Topic: Trade and Immigration

Exploiting China’s Growing Frustration with North Korea

South Korean officials insist that China now agrees that North Korea’s nuclear program poses a serious security threat to the region.  If that interpretation is accurate, it is a strong indicator that Beijing’s patience with its troublesome ally is wearing very thin.  But as I point out in a new article in China-U.S. Focus, the United States and its East Asian allies have a long-standing tendency to overestimate China’s willingness, even its ability, to restrain Pyongyang without incurring excessive risks to its own national interests.

Rumors continue to swirl that North Korea plans to conduct yet another nuclear test.  China is apparently trying to dissuade its volatile ally from taking such a provocative step.  According to Reuters, Beijing has used various “diplomatic channels” to convey its wishes to Kim Jong-un’s regime.  But China adopted a similar stance with regard to Pyongyang’s last nuclear test, as well as the test of a long-range ballistic missile.  Unfortunately, Beijing’s latest expression of opposition is not likely to fare better than previous efforts. Both Kim and his father, Kim Jong-il, defied China’s wishes and conducted such tests.  If that weren’t enough, North Korea also attacked the South Korean naval vessel Cheonan and shelled a South Korean island.  Although Beijing was clearly unhappy about such incidents, it did not prevent Pyongyang’s dangerous, destabilizing conduct.

Because China provides North Korea with a majority of its food and energy supplies, Pyongyang would seem to be highly vulnerable to pressure from Beijing.  But a decision by China to employ maximum economic power to impose its will on the North Korean regime would also require a willingness to incur grave risks. Bringing such pressure to bear could cause the North Korean state to unravel. Not only would that development produce a massive refugee crisis (and possibly a civil war) on China’s border, but North Korea’s demise would obliterate a crucial geographic buffer between the Chinese homeland and the U.S. sphere of influence throughout the rest of Northeast Asia.  Few Chinese leaders want to risk that outcome.

Executive Action on Immigration

President Obama will likely take some executive action this fall to reduce deportations or legalize some unauthorized immigrants. He recently ordered Jeh Johnson, Secretary of Homeland Security, to delay the release of a review of current deportation policy until after the summer. 

A White House official revealed the reason for the delay: “[President Obama] believes there’s a window for the House to get immigration reform done this summer, and he asked the secretary to continue working on his review until that window has passed.”

President Obama has taken a much more conciliatory tone toward Republicans in his push for immigration reform. His 2014 State of the Union address asked Republicans to support reform without blaming them for obstructing it. The White House official’s statement that Obama will delay executive action until after the summer is consistent with that bipartisan tone. It also allows President Obama to appear to be working with Republicans on reform while leaving his policy options open prior to the 2014 elections. 

There is no doubt that President Obama’s attitude is better than blaming Republicans for all immigration problems and is more likely to motivate House Republicans to pass some kind of reform, but the mere mention of executive action only deepens the distrust that many Republicans have for the president – not to mention the many legal issues it raises.  Republicans are justifiably concerned that President Obama may not enforce any immigration law that is passed or may change it with executive actions. 

The Obama administration has consistently piled on more complex rules and regulations for the H-2A, H-2B, and H-1B work visas (with some exceptions that will actually liberalize the system) that make the legal migration system difficult to use.  A new guest worker visa program created by Congress could be similarly stymied by rules and regulations promulgated by executive agencies. Some Republicans also complain about the president’s deportation policy.  These are real concerns that are not mitigated by the president’s threats.   

Many of President Obama’s adjustments to immigration enforcement have been disappointing and haven’t legalized as many unlawful immigrants as they could have. The president’s record on enforcing our harsh immigration laws is strict in contrast to his rhetoric and the stated goals of his executive actions.

However, only legislation can create a guest worker visa program and expand legal immigration enough to channel future immigrants into the legal market. Whatever executive actions the president decides to take, they will deal with problems that have emerged due to our restrictive immigration system that makes it virtually impossible for low and mid-skilled workers to immigrate. Expanding the scale and scope of immigration while diminishing the intensive regulatory oversight role of the federal government is a long-term solution in contrast to an executive action that is temporary at worst and at best seeds legal uncertainty.

More Competition Would Lower Health Insurance Premiums

I know, not exactly a shocking revelation! Nevertheless, here’s an article from today’s Washington Post:

With much of the focus on Obamacare now on how much individual premiums could increase next year, a new analysis suggests there’s one way to keep them in check — more competition. That’s the conclusion of a new report from economists Leemore Dafny, Christopher Ody and Obamacare architect Jonathan Gruber.

If every insurer that had sold individual policies in 2011 participated in Affordable Care Act insurance marketplaces this past year, average premiums for a benchmark exchange health plan would have been 11.1 percent lower in 2014, the economists found.

Big insurance companies generally took a cautious approach to the new exchanges in 2014, limiting their participation in the health-care law’s first year amid concerns about too many sick patients signing up for coverage. The Affordable Care Act exchanges were created as a way for people to buy their own insurance if they couldn’t find affordable options elsewhere, like through an employer.

The Affordable Care Act exchanges are supposed to fuel competition in the individual market, which hasn’t traditionally been all that competitive. Before the health-care law, a single insurer covered more than half of the individual market in 30 states, according to the Robert Wood Johnson Foundation.

A point I’ve been trying to make for a while is that there is a large untapped source of competition out there which could help lower prices: foreign insurance companies.  With or without ObamaCare, American consumers would be better off with more companies in the market, and the nationality of those companies does not matter.  Unfortunately, my sense is that foreign companies are not all that interested in entering the U.S. health insurance market.  Maybe it’s too daunting a prospect (it’s a highly regulated market), or maybe they just haven’t thought of it.  In case it’s the latter, I’m going to keep putting the idea out there, in the hopes that it reaches the right person.

Is There a STEM Worker “Shortage”?

The Center for Immigration Studies (CIS) released a new report claiming that there is no STEM worker “shortage”* after looking at the small wage gains in STEM occupations since 2000.  CIS has a history of using poor methodology and data in their reports (see here, here, here, and here), but assuming that they did everything correctly this time, their results don’t tell us much for two reasons.

First, they don’t compare wage changes for STEM occupations with all other occupations.

Total real (2012 dollars) median annual wage growth for each of the three big STEM occupations was higher than for the median for all occupations from 2001 to 2012.  Real wages for computer occupations grew by 2.05 percent, real wages for architecture and engineering occupations grew by 5.77 percent, and real wages for science occupations grew by 3.55 percent.  Those gains look low until you realize that real wages for all occupations actually decreased by 0.94 percent.  Compared to all occupations, wages for STEM occupations grew while attracting large numbers of immigrants.

Source: Occupational Employment Statistics, Bureau of Labor Statistics. http://www.bls.gov/oes/tables.htm.

Second, the CIS study ignores the dynamic economic effect of halting STEM immigration or what stopping STEM immigration years ago would have done to the economy.  The dynamic (general equilibrium) effects of kicking out STEM immigrants or halting their flow would be to shrink the economy and diminish wage, employment, productivity, and economic growth.


*CIS and others use the word “shortage” incorrectly.

Cyber-Espionage (Not Necessarily Implicating U.S. Agencies) Returns to the Headlines

The Washington Post reported this morning that the U.S. government is “charging members of the Chinese military with conducting economic cyber-espionage against American companies.”  According to the story, Attorney General Eric Holder will “announce a criminal indictment in a national security case,” naming members of the People’s Liberation Army.

If you will recall, cyber-security, cyber-espionage, and cyber-theft of trade secrets and other intellectual property belonging to American businesses started becoming prominent sources of friction in the U.S.-China relationship about 18 months ago before suddenly dropping off the front pages 11 months ago to make way for revelations of domestic spying by the U.S. National Security Agency.  Somehow, the notion that Chinese government-sponsored cyber-theft broached a red line lost some of its luster after Americans learned what Edward Snowden had to share about their own government.

But today the issue of Chinese cyber-transgression is back on the front pages.  Never before – according to the Washington Post – has the U.S. government leveled such criminal charges against a foreign government.  The U.S. rhetoric has been heated and, just this afternoon, the Chinese government responded by characterizing the claims as “ungrounded,” “absurd,”  “a pure fabrication,” and “hypocritical.”

While the U.S. allegations may be true, given well-publicized U.S. cyber-intrusions, it isn’t too difficult to agree with the “hypocritical” characterization either.  Perhaps that’s why the U.S. government is attempting to distinguish between cyber-espionage, which is conducted by states to discern the intentions of other governments – and is, from the U.S. perspective, fair play – from “economic” cyber-espionage, which is perpetrated by states or other actors against private businesses and is, from the U.S. perspective, completely unacceptable.  It’s not too difficult to understand why the United States has adopted that bifurcated position. The Washington Post quotes a U.S. government estimate of annual losses due to economic cyber espionage at $24-$120 billion.

Would You Prefer Cronyism or Paternalism With Your Government Potatoes?

Government has so many ignoble tendencies, it’s often difficult to guess which ones are driving any particular policy choice.  For example, how does the government decide which products are available for purchase using WIC benefits?  As reported today in DC political newspaper, The Hill:

A new rider to the 2014 funding bill for the Agriculture Department forbids the agency from excluding “any variety of fresh, whole, or cut vegetables, except for vegetables with added sugars, fats, or oils, from being provided as supplemental foods” under the Women, Infants and Children nutrition program

Rep. Mike Simpson (R-Idaho) is a lead sponsor of the language and can be expected to defend it from attacks during a full committee markup of the bill. 

The Agriculture Department excluded white potatoes from its list of approved items in 2009 because it argued they do not contain enough nutritional value and people shouldn’t be encouraged to buy them. Lawmakers fighting the exclusion are predominantly from the largest potato-growing areas such as Idaho and Maine.

I’m hopeful that Congress and the USDA will figure out just the right mix of paternalism and cronyism needed to ensure the effectiveness of federal food assistance programs.

FAIR’s Anti–Legal Immigration Principles

Jack Martin at the Federation for American Immigration Reform (FAIR) argues that I inaccurately characterized FAIR’s pledge as anti–legal immigration. On FAIR’s pledge, it states that its purpose is this:

It is therefore essential that we know whether you will support TRUE immigration reform policies.

What are FAIR’s “TRUE immigration reform policies” that the pledge references and emphasizes with blue underlined font? Here they are, in a document with the same title.  One of FAIR’s points of “TRUE immigration reform” reads as follows:

End family chain migration. Family-based immigration must be limited to spouses and unmarried minor children. Entitlements for extended family migration lead to an immigration system that is not based on merit, runs on autopilot and fosters exponential growth in immigration.

Depending on what FAIR means exactly, such a policy change would decrease annual lawful immigration to the United States by at least 138,066 or as many as 340,000 annually if we use 2011 as a benchmark. To put that in perspective, FAIR’s TRUE immigration reform policies advocate for a decrease in legal immigration of between 13 percent and 32 percent.  Sound anti–legal immigration to me. If Mr. Martin is so concerned about inaccurate characterizations of FAIR’s pledge, perhaps he should be more troubled by FAIR President Dan Stein’s reference to it as the “No New Amnesty Pledge” since most of the pledge’s points concern opposition to legal immigration and not amnesty.