Topic: Trade and Immigration

Public Support for Immigration Increasing

John Hinderaker at the powerlineblog posted immigration polling data from the Republican Senate staff.  You can read the poll results here.  According to the top Gallup poll reported by the staff, 60 percent of Americans are dissatisfied with the current immigration system while 33 percent are satisfied.  Of those dissatisfied, 39 percent wanted less immigration and 7 percent wanted more, a subgroup wants less immigration is hardly a ringing endorsement of more restrictions.

However, here is another poll question that Gallup has asked periodically since 1965 that shows public opinion becoming more supportive of increasing immigration as the annual number of green cards climbs.  The question is: “In your view, should immigration be kept at its present level, increased, or decreased?”  Surprisingly, Americans have become more supportive of liberalizing immigration over time.  In 1965, only 7 percent of respondents wanted to increase immigration while 24.5 percent did in 2014 (average of two polls in that year).

Chinese Free Trade Is No Threat to American Free Trade

I’m seeing a lot of support for the Trans Pacific Partnership (TPP) on the basis of reasoning along the lines of “we must stop China from dominating Asia.”  Here are two recent examples.

First, an analyst with the Third Way think tank says:

The Chinese economy is built on low labor standards, and they want to export these standards to the world.

This analysis of Chinese and U.S. trade deals demonstrates that, in the area of worker rights, there is an immense cost to ceding trade and commerce rules to China. And with China trying to impose those standards on the rest of the world, policymakers need to be extremely concerned with the effect on American workers.

Second, the Washington Post editorial board says:

the TPP would ensure that the Pacific Rim plays by U.S.-style rules and regulations, rather than by China’s neo-mercantilist ones

There are two arguments here: (1) China is imposing low labor standards on the rest of the world; and (2) China is spreading mercantilism through its trade agreements. Neither is true.  As I explain in this Free Trade Bulletin, China does not care what labor standards its trading partners use, and it is not trying to impose its standards on anyone through trade agreements.  In addition, Chinese trade agreements liberalize trade in goods and services, just as other countries’ trade agreements do; China is not using trade agreements to push for its trading partners to have more interventionist economic policy.

I conclude:

Chinese free-trade initiatives in Asia and the Pacific region should give the United States an incentive to get its own free-trade act together, but not for the reasons suggested by some. Chinese free trade is not a threat to American free trade. The justification for U.S. trade agreements is that free trade is good, not that China is somehow bad. Thus, the TPP should succeed or fail on its economic merits. The concerns about letting China write the rules are misguided. China’s trade rules are not a version of state-led capitalism. They are the removal of protectionist trade barriers, just as our trade rules are.

Immigration and Economic Inequality

Discussions of economic inequality are common nowadays thanks to Thomas Piketty’s new book Capital in the Twenty-First Century.  There are several good critiques of Piketty’s book and at least one wonderful podcast.  I’m not convinced that economic inequality in a (mostly) free-market economy matters one way or the other for economic growth, social stability, or political stability (ceteris paribus), so this blog is a response to those concerned that liberalized immigration could exacerbate wealth inequality.   

Papers on how immigrants affect the wages of Americans almost uniformly present the results as relative gains or losses compared to the wages of other workers.  While that work is valuable, below I will only discuss papers that focus exclusively on economic inequality caused by immigration. 

Borjas et. al. found that immigration (along with trade) only modestly affects earnings inequality – a role not substantial enough to account for more than a small percentage of the change.  Instead, he attributes the growth in income inequality to the acceleration of skills-biased technological change (SBTC) and other institutional changes in the labor market. 

David Card failed to find a substantially causal relationship between increased immigration and growth in wage inequality.  He discovered that immigration explains about 5 percent of the rise in overall wage inequality between 1980 and 2000.  An important distinction is between the wage inequality effects of immigration on natives and the effects on wage inequality for immigrants and natives.  While 5 percent of the growth in overall wage inequality can be attributed to immigration, immigration’s effect on native wage inequality is negligible.  Immigrants tend to have either very high or very low wages compared to natives, meaning that immigrants have a naturally higher residual level of income inequality than natives do.  Thus, immigration causes the economy-wide level of wage inequality to increase without changing native wage inequality.  Immigration has little, if any, effect on native wage inequality according to Card.

What’s Really in the New Trade Promotion Authority Bill?

After months of internal wrangling, a trade promotion authority bill has finally been introduced in the Senate.  If passed, TPA could prompt conclusion of the Trans-Pacific Partnership negotiations and facilitate the deal’s eventual ratification by Congress.  The basic function of TPA is to affirm that future trade agreements will receive a timely up-or-down vote in Congress while setting negotiating objectives and procedures for congressional oversight.

Politically, the debate over TPA (and the TPP) has pitted the Obama administration and Republicans against congressional Democrats.  The reason the current bill took so long to devise is that proponents needed the support of Senate Finance Committee ranking member Ron Wyden (D–OR) in order to get at least a handful of other Democrats on board.

So, any differences between this bill and one that was introduced but scuttled by Harry Reid last year is due to Wyden’s influence.  His main concerns are not related to specific trade policy issues but to the role of congressional oversight and transparency in the negotiations.  Wyden has given the current bill his seal of approval, as have the White House and Republican leaders.

The first thing we should keep in mind when talking about TPA is that while its basic function is beneficial in facilitating the passage of trade agreements, the bill is 113 pages long because it’s full of caveats and reservations.

Making Sense of the Trade Negotiations Secrecy Debate

In Tuesday’s New York Times, law professor Margot Kaminski laid out a compelling case for increased transparency in the Trans-Pacific Partnership negotiations.  On Wednesday, John Murphy of the U.S. Chamber of Commerce offered a fairly convincing response in defense of confidentiality.  The problem is that—as is common in trade policy “debates”—they’re not talking about the same thing.  That’s frustrating to me because I think they’re both right.

Kaminski makes the point that the U.S. Trade Representative has been overbroad in what it deems classified material, that the current approach improperly privileges business lobbying over public interest groups, and that as negotiations cover more non-trade issues negotiators need more exposure and guidance from different people.

Murphy responds by noting that trade agreements are successfully increasing U.S. exports, that confidentiality in negotiations is both appropriate and helpful in achieving this outcome, and that systems are in place to ensure that all interested parties have input. 

Murphy’s concern is that “public disclosure of confidential negotiating texts would mean a weaker hand for U.S. officials at the negotiating table.”  For Kaminski, “it’s a question of whose input we’re getting on decisions that reach far beyond trade — into questions on the price of generic drugs or whether websites will have to monitor users online.”

Murphy is right about the value of confidentiality.  Trade negotiations are negotiations, which means the final agreement is the result of some necessary compromise.  Compromise is politically difficult, and negotiators need to know that they’ll be evaluated on the final product regardless of their initial positions.  In any event, we don’t know what’s in the agreement until it’s completed, and there will indeed be time after the negotiations conclude to debate the package.  Murphy’s also justified in being generally defensive about secrecy complaints, which often simply mask general antipathy toward trade liberalization.

Bridging the Hatch-Wyden Divide Over Trade Promotion Authority

The eyes of the international trade community are fixed on Senators Orrin Hatch (R-UT) and Ron Wyden (D-OR), upon whom responsibility for crafting bipartisan Trade Promotion Authority (TPA) legislation has fallen. At last report, Senate Finance Committee Chairman Hatch and Ranking Member Wyden were at an impasse over some important components of the bill, passage of which is widely considered necessary to concluding the long-gestating, 12-nation Trans-Pacific Partnership (TPP) agreement. That agreement must be concluded before the Transatlantic Trade and Investment Partnership (TTIP) negotiations make any progress. Those negotiations will have far-reaching implications for the multilateral trading system, including China, India, Brazil and other countries not currently party to these mega-regional trade agreements. Hence, TPA’s outcome is of worldwide interest.

Trade Promotion Authority has been maligned as a congressional capitulation or executive power grab.  It is neither. The U.S. Constitution grants Congress the authority to “regulate commerce with foreign nations” and to “lay and collect taxes, duties, imposts, and excises” and grants the president power to make treaties with the advice and consent of the Senate. Accordingly, the formulation, negotiation, and implementation of trade agreements require the involvement and cooperation of both branches. TPA is a compact between the branches that obliges these respective constitutional authorities, while guaranteeing an up-or-down vote by Congress, on an expedited basis, of any trade agreement negotiated by the executive branch with foreign governments, provided that the agreements meet the objectives spelled-out by Congress in the legislation. This conditionality is often ignored or brushed over by news reporters, who either spend too much time with trade skeptics or who are looking to economize on words.

Without such a compact, trade agreements would be nearly impossible to conclude because foreign negotiators – knowing that any agreement reached would be subject to congressional revisions – would never put their best offers on the table.  The process of negotiating and renegotiating with 535 officials (instead of one agency, the Office of the U.S. Trade Representative) would make for an interminable process too cumbersome and costly to pursue.  For practical purposes, negotiations have to occur between small parties vested with the authority to speak on behalf of those whom they represent. Trade Promotion Authority is the solution.

Checking in on the Minimum Wage in the TPP

A few weeks ago, I wrote about the possibility of the Trans Pacific Partnership (TPP) saying something about the minimum wage, which the White House had been suggesting it would.  I was a bit skeptical that the TPP would really do anything on this issue, and subsequently, I spoke to a U.S. government official who seemed to indicate that the whole thing was overblown, and nothing much would happen with the minimum wage in TPP.

But now I see that Victoria Guida of Politico has been speaking to higher ranking U.S. government officials, who said the following:

The Trans-Pacific Partnership pact, which the White House is negotiating with 11 countries, would require members to set and enforce laws on minimum wages, maximum work hours and occupational safety and health standards — things no other U.S. trade agreement has done.

Labor Secretary Tom Perez, too, is practiced at explaining why the TPP should matter to its critics, calling the labor provisions of NAFTA and the Central American Free Trade Agreement “woefully insufficient.” Labor obligations, he acknowledges, must be in the main text — as they have been in the most recent free-trade agreements — and coupled with sanctions if countries don’t comply.

The worker protections in the deals with Peru, South Korea, Colombia and Panama stemmed from the “May 10 agreement” that House Democrats reached with the George W. Bush administration in 2007, which covered freedom of association, collective bargaining rights, the elimination of forced or compulsory labor, child labor and employment discrimination. The TPP would go further with its minimum wage, hours and workplace safety standards, Perez said.