Topic: Trade and Immigration

Mexican Immigration Policy Lowers the Cost of Central American Migration to the US

One persistent American complaint about the Mexican government’s opposition to immigration laws like Arizona’s SB-1070 is that Mexico’s immigration policy is far more restrictive than that of the United States or anything proposed in Arizona. In 2010, Representative Ted Poe (R-TX) articulately pointed out the Mexican government’s blatant hypocrisy. Brutal Mexican immigration laws were not only bad policy for Mexico but exposed an absurd level of hypocrisy.

After Representative Poe’s comments, the Mexican government passed a Migratory Act in 2011 that went into effect on November 1, 2012. This law replaced the General Law of Population that created the oppressive Mexican immigration laws Rep. Poe and others rightly critiqued. The Migratory Act made a number of significant changes:

  • Guarantees the equal treatment of migrants and Mexican nationals under Mexican law, entitling them to due process, 
  • Establishes “family unity and the best interests of children and adolescents as the principal criteria for the admission and stay of foreigners for temporary or permanent Mexican residency, alongside labor and humanitarian causes,” 
  • Establishes offices for protection of migrants’ human rights and the investigation of crimes purportedly committed against migrants, including those committed by immigration officials,
  • Simplifies entrance and residence requirements,
  • Establishes a point system for those who apply for residence,
  • Creates a 3 day regional visitors visa for people from neighboring countries, 
  • Streamlines the visa application process.

Other legal changes to Mexican laws in 2008 reduced the punishment for illegal entry from up to ten years in prison to a maximum fine of 5000 pesos. The Mexican government also introduced temporary visas, valid for up to a year, for agricultural laborers from Guatemala and Belize working in Mexico’s southern states. In 2010, undocumented migrants were guaranteed the right to report human rights violations and receive medical treatment without prosecution.

Mexican Immigration Laws, Central American Free-Movement Zones, and the Increase in Central American Immigration

One unintended consequence of Mexico’s more liberalized immigration laws, partly in response to legitimate American criticism, is that now the migration of people from Central America to the United States through Mexico is much cheaper than it used to be. The biggest hurdle for Central American migrants used to be the militarized Southern Mexican border and the abuse by corrupt police, which the Migratory Act of 2011 mitigates.

Mexico isn’t the only country that changed its immigration and border control policies in recent years. In June 2006, El Salvador, Honduras, Guatemala, and Nicaragua signed the Central America-4 (CA-4) Border Control Agreement that created a common passport and obliterated border controls and movement restrictions between those four nations. The removal of political barriers to movement has decreased the costs of migrating northward toward the United States.

Liberalized Mexican and Central American immigration laws and border controls likely play a role in lowering the cost of migrating to the United States. Ironically, American complaints that partly spurred Mexican immigration policy changes are likely a contributing factor of the recent increase in Central American migration.

Government Officials Praising Unilateral Trade Liberalization

It doesn’t happen often, so I like to highlight it when it does.  Here is Australian trade minister Andrew Robb:

We’ve seen over the last thirty years in Australia that tariffs are down on average 2.7 per cent across the economy.  A lot of that was done unilaterally – we didn’t wait for the rest of the world and it’s one of the reasons that we’ve had uninterrupted growth for 23 years, because we are a very open economy. We’ve got to drive it further, we’ve got to be more competitive but so does the rest of the world.

U.S. Trade Policy Attacks U.S. Energy Policy, Both Hurting

First there were oil and gas export restrictions, then pipeline injunctions, now import restrictions on the steel needed for exploration and extraction.  Washington is coming from all angles to kneecap the energy boom sparked by the horizontal drilling and fracking revolutions – a once in a generation supply-side shock, which otherwise promises to attract a flood of foreign investment and serve as a wellspring of economic growth and job creation.
 
The most recent assault on our “All of the Above” energy policy comes via our fantastically self-destructive trade policy. Last Friday, in a final antidumping determination, the U.S. Department of Commerce found exporters from nine countries to be dumping “Oil Country Tubular Goods” (OCTG) – a class of steel products used primarily in oil and gas well projects – in the U.S. market. The most important foreign source of OCTG in the case was South Korea, whose exporters were found NOT to be dumping in the preliminary determination issued back in February.
 
But in the intervening months, the U.S. steel industry and the Congressional Steel Caucus impressed upon the bean counters at Commerce that the methodology they used for the Korean preliminary determination was inferior to an alterative they favored.  Without getting too into the weeds here, as tends to happen when exposing the dishonesty of the antidumping regime, suffice it to say that the revision from 0% dumping margins to 10%-16% for Korean exporters was primarily the result of Commerce changing its estimate of what the home market profit rate “should be.”
 
For the preliminary determination, that estimate was based on Korean OCTG producers’ experiences (with OCTG and other products).  For the final determination, Commerce changed its estimate to one based on a University of Iowa graduate student’s estimation of the profit experience of a single Argentine OCTG producer named Tenaris.  That’s right!  The cost of steel for U.S. oil well projects will rise – maybe 16% – because some student was messing around with @functions on Microsoft Excel.
 

Nicaraguan Unaccompanied Child Migrants - Where Are They?

U.S. policy is equally generous to unaccompanied children (UAC) from El Salvador, Guatemala, Honduras, and Nicaragua – but today’s child migrants are not coming from Nicaragua.  Explaining why Nicaraguan UAC are not part of the recent surge may help explain why so many are coming from El Salvador, Guatemala, and Honduras - the so-called Northern Triangle. 

Nicaragua has low rates of violent crime, gang membership, and fewer family connections to the United States than the Northern Triangle.  If U.S. policy was the main reason why there is a sudden surge of UAC, it should also pull UAC from Nicaragua.  This suggests that other factors like the high levels of violence and strong family connections are the main reasons why UAC from the Northern Triangle are coming and why Nicaraguan UAC are absent.        

Nicaragua has a much lower homicide rate than El Salvador, Honduras, and Guatemala.  According to the United Nations, there has been a dramatic increase in murder rates across Central America since 2006 – except in Nicaragua.    

 

Source: United Nations Office on Drugs and Crime https://www.unodc.org/gsh/en/data.htm.

Federal Follies 200 Years before Ex-Im

Anyone who thinks that Washington waste is something new should examine the history of the Bureau of Indian Affairs (BIA). This essay discusses the mismanagement, corruption, and failures of the BIA since it was created in 1824.

As early as 1828, Indian expert H. R. Schoolcraft concluded: “The derangements in the fiscal affairs of the Indian department are in the extreme. One would think that appropriations had been handled with a pitchfork … there is a screw loose in the public machinery somewhere.”

By the 1860s and 1870s, New York Times editorials were railing against the “dishonesty which pervades the whole Bureau,” and arguing that “the condition of the Indian service is simply shameful.”

In their recent book, Uncle Sam Can’t Count, Burton and Anita Folsom describe the failure of a major Indian policy even before 1824. Here is the basic story:

• Unhappy that British fur traders were out-competing American traders, Congress appropriated $50,000 in 1795 to create frontier posts stocked with American goods to trade with the Indians for furs.

• These government-run fur “factories” were supposed to earn a return, but they “were so poorly run that many Indians held them in contempt and refused to trade there.” Congress had to heavily subsidize the system to keep it operating.

• Rather than respond to the market demands of the Indians, as private traders did, the official running the government system, Thomas McKenney, tried to push products on the Indians that he thought they ought to have.

• The government set up its trading posts at substantial distances from Indians. By contrast, private fur trader John Jacob Astor had his agents build close relationships with Indians, and he made trading easy for the tribes.

• Astor instituted pay for performance, while the government paid its fur bureaucrats fixed salaries.

• Astor watched international fur markets closely and adjusted his operations and marketing accordingly. The government ignored markets, and simply dumped furs in Washington for auction.

• Thomas McKenney was embarrassed by the government’s falling market share and the huge success of Astor. So, in 1818, McKenney began lobbying Congress to ban private fur traders. When that attempt at monopolization failed, McKenney lobbied to impose large fees on private traders and to boost taxpayer subsidies for the government system.

• Despite a new fee on private traders in 1820, the government system was falling apart because of plunging sales. An official report exposed the huge inefficiencies of the government system, and Congress finally voted to end it in 1822.

Long before Solyndra and the Export-Import Bank, politicians should have learned some basic lessons about why Washington ought to stay out of business. Unfortunately, each new generation of politicians are tempted to believe that enlightened federal planners can run the economy better than businesspeople and markets. Rather than wasting hundreds of thousands of dollars as it did two centuries ago, Congress blows billions of dollars today on new versions of its fur-trading folly.

Exporting Ex-Im Bank Skepticism

One of the points supporters of the Ex-Im Bank like to make is that other countries have their own versions of the bank to help finance purchases of those countries’ exports, and the United States should not “unilaterally disarm.” Here’s the NY Times:

[M]ost governments around the world support exports in similar ways, and if the United States dismantled the bank unilaterally, as some lawmakers are advocating, American companies could lose billions of dollars in overseas orders and decide to move their operations to other countries that provide generous export financing.

It’s true that other countries provide similar export subsidies, but I see this as an opportunity, not a hurdle to getting rid of Ex-Im. Liberalization through international trade negotiations has been struggling in recent years. Getting rid of Ex-Im could give it a boost. If we could end Ex-Im, and then call on our trading partners to follow our lead, it could give trade talks an important and meaningful purpose. In these negotiations, governments often seem reluctant to give up any protectionism until others agree to do so as well. That has not served us well recently; not much liberalization has occurred. It may be time to try something new, and lead the way with a unilateral liberalization proposal, to show the world we actually believe in free trade (they have good reason to doubt this), and encourage others to move in that direction as well.

Immigration Enforcement Aids Smugglers – Unaccompanied Children Edition

The increase of human smugglers transporting unauthorized immigrants to the United States is likely a consequence of more effective border enforcement.  Although the Obama administration has de-emphasized internal immigration enforcement after 2011, his administration has ramped up enforcement along the border – focusing on increasing the legal and economic costs imposed on unlawful immigrants apprehended while trying to enter the United States.  Since border and internal enforcement are substitutes, the shift in resources and increase in penalties for unlawful crossers does not represent a decrease in total enforcement.  Matt Graham from the Bipartisan Policy Center wrote an excellent breakdown of the reprioritization of immigration enforcement, the increase in penalties, and how it has deterred unauthorized immigration.

The price of smuggling is an indication of the effectiveness of immigration enforcement along the border.  The first effect of increased enforcement is to decrease the supply of human smugglers.  As the supply of human smugglers decreases, the price that remaining human smugglers can charge increases.  Before border enforcement tightened in the early 1990s, migrants typically paid about $725 (2014 dollars).  Currently, unauthorized migrants from Central America are paying around $7500.