What's That Sound?
By THOMAS L. FRIEDMAN

MEXICO CITY

I hadn't been to Mexico since 1996, so it definitely caught my ear when I started to hear two non-Spanish words on this trip that I'd never heard here before: "China" and "India." Mexicans are increasingly aware that these two countries are running off with jobs and markets that Mexicans once thought they owned. You have to feel sorry for the Mexicans: they are hearing "the giant sucking sound" in stereo these days — from China in one ear and India in the other. Worse, they seem stuck, unable to forge a coherent strategic response.

"We are caught between India and China," remarked Jorge Castañeda, the former Mexican foreign minister who just decided to run for president in 2006. "We have lost about 500,000 manufacturing jobs. It is very difficult for us to compete with the Chinese, except with high-value-added industries. Where we should be competing, in the services area, we are hit by the Indians with their back offices and call centers. . . . Not enough people here speak English." And that's not all. While China and India each send tens of thousands of students to be educated abroad every year in science and engineering, particularly in the U.S., Mexico sends just 10,000.

Go into any discount store in Mexico and look at low-priced clothing, toys, shoes and electronics, or even some Christian religious objects, and it is hard not to buy Chinese, added Mr. Castañeda, speaking at the Mexican Council on Foreign Relations. But more important, "the U.S. markets that we had a corner on is where we are losing jobs. . . . We knew it would happen when China [entered the World Trade Organization in 2001], but we did not get prepared."

Mexico's problem, in a nutshell, is this: The world is flat — or at least getting flatter. Thanks to PC's, telecommunication advances and market-opening agreements, capital can seek out factories and knowledge workers anywhere in the world with greater and greater ease. To get itself in shape to sign the Nafta free-trade accord with the U.S. and Canada, Mexico did what I would call the "wholesale" reforms — and they have been incredibly impressive. It made a historic transition to freer markets and democracy, with respect for human rights and fair elections.

But with China attracting huge amounts of dollars to put its low-wage workers to work on all sorts of industrial exports, and with India now able to export its low-wage brainpower over phone lines and fiber-optic cables, Mexico's advantages in the U.S. market — its proximity and Nafta — are being eroded. Mexico can stay ahead only if it does "retail reforms."

These are the micro reforms that will make its economy more flexible and productive. The government has set out five areas for reform: labor markets; the judiciary; the constitution and electoral system; tax collection, which is abysmal; and opening the energy and electricity markets to foreign investors so a gas-rich country like Mexico gets out of the crazy situation of importing natural gas and gasoline from America.

The old autocratic Mexico could have ordered these reforms from above. That's how China still does it, giving Beijing an advantage now that it will pay for later. But because Mexico is now a democracy, and needs to remain competitive, it can upgrade its institutions only by going through the messy, time-consuming process of consensus building. Alas, President Vicente Fox has not been very good at building consensus.

"We did the first stages of structural reform from the top down," said Guillermo Ortiz, the governor of Mexico's central bank. "The next stage is much more difficult. You have to work from the bottom up. You have to create the wider consensus to push the reforms in a democratic context. . . . There is an urgency for Mexico to finish the structural reforms at the micro level."

Why? Because while Mexico upgraded its competitiveness, notes the analyst Daniel Rosen in the journal The International Economy, China upgraded worker education, infrastructure, management skills, technology and quality controls even faster.

Will Rogers said it a long time ago: "Even if you're on the right track, you'll get run over if you just sit there." Mexico has put itself on the right track. But for the moment, it's just sitting there. If it doesn't start moving again, it's going to get run over by China, India, America — or all of the above.

But America had better not be a passive spectator, as it has been in these Bush years, because if Mexico gets hit, we, too, will feel its pain.

At last the topic of 9-11 has shifted onto productive ground. Thanks to the efforts of former counterterrorism official Richard Clarke, some thought is being put into the government failures behind the attacks. "Your government failed you," he says. Precisely, and in many more ways than he or anyone else at these hearings is willing to say.

Here is the problem. The core failure goes way beyond anything the current government managers—however inept, distracted, or corrupt—can correct. If you tell your dog to make you dinner, for example, you can observe later that the dog failed to do so, and have great regrets about this. But what you learn from this experience and how you proceed are the crucial questions. Does the dog need better tools, more scoldings, and a professional trainer? Better to observe that the dog is not the right one for the job. In the same way, the government is not the right one for the job of providing security for the American people.

How can the market provide security? This gets us into another huge area, and nothing I could write in a column would fully convince anyone of such a radical thesis, so let me merely refer you to the book, The Myth of National Defense, edited by Hans-Hermann Hoppe, which shows that security is not a unique good that must be provided by the state (even if you don't own it, there is no good excuse not to read it).

The projected costs, as well as the likely loss of economic competitiveness with the United States, has the EU wondering if it can virtually go it alone in implementing the Kyoto Protocols on climate change. The protocol has yet to take effect as a binding treaty since the US and Russia won't sign on, and China and India were given a pass for now.

In Germany, the EU's largest emitter of greenhouse gases, the government has been in a crisis over details of its plan. Last week at an EU summit, Chancellor Gerhard Schröder asked the body to slow down implementation but was rebuffed by France. All he won was a request for a cost-benefit study on "environmental and competitiveness considerations" in meeting Kyoto's strict targets.

No EU government had submitted a plan by last week, although seven of the 15 have drafts. Many governments are as troubled as Germany's, with the result that the European Commission sent out a warning that failure to submit a plan on time could result in legal action and fines.

Bit by bit, the UN is making itself look both silly and bigoted in the place that matters most to it - the U.S. The UN's persistently one-sided resolutions, its proclivity to blame Israel for everything and the Palestinians for nothing - not even for repeatedly rejecting every peace plan offered them - reduces it to irrelevance. What would these nations do with a society that exalts martyrdom and sends children to die in an effort to kill other children? These are criminal acts - and for what? An improved peace plan? Another block of Jerusalem?

So, I offer my own UN resolution. I want the UN to condemn Palestinian terrorism, specifically suicide bombers and most specifically, the use of confused and sad kids for that purpose.

It's pretty simple: If you cannot condemn the murder of innocents, especially by children, then you have no business condemning anything else. In the undiplomatic language of my old neighborhood, put up or shut up.

On the Senate floor, Sen. Sam Brownback, R-Kansas, displayed a devastating series of pictures of murdered women accompanied by the viable fetuses who died with them. "The question is simple," Brownback told his colleagues. "Do we have one victim or two involved in violent crimes such as these?" In one case, Brownback pleaded, "Look at this photo again of Christina and Ashley in the coffin. Is there one victim? Or are there two?" In another case, Brownback noted that the woman survived, but the fetus died. "Any congressman who votes for the 'one-victim' amendment is really saying that nobody died that night," said Brownback, referring to the Feinstein alternative. "And that is a lie."