Topic: Trade and Immigration

Pure Protectionism

Several years ago, I appeared on the radio show of the late and much-missed David Brudnoy to discuss deregulation of taxicabs. I advocated a free market and an end to licensing and medallions. We got a call from a spokesman for the taxicab industry, who was outraged. Public safety! he exclaimed. “Without licensing, you could have some crazy person driving a cab and have an accident and you could have a mudda an’ a dotta killed! Do you want to be responsible for that?!”

I remembered that call when I saw the letter in the Washington Post from Michael C. Alin, executive director of the American Society of Interior Designers. Responding to George Will’s column on the absurdity of licensing for interior decorators, Alin writes:

In one of the worst hotel fires in U.S. history, 85 lives were lost and more than 700 people were injured at the MGM Grand Hotel and Casino in Las Vegas in November 1980, partly because some of the materials in the interior finish and furnishing fueled a rapid spreading of the fire. If furniture is placed in such a manner that it impedes egress during an emergency, people will die. Should a nonqualified, non-educated person select the materials for the interior of a hospital, school or high-rise building? 

Will had blithely and insensitively mocked the idea of criminal penalties for impersonating an interior designer:

In Las Vegas, where almost nothing is illegal, it is illegal — unless you are licensed, or employed by someone licensed — to move, in the role of an interior designer, any piece of furniture, such as an armoire, that is more than 69 inches tall. A Nevada bureaucrat says that “placement of furniture” is an aspect of “space planning” and therefore is regulated — restricted to a “registered interior designer.”

Placing furniture without a license? Heaven forfend.

I hope that Will is suitably chastened now that he understands the real risks of letting just anyone pick out wallpaper and position furniture.

(Ways and) Means to an End

The House Ways and Means Committee released their trade policy vision on Tuesday, and it should give cause for concern to free-traders who thought a compromise could be reached between the Democratic majority and the administration on how to advance the trade agenda. There are few details on how exactly trade agreements could be made acceptable to Democrats in the immediate future, and plenty of demands that could give potential trade partners cause for alarm.

The administration must give 90 days’ advance notice to Congress when seeking its approval for trade agreements, under the terms of the trade promotion authority delegated by Congress to the President. Because that authority expires on July 1, there are only two working days left to iron out differences on completed trade agreements (those with Peru, Colombia, and Panama, and possibly the still-under-frantic-negotiation agreement with South Korea). The Democrats’ one-pager was lamentably short on details about how to make these agreements acceptable to them.

In the longer-term, if the new majority’s trade strategy is indicative of its overall approach to trade policy (and we have every reason to believe that it is) then negotiated trade liberalization looks to be over for the next two years at least. Unless, of course, the secret 15-page proposal (mentioned in this NY Times piece) presented to the administration contains more of substance, and less of the deal-breaking demands, than what was released to the public.

The details we do have from the one-pager, however, do not paint a pretty picture. The Democrats’ plan proposes new emphasis on labour and environmental standards (including some standards to which, some critics point out, the United States is not a party), non-tariff barriers, calls for immediate action (italics in original) on currency manipulation in China and Japan, and more help for workers displaced by trade. Organized labor has welcomed it, of course, although–bizarrely–so have some Republican members of the committee, including the ranking Republican, Jim McCrery (R-LA). Steven Pearlstein in an article in yesterdays Washington Post, called some of the demands “political poison pills.”

Previous Cato research on some of these topics can be viewed here, and my colleague Dan Ikenson gave an interview on BBC on Tuesday night on the Dems’ proposal: view here.

Prosperity Creates More Leisure, But Is “Unfair” to the Rich

An article at Slate.com looks at data showing a big increase in leisure time, especially among those with lower incomes:

In 1965, the average man spent 42 hours a week working at the office or the factory; throw in coffee breaks, lunch breaks, and commuting time, and you’re up to 51 hours. Today, instead of spending 42 and 51 hours, he spends 36 and 40. What’s he doing with all that extra time? He spends a little on shopping, a little on housework, and a lot on watching TV, reading the newspaper, going to parties, relaxing, going to bars, playing golf, surfing the Web, visiting friends, and having sex. Overall, depending on exactly what you count, he’s got an extra six to eight hours a week of leisure—call it the equivalent of nine extra weeks of vacation per year. For women, time spent on the job is up from 17 hours a week to 24. With breaks and commuting thrown in, it’s up from 20 hours to 26. But time spent on household chores is down from 35 hours a week to 22, for a net leisure gain of four to six hours. Call it five extra vacation weeks.

And because those with lower incomes have disproportionately gained from this trend, the author mockingly asks whether they should be forced - as part of the campaign to reduce inequality - to donate unpaid labor to the “less fortunate” with more money but less free time:

…a certain class of pundits and politicians are quick to see any increase in income inequality as a problem that needs fixing—usually through some form of redistributive taxation. Applying the same philosophy to leisure, you could conclude that something must be done to reverse the trends of the past 40 years—say, by rounding up all those folks with extra time on their hands and putting them to (unpaid) work in the kitchens of their “less fortunate” neighbors. If you think it’s OK to redistribute income but repellent to redistribute leisure, you might want to ask yourself what—if anything—is the fundamental difference.

Lies, Damn Lies, and Statistics

According to statistics, the average French worker has more productivity than the average American worker. But as George Mason University’s Don Boudreaux notes, averages often are misleading. His recent Christian Science Monitor article explains that the average worker in some nations is more productive only because people with fewer skills do not have jobs and thus are not workers — and that’s hardly a sign of a healthy economy:

[W]hat would happen to average worker productivity if Uncle Sam were to impose a minimum wage of $500 per hour? The correct answer is: “The productivity of the average worker would skyrocket!” This achievement, however, would be no cause for celebration, for this higher productivity would result chiefly from the firing of all workers incapable of producing at least $500 worth of output per hour. Measured productivity in America would jump impressively even as the U.S. economy tanked and most workers were cast into lasting unemployment.

…For example, if teenagers, immigrants, and other lower-skilled workers start entering the labor force in larger numbers, they will lower the average wage rate because lower-skilled workers generally are paid lower wages than those paid to higher-skilled workers. This fall in the average wage rate, however, does not signal that workers’ fortunes are declining. In fact, in this case it is evidence of economic health: The economy is sufficiently flexible to provide jobs to workers who haven’t yet acquired valuable skills. A less-flexible economy, such as France’s, which makes it difficult for lower-skilled workers to find jobs, will not “suffer” any such fall in its average wage rate. But that fact, surely, is small comfort to the many poor people left unemployed.

An Extra $15 Billion for Farm Programs

Further to David’s post yesterday, some telling details about the Senate Budget Committee’s ideas for “fiscally responsible” farm policy. Starting on page 54 of this document, section 306 the “Deficit-Neutral Reserve Fund for the Farm Bill” (which is a cute name – what chances do you give of this staying a “reserve fund”?) states that:

The Chairman of the Senate Committee on the Budget may revise the allocations, aggregates, and other appropriate levels and limits in this resolution for a bill, joint resolution, amendment, motion, or conference report that- 

  1. reauthorizes the Food Security and Rural Investment Act of 2002;
  2. strengthens our agriculture and rural economies;  
  3. provides agriculture-related tax relief; 
  4. improves our environment by reducing our Nation’s dependence on foreign sources of energy through expanded production and use of alternative fuels; or 
  5. combines any of the purposes provided in paragraphs (1) through (4); 

by the amounts provided in that legislation for those purposes up to $15,000,000,000 over the total of fiscal years 2007 through 2012, provided that such legislation would not increase the deficit over the total of the period of fiscal years 2007 through 2012.

Farm lobby groups were relatively happy with the 2002 Farm Bill, and would be still were it not for the inconvenient fact that market prices of some commodities are so high, and projected to remain high, that government spending on price-linked subsidies will probably be relatively low over the next few years (falling from about $15 billion annually to about $8 billion). Apparently, high market prices are not sufficient to please some farm groups, hence the extra $15 billion of your money that the Senate has seen fit to allocate to “any of the purposes provided in paragraphs (1) through (4).”

On today’s agenda, a group of congressmen are introducing a bill regarding the reauthorization of the farm bill. From the press release (via Ken Cook):

The bill reforms the Farm Bill to make a major new investment in the development of renewable energy on American farms, promote resource conservation, provide consumers with healthier food choices, and boost farm profitability. The Healthy Farms, Foods, and Fuels Act of 2007 also includes provisions to reduce greenhouse gas emissions on farms and fight global warming, and to expand programs to bring healthier foods to school cafeterias.

That’s quite a wish list.

Cato’s Center for Trade Policy Studies is on the case, though. Stay tuned for our alternative ideas for the farm policy, released shortly.

The Good News behind Today’s Trade Deficit Report

America’s broadest trade account reached another record deficit in 2006, according to a report this morning from the U.S. Commerce Department. The U.S. current account deficit reached $857 billion last year, which will predictably unleash a lot of wailing and gnashing of teeth in Washington today about the alleged failure of U.S. trade policy and the menace the deficit poses to U.S. economic growth.

The deficit doomsayers are wrong yet again. Far from being a sign of failure, today’s report contains a lot of good news if you care about the freedom of Americans to engage in international commerce. U.S. exports of goods and services last year were up by 12.7 percent from 2005, and imports grew by 10.5 percent, stoked by strong demand from American consumers and producers alike. Driving the record deficit last year were continued inflows of foreign capital, including a 67 percent jump in foreign direct investment. Growing levels of trade and foreign investment have boosted U.S. growth, job creation, and rising real wages.

As I have argued for a long time now, the trade deficit does not mean what our politicians and cable commentators keep telling us it means. For example, in a Free Trade Bulletin of mine published this week, I found no evidence that rising trade deficits are associated with slower economic growth. In fact, more robust economic growth typically translates into a rising current account deficit. 

If the expanding current account deficit is a drag on growth, somebody forgot to tell the U.S. economy.

Dice-K Takes American Job

Russell Roberts of George Mason University writes about Japan, China, and the trade deficit scare in the Wall Street Journal. Along the way he notes:

The story of the baseball off-season is the Red Sox spending $100 million to bring Daisuke Matsuzaka from Japan to the United States. Dice-K, as he’s known, is the ultimate import. He takes away a job from an American pitcher.

Russ is mocking the protectionist argument, of course. But he could have drilled in on this point more than he did. We often hear that immigrants “take American jobs.” But really, when America welcomes software engineers from India or magazine editors from England or the laborers who built my house from El Salvador, they don’t necessarily take anybody’s job. An expanding economy–expanding partly because of the immigrants–may well need more engineers, editors, or laborers than it would have needed in the absence of immigration.

But Dice-K actually is taking someone’s job. He’s going to pitch in the major leagues. There’s a fixed number of major league teams, and pretty much a fixed number of pitchers on each team. If the Red Sox hire Dice-K, they’re going to fire or not hire some other pitcher. Probably some good ol’ boy from the American South, whose next best alternative is, yes, being a greeter at Wal-mart. Maybe even one of my Kentucky relatives. Hey, maybe Pat Buchanan’s onto something here…