Topic: Trade and Immigration

Blinded by Ideology

Given the outspoken, anti-trade views of thrice-elected Senator Byron Dorgan (D-ND), you might think that North Dakotans have no stake in the global economy.  After all, if you’re comfortable voting for a candidate who disparages NAFTA and other trade agreements, certainly your livelihood wouldn’t depend on, say, exports to Canada.

Carter Wood over at the National Association of Manufacturers posted this gem (“Leading the Nation in Exports…and Protectionism?”) earlier today.

North Dakota’s exports grew faster than any other state’s in 2007, and the primary destination for its mostly agricultural output was Canada.  If I were a North Dakota farmer, I’d be a bit wary of my senator, whose rationale for endorsing Barack Obama is that he (Obama) “has always opposed Nafta.”

Good grief.

Obama and Clinton Threaten to Bully Our Neighbors over Trade

When they weren’t jabbing at each other over health care and Iraq, Barack Obama and Hillary Clinton spent a good chunk of their debate last night arguing over which of them is the strongest critic of the North American Free Trade Agreement. Both declared that they would withdraw the United States from the agreement if Canada and Mexico did not agree to inserting “enforceable” labor and environmental standards into the agreement.

Talk about a non-starter. It is unlikely that our two neighbors would agree to reopen a 14-year-old agreement that has worked well for all three nations. [You can read my assessment of NAFTA here.] In effect, Obama and Clinton will be asking our two neighbors to bend their national labor and environmental standards to the demands of the U.S. Congress under threat of trade sanctions. Where exactly is the upside for Canada and Mexico in such a request?

Of course, there is no upside. So the only motivation will be the threat that the United States will unilaterally withdraw from NAFTA. That, of course, would result in the re-imposition of tariffs on trade with our two most important trading partners. And because Mexican tariffs on imports from the rest of the world are significantly higher than U.S. tariffs, U.S. exporters to Mexico would face a much steeper tariff increase than Mexican exporters to the United States. By withdrawing us from NAFTA, the Democrats would transform what has truly become a “level playing field” of zero tariffs into one tilted against U.S. exporters.

And even if the U.S. government were able to demand that Mexico impose new and tougher environmental and labor restrictions on its producers, there is little reason to believe that goods now made in Mexico would be soon be produced in Youngstown, Ohio, and elsewhere in the United States. The far more likely scenario is that producers in Mexico would shift production to China, Vietnam, and other lower-cost producers.

Finally, consider the foreign policy implications of threatening to withdraw from NAFTA. The Democratic candidates have been critical of the Bush administration for its checkered record of winning friends abroad. But have the Clinton and Obama campaigns considered how our friends in Canada and Mexico will react to the heavy-handed demand that they re-write their domestic labor and environmental laws under threat of face tariff retaliation from Uncle Sam?

This would confirm the worst fears of our closest neighbors.

Demander-in-Chief

Bill Kristol’s column in yesterday’s New York Times contained an interesting, if disconcerting, quote from Michelle Obama:

Barack Obama … is going to demand that you shed your cynicism… That you push yourselves to be better. And that you engage. Barack will never allow you to go back to your lives as usual, uninvolved, uninformed.

The President of the United States is the employee of the American people. He is not there to make demands of people. If I want to sit on my couch for the rest of my life eating Doritos and watching trashy television – unengaged, uninformed and uninvolved – that’s my prerogative.

(Hat tip: our beloved founder, Ed Crane).

Why Politicians Are Wrong about Imports and Jobs

Politicians commonly blame imports for throwing millions of Americans out of work. If you don’t believe me, check out what Hillary Clinton and Barack Obama both said about trade in their post-Wisconsin-primary speeches Tuesday night.

It’s true that a certain number of Americans lose their jobs each year because of import competition, but the number is small compared to the overall size and underlying churn of the U.S. labor market. And jobs lost from import competition are more than offset by jobs created elsewhere in the economy. And if you don’t believe that, check out my recent Cato study, “Trading Up.”

Adding to the evidence, the recently published Economic Report of the President 2008 contains a nifty graph on page 94. It shows that during the past 25 years, as imports have been trending inexorably up as a share of our economy, the unemployment rate has been trending DOWN.

As the graph’s own caption concludes, “Over the long run, there is little connection between increased imports of goods and services and the strength of the labor market.”

Gingrich Conflates Meaning of Indigo vs. Cobalt

Electoral scholars and pundits appear to be reaching consensus that the Democratic nomination could very well be decided by the superdelegates. Writing in today’s New York Times, AEI scholars Thomas Mann and Norm Ornstein project that neither Obama nor Clinton is “likely to come close to the 2,025 delegates needed to win the nomination” from their pledged delegate counts. The key to the nomination, they write, is winning enough support from the 796 superdelegates.

Even though Democratic Party insider and superdelegate herself Donna Brazile said on CNN, “If 795 of my colleagues decide this election, I will quit the Democratic Party,” Mann and Ornstein express faith that the superdelegates will fulfill their purpose and produce a candidate behind whom Democrats will unify. At this point, anyway, that process seems more likely to produce bitterness than unity.

Meanwhile, on the pages of today’s Wall Street Journal, Newt Gingrich opines that, given the seeming stalemate, the only way to produce a legitimate Democratic presidential candidate is for the party to permit Michigan and Florida to hold do-over primary elections. Excluding those states’ delegations from the nominating process or including them and awarding the majority of those delegates to Clinton (who won those technically-meaningless-at-the-time elections after breaking her pledge not to campaign there) boils down to a choice between disenfranchising voters in two states or allowing party insiders to run roughshod over the nominating process. That, Gingrich claims, would constitute a “tainted or stolen” nomination, which would potentially “delegitimize the election itself and its outcome.” Gingrich implores: “The voters — not the party insiders — have the moral authority to choose the nominee.”

I agree with Newt that voters have the moral authority (and having primary elections in the first place honors that truth). But this is an issue between and among a group of people called Democrats, who are members of the same political party by choice. This is a nominating election, which is administered according to party rules, which have been agreed to — at least tacitly — by all party members. One of the rules is that there are superdelegates, whose opinions carry more weight then Joe and Jane Democrats’.

In the cases of Florida and Michigan, party rules were broken and consequently, members’ privileges were revoked. Voters haven’t been disenfranchised; party members have been disciplined.

How the issue is “resolved” will say nothing about the legitimacy of the general election and its outcome. How could a McCain victory in November be delegitimized by Democratic Party nominating procedures? Even more to the point, how could a Clinton or Obama victory in November be delegitimized when the proper rules and processes yield either her or him as the party’s nominee?

The best way to “resolve” the issue is to stay the course.  Rules are in place to guide the process. That doesn’t mean there won’t be discord; there probably will be. But changing the rules now, at this late date, to avoid implementing the original party nominating rules would be the real scandal.

DHS Promoting Violation of State Law - and Fish Now Smell Good

The Department of Homeland Security is instructing Illinois businesses that they do not have to comply with a law called the Illinois Right to Privacy in the Workplace Act.

The state’s law bars Illinois employers from enrolling in E-Verify or any similar system until the Social Security Administration and DHS can make final determinations on 99 percent of their “tentative nonconfirmation notices” - findings that people aren’t authorized to work under the immigration laws - within three days.

But in a notice that would panic any lawyer advising Illinois clients, the DHS claims that the state “has agreed to not enforce this law” because of its lawsuit against the state. “Illinois has agreed that it will not penalize employers simply for participating in the program, at least until the lawsuit is finished.”

The notice asks people who have been asked to comply with the law to “please contact DHS immediately.” The worry, one supposes, is that a rogue state employee might ask an Illinois business to comply with the state’s laws.

Fascinating. Whatever’s happening here makes the smell of fish downright pleasant.

You’ll be able to learn why Illinois might not want its employers using E-Verify in my forthcoming study, “Electronic Employment Eligibility Verification: Franz Kafka’s Solution to Illegal Immigration.”

More Refutation of Protectionist Doctrine

The backlash against trade in the 110th Congress is fueled by three emotive but purely fictional assertions: (1) trade agreements have caused the trade deficit to rise, and an increasing trade deficit means we are losing at trade; (2) rising imports explain the decline in the U.S. manufacturing sector, including the loss of jobs; (3) the United States is losing at trade because the Bush administration doesn’t enforce our trade agreements and instead turns a blind eye toward the rampant cheating of our trade partners.

The Center for Trade Policy Studies  has produced numerous refutations of the first two fallacies (1, 2, 3, 4, 5, ), while a ruling yesterday from a World Trade Organization dispute panel adds to the growing list of refutations of the third. 

Mostly affirming the complaints lodged by the United States, Europe, and Canada in 2006, the panel ruled that Chinese tariffs on imported auto parts violate China’s WTO obligations.

China must now act to bring its practices into conformity with its WTO commitments (i.e., change the offending laws or regulations) or it can challenge the ruling before the WTO’s Appellate Body.  Yesterday’s decision constitutes the first ever WTO panel ruling against Chinese trade practices, but it doesn’t represent the first U.S. enforcement action taken against China.

The Auto Parts case is the second of five formal U.S. complaints against China in the WTO.  The first case was brought in 2004 and involved a Chinese value-added tax on integrated circuits for which domestic firms could get partial rebates—putting foreign suppliers at a disadvantage.  That dispute was resolved 19 months later during the consultation phase—without need of a dispute panel—when the Chinese agreed to change the tax rule.

The third case was filed in February 2007 and concerns other Chinese tax policies that grant refunds, reductions or exemptions from taxes to domestic firms only.  A memorandum of understanding to resolve and terminate the dispute was reached 10 months later, with China agreeing to change the discriminatory nature of the law.

Two other cases—both initiated in Spring 2007—are pending.  One concerns the alleged failure of China to protect and enforce intellectual property rights and the other concerns alleged barriers facing foreign traders and distributors of copyrighted materials, like books, videos, and DVDs.  A dispute panel was recently composed for the IP case, and the distribution barriers case is still in the consultations phase.

The administration has demonstrated its commitment to enforcement, not only by bringing WTO cases, but in myriad other ways that fly under the radar.  Dialogue is always ongoing between the United States and China, and the United States and other trade partners.  Contrary to the implications of the rhetoric that trade enforcement requires a bludgeon, the most effective enforcement entails quiet diplomacy, where problems are discussed and resolved outside of the shine of the spotlight.

When the foundations of the protectionist backlash are revealed to be made of silly puddy, you’ve got to wonder how long the backlash will endure.