Topic: Trade and Immigration

Most U.S. Manufacturers Victimized by Ex-Im’s Hidden Costs

In an earlier post today, I described a reasonable methodology for estimating the hidden costs imposed on companies whose suppliers receive export subsidies from the Export-Import Bank. Ex-Im officials like to talk about how they “grow the economy” and create jobs by enticing foreign customers with low-rate financing to buy U.S. exports. As I described in that earlier post, when the cost to business of exporting is mitigated by subsidies, companies will likely export more. That may be good for them, but it’s not so good for their U.S. customers, whose foreign competition is now enjoying lower costs (courtesy of U.S. taxpayers). Delta Airlines’ complaint about subsidized Boeing sales to Air India having an adverse impact on Delta, who competes for passengers with Air India, is a fairly clear example of the problem.

As an approximation of the cost imposed on Downstream Industy A, (let’s call it the Delta Effect), I used the subsidies received by every industry whose output is used in Downstream Industy A’s production process, adjusted those subsidies by the importance of the input relative to the total of all intermediate goods inputs, and summed up the values.  I did this for every 6-digit NAICS manfuacturing code and presented tables of results in descending order from biggest victim to biggest beneficiary.  There were 236 industries – perhaps too much information, particularly for a blog post.

So for greater clarity, this table compiles the data at the broader, 3-digit NAIC industry level.  

As you can see, most aggregated 3-digit industries are victims of Ex-Im subsidies.  And most of the 6-digit industries within each broader 3-digit industry are victims, too. U.S. manufacturers of electrical equipment, appliances, furniture, food products, non-metallic metals, chemicals, computers, plastics, rubber, paper, primary metals, and many other goods should give Delta a call and get really busy during Congress’s August recess.

The Export-Import Bank and Its Victims: Which Industries Bear the Brunt

The Export-Import Bank of the United States is a government-run export credit agency, which provides access to favorable financing for the foreign customers of some U.S. companies.  For several months, Washington has been embroiled in a debate over whether to reauthorize the Bank’s charter, which will otherwise expire on September 30.  While Republican House leadership remains publicly committed to shutting down the Bank, a bipartisan group of eight senators introduced reauthorization legislation last night, setting the stage for a post-August recess showdown.

Reauthorization buffs contend that Ex-Im fills a void left by private sector lenders unwilling to provide financing for certain transactions and, by doing so, contributes importantly to U.S. export and job growth.  Rather than burdening taxpayers, the Bank generates profits for the U.S. Treasury, helps small businesses succeed abroad, encourages exports of green goods, contributes to development in sub-Saharan Africa, and helps “level the playing field” for U.S. companies competing in export markets with foreign companies benefitting from their own governments’ generous export financing programs.  Accordingly, failure to reauthorize the Bank’s charter would be akin to unilateral disarmament.

But those justifications – two rationalizations, really, and a few token appeals to liberal sensibilities intended to create the illusion of a bipartisan imperative for reauthorization – are unpersuasive or non-responsive to Ex-Im’s critics.  By effectively superseding the risk-based decision-making processes of legions of private-sector, profit-maximizing financial firms with the choices of a handful of bureaucrats using non-market benchmarks and pursuing often opaque, political objectives, Ex-Im risks taxpayer dollars.  That Ex-Im is currently self-sustaining and generating revenues is entirely beside the point and is no more reassuring than a drunk driver rationalizing that he made it home safely last night so there’s no danger in drunk driving tonight.

House Border Bill Would Treat Children Worse than Adults

After much debate, the House finally rolled out its version of a supplemental appropriations bill to deal with the surge of unaccompanied children (UAC) entering the United States.  The bill would treat Mexican and Central American UAC equally under the law - meaning they all would have fewer due process protections than many adults.  

1.       Interviews: The bill would treat Central Americans the same as how Mexican children are already treated. But Mexican children are subject to fewer due process protections than adults in two ways. First, apprehended adults are interviewed by asylum officers who are trained in country-conditions and asylum law.  Under current law, Mexican children are interviewed by Border Patrol agents who are untrained in this area.  In one case, a United Nations report found that a Border Patrol agent believed that a child who had expressed a fear of being trafficked had to be returned “because the paperwork was already filled out.”  Children are also expected to describe their fears of persecution and descriptions of traumatic and violent experiences to a gun-carrying law enforcement agent, which in many cases is an unreasonable request. In fact, a 2011 study by the Appleseed Foundation concluded that “no meaningful screening is being conducted” by Border Patrol.

2.       Appeals: Second, under current law, adult asylum seekers can appeal a determination by an asylum officer that they lack a “credible” asylum claim to an immigration judge (IJ).  The IJ can reverse the decision.  Mexican children cannot appeal the decision of a border agent – they are simply summarily removed from the United States.  This bill would treat Central American children in the same way, denying them an appeal.  The importance of these provisions was recently highlighted by the case of a Honduran girl who was accidentally deported to Mexico.  The United Nations found that border agents are requiring children to “prove they are being persecuted or trafficked” on the spot despite the fact that they are supposed to simply screen out those without any claim at all.  IJs mitigate that problem. 

DACA Did Not Cause the Surge in Unaccompanied Children

In June, 2012 the Obama Administration announced that it had authored a memo deferring the deportation of unauthorized immigrant childhood arrivals in the United States, a program known as deferred action for childhood arrivals (DACA).  The memo directed then Secretary of the Department of Homeland Security to practice prosecutorial discretion toward a small number of unauthorized immigrants who fulfilled a specific set of characteristics.  In essence, some unauthorized immigrants who had come to the United States as children were able to legally stay and work–at least temporarily. 

Did DACA Cause the UAC Surge?

Some politicians contend that DACA is primarily responsible for the surge in unaccompanied child (UAC) migrants across the border in recent years.  A recent House Appropriations Committee one-pager stated that, “The dire situation on our Southern border has been exacerbated by the President’s current immigration policies.”  Proponents of this theory argue that DACA sent a message to Central Americans that if they came as children then the U.S. government would legalize them, thus giving a large incentive for them to come in the first place.  Few facts of the unaccompanied children (UAC) surge are consistent with the theory that DACA caused the surge.

First, the surge in UAC began long before the June 15, 2012 announcement of DACA.  It is true that DACA had been discussed in late May 2012 but the surge was underway by that time.  From October 2011 through March 2012, there was a 93 percent increase in UAC apprehensions over the same period in Fiscal Year 2011.  Texas Governor Rick Perry warned President Obama about the rapid increase in UAC at the border in early May 2012 – more than a full month before DACA was announced.  In early June 2012, Mexico was detaining twice as many Central American children as in 2011.  The surge in unaccompanied children (UAC) began before DACA was announced.

Second, the children coming now are not legally able to apply for DACA.  A recipient of DACA has to have resided in the United States continuously from June 15, 2007 to June 15, 2012, a requirement that excludes the unaccompanied children coming now.   

Third, if DACA was such an incentive for UAC to come from Central America, why are so few Nicaraguan children coming?  They would benefit in the same way as unaccompanied children from El Salvdaor, Honduras, and Guatemala.  The lack of Nicaraguans points to other causes of the surge.

The timing, legal exclusion of the UAC from DACA, and lack of Nicaraguans indicate that DACA was not a primary cause of the surge.  Of the 404 UAC interviewed by the United Nations High Commissioner for Refugees since 2011, only 9 mentioned that U.S. laws influenced their decision to come to the United States.  Other American laws could have influenced the unaccompanied children to come but DACA is not the main culprit.           

Details on DACA

The DACA beneficiaries, at the time of the memo, would have to fulfill all of these requirements to have their deportations deferred:

  • Under the age of 31,
  • Arrived to the United States before reaching their 16th birthday,
  • Entered the United States without inspection or overstayed a visa prior to June 15, 2012,
  • Continuously resided in the United States from June 15, 2007 to the time of the memo,
  • Physically present in the United States on June 15, 2012, as well as at the time of requesting deferred action from United States Citizenship and Immigration Services (USCIS),
  • Been in school at the time of application, or have already graduated or obtained a certificate of completion from high school, or have obtained a general education development (GED) certificate, or are an honorably discharged veteran of the U.S. Coast Guard or the U.S. Armed Forces
  • Not been convicted of a felony, significant misdemeanor, or three or more other misdemeanors, and do not otherwise pose a threat to national security or public safety.

Beneficiaries of DACA were also allowed to apply for employment authorization according to the Code of Federal Regulations.  There is a debate amongst legal scholars over whether the administration’s grant of deferred action was legal.  Those who argue that DACA was illegal contend that the President overstepped his constitutional authority to defer the deportation of some unauthorized immigrants.  Those who argue that DACA was legal point to the general power of the Secretary of the Department of Homeland Security to defer enforcement action.  They argue that the Supreme Court has ruled that decisions to initiate or terminate enforcement proceedings fall within the authority of the Executive – an enforcement power used since the early 1970s.  Here is more of their argument.  This disagreement has not been settled.     

By the end of September, 2013, 580,000 requests for DACA were accepted by the U.S. government and 514,800, or 89 percent, were approved.  Seventy-six percent of the requests came from Mexicans.  Twenty-nine percent of the requests were filed from California, 16 percent from Texas, and 6 percent from Illinois.

Legalization or Amnesty for Unlawful Immigrants – An American Tradition

Legalization of unlawful immigrants, commonly referred to as amnesty, has been hyperbolically described as an affront to U.S. national sovereignty, the rule of law, and even our Constitutional Republic.  However, the U.S. government has a long history of successfully legalizing violators of immigration laws.

In 1929, the year the Immigration Act of 1924 went in effect, Congress passed an amnesty to allow for the voluntary registration of all unlawful immigrants who wished to legalize their unrecorded entry.  Beginning a familiar pattern, Congress combined this 1929 amnesty with severe legal penalties on unauthorized immigrants who entered the United States without inspection after the amnesty was complete.[i]

As part of the reforms of the Bracero Program’s guest worker visa in the late 1940s and early 1950s, many unauthorized Mexican migrants were legalized and granted a visa on the spot.  According to Professor Kitty Calavita, 55,000 unlawful Mexican immigrants were legalized as Bracero workers in 1947 through a process derogatively referred to as “drying out” unlawful migrant workers.[ii] Under the auspices of an increase in immigration enforcement and the expansion of the Bracero guest worker visa, other unlawful Mexican migrants were driven down to the Mexican border and made to take one step across the border and immediately reenter as a legal Bracero worker, a process referred to as “a walk around statute.”[iii]

In 1958, the cutoff date for the 1929 amnesty was advanced to June 28, 1940 – meaning that unlawful immigrants who entered before that later date could legalize.  The Immigration Act of 1965 again advanced the cut off date for the 1929 amnesty to June 30, 1948.[iv]

Year

 Legalizations of Unauthorized Immigrants

1959

4,321

1960

4,773

1961

5,037

1962

3,399

1963

2,680

1964

2,585

1965

2,064

1966

2,595

1967

3,195

1968

2,148

1969

1,565

1970

1,520

1971

1,190

1972

1,653

1973

1,254

1974

875

1975

556

1976

796

1977

546

1978

423

1979

262

1980

428

1981

241

Total

44,106

Source: Vernon M. Briggs Jr., Immigration Policy and the American Labor Force, The Johns Hopkins University Press, Baltimore, 1984, p. 66.

The Immigration Reform and Control (IRCA) Act in 1986 – the so-called Reagan Amnesty – legalized 2.7 million unauthorized immigrants who had been residing in the United States since 1982.  After IRCA, the Section 245(i) legalization passed in 1994 and was then extended again in 1997.  The 1997 Nicaraguan Adjustment and Central American Relief (NACARA) Act also legalized close to one million unlawful immigrants from Central America.  The Haitian Refugee Immigration Fairness (HRIFA) Act legalized around 125,000 unauthorized immigrants from Haiti in 1998.  The Legal Immigration Family Equity (LIFE) Act of 2000 reinstated the rolling 245(i) legalization provision. 

So long as there are immigration restrictions on the movement of peaceful and healthy people, and Americans want to continue to hire and sell products to immigrants, some will always come whether the immigration laws allow it or not.  To address the unlawful immigrant population, Congress periodically passes a legalization or amnesty bill, but the number of unlawful immigrants rises again because lawful immigration has not been sufficiently liberalized – despite vast increases in enforcement.

Past amnesties and legalizations of unauthorized immigrants didn’t destroy U.S. national sovereignty (the United States is still a sovereign country), the rule of law (in tatters for many reasons, including efforts to enforce our arbitrary and capricious immigration laws), or our Constitutional Republic.  It’s hard to see why another one passed by Congress and signed by the President would produce those grave harms.


[i] Vernon M. Briggs Jr., Immigration Policy and the American Labor Force, The Johns Hopkins University Press, Baltimore, 1984, p. 47.

[ii] Deborah Cohen, Braceros: Migrant Citizens and Transnational Subject in the Postwar United States and Mexico, University of North Carolina Press, 2011, p. 209, Kitty Calavita, Inside the State: The Bracero Program, Immigration, and the INS, Quid Pro Books, New Orleans, Louisiana, 2010, pp. 25-26, 34.

[iii] Kitty Calavita, Inside the State: The Bracero Program, Immigration, and the INS, Quid Pro Books, New Orleans, Louisiana, 2010, p. 43.

[iv] Vernon M. Briggs Jr., Immigration Policy and the American Labor Force, The Johns Hopkins University Press, Baltimore, 1984, p. 66.

A Needlessly Confrontational Trade Policy Pitch

Thanks to an ad campaign by a U.S. agriculture group, Washington, DC, commuters—especially those who work on Capitol Hill—have been learning about Japan and the Trans-Pacific Partnership.  The agribusiness lobby group called “Keep Food Affordable” has covered one DC metro station with ads complaining about Japan’s effort to maintain some of its tariffs in the TPP negotiations. 

No Special Treatment for Japan

It’s rare to see public advertising about trade policy.  This is true even in the unique DC market where commuters encounter pitches for other strange things like fighter jets, tax reform, and museums dedicated to remembering genocide. 

When trade policy does make it into advertising space, it’s almost always bad.  Election campaigns and advocacy groups use emotionally charged language to push protectionist policies: ‘China is poisoning us,’ ‘international organizations are stealing our country,’ ‘small town life is fading,’ ‘baby seals are dying,’ etc. 

House Bill Eviscerates Asylum System, Deports Child Trafficking Victims

President Obama recently asked Congress for authority to treat Central American children in the same way the government treats Mexican children. The Asylum Reform and Border Protection Act (H.R. 5137), introduced today by Reps. Chaffetz (R-UT) and Goodlatte (R-VA), Chairman of the House Judiciary Committee, goes beyond the President’s request. The bill eliminates any sort of review for juvenile victims of trafficking and the requirement that an immediate return of a child be voluntary.

Under current law, Mexican children may be immediately removed if they are:

  1. Not severe victims of trafficking,
  2. Not asylum seekers, or
  3. If they accept voluntary departure, a procedure by which the child admits that he or she has no right to be here and leaves in lieu of formal removal proceedings.

Under the proposed H.R. 5137, all children caught at the border would be subject to expedited removal, a process under which they can be removed without a hearing before a judge if they have no credible fear of persecution (8 USC 1225(b)). This process triggers an automatic 5-year bar on legal reentry (8 USC 1182(a)(9)(A)(i)). Any child caught at the border may be detained until his asylum application is adjudicated. It extends the current arbitrary one year deadline on asylum applications for adults to children.

Unaccompanied children could be detained or released under the bill while waiting for final approval of their asylum application, but the bill redefines “unaccompanied” to mean that once a child has been released to a parent, they no longer qualify for release, which means they would head right back into detention.

Worse, H.R. 5137 raises the initial standard of review for all asylum claims for children. Rather than going before a judge simply by asserting a fear, they would actually have to convince an asylum officer that their claim was “more probable than not” to be factual in order to even to go before a judge. Raising the standard that high for an initial review would bar many legitimate asylum seekers.

Even worse, H.R. 5137 allows children apprehended at the border to be removed without any asylum screening to a “safe third party country” (i.e. Mexico) without an agreement from that country, as is required by current law. If H.R. 5137 becomes law, the U.S. government would immediately start dumping Honduran, El Salvadoran, and Guatemalan children into Mexico.

The crisis along the Southwest border has prompted many Americans to want all unlawful immigrants and children removed. But this bill goes far beyond that desire. H.R. 5137 would remove many foreigners who have legal rights under our current immigration laws. H.R. 5137 would be a disastrous blow to America’s asylum system and send numerous children with legitimate asylum claims back into danger.