Topic: Trade and Immigration

Path to Citizenship vs. Legalization: Let the Immigrants Choose

Representative Goodlatte (R-VA) is working toward a compromise on legalization and a path to citizenship for unauthorized immigrants.  This issue is the current bottleneck in the immigration reform debate.  Many Republican, Goodlatte included, are skeptical of a path to citizenship for current unauthorized immigrants.  Many Democrats, however, will not support immigration reform unless some unauthorized immigrants are allowed to become citizens eventually.  Could this impasse make immigration reform impossible this year?

Goodlatte’s proposal, as far as we know, would be to grant unauthorized immigrants provisional legal status.  They would then be legally allowed to work and live here but only eligible for a green card or citizenship if they use the existing immigration system.  This proposal would shrink the number of unauthorized immigration who could eventually earn a green card or gain citizenship.

I suggest a third proposal: create two paths toward legal status.

The first path should lead to permanent legal status on a work permit that cannot be used to earn a green card unless the person marries an American or serves in the military (other categories should be considered too).  This path could be relatively easy and cheap, preferably a few hundred dollars to pay for the paperwork processing fee as well as criminal, national security, and health checks.

The second path should be toward a green card and eventual citizenship.  It should probably be similar to the Senate plan, take many years, and cost more money.  This should be the more difficult legalization process but it should not be any more difficult than what is included in the Senate bill.

Creating two paths will allow the unauthorized immigrants themselves to choose the type of legal status they wish to have in the United States.  This also addresses some of the concerns of immigration reform skeptics while actually allowing a path to citizenship that, theoretically, most unauthorized immigrants could follow.  Furthermore, this plan is probably more politically feasible than a one sized fits all path to legal status.  The sooner a reform is passes, the sooner the deportations can stop.

Currently every interest group involved in immigration reform is trying to choose which legal status unauthorized immigrants should have.  The unauthorized immigrant should instead be able to choose for themselves.  Ever more complex legalization and path to citizenship plans of the type Goodlatte will propose will not accommodate most of the 11-12 million unauthorized immigrants here.  Several paths toward legal status should be created and the unauthorized immigrants should be allowed to choose for themselves.

Free Trade in Medical Services? Bring It On!

The NY Times has a long article about the U.S. medical system, in which it notes how much cheaper things are abroad. I’ll leave it to my colleague Michael Cannon and others to comment on the accuracy of the piece, if they see anything worth commenting on.  I just want to weigh in on a trade policy aspect.  Economist Dean Baker responded to the article with a post that starts off as follows:

The NYT has an article today on the enormous savings available to people who had major surgeries performed in Europe rather than the United States. The piece reports that the cost of hip replacement or knee replacement surgery in the United States are more than five times higher than they are in comparable quality facilities in Europe. (The gap would be even larger with facilities in Thailand and India.)

This shows the enormous potential gains from increased medical trade. In effect, our hospitals, doctors, and medical equipment makers benefit from tariffs on the order of 500 percent or more. If the Obama administration really is interesting in promoting growth through trade it would be difficult to imagine a sector with larger potential gains than trade in medical care. The agreements would focus on setting clear liability rules, accreditation systems, and removing obstacles for insurers and government programs that prevent them taking advantage of lower cost medical services in other countries.

I think he is absolutely right that there are enormous gains to be had here.  I’m not sure about the recommendations he makes in the last sentence – I would want to talk to a health care expert about specific barriers before endorsing his proposals.  But I have no doubt that making it easier to trade medical services across borders would be of great benefit to consumers. If there are barriers getting in the way of trade, let’s get them out of the way.

But here’s where things get interesting.  Baker seems to think he has caught free trade advocates in some hypocrisy.  The post is entitled “Will Medical Trade Be Included in the EU Trade Deal and the TPP? If Not, Why Not?,” and he says:

If the trade deals do not include major openings on medical trade then it would be a clear example of why these deals are in fact about selective protectionism rather than free trade. Past trade deals have been quite explicitly focused on putting U.S. manufacturing workers in direct competition with the low paid manufacturing workers in developing countries.

Anyone who believes in free trade would want U.S. doctors and other professionals subjected to the same sort of competition. Otherwise, they really only want to use trade to lower the wages of less educated workers to benefit the the wealthy. (Low wages means cheap help.) It is dishonest to call that policy “free trade.”  

He then tweeted: “For some reason “free traders” don’t understand trade in medical services: Gains from eliminating protections enormous”.

Thus, his suggestion seems to be that there are some free traders out there who are arguing for free trade only in the manufacturing sector, not in professional service sectors, and as a result the two big trade talks going on right now might exclude these services.

Let me respond by noting that I have never met any free traders who take the view that professional services, or any other sectors (except perhaps defense), should be excluded.  Of course, if they did, they wouldn’t really be free traders.  Free trade doesn’t make a distinction between sectors.  So, to Dean Baker, let me just say that I, a confessed free trader, whole-heartedly endorse the idea of free trade in medical services!  And I’m pretty sure all other free traders feel the same way.

That’s not to say there aren’t people (i.e., special interest groups) out there who want protection for the medical service sector, just like there are people who want protection for the manufacturing sector.  No doubt U.S. doctors would love to impose a 25% tariff on foreign medical services, just like the tariff we impose on imports of SUVs.  But that’s just special interests doing what they always do, in all policy areas.  It’s our job to fight their efforts, and hopefully Baker will join in.  Baker mentions the Europe and Pacific trade talks underway right now.  With some good arguments and a bit of luck, those talks will go a long way towards getting rid of any protectionism in these and other sectors.

Free Trade Makes You Fat

Last month’s report from the United Nations Food and Agriculture Organization (FAO) made headlines for revealing that Mexico is now fatter than the United States. The ensuing media articles and commentary grappled with questions like why are Mexicans getting fatter and what should be done about it. Some have taken to blaming NAFTA for Mexican obesity because increased trade with the United States has enabled Mexicans to consume more junk food. 

The critics are absolutely right.  Free trade makes you fat—and that is awesome!

People in Mexico are on average fatter than they were 20 years ago, and by all accounts they are consuming a lot more unhealthy foods. But the fact remains that people in Mexico are getting fatter because they want to be fatter. Economic growth and, particularly, free trade with the United States have empowered more Mexicans to choose the food they like to eat instead of merely the food they need to eat.

Paternalism comes in many forms, and worrying about people’s diets is one of the worst. We should be celebrating trade for enabling people to make the choices they want to make, not condemning it simply because happier, wealthier people have the luxury to eat unhealthy food.

TAA and TPA: Together Again. And Not Necessarily For the Good.

It’s that time again; time for supporters of trade liberalisation to question the value of enhanced training and welfare programs for those who lose their jobs because of import competition, and for trade-skeptics to ask why we need trade liberalization at all.

This argument traditionally takes place in the context of the debate about renewing (or, as in 2009, expanding) the Trade Adjustment Assistance (TAA) program, and whether it should be linked to renewal—or, in the current context, reinstatement—of trade promotion or “fast-track” authority, power granted to an administration to negotiate trade agreements and submit them to Congress for an up-or-down vote with no scope for deal-killing amendments. The two have traditionally been combined so legislators who would not normally support any procedural mechanisms to ease trade liberalisation (e.g., those close to labor unions) feel politically covered to do so. I’m not a fan of the TAA program for many reasons, which I summarized for the Downsizing Government website, and in any case I have long suspected that renewing TAA doesn’t really buy much support for trade liberalization any more.

Apparently Sen. Orrin Hatch (R-UT) agrees, and said he is fed up with the deal:

Senate Finance Committee Ranking Member Orrin Hatch (R-UT) this week made clear that he sees a potential obstacle to moving a new fast-track or Trade Promotion Authority (TPA) bill in the demands by Senate Finance Committee Chairman Max Baucus (D-MT) and the Obama administration that it be linked to an extension of the expiring Trade Adjustment Assistance (TAA) program.

“One of the problems with TPA is that they want to push TAA, which generally has [sic] union encroachment on free trade,” Hatch told reporters after a July 30 speech to the American Enterprise Institute.

Asked whether he would oppose combining the two bills, Hatch said he would have to wait and see whether TAA is “just another improper gift to the unions.”  [Source: Inside U.S. Trade, July 31, 2013, subscription required]

Obama Administration’s Accidental Support for Unilateral Free Trade

The U.S. Trade Representative issued a statement yesterday lamenting Congress’s failure to extend tariff breaks for imports from poor countries. In defense of the program, known as the Generalized System of Preferences (GSP), the statement makes a wonderfully succinct case for unilateral free trade.

GSP is a 37-year-old trade preference program designed to promote economic growth in the developing world by providing preferential, duty-free entry for up to 5,000 products when imported from one of 127 designated beneficiary countries and territories.

GSP also supports U.S. jobs: U.S. businesses imported $19.9 billion worth of products under the program in 2012, including many raw materials, parts or components,  and machinery and equipment used by U.S. companies to manufacture goods in the United States for domestic consumption or for export.  The program also helps to support American jobs associated with moving GSP imports from the docks to farmers, manufacturers, and retail shelves. 

“Beginning August 1, U.S. businesses and consumers will pay more for thousands of goods imported under the GSP program, including many inputs for U.S. manufacturing,” said Ambassador Froman.  “The Obama Administration urges Congress to extend this important trade program, which increases U.S. competitiveness, keeps costs low for U.S. consumers, and benefits some of the world’s poorest countries.” [emphasis in original]

And that’s just 5000 products from 127 countries. Imagine if all products from all countries were allowed to enter the United States without paying import duties. Raw materials for manufacturing! American jobs in the supply chain! Increased U.S. competitiveness! Low prices for consumers! Opportunity for the poorest people in the world!

These are the benefits of open trade, and none of them depends on expanding export markets for U.S. goods. Unfortunately, the entire edifice of U.S. trade policy stands in defiance of that simple truth. Imports are seen as losses in the great game of trade and should be accepted only in exchange for an equal number of exports. Ambassador Froman certainly has no intention of challenging that paradigm. But the truth is there for those willing to see it, and it managed to shine through a little bit yesterday from an unlikely source.

Trade Adjustment Assistance Ineffective (Not that the DoL Appears to Care)

A new paper released today by David B. Muhlhausen at the Heritage Foundation draws attention to yet another study (from August 2012) commissioned by the U.S. Department of Labor that throws ice-cold water on the notion that the Trade Adjustment Assistance program is particularly effective at helping workers displaced by competition from imports.  In fact, TAA assisted workers earned less than comparable non-TAA workers, according to the report.

I’d like more details on the methodology of the August 2012 report; for example, more information about the “wide array of observable baseline measures” that the study controls for. I suspect that the controls include education and age, but I would have thought that the study’s authors would want to address clearly and explicitly the argument frequently given by supporters of TAA that trade-affected workers are older and less educated than the average laid-off worker, and thus it is unfair to compare prospects. So I would like to know more before fully endorsing the study’s findings.

It’s a good thing that Dr Muhlhausen drew our attention to this study, by the way, because it is not particularly easy to find on the DoL’s dedicated TAA website. It is not listed on the publications page for the TAA program (although it is listed on the broader Employment and Training Administration publications list). You’d think that the DoL would want to publicize it more heavily, given they commissioned and paid for it and all, and especially given that the TAA program is due to expire in December and is on the legislative agenda of prominent U.S. senators. But the DoL has some form in burying research: there is also, according to the Heritage Foundation article, a mysterious 2010 evaluation of TAA that has not yet been released to the public. And a December 2012 study that found a net cost to society from the program is also missing from the TAA website (along with any publications after 2012). Time for an update, DoL webmaster?

Of course, even if TAA were the most effective program in the world, it doesn’t necessarily follow that providing it is an appropriate role for the federal government and it in any case rests on dubious moral foundations. I agree with the Heritage Foundation on this one: let TAA expire.

China–EU Solar Trade Agreement Shuffles Winners and Losers

The European Union has recently agreed to drop antidumping duties on Chinese solar panels and replace them with a voluntary “price undertaking.”  In effect, Chinese manufacturers can avoid punitive tariffs if they promise not to sell their products at overly competitve prices.  The scheme does not liberalize trade in solar panels or even further a green energy policy agenda.  It merely shifts government privilege from one group of special interests to another.

The international solar panel market is a big fat mess.  Governments spend billions of dollars in subsidies to make solar panels cheaper and then turn around and impose trade barriers to make them more expensive.  Europe imported over $27 billion dollars of solar panels from China last year despite a global epidemic of Solyndra-style bankruptcies.

The negotiating dynamic that brought about the current minimum price deal between Europe and China aptly shows just how incoherent solar policy really is and reveals a lot about who the winners and losers are here.

Despite being home to much of Europe’s solar manufacturing, the German government was opposed to any action against Chinese solar panels.  As the New York Times reports:

Chancellor Angela Merkel of Germany opposed the trade case from the very beginning, saying that it would be preferable to continue talking with Chinese officials about the issue. Solar panel manufacturers in Germany tend to be independent companies that are not part of the country’s big industrial powerhouses like Volkswagen or BASF.

Germany has had far more success in exporting to China than any other European country, particularly in shipments of factory equipment, and Ms. Merkel has sought to cultivate a special relationship with Beijing. Most big German companies were unenthusiastic about the trade case, fearing that it could lead to a broader trade war that might hurt German exports.

Germany decided which domestic companies it would go to bat for and the solar manufacturers didn’t make the cut. 

Along a similar vein, the agreement has interesting implications for the Chinese industry:

Customers are only likely to pay the new minimum price of 56 euro cents per watt for the highest-quality solar panels with the best warranties, giving an advantage to the largest Chinese manufacturers. That is consistent with the Chinese government’s goal of thinning its nation’s solar panel industry to produce a few world-leading companies that can set high, profitable prices.

So the agreement benefits large Chinese manufacturers at the expense of smaller ones.  But, smaller Chinese companies aren’t left entirely out in the cold:

Out of 140 Chinese solar panel exporters, 50 refused to accept the minimum price, which means that they will face a prohibitive 47.6 percent tariff on any further shipments to the European Union. Since the United States Commerce Department imposed tariffs totaling only 31 percent last spring, the European Union’s settlement could send another wave of extremely low-priced Chinese solar panels without warranties toward the United States instead.

Whether you find the idea of cheap solar panels in the United States appealing or appalling, I advise you not to get too excited.  The U.S. Trade Representative is also very interested in turning protectionist U.S. antidumping duties into a lobbyist driven price control scheme.

It’s all for the good of the environment, I’m sure.