Topic: Trade and Immigration

If It’s Not a National ID, Then What is It?

Former IRS Commissioners Doris Meissner and James Zigler editorialize in today’s New York Times about their support for “secure, biometric Social Security cards” as an essential part of immigration law reform.

The give-away line?: “To insist on secure documents with biometric identifiers is not a call for a national ID.” They provide no logical support for this naked assertion. Because it’s false.

Strengthened “internal enforcement” of immigration law means federal surveillance and tracking of all workers. All of them. Including you.

Can We Blame the Record Trade Deficit for Global Warming, Too?

An Associated Press story today on the latest trade deficit numbers noted as an aside, “The trade gap has set new records for five consecutive years, a period when the country lost more than 3 million manufacturing jobs.” 

Thoughtful people can disagree about the long-term implications of the trade deficit, but there is no evidence that the trade deficit itself is responsible for the recent drop in manufacturing employment.  

Manufacturing employment has been on a downward trend, not because of imports, but because of soaring productivity in the sector. In fact, overall manufacturing output in the United States continues to increase. American factories can produce more with fewer workers because the remaining workers are so much more productive.  

During the 1990s, the trade gap set new records for seven years in a row (1994–2000). That was also a period of robust domestic growth in which the country added almost a quarter of a million manufacturing jobs.  

As for the most recent string of record trade deficits (2002-2006), one could also describe that period as one when: 

… the real output of American factories grew by 14 percent.    

… the country added a net 6 million new jobs.   

… the unemployment rate fell from 5.8 percent to 4.5 percent.   

… annual real GDP grew by $1.5 trillion, or 15 percent.  

… the net household wealth of Americans grew from $38.8 trillion to $55.6 trillion.  

As I’ve written recently in a Cato Free Trade Bulletin, the reality behind the trade deficit numbers is more multi-faceted than the public discussion in Washington would lead us to believe. 

Behind China’s Headline Export Numbers

China overtook the United States in the second half of 2006 to become the world’s second leading exporter of goods. That fact, contained in a new report from the World Trade Organization and trumpeted in headlines around the country this morning, is bound to further rile up skeptics of America’s growing trade with China.

Although the United States exported more goods ($1,037 billion worth) in all of 2006 than China (which exported $969 billion), figures for the second half of the year show that China has now claimed the no. 2 spot behind Germany.

For those of a mercantilist mindset, to whom trade is all about exporting more than you import and more than the other guy, this news is guaranteed to be alarming. But the real news is nothing of the sort.

First, China is bound to move up in the world rankings of trade. It represents 20 percent of the world’s population, it is surrounded by thriving, trade-oriented economies, and its increasingly open and free economy has been growing at double-digit rates for more than a decade. We should welcome the news that China is more integrated than ever in the global economy.

Second, the United States continues to be a trade and export powerhouse. U.S. exports of goods grew 14 percent between 2005 and 2006, and surpassed $1 trillion for the first time ever. When combined with the $387 billion in services Americans sold abroad last year, we remain the world’s no. 1 exporter.

Third, most of the goods that China exports are in fact designed and in large part made in other countries, including the United States. “Assembled in China” would be a more accurate label than “Made in China” for most of its exports. More than half of China’s exports are made in foreign-owned factories. The most sophisticated components in the computers and other consumer electronics exported from China are in fact made in Japan, South Korea, Taiwan, the United States, and other, more advanced economies. China has become the final link in a deepening global supply chain. (For more detail, see my 2006 study on U.S. trade with China.)

Finally, trade is about more than exports. It’s about, well, trade. We export for the purpose of getting back things of even greater value. Americans benefit at least as much from imports as we do from exports. The $2.2 trillion in goods and services we imported last year make our lives better every day.

As author P.J. O’Rourke summarized in his terrific new book, On the Wealth of Nations, “To give [Adam] Smith’s case against mercantalism in extreme concision: imports are Christmas morning; exports are January’s MasterCard bill.” 

Is Benign Neglect the Best Immigration Policy?

Writing in the Wall Street Journal, a professor from the University of California, San Diego, argues that an expanded guest worker program might be less desirable than the status quo. Given the likelihood that politicians and bureaucrats will sabotage even a good idea with needless regulation and red tape, this is a compelling argument:

…from a purely economic perspective, illegal immigration is arguably preferable to legal immigration. …the illegal route is for the moment vastly more efficient than the cumbersome legal system. Illegal immigration responds to economic signals in ways that legal immigration does not. Illegal migrants tend to arrive in larger numbers when the U.S. economy is booming and move to regions where job growth is strong. Legal immigration, in contrast, is subject to bureaucratic delays, which tend to disassociate legal inflows from U.S. labor-market conditions. The lengthy visa application process requires employers to plan their hiring far in advance. Once here, guest workers cannot easily move between jobs, limiting their benefit to the U.S. economy.

Hollywood For the Stylish

I loved this. It seems that there is a push (led by a fashion lawyer and a fashion show consultant, no less) for Washington, D.C. to get its own version of Chicago’s Magnificent Mile. According to today’s Yeas and Nays column in the Examiner (second item), a few D.C. council members are pushing to create a “Commission on Fashion Arts and Events.” It will “recognize the achievements of D.C.’s burgeoning fashion community” (really) and dedicate a section of the “city’s landscape” for fashion retail.

High-Tech Welfare for High-Tech Billionaires

Voters in a New Mexico county appear to have approved a tax increase to build the nation’s first commercial spaceport. Two other counties will also hold tax referendums before the project can proceed. British billionaire Richard Branson and his company Virgin Galactic have signed a long-term lease to use the spaceport.

But why should the taxpayers of rural New Mexico be paying for facilities for billionaire space entrepreneurs? If the spaceport is going to be profitable, then businesses could pay for it. And even if it weren’t profitable, the space business has attracted the attention of a lot of people with a sense of adventure and billions of dollars, from Branson to Microsoft cofounder Paul Allen, the seventh richest man in America.

The argument to spend tax dollars on the spaceport is very similar to the argument for tax-funded stadiums and convention centers. Proponents say it will bring jobs and tax revenues to the three rural counties. But apparently it isn’t a sure enough thing for businesses to invest their own money.

Cato scholars have argued for years against corporate welfare. The spaceport is a classic example of corporate welfare, though in this case it might better be called billionaire welfare. It will transfer money from middle-class and working people to subsidize businesses and billionaires who won’t have to invest their own money — just like the typical stadium deal, paid for by average taxpayers to benefit millionaire players and billionaire owners.

At least in this case the voters get to decide, which rarely happens with stadium subsidies. The vote pitted “political, business and education leaders” against retirees and groups representing the poor.

“I’m not opposed to the spaceport, but I think it’s a terrible idea to tax poor people to pay for something that will be used by the rich,” said Oscar Vasquez Butler, a county commissioner who represents many of the unincorporated rural colonias where the poorest New Mexicans live, often without proper roads and water and sewage systems. “They tell us the spaceport will bring jobs to our people, but it all sounds very risky. The only thing we know for sure is that people will pay more taxes.”

The USTR Pulls An All-Nighter

With only minutes before a key deadline, the Bush administration formally notified Congress last night that a deal had been reached with South Korea on a free trade agreement. The Office of the United States Trade Representative’s press release (which contains not many details and plenty of the usual mercantalist, all-exports-all-the-time rhetoric) can be viewed here.

As expected, rice was not included in the agreement. Korean negotiators had been adamant that rice, an extremely sensitive (i.e., protected) sector in Korea, was not on the table for negotiation and that a deal would be impossible if the United States insisted on pushing for access to the Korean rice market. On that basis, the Americans evidently decided to drop the rice issue.

Rice was never so much a concern, though, as beef. U.S. beef has been denied access to Korea on food safety grounds since late 2003, when BSE was found in beef originating in Canada. Although the issue was not formally part of the FTA negotiations, and thus was not resolved in the agreement itself, it has the potential to scupper it if lawmakers link their approval of the deal to resolution of the beef dispute. Sen. Max Baucus (D-MT), chair of the Senate Finance Committee, has made it clear that his support for the Korean FTA depends on a full re-opening of the Korean market to U.S. beef. (The Ranking Member of that Committee, Sen. Chuck Grassley (R.-IA), was somewhat more measured in his comments).

Similarly, Sen Debbie Stabenow (D-MI) sees that reducing Korean tariffs (albeit over a long phase-out period for trucks) on U.S. autos and a “restructuring” of the Korean auto tax structure is not enough: her press release insists that she will “do everything in [her] power to defeat this agreement and ensure that any future fast-track authority includes provisions guaranteeing that American businesses and workers can get a fair deal”. Sen. Stabenow does not say what specific measures would assuage her concerns, although one suspects that she is offended at the USTR’s refusal to specify minimum guaranteed sales targets.

In short: yes, the USTR met the deadline of concluding the deal so that it can be considered under fast-track authority. But its passage is far from secured.

More broadly, though, the statements of these lawmakers, especially if it is a taste of what is to come, should worry free-traders everywhere. While bilateral and regional trade agreements are, at best, only the third most optimal way of liberalising trade, the deal between South Korea and the United States was one of the more worthwhile agreements of this administration. And if Congress is going to base support for agreements on its ability to manage trade in certain sectors, then the trade agenda is in serious trouble.