Topic: Trade and Immigration

Spying on Trade Lawyers

The latest NSA spying revelations involve international trade issues, in particular an Indonesian complaint brought at the WTO in response to a U.S. ban on clove cigarette.  (The trade problem was that the U.S. banned clove cigarettes, which are mostly made in Indonesia, but did not ban menthol cigarettes, a competing U.S.-made product). According to the New York Times, the Australian government monitored communications between the Indonesian government and its DC-based trade lawyers, possibly in relation to this case, and passed the information along to the NSA.  (Note that law prof Orin Kerr is skeptical about the way the story is presented in the Times.)

Let me offer the following thoughts:

1. It’s hard to imagine that any information gathered by the Australians had much impact on the WTO case. I suppose it could be a slight advantage to get an early look at your opponents’ arguments, and see how they are thinking about the issues. But I can also imagine that all this additional information would be a distraction, with too much time being spent on marginal points.  It’s worth noting that, in spite of any information U.S. government trade lawyers may or may not have received, the U.S. lost the case. Thus, like most NSA spying, any spying here was probably of limited value.

2. Regardless of its value, this kind of spying is likely to be pretty offensive to our trading partners. The WTO has detailed rules of procedure for its disputes, one of which says the parties must act in good faith (“all Members will engage in these procedures in good faith in an effort to resolve the dispute”). It’s hard to see how receiving confidential information about your opponents’ arguments, if that happened, satisfies this requirement. It will be interesting to see if this gets discussed in upcoming WTO meetings.

3. I wonder whether all of these revelations about spying will accelerate proposals being made by foreign governments to develop non-U.S.-based communications networks: “German Chancellor Angela Merkel said on Saturday she would talk to French President Francois Hollande about building up a European communication network to avoid emails and other data passing through the United States.”

Immigration Restriction on a Kuznets Curve: Switzerland and Arizona

Bryan Caplan has an interesting post on the recent Swiss referendum to restrict immigration from the European Union.  Tyler Cowen also blogged on the same issue twice.  Caplan’s point is that the Swiss imposed restrictions because there was insufficient immigration rather than too much.  Areas of Switzerland that had fewer immigrants voted to restrict immigration while areas with many immigrants voted to keep the doors open.

A similar theory could explain why immigration quotas were first imposed in the United States after World War I.  That war substantially reduced immigration from Europe.  From 1904 through 1914, almost 1 million immigrants arrived annually in the United States – a total of 10.9 million.  This large population, combined with their children, opposed numerous legislative efforts to restrict immigration from Europe.

  1st Gen % 2nd Gen % 1st+2nd Gen %
1870 14.4 14.0 28.4
1880 13.3 18.3 31.6
1890* 14.8 ? ?
1900 13.7 20.9 34.6
1910 14.8 21.0 35.8
1920 13.4 21.9 35.3
1930 11.8 21.4 33.2
1940 11.8 18.2 30.0
1950 9.6 16.6 26.2
1960 6.0 13.7 19.7
1970 5.9 11.8 17.7
1980* 6.2 ? ?
1990^ 8.7 8.8 17.5
2000 12.2 10.3 22.5
2010 13.7 11.3 25.0
*Data unavailable
^1990 = 1993
 
Source: iPums

World War I erupted in August 1914, slowing immigration and causing the percentage of immigrants to decline more than the increase in the second generation.  During the four years of the war, slightly more than one million immigrants arrived.  That minor decline, especially in the 1st generation, might be part of the reason why anti-immigration politicians succeeded in passing the first immigration quotas in 1921.  During that time many non-citizens could vote and it was much easier to naturalize than it is today. 

The post-war U.S. recession, the continuing blockade of Germany, and chaos in Europe prevented immigration from rebounding until 1921 when 805,228 people immigrated – the same year that numerical quotas restricted immigration for the first time.  If the pre-war pace of immigration was uninterrupted by World War I, 4.6 million additional immigrants would have landed in America by that time – boosting the immigrant share of the population to somewhat less than 17.7 percent of the total population and the second generation by a smaller amount too.  Combined, the first and second generations would have been equal to around 40 percent of the American population.  Supporters of immigration restrictions might have understood this and known that immigration from Europe was about to rapidly accelerate, meaning that they only had a narrow window to approve restrictions before the changing nativity of the population made that more politically difficult.

Several reasons would have made it more difficult to achieve the 1921 vote to restrict immigration if there were that many more immigrants.

Fast Track Fallacies Knee-Capping the Trade Agenda

Media have been reporting lately about the public’s burgeoning opposition to the Congress granting President Obama fast track trade negotiating authority. Among the evidence of this alleged opposition is a frequently cited survey, which finds that 62 percent of Americans oppose granting fast track to President Obama.
 
Considering that the survey producing that figure was commissioned by a triumvirate of anti-trade activist groups – the Communication Workers of America, the Sierra Club, and the U.S. Business and Industry Council – I had my doubts about the accuracy of that claim. After all, would lobbyists who devote so much of their efforts to derailing the trade agenda risk funding a survey that might produce results contrary to their objectives?
 
My skepticism – it turns out – was warranted. The 62 percent who allegedly “oppose giving the president fast-track authority for TPP [the Trans-Pacific Partnership agreement]” actually oppose giving the president a definition of fast track that is woefully inaccurate. The graphic below shows the question and response tally, as presented in the report showing the survey’s results, which is here.  Read the question that begins with “As you may know…”
 
 

The Farm Bill Came Surprisingly Close to Fixing Some Protectionist Regulations

There’s plenty of criticism flying around about the new farm bill. It spends unprecedented amounts of money to prop up one of the most successful industries in the country. It uses Soviet-style central planning to maintain food prices and make rich farmers richer. Its commodity programs distort trade in violation of global trade rules. 

But this year’s the farm bill had the potential to mitigate some these sins by repealing a number of high-profile protectionist regulations. Despite a few close calls, however, the final version of the bill kept these programs in place, exposing the United States to possible retaliation.

COOL

One of those programs is the mandatory country-of-origin labeling (COOL) law. This requirement was first imposed by the 2002 farm bill. Ostensibly designed to increase consumer awareness, the true impact of the program is to push foreign-born cattle out of the market. The law requires meat packers to keep track of, and process separately, cattle that was born and/or raised for some time in Canada. The added expense benefits a portion of U.S. cattle ranchers at the expense of meat industry as a whole.

The negative impact on the Canadian and Mexican cattle industries was enough to prompt a complaint at the WTO. After the United States lost that case, the administration amended the regulation. But the new regulation, rather than bringing the United States into compliance, actually makes the law even more protectionist. Canada has made clear its intention to impose barriers on a wide range of U.S. products in retaliation.

Repealing this disastrous regulation through the farm bill was discussed during numerous stages of the legislative process, but no language on COOL was ever added to the bill.

Catfish

Another program that could have been fixed by the farm bill was a bizarrely redundant and purely unnecessary catfish inspection regime. The new system would cost an estimated $14 million per year to administer and (by the USDA’s own admission) do nothing to improve the safety of catfish. However, the new institutional requirements imposed on catfish farmers to comply with the new regime would all but eliminate Vietnamese competitors from the market. The U.S. catfish industry and their allies in Congress are all for it.

Even though both house of Congress had at one point or another passed bills that repealed the new catfish regime, the final bill that came out of conference kept the redundant system in place.

The inspection issue has complicated negotiation of the Trans-Pacific Partnership, of which Vietnam will be a member, and could become the basis of a complaint at the World Trade Organization. 

In the words of Sen. Mike Lee, the farm bill is “a monument to Washington dysfunction, and an insult to taxpayers, consumers, and citizens.”  It is also the most popular vehicle for imposing protectionist regulations that serve a small set of businesses at the expense of the national economy. 

There was hope that this bill could roll back some of the damage done in the past, at least for a handful of odious regulations. That hope was sorely misplaced.

Globalizing the Airline Business

From the NY Times:

Flying doesn’t come cheaply these days, particularly on long-haul flights across the Atlantic. But Norwegian Air Shuttle, which specializes in low-cost flights within Europe, plans to bring its pared-down model to the United States and Asia.

Its strategy, however, comes with a few twists: Norwegian is moving its long-haul operations from Norway to Ireland, basing some of its pilots and crew in Bangkok, hiring flight attendants in the United States, and flying the most advanced jetliner in service—the Boeing 787 Dreamliner. In the process, it has infuriated established carriers and pilots.

… Norwegian started flying between Oslo and Kennedy Airport in New York in May and has round-trip fares starting at $509. The second-lowest price found recently was $895 on United Airlines flying out of Newark Liberty International Airport. Norwegian plans to add more than a dozen new routes this year, including direct service from London to New York and Copenhagen to Fort Lauderdale, Fla., once regulators approve its new registration in Dublin.

Not surprisingly, there is resistance:

But Norwegian’s novel model has raised stiff opposition from American labor groups, airlines and pilots who see it as a backhanded attempt to outsource cheaper labor and undercut competition. Norwegian, these critics argue, is unfairly taking advantage of an open-skies agreement between the United States and Europe even though Norway is not a member of the European Union.

I’m always shocked by the price of flights to Europe, so best of luck to Norwegian as it tries to navigate this regulatory process and bring lower fares to consumers.

When the Levee Breaks: How the SAFE Act Could Unconstitutionally Strip States of FEMA Funding

The Strengthen and Fortify Enforcement (SAFE) Act (HB 2278) is part of the House’s attempt to split up comprehensive immigration reform into individual bills. The Act suffers from the fundamentally misguided belief of many Republicans that enforcement has to come before any attempt to rationalize our broken immigration system. Of course, if we fix our Kafka-esque immigration system, then many of the problems with unauthorized immigrants will greatly diminish, if not disappear. Focusing on enforcement is like someone saying during prohibition, “before we can talk about legalizing alcohol we first need to stop all these bootleggers and gangsters.”

The SAFE Act is also a constitutional boondoggle with many dangerous and suspect provisions that guarantee the act will be tied up in court battles, not to mention to litany of expected civil liberties abuses that will arise if the Act is ever enforced. The ACLU and the Center for American Progress have already pointed out many of the civil liberties concerns, as well as the bad policies that animate the Act.

Gone unnoticed is a large and consequential problem that has constitutional ramifications: the Act denies law enforcement and Department of Homeland Security funding to states or municipalities that have policies or practices that “prohibit law enforcement officers of a state…from assisting or cooperating with Federal immigration law enforcement[.]” If a state or municipality has such a policy then they “shall not be eligible to receive…any…law enforcement or Department of Homeland Security grant.” (Section 114).

California has just such a law. The TRUST Act, signed by Governor Brown in October 2013, prohibits California state officials from detaining people when U.S. Immigration and Customs Enforcement (ICE) issues a “hold” request (in order to transfer them to federal immigration authorities) if they have been convicted of only minor crimes.

“High” vs. “Low” Intellectual Property Protection

One issue that may be controversial in the US-EU trade talks is intellectual property, which has increasingly caused tension in trade negotiations. Many in the U.S. will argue that any such agreement should have “high standards” in this regard. Along these lines, this is from Senator Orrin Hatch:

There also remains some serious question as to whether the administration will even pursue an intellectual property rights chapter in our negotiations with the European Union. 

This is incredible.

The U.S. has the highest intellectual property rights standards in the world. 

Intellectual property is our competitive advantage.

It is our economic future. 

Once you set the precedent of substantively carving out intellectual property rights from a trade agreement, every other country we negotiate with is going to demand the same treatment. 

Now here’s the European Commission on IP issues:

Intellectual Property Rights: Both the EU and the United States are committed to maintaining and promoting a high level of intellectual property protection. Given the efficiency of their respective systems, the intention is not to strive towards harmonisation, but to identify a number of specific issues where divergences will be addressed. For the EU side, Geographical Indications (GIs) are of particular importance in that context. During the negotiations, we therefore intend to present specific ideas for ensuring adequate protection of GIs.

So everyone agrees: The standards should be “high”.

But wait, there’s also this from Senator Hatch:

As the U.S. and EU are the two most innovative economies in the world, any successful agreement between us must promote the highest standards of intellectual property protection. … It is also critical that the United States strongly promote the interests of U.S. businesses, farmers, ranchers, and workers with respect to EU policies, including geographical indications, that impede their ability to compete. (emphasis added)

So, both sides definitely want “high” IP standards in any US-EU trade agreement. But, on the other hand, they disagree on what are the appropriate standards are for geographical indications. The EU says they are important and need protection; Senator Hatch says they “impede the ability” of U.S. business to compete.

What I take from this is that we can’t really use “high” and “low” in the context of IP protection. The real question is, what is the appropriate level of protection for each particular kind of IP? Longer protection doesn’t necessarily mean a better policy, as I think Senator Hatch’s statements about geographical indications acknowledges.

In practice, unfortunately, what the two sides seem to be doing is promoting what they think is in the interests of their producers. Perhaps it would be better if everyone took a step back on IP, and thought about what was in the interest of society more generally.