Reinventing Mexico

Many of the tensions between Mexico and the United States are driven by the huge gap in the pay and productivity of the workers in each country. In criticizing the North American Free Trade Agreement (NAFTA), President Trump repeatedly has complained of the unfairness of very low Mexican wages compared to those of U.S. workers. This same dynamic continues to drive illegal immigration by Mexicans to the United States, an issue that arguably got Trump into the White House.

However, a renewed NAFTA and increased vigilance on the border will do nothing to raise the pay of Mexican workers. “We have two borders: One with Canada, one with Mexico,” Senator Lindsey Graham (R-SC) recently said . “I’ve never met an illegal Canadian. The point is that Canada has a sound economy. People to the south of us do not.” But if a quarter century of trade with, investment from, and integration into the largest combined market in the world hasn’t resulted in a “sound economy” in Mexico, then what will?

One way is to encourage Mexico to become a country that generates new ideas rather than cheap labor. Mexico already is finding it difficult to compete with countries like China on cost. Unfortunately, when it comes to innovation, Mexico ranks at the very bottom of industrialized countries. In 2016, only 423 patents were granted by the Mexican patent office to all domestic applicants (including Mexican research universities and the private sector). This was 20 percent less than the number of U.S. patents issued alone to the University of California.

According to 2011 data from the Organization for Economic Cooperation and Development (OECD), Mexico is dead last (per gross domestic product) in almost every measure of innovation: the lowest number of patents filed by universities and public laboratories; the least amount of research and development spending (both public and private); the fewest universities in the OECD top 500; and the lowest doctoral graduation rate in science and engineering. Mexico exceeds the OECD mean in only one area: international copatenting. In other words, world-class Mexican researchers exist, but they are trapped in a failed system.

A culture of innovation can’t be created overnight, but it can be helped along. The U.S. experience is instructive. At the end of the 1970s, Congress realized that not enough research at U.S. public universities (much of it funded by federal dollars), was making its way into the marketplace in the form of inventive technologies. In response to several highly publicized spats between researchers and universities over commercially successful inventions (for instance, between the doctors who invented Gatorade and the University of Florida), Senators Birch Bayh (D-IN) and Bob Dole (R-KS) created bipartisan legislation that allowed institutions using public money to split the profits with the inventors.

Known as the Bayh-Dole Act, this relatively simple step accelerated an existing trend toward more university patenting. In the decade preceding Bayh-Dole, the top 100 U.S. research universities generated less than 2,200 patents. Many of the country’s most elite schools had exactly zero patents to their name. But by 1990–2000, the top 100 universities produced 17,000 patents.

Bayh-Dole has been “credited for creating the U.S. biotechnology industry” with “at least 50 percent of current biotech companies” originating in university research. Biotech companies represent about 1.5 million jobs. Today, major research universities actively promote their research as commercial opportunities. In addition to creating start-up cultures all over the country, the transfer of technology from universities also has created networks of angel funders and early stage private equity firms. They provide the critical early dollars for researchers who have promising lab results but little else.

With a small but growing tech sector and the introduction of robotics in many factories, Mexico has made strides toward a knowledge economy. But like the United States prior to Bayh-Dole, it is struggling to convert public investments in science and technology into real intellectual property, the kind that can be bought and sold. Without stronger links between university researchers and the Mexican market, Mexico will continue to depend heavily on assembling the rest of the world’s technology and may fall further behind economically compared to the United States. Without a “sound economy” that generates more value south of the U.S. border, Mexico and the United States will remain wary neighbors at best.

Richard G. Miles is director of the U.S.-Mexico Futures Initiative and deputy director of the Americas Program at the Center for Strategic and International Studies in Washington, D.C.

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