Topic: Trade and Immigration

The Predictable Fallout from Doha

Following the collapse of the Doha round of multilateral trade negotiations last month, WTO members have chosen to pursue their trade objectives through litigation.

Brazil (through its foreign minister, Celso Amorim) said Wednesday (eastern Australian time) that it plans to ask for billions of dollars of punitive damages from the United States in retaliation for U.S. cotton subsidies (more on that dispute here). The precise figure has yet to be released, but the United States has lost at every point in this dispute and although the Office of the United States Trade Representative plans to defend the subsidies “vigorously,” another loss for the U.S. would be expected. (Note that in WTO litigation proceedings, ‘damages’ aren’t paid by check; rather, the aggrieved member is given permission to retaliate by suspending its own obligations to the errant member. Usually this involves the injured party raising tariffs on the errant member’s exports, economically insane though that action might be.)

The United States has joined the melee by making preliminary legal moves of its own–against China. In a communication to the WTO posted on Monday, the United States listed its grievances as a series of questions to China about its allegedly discriminatory tax treatment for domestically-reared pork, as well as other subsidies. The United States has pitched these questions as part of the “transitional review mechanism” that was part of the deal when China joined the WTO but it could form the basis of a dispute settlement action if the questions aren’t addressed to the United States’ satisfaction.

The collapse of the Doha round, as well as political pressure to enforce the terms of trade agreements and to save special firepower for China, is bearing predictable fruit.

New Income and Poverty Figures Spoil the Pity Party

The Census Bureau’s release this morning of the latest income, poverty and health insurance numbers did not follow the script of those who want to paint a picture of a nation in crisis.

Opponents of free trade, immigration, and limited government constantly tell us that the middle class is shrinking, the poor are getting poorer and more numerous, and the number of Americans without health insurance is climbing inexorably. Their solution is always to restrict trade and immigration and launch expensive new programs to alleviate the obvious misery.

Spoiling the pity party is this morning’s widely anticipated report, “Income, Poverty and Health Insurance Coverage in the United States: 2007.” Among its major findings:

  • The number and percentage of Americans without health insurance actually declined slightly in 2007 compared to 2006. The share without insurance in 2007, 15.3 percent, is actually lower than it was a decade ago.
  • Median household income is not falling: “Between 2006 and 2007, real median household income rose 1.3 percent, from $49,568 to $50,233—a level not statistically different from the 1999 prerecession income peak.”
  • The share of households earning a middle-class income of between $35,000 and $100,000 in real 2007 dollars has indeed shrunk slightly compared to a decade ago, but so too has the share earning less than $35,000 a year, while the share earning more than $100,000 continues to rise. The middle class is not shrinking; it is moving up.
  • The 12.5 percent of Americans living below the poverty line in 2007 was statistically unchanged from 2006, and remains below the 13.3 poverty rate in 1997. The poverty rate has been trending downward since the early 1990s during a time of growing trade and immigration flows.
  • The Gini coefficient, a statistical measure of income inequality, was .463 in 2007, down slightly from earlier in the decade and virtually the same as it was a decade ago.

We can argue all day about what policies should be adopted to spur growth and higher incomes for the broadest swath of Americans. We certainly have plenty of ideas here at Cato. But it flies in the face of reality to argue that the major indicators of economic well being in America are trending downward in some sort of crisis that demands sweeping government intervention.

Joe Biden’s So-So Record on Trade

During his long tenure in the Senate, Joe Biden of Delaware has compiled a mixed record on votes affecting our freedom to participate in the global economy. The record of the Democratic vice-presidential hopeful is more pro-trade than Barack Obama’s but much less so than John McCain’s.

According to our “Trade Vote Records” feature on the Cato trade center web site, Biden has voted in favor of lower trade barriers on 24 out of 48 votes in the past 15 years. On trade-distorting subsidies, such as farm price supports, he has voted for lower subsidies on only 3 of 11 votes. Since Obama joined the Senate in 2005, he has voted for lower barriers 36 percent of the time and for lower subsidies 0 percent. John McCain has voted for lower barriers on 88 percent of votes and for lower subsidies on 80 percent.

Here are the highlights and lowlights of Biden’s voting record on trade:

On the positive side from a free trade perspective, he voted consistently to maintain normal trade relations with China, including permanent NTR in 2000; for the North American Free Trade Agreement with Canada and Mexico in 1993; for the Uruguay Round Agreements Act in 1994; for the Freedom to Farm Act in 1996; for fast-track trade promotion authority in 1998; to defund enforcement of the travel ban to Cuba; to cut sugar production subsidies; and in favor of the Morocco and Australian free trade agreements in 2004.

On the negative side for those who support the freedom to trade, Biden voted for steel import quotas in 1999; for the 2002 and 2008 protective and subsidy laden farm bills; against trade promotion authority in 2002; against the Chile, Singapore, Oman, and Dominican Republic-Central American FTAs; in favor of the Byrd amendment directing anti-dumping booty to complaining companies; in favor of imposing steep tariffs on imports from China to force changes in that country’s currency regime; and in favor of screening of 100 percent income shipping containers by 2012.

For a senator who prides himself on his foreign policy experience, Biden’s record shows great ambivalence about American participation in the global economy.

Our Convoluted, Less-than-open Immigration System

If you think the United States has an “open border” policy toward immigrants, check out this immigration flowchart put together by our friends over at the Reason Foundation.

In one graphic sweep, it explains better than mere words why we need comprehensive immigration reform.

Of course, if you are one of those people who like to read the articles and not just look at the pictures, you can check out Cato research on immigration at the Center for Trade Policy Studies web site.

The Democrats and Free Trade

If and when trade and globalization come up at the Democratic National Convention next week, I can almost guarantee that the take will be negative. It has become part of the party’s core message these days that free trade favors the rich at home and our unfair trading partners abroad. Just yesterday, in a tour of southern Virginia, Democratic hope Barak Obama took an indirect swipe at trade when he told a crowd in Martinsville, “You’re worried about the future. Here people have gone through very tough times. When you’ve got entire industries that have shipped overseas, when you’ve got thousands of jobs being lost… . That’s tough.”

Not all Democrats share the pessimistic view of trade. In the latest edition of the Cato Journal, hot off the presses, I review a new book by pro-trade Democrat Ed Gresser of the Progressive Policy Institute. In my review of Freedom from Want: American Liberalism and the Global Economy, I wrote:

Although it is easy to forget today as Democratic candidates rail against NAFTA and globalization, but for decades it was the Democratic Party that championed lower tariffs. Democrats opposed the high tariff wall maintained by Republicans from the Civil War to World War One, arguing that tariffs benefited big business at the expense of poor consumers. Under President Woodrow Wilson, Congress drastically lowered tariffs in 1913 and replaced the revenue with an income tax, only to see Republicans raise tariffs again in the 1920s, culminating in the Smoot-Hawley Tariff of 1930 and the Great Depression that followed.

The Democrats should think long and hard before they give up that legacy altogether.

You can read the full review here.

A Modest Proposal to Protect Newspaper Jobs

Gannett announced this week that it will eliminate more than 1,000 positions among its 85 daily newspapers and 900 non-dailies. The reason for the layoffs has become all too familiar — declining readership and advertising sales, primarily because of lower-cost competition from the Internet.

I’m waiting for a member of Congress to issue the following news release:

WASHINGTON, Aug. 15—Rep. John Smith today announced his opposition to the loss of jobs at Gannett and other newspaper companies and demanded that Congress and the president rethink their commitment to “so-called free domestic trade.”

“The loss of thousands of decent, good-paying middle-class union jobs will be devastating to my district and to communities across America,” Rep. Smith announced. “Our misguided domestic trade policies have exposed vital industries to unfair competition. Our newspapers, record shops, and book stores must not be forced to compete against dumped services sold at predatory prices.”

Rep. Smith blamed growing use of the Internet since 1994 for stagnant real wages, a shrinking middle class, falling home prices, and rising levels of crime, alcoholism, and divorce in America’s newsrooms.

Rep. Smith rejected what he called “academic theories about competition, comparative advantage, technological progress, and productivity gains.” He also denounced supposed evidence that the Internet has brought benefits to millions of workers and consumers as “mere statistics.”

As Rep. Smith told cheering constituents at a recent debate, “Look, people don’t want cheaper news and information if they’re losing a job in the process. They would rather have the job and pay a little bit more for their news. And I think that’s something that all Americans could agree to.”

Rep. Smith demanded that the president and Congress embrace an immediate “time out” on all new technologies and web sites until domestic trade policies “can be made to work for all Americans.” He demanded more vigorous enforcement of domestic antidumping rules and an additional $1 billion in the FY2008 budget to expand Technology Adjustment Assistance (TAA) programs.

The Answer to High Oil Prices and Global Warming? More Global Poverty, Less Immigration

Opponents of immigration are now trying to hitch their wagon to worries about high oil prices and global warming.

An ad on page A12 of today’s Washington Post asks, “If foreign oil has us over a barrel now, what happens when our population increases by another 100 million?” The text of the ad tries to provide the answer: “With America’s population at a record 300 million today, [oil] supplies are again tight in spite of record high prices. And the U.S. Census Bureau projects that another 110 million people will be added to our population between 2000 and 2040.” So, if we want lower oil prices, we need to reduce America’s population growth and that means reducing immigration. Get it?

The ad is sponsored by five anti-immigration, anti-population-growth groups, including the Federation for American Immigration Reform (FAIR) and Californians for Population Stabilization.

The ad provides no evidence that rising global demand for oil has been driven primarily or even significantly by population growth in the United States. In fact, our total oil consumption has actually declined compared to last year, while demand continues to rise in developing countries. The two previous big spikes in global oil prices, in 1973 and 1979, occurred when the U.S. population was 80 to 90 million LOWER than it is today.

The future direction of oil prices will be determined by such factors as energy efficiency, economic growth in emerging economies, oil production, and development of alternative energy sources. Immigration rates to the United States won’t matter.

As though on cue, the Center for Immigration Studies released a report this morning with the headline, “Immigration to U.S. Increases Global Greenhouse-Gas Emissions.” The report argues that immigration “significantly increases world-wide CO2 emissions because it transfers population from lower-polluting parts of the world to the United States, which is a higher-polluting country.”

What the CIS study is really arguing is that rich people pollute more than poor people, so the world would be better off if more people remained poor. The same argument could be used to oppose economic development in places such as China and India that has lifted hundreds of millions of people out of poverty in the past two decades.

Through the dark lens of CIS, the world is a better place when poor people remain stuck in poor countries, and poor countries remain poor.