Topic: Trade and Immigration

Good Night, Lou Dobbs

In his CNN swan song last night, Lou Dobbs told his loyal if shrinking audience that important national issues

are now defined in the public arena by partisanship and ideology rather than by rigorous empirical thought and forthright analysis and discussion. I will be working diligently to change that as best I can.

I would argue that his very act of resigning from his prime-time perch is probably the best contribution he’s made yet to advancing “rigorous empirical thought.”

Since he launched his program “Lou Dobbs Tonight” in 2003, the CNN anchor has been engaged in one long rant against immigration, free trade, and other populist bugaboos. His approach was anything but rigorous and empirical.

In a review of his 2004 book, Exporting America, I critiqued his flabby reasoning and questionable facts. (My new Cato book, Mad about Trade, is a painless, one-shot antidote to everything Dobbs has said about free trade, manufacturing, and the middle class.) The New York Times, “60 Minutes” and other mainstream news outlets have exposed such outrageous whoppers from Dobbs as his claim that immigrants have caused an explosion of leprosy cases and crime.

Dobbs was vague about his plans for the future last night, but there is some speculation that he will run for office, perhaps for president in 2012. I hope he does. It would be an interesting test of just how popular his sentiments really are among Main Street Americans.

More Trade News

My colleague Dan Griswold pointed out yesterday some unfortunate editing in the Washington Post. Here are a couple of other trade-related items in the news recently:

  • Sen. Max Baucus (D, MT and Chairman of the Senate Finance Committee) has seemingly thrown his weight behind the idea of “border measures” (i.e., carbon tariffs).  After paying the semi-obligatory lip service to the United States’ obligations under international trade law – and I say only “semi-obligatory” because some U.S. lawmakers appear not to care about it at all – Baucus goes on to deliver this rhetorical gem:

    I think often the United States has to lead,” Baucus said, noting that what lawmakers come up could be used as a model for other countries to copy.

    So the U.S. would saddle its consumers with higher prices in exchange for little benefit environmentally and in the process risk retaliation and alienating countries who it insists are necessary for global cooperation on climate change?

    Some leadership.

    And it may well be that the Chinese have the jump on the United States here, in any case. They’re proposing to introduce a carbon tax of their own, to prevent double-taxation in the form of carbon tariffs by the developed countries (banned under WTO rules) and to keep the carbon tax revenue – collected, remember, from U.S. consumers! – for themselves, all while seeming to play nice on climate change. I bet those who proposed carbon tariffs are sorry they spoke out now. (HT: Scott Lincicome)

  • Brazil has published a list of over 200 mostly consumer and agricultural goods that would be subject to retaliatory tariffs as part of the on-going dispute over U.S. cotton subsidies (an excellent backgrounder to that dispute is available here).

    I note with sorrow that the list also contains intermediate goods, which of course would mean saddling Brazilian manufacturers with higher prices. Even if the Brazilian government isn’t too concerned about  burdening its consumers with extra taxes, rarely a concern of politicians apparently, you’d think they would hesitate to impose higher costs on manufacturers, who employ people.

    Again, it is important to draw a distinction here between the mercantalist political logic of retaliatory tariffs and the economic insanity of increasing costs to your own people in “retaliation” for the harm another country’s policies have done to you. (And no, I don’t count the “game-theory” argument as an “economic” one here. That is a fancy way of saying that in an international relations, i.e. political, sense, retaliation can bring about the desired change.  I’m talking about the fact that costs to consumers from tariffs – whatever their rationale – far outweighing the benefits that producers derive from protection). But this latest development is a sign that Brazil is serious about getting the U.S. to reform its agricultural policies, something it should be doing anyway.

    Brazil was, it should be noted, given permission from the WTO to suspend intellectual property rights protections as a form of retaliation, a new but increasingly attractive way of exacting retribution, but only after a certain amount of damages had been collected the usual way.

  • Freedom for Thee, But Not for We

    I expected and got some pushback about my post comparing the Berlin Wall to the wall along our southern border. Happily, it was more civil than the reactions I often get when I talk about immigration and free movement of people.

    One fair comment focused on the key distinction between the Berlin Wall and our border wall: the direction the guards were facing.

    From the perspective of the state, it’s easy to conceive of border guards facing “in” or “out”—and those facing in suggest much worse than those facing out. But from the perspective of the individual, what matters is whether or not the border guards are facing you. Our border wall keeps Mexicans and Central Americans from freedom and a better life precisely the way the Berlin Wall did East Germans.

    Another pointed out the inconsistency between liberal immigration policies and the welfare state. But the solution is not to wall off the country; it’s to wall off the welfare state. David Friedman has pointed out that liberal immigration policies can create political incentives to hold down welfare benefits.

    Twenty years ago, West Germany took into its fold an impoverished population whose capacity for self-governance had surely been eroded by years of totalitarian rule. Today, one of that population is its center-right chancellor. Liberalizing immigration would be a project far smaller for the United States, it would bring overall economic benefits, and it would help restore our country’s status as a beacon of freedom.

    Those who wish to immigrate to the United States did not create the political or economic conditions in their birth countries. Yet many treat their desire for a life like ours as blameworthy. It’s incoherent for individualists to think that way about immigrants to the United States while treating the reunification of Germany as something to celebrate. Such incoherence is reflected in our ’wall’ policies, which indeed boil down to “freedom for thee (Europeans), but not for we (Americans).”

    Imports Wrongly Blamed for Unemployment

    Import competition can throw Americans out of work. Even advocates of free trade like me will readily acknowledge that fact. And nobody needs to remind the people of Hickory, North Carolina.

    On the front page of the Washington Post this morning, under the headline, “In N.C., damage not easily mended: Globalization drives unemployment to 15% in one corner of state,” the paper reports in detail how the people of that community are struggling to adjust to a more open U.S. economy:

    The region has lost more of its jobs to international competition than just about anywhere else in the nation, according to federal trade-assistance statistics, as textile mills have closed, furniture factories have dwindled and even the fiber-optic plants have undergone mass layoffs. The unemployment rate is one of the highest in the nation–about 15 percent.

    Nobody wants to lose their job involuntarily, but a story like this needs to be read in perspective. As I document in my new Cato book Mad about Trade, the large majority of Americans who lose their jobs each year are not displaced by trade. Technology is the great job disruptor, but Americans also lose their jobs because of domestic competition, changing consumer tastes, and recessions.

    For every person who loses their job because of globalization, I estimate there are 30 who have lost their jobs for other reasons. I’m waiting for a front-page story on all the newspaper workers who have lost their jobs because of the Internet, or the 30,000 workers laid off by Kodak in the past 5 years because of the spread of digital cameras and plunging film sales, or the book stores and record stores that have shut down and laid off workers because of Amazon.com and iTunes.

    Trade is not a cause of higher unemployment nationwide, either, as the Post story seems to imply. Imports have fallen sharply during the latest recession along with the trade deficit. In contrast, imports were rising at double-digit rates when the unemployment rate was below 5 percent. Like technology, trade can put people out of work, but it also creates new and generally better paying opportunities for employment, while raising our overall standard of living.

    Mr. Obama, Tear Down This Wall

    On his personal blog, Bottom-Up, Cato adjunct scholar Timothy B. Lee compares the Berlin Wall to the wall along the southern border of the United States. There are differences, of course, but important similarities too.

    [I]t’s jarring that less than 20 years after one Republican president gave a stirring speech about the barbarity of erecting a wall to trap millions of people in a country they wanted to leave, another Republican president signed legislation to do just that. Conservatives, of course, bristle at analogies between East Germany’s wall and our own, but they seem unable to explain how they actually differ.

    Judging by its ‘wall’ policies, the United States appears to value the freedom of Europeans more than Americans.

    Give Us Your Tired, Your Energetic, Your Poor, Your Rich — Pretty Much Anyone Who’s Not a Criminal or Terrorist

    On Wednesday I blogged about how, for the first time in many years — since the last recession — H-1B skilled worker visas remain available despite the hard cap on their number.  In other words, even foreigners respond to market incentives: when there are no jobs, there are fewer immigrants.

    I’ve gotten some interesting email in response to that little notice, one of which I post below, along with my paragraph-by-paragraph responses.

    Just read your blog entry on the H-1b visa.  The problem is that this visa has been misused by sponsoring companies, suffering from high rates of fraud.  I find it strange that Cato supports (or appears to support) a labor tool that is anything but free market.  The H-1b visa is more of an indentured servant visa program than anything else – where employees must be sponsored by an employer.  Since employees aren’t free to find new jobs or start their own business, it results in a captive workforce who will do whatever the employee asks, even beyond reason.  They won’t bargain for higher wages, quit if mistreated, join unions, or do anything that might result in their immigration status being jeopardized.

    Having myself been on H-1Bs with several employers, including Cato, I agree that the program is seriously flawed, in the ways this correpondent describes and in others.  Ideally, people would be able to apply for a work permit — their application gaining more “points,” say, for language, youth, skills, the needs of the economy, or whatever other criteria the political process determines are important — and then not be tied to an employer and have an opportunity to receive permanent residence and eventual naturalization if they pay their taxes, stay out of jail, etc.  Or, indeed, we could admit all people who want to come here (after screening for security, criminal, and health concerns), and give them the same opportunity.  But until we get to that more perfect world, I see no conflict in advocating for a repeal of the H-1B cap or pointing out how this recession shows that immigrants come for jobs, not to leech off our welfare state (if that’s the concern, then wall off the welfare state, not the country) or commit crimes.

    One thing not correct in your blog is that H-1b visa holders cannot get a green-card.  They can, unfortunately most of the workers are from India so it is difficult for those workers to get the green-card because of how, numerically, green-cards are issued.  The H-1b visa is a “dual intent” visa meaning there is a path to permanent residence and after 6 years on the visa holders can extend 1 year until their green-card is processed.  Indian workers call it the “green carrot” and relate it to the picture of where the mule driver holds a carrot on a stick in front of the mule to keep him moving.  No matter how hard the mule tries, the carrot gets no closer.

    The H-1B’s “dual intent” provision is categorically not a path to a green card.  All it does is, as the correspondent points out, allow the worker to stay in the country during the green card application process.  That process, however, and the substantive requirements for obtaining a green card, is no different for H-1B holders than it is for anyone else.  Indeed, spending five or six years on an H-1B with one employer can be a detriment, inasmuch as that employer’s sponsorship application cannot take into account the skills gained during that time of employment.  And yes, the nationality-based restrictions are also obnoxious.

    The primary sponsors of H-1b workers are Indian outsourcing firms.  In short, the visa is used as a tool to send jobs overseas.  People from Cato may not have a problem with that because of their own views on globalization and free trade, but the majority of Americans do.  You guys are notorious at just looking at one half of the equation when it comes to free market practices unfortunately – which is the corporate side.  Yes, corporations can move people around the world using a variety of immigration programs.  But do the people being moved around control their own destinies or are they at the mercy of the corporations?

    Cato is not a corporate shill.  Plenty of what we advocate is counter to the expressed preferences of Big [fill in your preferred Villain] because the business community often prefers stability over liberty-enhancing volatility — smaller, secure profits over potentially larger but not-guaranteed ones — and a place at the government subsidies trough over a truly free market.  Moreover, and with much irony, it is the H-1B’s cap and costly bureaucratic processing that has promoted outsourcing — which in and of itself is not problematic for the American economy as a whole — by preventing American firms from bringing Indian (and other) workers here.  And people on H-1Bs are “at the mercy of corporations” precisely because this visa is tied to one employer, as mentioned in the first quoted paragraph above.

    Liberty doesn’t just apply to corporations and the narrow objective of free trade.  I just don’t understand how the Cato Institute and all of your intellectuals don’t see through this visa for what it is.  It deprives people of liberty.  Many American workers don’t care that “an Indian” is being deprived of their liberty, but they should if not for moral reasons than for economic reasons.  If I have a worker that I can exploit and pay less, now I have a bargaining tool against the worker I previously could not.  When one man is deprived of their liberty, in a way we all are.

    I couldn’t agree more that our current immigration regime benefits nobody — not big business, not small business, not skilled workers, not unskilled workers, not the American economy as a whole, not certain sectors of it — with the possible exception of populist demagogues of both the left and the right.  The answer to that morass isn’t to attack globalization or free trade — which is not a “narrow objective” but a fundamental mechanism for enhancing peoples’ lives all over the world — but to reform our immigration system.

    For more on these and related issues, check out these recent studies put out by my colleague Dan Griswold and his trade and immigration policy team: