the room I try and not be truthful about immigration issues. Our public debate has almost been comical about this issue. I mean, the reasonable outcome of the debate was, well, we're going to have a policy where the -- and pick a number you believe. I say there's 12 (million) to 16 million illegal aliens in this country right now, at least half of them Mexican nationals. Many of the rest are Central Americans. More come at a rate of at least 800,000 a year, and never mind the 800,000 Arab Americans in Southern California. There are 450,000 in Warren, Michigan, et cetera.

By and large, they sustain our economy -- low-wage, high disciplined workers in muscle industries. And we say -- I think the upside of that last debate was, if you turn yourself in we'll wind you up in green duct tape; we'll send you back where you came from with a fine; and maybe we'll let you reapply and come in.

God, you know, we got 14,000 people in the Customs and Border Protection. This is complete asinine talk. And, by the way, why would we want to do that? So, the Mexicans listen to this debate and think this is foolhardy. I mean, why -- we have more people leaving football games on a weekend than we do people illegally entering the country.

Why can't they have biometric identity cards? Why can't we fence the border, build law enforcement institutions of the right size, manpower, technology to defend our frontier, in cooperation with Mexico and Canada? Why can't we do these things? These are not intellectual challenges. They're problems of political will, and the debate has not been reasonable from my viewpoint.

I don't know why you couldn't, say, "Go to report to a post office; we're going to take your picture; fingerprint you; you can fill out a five-page essay. If it turns out you lied on it, within 10 years we'll prosecute and deport you, and other than that, you're an instant citizen." My grandparents, both sides, got off the boat down here at Ellis Island drunk, and they did okay.

(Laughter.)

These hardworking Mexicans, why can't we incorporate them into our public life? I don't know, we got to -- it seems to me we have a responsibility to have a more informed, rational debate.

MALCOMSON: Well, on that note -- (laughter) -- any questions about McCaffrey family history, or --

MCCAFFREY: I didn't mean to offend the Irish in the audience --

(Laughter.)

MALCOMSON: -- Mexico?

O'NEIL: Mine were with you. (Laughs.)

MALCOMSON: -- (inaudible). Go ahead.

QUESTIONER: (Off mike) -- I'm sorry. Stephen Blank, North American Transportation Research Council.

First, Shannon, thank you for mentioning the guns issue. It's about time we talked more about that. It might lower our moral imperiousness if we acknowledged what -- that's happening.

But, here's a question, you've opened the door, what do you think Janet Napolitano's policy toward Mexico is going to be? Is it going to change? What do you think Homeland Security will do? What's your reading of the situation now?

MCCAFFREY: I've known her for years. I think the world of her. She's world-class. She's got 25 years of public life left in her. She's smart. She can work both parties. She understands Mexico. She's bringing in Jane Holl Lute as her number two, if she gets confirmed by the Senate, of course.

And so I -- you know, and by the way, to be fair, Department of Homeland Security, you know, the third biggest department in government, I testified against forming that when it came up because I knew it was a 15-year job to create a new system -- subsystem of government. But, they're now up and starting to be a tool at the disposal of the American people. She'll bring a fresh look at the issue.

I must admit -- and somebody raised it at the table, we'd better watch NAFTA. NAFTA has been an unadulterated good thing for America -- Canada, Mexico, U.S., one lifeboat, free movement of goods, services, ideas, people. We're moving in the right direction. It's taken a long time to get there, I know, but I certainly don't want any missteps on NAFTA.

And the tougher problem will be the Canadians, I think, rather than Mexicans. The Canadians have got some good grievances against us. They object to us poisoning their atmosphere. They object to us putting unilateral tariffs on their products. So, I hope the Obama administration -- Commerce, Treasury, Labor doesn't use this as a, you know, a labor issue; it doesn't use it as a device to impair NAFTA's effectiveness.

O'NEIL: For those that like Mexico and want Mexico to succeed, and our relationship with Mexico to succeed, I think Janet Napolitano is a great choice. And, as Barry was saying, if you live within 25 miles of the border you want that relationship to flower. And she's governed that area, right -- that's 25 miles on the border, as well as others.

So, those things, I think, are positive signs. She understands many of the issues, being a border-state governor before. We'll probably see changes, smaller changes, for instance, you know, raids on illegal immigrants in different plants. Some of those things we're already seeing a pullback, and so some of that will change.

But, that said, many of the policies that people would like to see re-thought are -- come from Congress, not exactly from the Executive Branch. There's things that she can't do, in what she's doing.

And, two -- at least on the migration issue, until we get some sort of discussion, reform that changes the system, which is not working today, there's not a lot she can do besides enforce the laws as they stand, which, as we see, do not work, right. The laws of supply and demand, it's an -- it's an economic exchange, principally, and the laws of supply and demand do not match the public policy that we have, in terms of those coming in and out of the country.

Now, we've seen in the last -- there's been much made in the Press, actually, about, oh, maybe all the Mexicans will go home now that the economy is failing in the United States. And there's been a couple articles that interview, you know, one Mexican family who's decided to pack it up and go home, and that must be a big trend. If you actually look at the data, that isn't what's happening. We're seeing fewer Mexicans make the journey to the United States. That is true.

There's fewer people leaving Mexico to come to the United States in the last six months or so. And that's because the way this market has worked, historically, is most of these people already have a job when they decide to make the trip; and particularly, since the trip now is so much more expensive, given greater border controls, people still get through but it's much more expensive in terms of the coyotes -- the smugglers that bring you up. You need to have a job on the other end to ensure that you'll be able to be able to pay that loan back.

So, that has dwindled -- the, sort of, flow coming up. But also, because of the enforced border control, the opportunity costs -- if you're here, and you lose your job, especially those who have families here, the idea of going home means it's going to be very hard for you ever to get back in. So, the circular -- it breaks the idea of circular migration, "Well, I want to go back;" or "I'm just going to come up here, leave my family in Mexico, and go back in case I lose my job or in case, you know, I have a lull in my employment." It's much harder to do that.

So, I think what we've done is, sort of, solidify, with the economic downturn, the populations on both sides, so we're not seeing the circularity. And that, Janet Napolitano can't do anything about. That has much more to do with this larger migration policy.

MCCAFFREY: And I think you've got the public anger toward immigrants. It's been interesting to watch. You know, there's a human rights issue here that hasn't been written about much. But, you go to a place like Yakima, Washington -- you know, sort of, the center of the wine industry, the center of the fruit industry, and 98 percent of the hard labor is done by Mexicans.

And yet they're -- the majority of them are here, many of them with families, they're living out of cars. They can't go to the police and say, I'm being sexually harassed by my boss because they're fearful of being deported. They're not getting minimum wage. They're not getting OSHA safety standards. We ought to be ashamed of ourselves for that.

You know, there's no reason why they can't be priced into the structure; why they can't be there legally; why they can't wire their money home to their mother, instead of being shaken down at the border by their own law enforcement authorities. So, we've got to fix that. And, again, I don't think, intellectually, that is a hard problem to think through. It's a matter of political will.

MALCOMSON: Jim, you had a question?

QUESTIONER: I'm Jim Zirin (sp).

A few months ago over Mexico City, the home secretary -- who was known as a vigorous enforcer of the drug laws -- and the chief prosecutor found themselves on the same plane, which mysteriously crashed. And I wondered whether you might comment on whether fear, as well as bribery, and other forms of corruption have really undermined their criminal justice system -- the independence of the judiciary, the vigorous enforcement of the criminal laws, to the point that it really has become almost a lawless society, at least in so far as drug are concerned?

MCCAFFREY: Well, I think it's widespread agreement that they weren't murdered, and that was a supposition by everyone, including leading Mexican authorities. I think it was just pilot earlier. It was just incompetence. But, I don't disagree with your larger issue.

And, by the way, you got to take into account that Secretary Luna, and these senior people, their lives are at risk. And, yeah, Interpol (sic) had got arrested, and his predecessor, both. But they're assassinating senior -- like the number-two guy in the FBI has been killed, two in a row. They just abducted some general down in -- what was it, Cancun, tortured him to death, along with his aide and his driver.

So, these are -- what you never hear said in this country is a sense of admiration for the courage and the leadership of the Mexican leadership, to include police and the army, and that they're -- they can penetrate these organizations. Not at will, the Mexican army and navy, by and large, have been pretty resistant. I personally think the three presidents in a row that we've talked about -- Zedillo, Fox and Calderon, are patriots and people of honor and integrity. But, their institutions are flawed, there's no two ways about it.

And that's in -- it's something I keep telling them. You know, it takes 15, 20 years to -- if you're a 19-year-old Mexican boy and you join the police force; you want your mother to be proud of you, you're enormously proud of your country and your flag, and its public image; and then you join a criminal organization when you join the Juarez Police Force. And you find out you've got to rent your pistol from your sergeant; and you find out that people are competing to be on the traffic squad because you can tow cars and sell them back to the owners.

And we know, in our own institutions, that, you know -- you're 19, and you look around, and you're joining an organization like the FBI or the U.S. Marine Corps, and you get pulled into that value system. That's what Mexico is trying to do. But, they start with nice boys and girls that want to serve the Mexican people. They lack institutions worthy of defending them.

O'NEIL: I can attest to that. I actually bought my car back from a Mexican policeman -- (laughter) -- in Mexico City once. And it was only a hundred pesos, so it was a good deal. (Laughs.)

Let me just stay on your point, in terms of, sort of, increased lawlessness. And the point I was trying to make earlier, which holds in this case, is that law wasn't there before. It's not as if somehow in the last six years the law that was there has been undercut by drug money, by corruption, by these things. It wasn't there before.

Before, you had a judicial branch but it was controlled by the politicians. And they used it, really, as the carrot and the stick. If you with the PRI political party, and you did something wrong, and you would have been, you know, prosecuted in the courts, well, they would work it out for you.

And if you were an opponent of the political party, and you didn't do anything wrong, they could use the judicial branch, they could bring a case against you and intimidate you that way. And so, coming into the democracy they didn't have that system there already. They're trying to form that system. They're trying to create these institutions that Barry is talking about.

And, at the same time, they're being blindsided, hit on this side with all these drugs, and money, and people trying to manipulate and undermine any efforts they have at setting up a professional legal system. And so that's the big challenge that they have right now. And I think that's actually, for the long-term, for Mexico, the real fundamental challenge they face -- the most important one.

QUESTIONER: Jim Hoag (sp), from Foreign Affairs.

This is a question about the violence issue -- which is getting so serious that it's undermining the government. Now, as was mentioned by the General, a great deal of the hardware that's making it so violent is coming across our border. Last time I looked, I saw a figure of 7,000 gun shops along our southern border.

Governor Napolitano comes into office with a great deal of praise. My question is, what, practically -- if anything, can she do about this trade, as long as our gun culture in this country is really run by the NRA?

MCCAFFREY: Hmm. Boy, I'll tell you, having quit the NRA myself a few years ago, we do have a problem, you know. And we're not going to change our culture, certainly not overnight, you know. Half the country is armed. At least 5 percent of us are nut-jobs. (Laughter.) You know, we murder 25, 000 people a year. It's hard to get our attention, we're shooting each other with such wild abandon. And that is a -- that is a really an electric issue. And we're not going to solve it.

Now, having said that -- and I think Shannon already made the point, our current border system, we have gone, thank god, from 4,000 Border Patrol to over 14,000. We have created Customs and Border Protection, so there's no longer this nonsense of, "I'm in charge here at El Paso Bridge of the Americas, but 200 meters over there is a different department of government in charge of the border."

So, we're doing better. Intelligence has been showing up. Fencing has been enormously helpful -- real fencing not virtual -- and other technology. The Coast Guard's got new resources. That's all to the good.

But, having said that, there was a house seizure -- what was it, two years ago, I think if I remember the number, $220 million in hundred-dollar bills, stacked waist-high throughout an urban residence. You can't buy brand new hundred-dollar bills in Mexico City. They came right out of the U.S. And here we got crates of AK-47s going south.

We do have to develop a law enforcement system -- by the way, I think fencing has to be part of it -- that protects Mexico as much as it portends to enforce our federal law. And we haven't done that. And if someone was doing that to us, we'd consider it providing sanctuary to an attack on our own government. We've got to do better, and I think we can.

By the way, that fencing, I know there'd probably -- we could divide the room into two warring factions over that. I never met a fence I didn't like -- (laughter) -- whether it's in Gaza or along the U.S.-Mexican border. And you can argue about, "Well, sir, I don't think your fence ought to be there, it ought to be at -- ." Okay, well let's discuss it.

But, in this situation I do not understand how we can get -- enforce immigration laws, do counter-criminal activities, unless we use obstacle and barrier plans to force people through where law enforcement professionals are waiting, and where we're using technology. We've got to control both borders, but particularly the U.S.-Mexican border. Otherwise we can't protect Mexico. And I think we've got to get on with that one too.

We've turned this into an incredible dance -- macabre, you know. People, "Well, you can't fence the border;" "You couldn't physically do it, come on;" It's 24 months and $5 billion. It's two weeks of Iraq expenditures. This is not hard at all.

And, yes, I understand you can hop over it, burrow under it, you know, you can go in hot-air balloons over it, you can do all sorts of things. But, you'll go from 200,000 people in a day, running down the interstate -- we've seen things like that along that border -- to suddenly it's 70 a day.

And that fencing brings -- reduces violence. Anybody that understood what San Diego-Tijuana was like before we put in the 48 miles of fence, triple barrier fence -- gang rapes, 70-plus murders a day. The fence went in, now you see families sitting on the beach on both sides of that border.

So, at some point, we've got to do fencing, and that's a problem for both U.S. political parties and it's poisonous for the Mexicans. The El Paso City Council would hound me around the building if they were -- I'll be there Sunday night, by the way, and they're not going to like that part of the presentation.

We had train robberies in El Paso, Texas in '96 when I became the drug policy director -- like 1870. We put in the fence -- was -- one of the most dangerous city on the face of the earth, was El Paso, Texas, loss -- theft of motor vehicles. Today it's the second safest city in America because of that fence.

So, the people who say fences don't work. Come on. They do. There's no argument about that. There's a political argument about the wisdom of putting them in.

MALCOMSON: Shannon, do you want to touch the fence issue?

O'NEIL: I'm going to touch on that -- on what we do about the guns. There's two things we can do: One is, we could check cars going south, not just north -- we could look into that; and two, we could put more ATF people on the border. Right now there's 100 officers stationed on a 2,000 mile border. We could have more resources there.

MCCAFFREY: Let me add to that. One way to get the room in an uproar is for me to explain to you that U.S. national defense is under-resourced. It's 4.2 percent of GNP, right in the middle of a war -- Vietnam, 17 percent; Korea, 19 percent; World War II, 37 percent. We have under-resourced U.S. national security.

Now, having said that, the Department of Defense has 2.4 million men and women in the Armed Forces Active Guard/Reserve civilian component -- 2.4 million -- and we're involved in these inane debates over whether 14,000 Border Patrol is too many; and do we need USAID rebuilt; do we need a public health service; and do we -- should the Marshals Service, instead of being 11,000 people, be 40,000?

And I tell every attorney general the Border Patrol ought to be 45,000 people. They say, "General, where are the analytics underpinning your argument?" Underpinning my argument? I made it up -- (laughter) -- entirely out of whole cloth. How could you possibly defend the U.S. frontier -- it's 12,000 miles. When we started -- when I started this in '96 there were 4,000 Border Patrol.

So, we do have to -- I mean, ATF -- DEA, by the way, DEA has -- this is an unclassified figure, probably 15 DEA agents in Afghanistan, somewhat less than the number of narcs than we have in Newburgh, New York. So these civilian law enforcement agencies are completely not proportioned -- they have the wrong doctrine, resources, training. They need to be redesigned.

MALCOMSON: I'm going to take, like, three questions so that we don't -- go ahead, please.

QUESTIONER: Stephen Cass (sp).

How about some serious effort to reduce demand for drugs as a way of beginning to get a handle on that? And if so, what would you prescribe that we're not currently doing?

MCCAFFREY: I --

MALCOMSON: I'm sorry, I wanted to get a couple of questions in --

MCCAFFREY: Oh, I see.

MALCOMSON: -- because we'll run out of time.

MCCAFFREY: That's too bad. Write them down because I'm a one-question guy. (Laughter.)

MALCOMSON: (Laughs.) I'll write them down.

MCCAFFREY: You could do the same thing as a waiter -- you know, "What'd you say?" (Laughter.)

QUESTIONER: Hi, I'm -- first, General, thanks for your excellent presentation today and for your long record of public service.

My question is, I infer from what you say -- shouldn't infer, it's probably obvious -- that at the root of the corruption in Mexico, including the lack of law enforcement, and the crime and violence, is the flood of drug money coming largely from the United States. Is there any change in U.S. drug policy that would dry up that profit?

MCCAFFREY: That's another aspect of the earlier question, right.

QUESTIONER: I think so.

MALCOMSON: Can we get one more here?

QUESTIONER: Ed Schumacher-Matso from Harvard.

Same thing. (Laughter.) But, I'd just take it one step further, why not just legalize drugs?

MALCOMSON: Okay, the demand-side issues. Who wants to go first?

MCCAFFREY: You got to let me.

O'NEIL: Okay, you go first. (Laughs.)

(Cross talk, laughter.)

MCCAFFREY: There's a 10-minute answer, there's an hour answer, there's a three-day answer. And, fortunately, since I'm not in public life, I actually don't care. I care about 6th graders through 12th graders. If you're 40 years old, and you're living in Oregon, and you have 12 giant pot plants in the back of your log cabin, knock yourself out.

(Laughter.)

Now, let me tell you, though, about drug policy, as a general tool. There's 300 million 0of us, overwhelmingly we don't use drugs -- overwhelmingly. Unfortunately -- again, pick a study you believe in, there's probably 16 million of us that do, and have a chronic substance abuse problem.

It's poly-drug abuse. It's dominated by the most dangerous drug in America, bar none -- alcohol. Or, would you prefer to say nicotine. You know, nicotine maybe kills -- pick a number you believe, 440,000 people; alcohol maybe kills 100,000; illegal drugs maybe kill 50,000.

And so it's a problem, you know, and it dominates -- I tell people, find something you don't like about America, and, basically we like a lot of what goes on here: spouse abuse, dropping out of school, STDs, you name it -- at the heart and soul of it you will find a contributing or dominant factor is the abuse of illegal drugs or alcohol. So, all of us ought to say we're against that.

And what do you do -- and, by the way, it's going down dramatically. Peak year of modern drug use in America was 1979. It was around -- 13 percent of us were past-month drug users. Now, probably, it's 7 percent.

In the Armed Forces, Active and Reserve, it's probably under 2 percent -- to include the Guard. And the reason for that, I might add -- since half of our young people have used an illegal drug when they come in the Armed Forces, is because we got sergeants who act like parents are supposed to act. And so they say, look, if you're in this squadron, in this battalion, in this wing, and you use drugs, we won't lock you up, we'll throw you out of the Armed Forces -- which is what we do.

So, I would tell you drug use in America has gone down dramatically. Casual use of cocaine is down by 85 percent. Chronic illegal drug use is around 5 million people, and probably is stable, although it's changed forms -- new drugs show up, methamphetamines, OxyContin, chemically-produced opiate -- synthetic opiates.

So, the drug use thing changes but, you know, I -- and, by the way, here's the final point just to consider, there's a lot of things in life that if you are really bright, like most of us in this room -- possibly exception being me, there's all sorts of things that are good intellectual arguments. The legalization of drugs? We're not going to do it. It's not going to happen. Parents aren't going to do it, police chiefs, employers. We can debate it all we want.

So, normally, people will retreat to marijuana. Well, how about marijuana? It's already, de facto, a not-prosecutable offense everywhere in the country. If we arrested you and locked you up in a federal prison system for possession of marijuana, you had a little over 200 kilograms on you when we busted you -- and, by the way, there's room for more -- but, by and large, in this country, we don't prosecute.

Matter of fact, we basically don't prosecute simple possession of heroin if we know you're an addict. Go grab one of Ray Kelly's cops -- you got the best police force on the face of the earth here, probably -- and, as a general statement, if you want to understand drugs, talk to an emergency room doc, a New York police officer, a local judge or a social worker, and they want to solve the problem with treatment, prevention, stabilization. And that's essentially what we're trying to do, but it's really difficult.

So, anybody -- this is sort of an older group, anybody got kids that are under 19 still in the room? A couple of you military guys do. Kids at 6th grade are drug free. By 8th grade they've seen and understand drugs, and there is probably higher rates of heroin abuse among 8th graders and 12th graders. By the time they're 12th graders, half of them have used an illegal drug, and one out of four are past-month drug users. From that population comes the 16 million of us with a substance abuse problem.

You don't want your kids to be a heroin addict when they grow up? Get them to age 19, eating supper with their parents, going to church or synagogue, play an organized sport, and where they clearly remember they heard mother or dad say, "In this family we don't drink beer and drive; we don't smoke pot and we don't use ecstasy." That's the drug war right there.

And that's the 10-minute, or five-minute -- (laughter) -- answer.

O'NEIL: (Laughs.)

So, there are two general models in the world of how to conduct drug policy. One is one the United States follows, which is much closer to a criminalization -- the way you think about drugs is it's criminal activity, and it's illegal activity, and that's how you deal with it.

There's another model, which is much more based on public health. And the way you focus on drugs is thinking about the public health aspects of it, and that's much more of a Northern European model. And, sort of, in thinking about the demand -- that was asked back here, and is asked generally, more effort -- if we moved a little bit away from the extreme of the criminalization, a little bit more towards the public health, which is the things Barry was talking about, about treatment, about stabilization, if more of the U.S. money went towards those programs, there is suggested evidence that, 1) those dollars would be better used, in terms of results, from eradication, interdiction on the other side of our border, and even from law enforcement on this side of our border.

And if you could get some of the hard-core drug addicts, those who use, particularly drugs like cocaine -- that population is stable, in terms of general use, but if you could get some of those addicts off of those drugs, you would reduce demand, and you would reduce money flowing back to Mexico in the drug cartels. So your question -- that's one question.

The other, on the legalization -- and I agree with Barry, you know what, it's not going to happen. So we could talk about it -- what would it be like if we legalized it? Well, you know, we'd get rid of some problems and we'd get other problems. You know, looking at some of the European models, particularly the harder drugs, we'd have those problems.

But, it would, especially, and let's say we just went for marijuana -- we didn't go for, you know, every type of drug, we just went for marijuana, because, you know, the effects are pretty much like alcohol, tobacco, other things -- we'd have some of the public health issues, those would be issues on the table, but for Mexico it would matter, actually, because a third of the drug profits into Mexico come from marijuana. The rest is cocaine, heroin, now meth is increasingly a part -- but it is a good amount of money there.

Now, would it totally change the game in Mexico with the drug cartels? No, it wouldn't. They still have two-thirds of their profits, and that's a lot of money. But, it would change some of the dynamics.

MCCAFFREY: By the way, I might add that the -- I'm on the board of directors of two of the principal -- Dr. Mitch Rosenthal, Phoenix House; and CRC Health Group. I've stayed very involved in treatment, primarily. It's the area of public policy that's least well formed, least well-understood, and the least well-resourced and appreciated.

And so I, you know, spent a lot of time in 12 Step groups, a dozen men and women here, you name it, and at the end of it I frequently say that this -- we're wandered afar from Mexico, Mexico does have 10,000 metric tons of marijuana crossing the border into the U.S. every year probably -- but if you asked a bunch of people in recovery, it's not a theoretical proposition now, it's a white female -- and, by the way, overwhelmingly, when you start talking about rates of chronic drug abuse, it's more white than black, it's more high-income than low-income. One of the highest demographic rates of chronic drug abuse are health professionals -- who respond very well, I might add, to treatment; along with airline pilots, because we have their credentials to be employed in our hands.

But if you asked a bunch of people in treatment and say, "What should (I) get -- I'm going to leave here tomorrow and I'm going to talk to high school students, what should I tell them about marijuana?" What do you think they'd say? Uniformly, 100 percent of them will say, "Tell them this is the, this is the step-one -- along with booze, the most dangerous drug in America -- to chronic substance abuse.

So, personally, I don't want to see marijuana legalized either. I think, de facto, we don't have a criminal model in America -- I disagree. We have high social disapproval rates, and it's backed up by being against the law to possess, use, sell marijuana. But, basically, we've got a system in which our rates of drug abuse are going down and others are going up.

So, be careful. I've been to Switzerland, been to the Netherlands, been to Sweden -- Sweden probably has the best drug policy in the world. It won't fit us. They're all -- a very different society.

But, I think it's very easy to -- I was just at the -- god, what was it, the Heritage Foundation talking about Mexico, and the latter part of the conversation turned into the legalization of drugs there also. And it's -- so, it's wandering away from Mexico, but we're not going to legalize drugs and Mexico shouldn't either.

MALCOMSON: Well, I'm going to have to impose the one rule, which stopping on time. Thank you both very much. That was completely fascinating.

(Applause.)

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