Topic: Trade and Immigration

The Failure of Do-Nothing Policies

A news story from today in a slightly alternate universe:

Jobless Rate at 26-Year High

Employers kept slashing jobs at a furious pace in June as the unemployment rate edged ever closer to double-digit levels, undermining signs of progress in the economy, and making clear that the job market remains in terrible shape.

The number of jobs on employers’ payrolls fell by 467,000, the Labor Department said. That is many more jobs than were shed in May and far worse than the 350,000 job losses that economists were forecasting.

Job losses peaked in January and had declined every month until June. The steep losses show that even as there are signs that total economic activity may level off or begin growing later this year, the nation’s employers are still pulling back.

White House press secretary Robert Gibbs said, “President Obama proposed a $787 billion stimulus program to get this country moving again. He tried to save the jobs at GM and Chrysler. But the do-nothing Republicans filibustered and blocked that progressive legislation, and these are the results.”

House Speaker Nancy Pelosi said at a press conference, “We begged President Bush to save Fannie Mae, Merrill Lynch, Bank of America, AIG, the rest of Wall Street, the banks, and the automobile industry. We begged him to spend $700 billion of taxpayers’ money to bail out America’s great companies. We begged him to ignore the deficit and spend more money we don’t have. But did he listen? No, he just sat there wearing his Adam Smith tie and refused to spend even a single trillion to save jobs. And now unemployment is at 9.5 percent. I hope he’s happy.”

Democrats on Capitol Hill agreed that the “do-nothing” response to the financial crisis had led to rising unemployment and a sluggish economy. If the Bush and Obama administrations had been willing to invest in American companies, run the deficit up to $1.8 trillion, and talk about all sorts of new taxes, regulations, and spending programs, then certainly the economy would be recovering by now, they said.

The European Union Stops Banning Ugly Veggies

The European Union has helped create a continental European market and knock down protectionist barriers, which is good.  But it also has created another opportunity for meddling bureaucrats to interfere with people’s lives. 

Now consumer protests have led to at least one victory for liberty.  Reports London’s Sun newspaper:

Now the European Commission has finally scrapped the 20-year ban on 26 types of fruit and veg including asparagus, celery and aubergines.

They ruled they can now be sold - as long as they are labelled as “intended for processing”.

Sainbury’s spokeswoman Lucy Maclennan said: “We are delighted to have played a part in winning the wonky veg war against these bonkers EU regulations.”

Tesco spokesman Adam Fisher said: “It’s not before time. We welcome this move.”

And last night it was predicted the change could see some prices fall by 40 PER CENT.

A Commission official said: “Times have changed - now household budgets are tighter and there is the problem of wasting food.”

One bad regulation down.  Who knows how many to go?

Attention GM Shareholders (That Means You!)

As my colleague Doug Bandow pointed out this morning, today’s Washington Post has an analysis about the uncertain prospects of GM ever making taxpayers whole again. It is a very similar analysis to the one I gave in this L.A. Times Dust-Up installment four weeks ago, although I find prospects unlikely, rather than just uncertain.

If GM emerges from bankruptcy next month in accordance with the pre-packaged Obama plan (as expected), taxpayers will be on the hook for $50 billion. That $50 billion will buy taxpayers a 60 percent stake in the company, which according to the laws of mathematics means that GM has to be worth $83.33 billion for the taxpayers to get their equity back without making a dime in capital gains or interest.  In the L.A. Times, I asked:

How and when will that ever happen? At its peak in 2000, GM’s value (based on its market capitalization) stood at $60 billion. Thus, the minimum benchmark for “success” will require a 38% increase in GM’s value from where it was in the heady days of 2000, when Americans were purchasing 16 million vehicles per year. U.S. demand projections for the next few years come in at around 10 million vehicles. Taxpayer ownership of GM is something we should all get used to, and the “investment” is only going to grow larger. Think Amtrak.

Charles Rangel Keeps a Cool Head

Pat Michaels and I have written an op-ed on the climate change bill due for a vote tomorrow in Congress, and our opinions on its provisions are summarized pretty well there. In short, the bill appears to offer very little in the way of reduced global warming in return for harm to the domestic economy and to international relations.

Yesterday’s New York Times energy and environment section (online) contains an article picking up on the increasingly harmful trade-related parts of the bill. Apparently the House Ways and Means Committee is trying to assert language that would make imposing carbon tariffs more likely than did the original Energy and Commerce Committee bill, bad enough that it was.

So what say you, Rep. Charles Rangel (D-NY), chairman of the House Ways and Means Committee and a powerful voice on trade?

[Rangel] downplayed the significance of his proposals. “I don’t think there will be many changes there,” he said. “There are just provisions in there that deal with trade and the poor. It’s not changes, it’s just vacuum.”

Assuming the quote was not taken out of context, for the leading House voice on trade to be so dismissive of important (if somewhat under-the-radar) provisions is irresponsible to say the least.

Are Democrats Serious about Immigration Reform?

President Obama is meeting today with a bipartisan group of lawmakers to talk about reforming our broken immigration system. The challenge for both parties will be whether they can overcome opposition within their respective bases to expanding legal immigration.

For Republicans, the chief opposition remains the faction of talk-radio-driven conservatives who just don’t like immigration, period, especially when it comes from Latin America. For Democrats, who now run Washington, the chief opposition to allowing more foreign workers to enter the country legally is represented by organized labor.

As the Wall Street Journal reports this morning, advocates of immigration reform “worry that Democrats will defer to the AFL-CIO on the issue of legal immigration. The labor confederation has opposed a robust guest-worker program or higher levels of legal immigration, fearing they would depress wages. A larger labor presence would splinter the coalition of business and pro-immigration groups that embraced past immigration efforts, only to see them falter in the Senate.”

As I’ve argued consistently in the past, immigration reform is not worth pursuing if it does not include expanding future flows of legal immigrants, both highly skilled and lower-skilled workers.  If Congress confines itself to legalizing the 8 million or so workers already here illegally, with a vow to get tougher on enforcement, then we are just repeating the mistake of the 1986 Immigration Reform and Control Act.

We will know if President Obama and Democratic leaders in Congress are serious about fixing the problem of illegal immigration if they face down their labor-union allies and embrace a workable, market-oriented expansion of legal immigration. Otherwise, we are in for more futility, frustration and failure.

Buy American, Destroy American Jobs

The “buy America” provision in the misnamed stimulus bill was supposed to protect jobs in the U.S.  Alas, by encouraging foreign protectionism, the measure is likely to end up destroying American jobs.

Indeed, the provision has all the earmarks of a grand political fiasco.  Reports the Financial Times:

Confusion reins. For fear of missing out on contracts, many companies are demanding that all their suppliers are Buy American-compliant regardless of any exemptions.

“Those companies that can comply are of course thrilled and are trumpeting that in their marketing. Those that cannot are in agony and are losing business and cutting workers,” says David Ralston, a government procurement lawyer at Foley & Lardner. “The many companies that find themselves in the gray areas are calling their lawyers.”

Canada’s government has been an early and vocal lobbyist against the measures, sending officials to Washington to warn that a trade war is brewing. Canadian municipalities threatened to attach “do not Buy American” provisions to their own public projects after manufacturers were cut out of US stimulus projects, but have agreed to hold off while the national government tries to resolve the problem.

Canada wants to broker a bilateral trade agreement on government contracts which would extend all the way down to the level of local authority. The US trade representative says it is open to the idea.

While this would quieten the Canadians, it could spark cries of protest from the US’s other trading partners. The British ambassador has given several speeches in recent weeks chastising the US over Buy American and the way it is being implemented. The Europeans are watching closely. But could the US write bilateral deals with them all? Buy American’s supporters in Congress would surely kick back.

The Chamber of Commerce is proposing a compromise. It has called on the administration to tell municipalities to act as if they were signatories to the federal government’s agreements. “I think there is enough flexibility for OMB [the Office of Management and Budget] to make that change. I don’t have a crystal ball but for multiple reasons it would make sense for them to do it,” says Chris Braddock, the Chamber’s procurement expert.

On Monday all groups with a stake in the debate submitted their written comments to the OMB, the White House department handling the stimulus. The administration must now write the final rules on how to implement Buy American.

The U.S. has gained enormously from the expansion of trade in recent years.  We all will lose if Washington now encourages a global retreat from free markets.

Some Center-Left Governments Are Prepared to Promote Trade

Not to brag, but my homeland has a pretty good record when it comes to trade liberalization.  Even the center-left Labor party is supportive of multilateral trade negotiations, although they have historically been less enamored of bilateral and regional preferential deals. (A completely respectable view, by the way). Indeed, the most substantial unilateral trade liberalization efforts in Australia’s history occured under Labor governments.

Simon Crean, the current (Labor) Minister for Trade recently confirmed that commitment in the face of trade union opposition. In a statement that could have come directly from Cato’s Center for Trade Policy Studies, he said:

People seem to think that jobs can be protected by reverting to protectionism. The exact opposite is the case. If the country and the world reverts to protectionism, it costs jobs and lowers living standards.

Minister Crean then went on to make mildly mercantalist noises about how many Australian jobs are “trade related” – and you can be sure he is not referring to imports – but, really, I shouldn’t nit-pick. If more governments, including those of the center-left, were as supportive of free trade and as skeptical of protectionism, the global economy would be better off.

HT: our friends over at the Club for Growth.