This paper reprints two previous studies prepared for the Department of State in 1977 and 1978. The paper argues that the improvement of U.S.-Mexico relations deserves high priority on the U.S. national agenda, and that changing domestic situations in both nations have provided new incentives for surmounting the constraints. The paper reexamines the issues surrounding U.S.-Mexico relations and considers options for creating a new policy framework. The authors assess the central issues of defining government-to-government relations and managing U.S.-Mexico interdependence. They discuss policy measures ranging from narrowly selective tariff adjustments to cosponsored border development programs. However, the prevailing tendencies in U.S.-Mexico relations have resulted in isolated piecemeal efforts at resolution. Finally, the authors propose guidelines for developing a new mechanism for managing U.S.-Mexico interdependence. An appendix contains the text of remarks made by Luigi Einaudi, Director, Office of Policy Planning, Bureau of Inter-American Affairs, Department of State, at the Mexico-United States Editors Conference, Racine, Wisconsin, March 1979.