Topic: Trade and Immigration

Should We Compensate the Losers from Free Trade?

By
Simon Lester

Writing at Foreign Policy, economist Daniel Altman does a good job explaining the benefits of free trade:

basic economics teaches that two people who trade with each other always end up better off. Why else would they trade in the first place? … the idea is that there are gains from trade to both sides whenever a transaction occurs. Realizing those gains by buying and selling goods, services, assets, and labor is one of the keys to economic growth.

However, he then expresses some concerns with the impact of free trade.   He says it does not affect everyone equally:

Though two countries that trade with each other will also achieve gains from trade, their people won’t necessarily share those gains equally. Indeed, both countries will be better off overall, but inside each country there will be winners and losers

In his view, we should follow a policy of free trade, and, in fact, we could do so if only we would compensate the losers:

But free trade needn’t be such a divisive issue. At the national level, the benefits from free trade always outweigh the losses; this has to be true, since each new transaction creates its own gains from trade. Put another way, a country that opens its markets is always richer as whole. And so here’s the genius part: It should be possible for the winners to compensate the losers so that everyone is better off, or at least no worse off than they were before. … [This] is an essential part of the process of opening markets. Done right, it practically guarantees that everyone in a country can and will support free trade.

We already do compensate the losers, of course, but he says we don’t compensate them enough:

Sure, there are programs such as Trade Adjustment Assistance (TAA) in the United States and the Globalization Adjustment Fund in the European Union. But they’re tiny and relatively ineffective.

He proposes the following:

One idea would be to identify the prospective winners of a new trade agreement and ask them to contribute lump sums to a fund that would compensate the losers. The trade agreement would go forward much as buyouts do in the stock market; if enough of the winners signed up and contributed, the rest of them would be compelled to pay, perhaps on their annual tax bills. Then the fund – likely to hold a lot more than $1 billion for any major agreement – would be divvied up between the losers.

I appreciate his efforts to get the public on board with free trade. It’s always nice to find allies in this fight!  But I have doubts that his approach is a good one.  (I’m going to put aside any general issues related to compensating people who have lost jobs or otherwise suffered from a bad economy.  I’m not really qualified to weigh in on this.  Let me just focus instead on the trade related issues.)

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Topics: 
International Economics and Development, Trade and Immigration

Migration Opportunities for Lower-Skilled Workers

By
Alex Nowrasteh

Today President Obama is meeting with immigration reform activists, labor unions, and business leaders to discuss immigration reform. The House Judiciary Committee is also having a hearing about opportunities for legal immigration and enforcement of existing laws. Opening the House hearing, Representative Bob Goodlatte (R-VA) said that any immigration reform “must prevent unauthorized immigration into the future.”

So far President Obama and the Senate blueprint for immigration reform have either not mentioned lower-skilled workers outside of agriculture and dairy or propose increasing the rules and regulations that currently make American guest worker visas unworkable. The 2007 immigration reform effort was stopped cold in the Senate when its guest worker provision was gutted because of union pressure—with help from then senator Barack Obama (D-IL) and then senator Jim DeMint (R-SC).

Unions and immigration restrictionists came together in 2007 to stop reform. If they cannot stop it again, they can certainly eviscerate much of the long term gains of a freer international labor market.

In a video released today, I discuss how immigration reform could severely reduce immigration problems going forward, including unauthorized immigration.  My three points in the video are:

  1. Increasing lawful migration opportunities for lower-skilled workers will funnel potential unauthorized immigrants into the legal market.
  2. Welcoming highly-skilled immigrants regardless of where they were educated jumpstarts innovation, entrepreneurship, and allows for firms to expand production in the United States while also increasing employment opportunities for native-born Americans.
  3. Pursuing border and immigration enforcement without a lower-skilled guest worker visa program is a waste of resources. The economic allure to immigrants of coming here is so great that many of them will knowingly and intentionally defy America’s international labor market regulations immigration laws if they are too restrictive. A legal avenue for lower-skilled workers to come to the United States in sufficient numbers to satisfy economic demand and eliminate the supply of unauthorized immigrants is essential.

Legalizing unauthorized immigration will be good for the United States and good for legalized workers. However, without a guest worker visa program going forward this reform will just be an improvement on President Reagan’s 1986 law, but with highly-skilled worker visas.

Immigration Reform: Three Vital Components (Alex Nowrasteh)
Topics: 
Trade and Immigration

WaPo: Let’s Have a National Identity System

By
Jim Harper

There can be no denying the link between the E-Verify system prominent in discussions of immigration reform and the policy of having a national identification system. The Washington Post editorialized about it this past weekend, saying “a universal national identity card” must be part of “any sensible overhaul of the nation’s immigration system.”

I’ve written about it many times, as I certainly will in the future. Today, though, I’ll commend to you a well-written piece by David Bier on the Competitive Enterprise Institute’s “Open Market” blog. In “The New National Identification System Is Coming,” Bier writes:

“Maybe we should just brand all the babies.” With this joke, Ronald Reagan swatted down a national identification card — or an enhanced Social Security card — proposed by his attorney general in 1981. For more than three decades since, attempts to implement the proposal have all met with failure, but now national ID is back, and it’s worse than ever.

Read the whole thing.

The irony is that appropriate immigration reforms—those that align the law with our country’s need for immigrant workers—could dispense entirely with “internal enforcement,” national employment surveillance, and deputization of businesses as immigration agents.

Topics: 
Telecom, Internet & Information Policy, Trade and Immigration

And Congressmen with Consumers as Constituents Outnumber Both

By
Sallie James

It seems that talks about a possible transatlantic trade deal between the United States and the EU are ongoing. Speaking at Davos, soon-to-be-ex U.S. Trade Representative Ron Kirk told reporters that the United States was keen to lower trade barriers on goods and services flowing between the two economies, but wants to make sure that the political ducks are in a row first. One hurdle? Famers. Apparently he wants to make sure that U.S. farmers are comfortable with the deal before proceeding, as they have the power to block any deal once it comes before Congress. From the New York Times on Sunday:

But Mr. Kirk noted that members of Congress with farmers as constituents far outnumbered those whose districts included big companies like Boeing or Apple that would benefit from a trade deal. “Agriculture tends to be a challenging issue,” he said.

Ugh. Again with the implication that the benefits of trade come from exports, and flow to big corporations. As far as the congressional maths is concerned, Mr Kirk fails to recognize that members of Congress with consumers as constituents– that is, all of them– far outnumber those whose districts include either “big companies like Boeing or Apple” or farmers (who may also see higher export sales, in any case). Consumers have long been the silent, long-suffering minority when it comes to political support for free trade, but it would be nice if we had a trade representiative willing to make their case. Perhaps Mr. Kirk’s successor will be more bold.

Topics: 
International Economics and Development, Trade and Immigration

The Good and Bad of the Immigration Reform Blueprint

By
Alex Nowrasteh

Today, the so-called Gang of Eight senators revealed a blueprint for an immigration reform bill. Details in the actual legislation will matter a great deal but these are initial impressions based on the blueprint. The good and the bad.

Good:

  • Earned legalization for non-criminal unauthorized immigrants. After paying fines, back taxes, undergoing a criminal background check, and other firm penalties, unauthorized immigrants will be able to stay in the United States and eventually earn a green card. This will increase their wages over several years much faster than if they remained unauthorized. 
  • DREAMers will not face the same penalties as unauthorized immigrants who intentionally broke U.S. immigration laws, which is a positive step.
  • Legalization for unauthorized immigrant workers in the agricultural industry will be fast-tracked. This is especially important because the majority of farm workers in most states are unauthorized immigrants.
  • Removing some regulatory barriers and increasing quotas for highly skilled immigrants. This will likely include an increase in the number of employment based green cards and removing the per-country quotas that produce wait times for Indian, Chinese, Mexican, and Filipino workers. Currently, numerous firms and immigrants are dissuaded from even trying to obtain employment based green cards because of the enormous wait times.

Bad:

  • Increases the amount of resources spent on border security. The size of the border patrol is double of what it was in 2004. The number of border patrol agents is seven times greater than what it was in the 1980s with about nine times as many on the southern border. More technology and aerial drones on the border will be wasteful and not produce results.
  • Strong employment verification system like E-Verify. As I wrote here, here, and here, E-Verify is an intrusive big government workplace identification system that does not even root out unauthorized immigrants. In Arizona, which has had mandatory E-Verify since 2008, many unauthorized immigrants have moved deeper into the black market, some industries fire numerous unauthorized workers but don’t hire natives to fill the spots, and the business formation rate dropped because the penalties for intentionally or knowingly hiring unauthorized workers are so draconian.
  • Increases regulations for guest worker visas. Current guest worker visas for agricultural workers are so overregulated that they are barely used. Adding more regulations will only make the visas more unusable and incentivize American farmers and employers to hire unauthorized workers.

A viable guest worker program will increase economic growth in the United States. Guest worker visas are not as good as green cards for lower-skilled workers, but they are the only viable option at this moment. The devil is in the details but this blueprint does not provide for enough future low-skilled immigration.     

Topics: 
General, Trade and Immigration

“If Poor People Get Richer, They Won’t Have Anything to Eat”

By
K. William Watson

The nonsensical sentiment expressed in this post’s title seems to be the guiding belief among people in the United States and United Kingdom currently concerned that eating imported quinoa is harmful to the Bolivian farmers who grow it.

For the uninitiated, quinoa is a grain-like plant that grows only in the Andes Mountains and is possibly the most nutritious food on the planet. In recent years, health food enthusiasts in the United States and Europe have developed an affinity for the exotic import. The result has been a sharp rise in the food’s global price and a concurrent increase in production in Bolivia and Peru.

If you’re like me, you probably think this is a terrific outcome for the Bolivians, who can now sell their crop for three times what they could just five years ago. Major media outlets disagree. The New York Times ran a piece titled “Quinoa’s Global Success Creates Quandary at Home” that warns, “The surge has helped raise farmers’ incomes here in one of the hemisphere’s poorest countries. But there has been a notable trade-off: Fewer Bolivians can now afford it, hastening their embrace of cheaper, processed foods and raising fears of malnutrition in a country that has long struggled with it.”

The UK Guardian ran an article last week airing similar concerns and also published a commentary titled, “Can Vegans Stomach the Unpalatable Truth about Quinoa?” The commentary’s author laments that “the quinoa trade is yet another troubling example of a damaging north-south exchange, with well-intentioned health and ethics-led consumers here unwittingly driving poverty there.”

This is all par for the course in the interminable fair-trade, ethical-consumption conundrum in which the desire among affluent American consumers for things is pitted against their concern that production, commerce, and consumption breed injustice. While part of me finds this hand-wringing amusing, I can’t help but worry about the bigotry implied in the notion that poor foreigners will starve if they are allowed to sell food for money. 

I came across a blog post recently by Stefan Jeremiah and Michael Wilcox, two photographers currently in Bolivia making a documentary. They do a really great job of putting the quinoa controversy in its place. After National Public Radio ran a story in November worrying about overpriced food for poor Bolivians and considering the possibility of growing quinoa in the United States, Jeremiah and Wilcox wrote this in response:

Read the rest of this post »

Topics: 
International Economics and Development, Trade and Immigration

It’s Cowboys vs. Packers in the Game of Politics, and the Price of Beef Is at Stake

By
K. William Watson

An effort is underway at the Department of Agriculture to reform the federal government’s mandatory country-of-origin labeling rules for beef.  The current scheme was successfully challenged by Canada and Mexico as a violation of WTO obligations prohibiting protectionist regulatory discrimination.  If the United States does not bring its law into compliance, Mexico and Canada will have the option of raising tariffs on U.S. goods in retaliation.

The supposed purpose of mandatory origin labels is to improve food safety by providing consumers with information.  How does the country of origin of the cattle impact food safety?  I surely do not know.  If consumers want this information, why is a law needed to compel businesses to provide it?  I don’t know that either.

The actual purpose of the law is to prevent Canadian cattle raisers from competing with American cattle raisers.  The labeling scheme accomplishes this not by informing consumers that their beef is made from cattle that ate grass north of the 49th parallel, but by imposing on downstream processors the expense of keeping track of the cattle’s historical whereabouts.  The meat packers can avoid this expense by purchasing only purely U.S. origin cattle.    The price of American cattle goes up accordingly.

The extent of any reforms made this year will tell us how much the WTO ruling affected the balance of political power within the cow-to-hamburger value chain.  The law’s existence is evidence that cattle raisers currently have more influence in Washington than meat packers, but the WTO ruling has already made a difference simply by prompting the initiation of a reform effort.  The possibility of retaliation by Canada and Mexico spreads the negative consequences of the law to other politically relevant U.S. industries with a stake in North American trade.  These industries will not sit idly by while their own businesses suffer in the name of expensive beef.  

Let the lobbying begin!

Topics: 
Government and Politics, Trade and Immigration

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