Topic: Trade and Immigration

Big Candy’s Greed

By
Chris Edwards

That’s the title of a quarter-page advertisement in the Washington Post on Wednesday.

When it comes to inside-the-Beltway economics, black is white, up is down, and lobbyists for some of the most government-coddled farmers in America are calling other people greedy.

For people familiar with the government’s Byzantine sugar program, the text from the American Sugar Alliance (ASA) ad is frankly hilarious:

  • Jeopardizing 142,000 U.S. jobs and America’s food security isn’t a game. It’s a travesty.
  • So why are Big Candy executives lobbying Congress to outsource America’s sugar production?
  • To boost their already bloated profit margins at the expense of American farmers, workers and consumers.
  • Winners: A few corporate executives.
  • Losers: America.

I described the basic features of federal sugar subsidies in this study. Essentially, the government confers monopoly power on U.S. sugar growers, which comes at the expense of food manufacturing companies and consumers. 

The ASA ad claims that there are 142,000 jobs in the sugar-growing industry, but there are roughly 1,000,000 jobs in the food manufacturing firms that are hurt by current sugar policies. The Department of Commerce produced this study looking at the negative employment effects of the current sugar program.

One silly claim in the ASA ad regards outsourcing. The sugar program raises U.S. sugar prices, which induces U.S. manufacturers—such as candy makers—to move their production abroad. Thus current federal policies unfairly protect Big Sugar at the expense of Big Candy, but here Big Sugar is claiming the reverse. 

The other silly thing about the outsourcing claim is that the biggest of ASA’s Big Sugar companies are owned by the Fanjuls of Florida. And yet the Fanjuls themselves outsource sugar production to the Dominican Republic.

And note that whatever lobbying is done by Big Candy is surely dwarfed by Big Sugar’s legendary efforts to buy political protection. Just ask Monica Lewinsky.

A policy wonk quoted in this piece summarized the sad reality of sugar growers: “They are unlike any other industry in Florida in that they aren’t in the agricultural business, they are in the corporate welfare business.” 

Topics: 
Tax and Budget Policy, Trade and Immigration

The American Consumer Grows Up

By
Sallie James

An article in Politico on Monday looked at the declining influence of agriculture in DC (I wish), comparing the touching/nauseating Chrysler ad paying homage to the American farmer that was aired during the Superbowl with the relative lack of political attention given to farm programs. How come people feel all warm and fuzzy when they watch the ad, and yet poor little agriculture can’t get any love?

Trying to sell Ram trucks, Chrysler made a splash in the Super Bowl this month with a two-minute television spot celebrating the American farmer — a montage of handsome still photos and a vintage Paul Harvey speech all ending with the pitch: “For the farmer in all of us.”

Nine days later, the picture was very different as President Barack Obama skipped over farmers entirely in his State of the Union address, never mentioning the yearlong farm bill stalemate in Congress nor even including “agriculture” among the thousands of words spoken that night…

“Agriculture has become so efficient, so few people actually raise the food … the American consumer has become almost like high school kids,” [House Agriculture Committee Chairman Frank] Lucas said. “It’s always been there, it will always be there. Dad can I have the keys to the car? Does the car have gas in it? Oh, it will always have gas in it, right Dad?”

Are American consumers like teenagers? Are they spoiled, and taking agricultural production for granted? Is that why the farm bill is such a heavy lift? Or perhaps, just perhaps, the American consumer is growing up, questioning the cost and necessity of farm subsidies, and no longer falling for myths about the need for farm subsidies to prevent mass starvation. My colleague David Boaz, in a 2011 blog post, summarised the reasons why folks might oppose spending programs. As I read the Politico article and, specifically, the whining by the agri-industrial complex and its political backers, David’s second point came to mind:

We know that many wonderful things, perhaps including truly fast trains, could be created at massive cost, but that you always have to weigh costs and benefits. Children say, “I want it.” Adults say, “How much does it cost, and what would I have to give up to have it?”

Topics: 
Tax and Budget Policy, Trade and Immigration

The Sequestration Immigration Scare

By
Alex Nowrasteh

Immigration and Customs Enforcement (ICE) has released several hundred unauthorized immigrants from detention in Texas, Florida, Arizona, and Louisiana in preparation for budget cuts as part of the sequestration. The administration has noted that cuts would effectively reduce Border Patrol by about 5,000 agents—down to about 2007 levels of staffing if all of the cuts occur on the Southwest border. 

This reduction in Border Patrol will not unleash a tidal wave of unauthorized immigrants like many claim. Since 1989 the Border Patrol’s appropriations have increased by 750 percent and there are six times more staff today than in 1989. 

Apprehensions of unauthorized immigrants on the border are also near 40 year lows because fewer unauthorized immigrants are trying to enter illegally due to the poor economy. Decreasing the size of the Border Patrol will not do much to increase unauthorized immigration because many would-be immigrants are repelled by high unemployment rates.  

Unauthorized immigration has slowed dramatically because of a lack of economic opportunity in the United States, not because border patrol is larger or more effective. Cuts to Border Patrol, even those that would return its size to the 2007 levels, will not much affect unauthorized immigration.

American unemployment rates and demand for immigrant workers drive unauthorized immigration.  Look at this graph relating border apprehensions and the national unemployment rate:

Apprehensions and Unemployment Rate

The higher the rate of unemployment, the fewer unauthorized immigrants try to enter, and the fewer apprehensions are made.   

Perhaps if you had looked at this graph, you might have thought that the size of the Border Patrol could deter unauthorized immigration:

Apprehensions and Border Patrol Staff on Southwest Border

But if Border Patrol deterred unauthorized immigration, it would probably also deter other illegal activity—like cross border drug seizures. Consider this graph:

Border Patrol Staff and Marijuana Seizures 

Drug seizures have increased along with the size of the Border Patrol. Americans still demand marijuana so increased security results in more marijuana seizures (and more marijuana entering the black market). In contrast, unauthorized immigration is down because there is less American economic demand for their labor. Decreasing the size of the Border Patrol down to 2007 levels will not result in a flood of unauthorized immigration because not as many people want to come here as they did during the housing boom.

Topics: 
Trade and Immigration

The Challenges of Negotiating a U.S.-EU Trade and Investment Agreement

By
Simon Lester

A couple months ago on this blog, I set out some views on the possible U.S.-EU free trade agreement that was being discussed.  Things have now progressed a bit, and President Obama has announced talks on a “Trade and Investment Partnership” with the EU.  Reports suggest that the negotiations will begin this summer.

Should we be excited about these developments?  Perhaps a little bit, but overall I maintain the ambivalence I had in my earlier blog post.  I have elaborated on this ambivalence in a Free Trade Bulletin. To summarize, I like all the trade liberalization parts of these talks (lower tariffs, removing barriers to services trade, opening up government procurement), but there are also aspects that take us down a difficult and unclear negotiating path.  One of these aspects is the issue of “regulatory barriers to trade.”  Some people have the idea that there will be great economic benefits if we can harmonize regulation across the U.S. and EU, so that, for example, manufacturers do not have to produce different products for different markets.  I agree that there would be benefits if we could address this problem.  But it won’t be easy to reach agreement here, and there could be some downsides (e.g., if this is a compromise, both the U.S. and EU may have to agree to some regulatory changes that they don’t like).

I’d like to get excited about these talks. But I have some doubts about their scope, and I’m not sure anything will come out of them.

We’ll be talking more about all this at a policy forum here at Cato tomorrow.

Topics: 
General, Trade and Immigration

How Does Immigration Impact Wages?

By
Alex Nowrasteh

Many Americans are curious about the impact of immigration on the wages of other Americans.  The best research on this focuses on the period between 1990 and 2006, when almost 17 million people immigrated to the U.S. lawfully and a net 12 million came unlawfully.  The first major study is by Borjas and Katz (B&K) and the second is by Ottaviano and Peri (O&P).  O&P borrowed much of B&K’s methodology.  Here are the long run findings:

B&K draw a more negative conclusion than O&P.  The main differences are that O&P assume capital adjusts quicker to increased labor abundance and immigrants are more complementary.  B&K’s paper reflects their assumptions about native-immigrant substitutability.  Since immigrants are more likely to have less than a high school degree and more likely to have a graduate or professional degree than natives, B&K’s model assumes natives in those categories are competing with immigrants for jobs and therefore experience wage declines. 

Read the rest of this post »

Topics: 
Trade and Immigration

Are We Moving Toward a More Ideological Trade Policy Debate?

By
K. William Watson

With John Kerry leaving the Senate to become Secretary of State, the seat that Kerry held on the Senate Finance Committee will be filled by Senator Bob Casey of Pennsylvania.  This is an interesting committee assignment given that the Finance committee oversees all international trade issues in the Senate and that Senator Casey is one of the most protectionist members of Congress today.  But there is another reason why Casey’s assignment and his voting record are intriguing for the future of trade policy.

The Cato Institute has been keeping track of Congressional votes affecting trade freedom since 1999.  Every member of Congress has a trade vote profile that reveals their support for trade barriers and trade subsidies throughout their career.  The database reveals some interesting facts about members of the Finance Committee, swing states, and ideology.

Pennsylvania and Ohio are both states where neither Republicans nor Democrats hold a stable majority, and indeed there is one Republican senator and one Democratic senator from each.  All four of those senators are now on the Senate Finance Committee.  What’s especially interesting is that the two Democrats—Casey from Pennsylvania and Sherrod Brown from Ohio—are solid Interventionists according to Cato’s trade scoring matrix, while the two Republicans—Pat Toomey from Pennsylvania and Rob Portman from Ohio—can both securely claim the (alas, much-rarer) Free Trader designation. 

The significant disparity in voting records for Senators with the exact same constituents goes against conventional trade-policy wisdom.  Trade barriers often have regional implications so that support for a particular policy will transcend ideology or party affiliation.  Polticians from Maine support shoe tariffs; politicians from Arkansas support catfish restrictions; politicians from Florida support sugar subsidies; politicians from South Dakota support beef restrictions; and so on. 

I find the possibility of a more ideological trade debate refreshing.  Maybe this phenomenon in Ohio and Pennsylvania says more about the electoral peculiarities of swing states than it does about trade policy—all four of these Senators are new comers to their office and were elected in mid-term elections that favored their party.  But if it signals a new trend in how the battle lines of trade policy will be drawn in Congress, the future looks bright.  I’d rather be governed by two principled ideologues with opposing ideas than by two centrists tied to special interests.

Topics: 
Trade and Immigration

America Does Not Have a ‘Genius Glut’

By
Alex Nowrasteh

On Friday, Ross Eisenbrey of the Economic Policy Institute wrote an op-ed in the New York Times titled “America’s Genius Glut,” in which he argued that highly-skilled immigrants make highly skilled Americans poorer. 

A common way for highly-skilled immigrants to enter the United States is on the H-1B temporary worker visa. 58 percent of workers who received their H-1B in 2011 had either a masters, professional, or doctorate degree. The unemployment rate for all workers in America with a college degree or greater in January 2013 is 3.7 percent, lower than the 4 percent average unemployment rate for that educational cohort in 2012. That unemployment rate is also the lowest of all the educational cohorts recorded. 

Just over half of all H-1B workers are employed in the computer industry. There is a 3.9 percent unemployment rate for computer and mathematical occupations in January 2013, and an unemployment rate of 3.8 percent for all professional and related occupations. For selected computer-related occupations from the Bureau of Labor Statistics’ “Quarterly Census of Employment and Wages,” real wage growth from 2001 to 2011 has been fairly steady:   

 

 11 percent of H-1B visas go to engineers and architects but wage growth in those occupations has been fairly steady too:

 

Mr. Eisenbrey concludes that those rising incomes would rise faster if there were fewer highly-skilled immigrants. 

The unemployment rates for engineers and computer professionals are low but not as low as they used to be. There are a whole host of factors explaining that, but highly-skilled immigration is not likely to be one.  

Read the rest of this post »

Topics: 
Trade and Immigration

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