Topic: Trade and Immigration

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:

Chamber of Commerce Endorses Carbon Tariffs?

Even though the climate change summit in Copenhagen next month is likely to yield very little, domestic shenanigans continue. The Senate Committee on Environment and Public Works passed a bill on Thursday amid controversy, and the farmers’ friends in the Senate (notably Sen. Debbie Stabenow, D. Mich) are looking to send goodies their way by filing an amendment that would pay farmers for not cutting down trees, not farming, and will likely see states such as — well, how about that! —  Michigan “cashing in” (see here).

Meanwhile, those concerned about the cost of climate change regulations may have lost an ally. Often, but not always, one can depend on the U.S. Chamber of Commerce to defend free enterprise, or at least free trade. On climate change, however, they are a little more ambiguous. If anything, they appear to be getting more sympathetic to climate change legislation. Nothing to do with membership defections, they assure us, just good business practice. Maybe it is. I’m not a member of the Chamber so their strategy is not really any of my business.

What concerns me is the apparent shift in their position toward so-called carbon tariffs (also called “border adjustment measures,” and often spoken of in terms of “international competitiveness,” “negotiating leverage” and other terms that should raise the alarm). My friend, and former Catoite, Scott Lincicome does an excellent job here of parsing through the Chamber’s recent public letter in support of  the Kerry-Graham “framework” (outlined in this New York Times op-ed) and their strange silence on the framework’s inclusion of the need for carbon tariffs, so I won’t repeat his analysis here. Suffice to say, their non-comment on the issue of carbon tariffs is worrying. As Scott points out, they appear to endorse the concept, if in a coded manner.

Back in June, the Chamber explicitly opposed Waxman-Markey, in part because “It would also impose carbon tariffs on goods imported into the U.S., a move that would almost certainly spur retaliation from global trading partners.” (See here.) I would feel a lot more comfortable if a similarly explicit statement had been repeated in their letter.

Cato Podcast Exposes Anti-Poor Bias of U.S. Tariffs

The dirty secret of the U.S. tariff code is that it is not only insanely complex but that it is biased against the poor. Our highest remaining trade barriers are imposed on goods that loom the largest in the budgets of poor and middle-income families — such as food, shoes, and clothing.

Politicians and interest groups that fight any reduction of U.S. tariffs are unwittingly picking the pockets of the poor every day. I discuss how President Obama supports this unfair status quo in a new Cato podcast, in an earlier newspaper column, and in Chapter 9 of Mad about Trade.

And you can bet your imported t-shirt that I will highlight this inconvenient truth during my presentation at today’s Cato book forum. You can watch it live online beginning at noon, eastern time. Commenting on Mad about Trade will be Steven Pearlstein, business columnist for the Washington Post.

Immigrants Respond to Economic Incentives

As I blogged here, I got my green card in April – and am now counting down the days till I can naturalize (five years from the green card, though you can apply three months before that and processing takes a year or so).  Because of my various travails over the years that led to that fortunate day this spring, I’ve learned quite a bit about immigration, both as a matter of policy and as a matter of law.  Indeed, both before joining Cato and ever since, it’s been an area in which I’ve been writing and speaking – and I appreciate very much the synergy this work has had with my colleagues in the trade and immigration shop.

One oped I had in National Review Online dealt with H-1Bs, the temporary visas for highly skilled workers to work in the United States.  One of the problems with H-1Bs is that they provide no path to a green card (meaning permanent residence) or citizenship – so just as hard-working, tax-paying professionals gain expertise in a particular American company or industry, just as they grow roots in an American community, they have to leave.  Nevertheless, there have long been more H-1B applicants than available visas.  The last few years, the annual 65,000 quota has been oversubscribed on the very first day of eligibility for each fiscal year!

Well, not any more.  As this recent article points out, the recession has impacted our immigration system as well: “A coveted visa program that feeds skilled workers to top-tier U.S. technology companies and universities [the H-1B program] is on track to leave thousands of spots unfilled for the first time since 2003, a sign of how the weak economy has eroded employment even among highly trained professionals.”

This is just another indication that the free movement of goods, money, and people, will regulate even such perceived social ills as “foreigners taking American jobs.”  There’s simply no need for “U.S. citizen only” provisions in (so-called) stimulus bills, or (further) immigration restrictions during bad economic times.

In other words, even foreigners respond to market incentives.

For more on Cato’s work on immigration policy, go here.