Topic: Trade and Immigration

Krugman on the TPP

Paul Krugman weighed in yesterday on the Trans Pacific Partnership (TPP). I agree with one of his points; I disagree with another.

First, the disagreement: Krugman claims protectionism is mostly gone, and thus the TPP is not all that important:

The first thing you need to know about trade deals in general is that they aren’t what they used to be. The glory days of trade negotiations—the days of deals like the Kennedy Round of the 1960s, which sharply reduced tariffs around the world—are long behind us.

Why? Basically, old-fashioned trade deals are a victim of their own success: there just isn’t much more protectionism to eliminate. Average U.S. tariff rates have fallen by two-thirds since 1960. The most recent report on American import restraints by the International Trade Commission puts their total cost at less than 0.01 percent of G.D.P.

He said the same thing a while back, but it’s just as wrong now as it was then. Here’s what I said at the time:

Tariffs on certain goods are still quite high. A publication called World Tariff Profiles illustrates this nicely. If you look at p. 170 for U.S. statistics, you will see tariff duties for four general product categories of over 10%. You’ll also see maximum tariffs (i.e., the high tariff on particular products) of over 100%!

And if you look at the duty rates for other countries, they are generally much higher.

And none of that includes special “trade remedy” tariffs (anti-dumping, countervailing duties, safeguards), subsidies, discriminatory government procurement, or domestic laws and regulations that discriminate (such as local content requirements).

So, protectionism is alive and well. 

Laura Ingraham’s Poor Response to George Will on Immigration

Radio talk show host Laura Ingraham recently penned a criticism of an excellent column written by George Will about immigration.  Although George Will is more than capable of defending himself, I thought I should step in and push back against many of Ingraham’s points.

The first two arguments made by Ingraham respond to practical political concerns – the midterm elections in 2014:

Will claims that the GOP should not focus its arguments in 2014 solely on Obamacare. I agree, and so do other conservative opponents of immigration reform. But that hardly proves that we will benefit politically from giving in to the president on his top priority and yielding a huge political victory to the Democrats that will boost their morale and devastate many people in our base.

Will maintains that if the GOP enforces unanimity on major issues, it will not grow. GOP supporters of reform are not being silenced or pushed out of the party. And, again, I don’t see the political benefits of siding with the president and House Minority Leader Nancy Pelosi (D-Calif.) against the conservative base on such a vital issue. The easiest way for the GOP to do very poorly in 2014 would be for its base to stay home, and that is more likely to happen if conservative voters watch the GOP cooperate with the president on immigration.”

Many Republicans are looking at polling data, months in advance, and counting their electoral chickens before they hatch.  The train wreck of Obamacare will likely help Republicans in the 2014 elections.  I’m not a political strategist so I won’t comment on Ingraham’s or Will’s arguments about that.  Ingraham, however, misleadingly leaves off the name of prominent conservative Republicans who support immigration reform, namely Senators Marco Rubio (R-FL) and Jeff Flake (R-AZ).  It is true that President Obama and Rep. Nancy Pelosi (D-CA) support immigration reform, but excluding conservative backers makes the bipartisan reform effort appear entirely Democratic – which it isn’t.

Dumbest Trade War Indeed

In an article titled “The World’s Dumbest Trade War,” Slate’s Will Oremus offers a thorough accounting of the ridiculous policy of imposing tariffs on cheap solar panels from China. 

Remember, the U.S. government wants Americans to buy solar panels, and it subsidizes those purchases through rebates and incentives. The Chinese government wants Chinese companies to build solar panels, and it subsidizes their manufacture. And yet rather than celebrate this fortuitous arrangement, the world’s top economic powers find themselves on the brink of a trade war that could cripple a promising industry in both countries, kill jobs, and hurt the environment all at once. It’s a terrible trade-policy trifecta.

Trying to make solar panels more expensive to aid domestic manufacturers defeats the whole purpose of having domestic manufacturers in the first place. It aptly demonstrates the folly of green industrial policy—subsidies and tariffs to create and then maintain “green jobs”—as a rational environmental policy.

Fortunately, some countries have recognized the harmful impact of trade barriers and called for free trade in environmentally friendly products like solar panels and wind turbines. This initiative may be included in some form in the Trans-Pacific Partnership agreement. Last year, Simon Lester and I wrote a paper explaining that any such endeavor should not exclude antidumping and anti-subsidy duties like those being used here by the United States.

What’s more, as Oremus aptly points out, these duties not only reduce the viability of green energy, they harm domestic businesses that install solar energy equipment. 

Unfortunately, this phenomenon is in no way unique to solar panels. The U.S. imposes a great number of antidumping and anti-subsidy duties on imports that U.S. manufacturers rely on as inputs. Check out this video to learn more about America’s economically irrational and destructive antidumping laws:

What Both Sides Miss in the Immigration Debate

That’s the title of my latest Forbes column, which begins:

As chances for immigration reform fade ahead of this year’s congressional elections, the main sticking point seems to be the “pathway to citizenship” for those who are in the country illegally.

Reform opponents don’t want to reward those who break our laws, while activists on the other side refuse to consider a deal that doesn’t naturalize this entire population. Fixing our broken immigration system thus seems to turn on the question of what to do with the estimated 11-12 million illegal aliens living in our midst. (I’m reminded of John Candy’s final movie, Canadian Bacon, where a propaganda bit ominously decries: “Canadians: They walk among us.”)

But both sides are wrong to focus on citizenship and should instead target permanent resident status—otherwise known as green cards.

Read the whole thing, which includes a bit about the naturalization process that I’m now experiencing.

Freedom to Panties!

The Associated Press reports that “30 women protesters in Kazakhstan were arrested and thrown into police vans while wearing lace underwear on their heads and shouting ‘Freedom to panties!’”

Is this the beginning of a sexual revolution in authoritarian central Asia?  Alas, no.  The protest is a response to new rules from the Russia-led Eurasian Customs Union banning the sale or importation of underwear containing less than 6% cotton.  The ban will outlaw 90% of the underwear currently being sold in those countries, stoking concerns of a return to Soviet-era underwear.

Although it is unclear to me at this point exactly why, lacy silk lingerie apparently threatens the economic vitality of Russia, Kazakhstan, and Belarus.

Banning clothes for economic reasons is unfortunately nothing new.  In her thorough and informative book, The Travels of a T-Shirt in the Global Economy, Georgetown professor Pietra Rivoli details the efforts of the English Parliament in the 17th Century to keep people from abandoning English woolens in favor of cotton garments from India.  In 1700, Parliament went so far as to mandate that all corpses be buried wearing nothing but wool.

Will trade historians one day write about the great Russian panty raid of 2014?  Will they tell of the uprisings in the streets, the dangerous and exotic world of black market lingerie smugglers, Vladimir Putin’s regime-shattering silk drawers scandal?  Only time will tell.

The purpose of trade barriers is always to control consumers, because free consumers are a danger to the goals of the state.  And so, I call on free traders all around the world to stand in solidarity with these protestors.  Freedom to panties!  Freedom for all!

Spying on Trade Lawyers

The latest NSA spying revelations involve international trade issues, in particular an Indonesian complaint brought at the WTO in response to a U.S. ban on clove cigarette.  (The trade problem was that the U.S. banned clove cigarettes, which are mostly made in Indonesia, but did not ban menthol cigarettes, a competing U.S.-made product). According to the New York Times, the Australian government monitored communications between the Indonesian government and its DC-based trade lawyers, possibly in relation to this case, and passed the information along to the NSA.  (Note that law prof Orin Kerr is skeptical about the way the story is presented in the Times.)

Let me offer the following thoughts:

1. It’s hard to imagine that any information gathered by the Australians had much impact on the WTO case. I suppose it could be a slight advantage to get an early look at your opponents’ arguments, and see how they are thinking about the issues. But I can also imagine that all this additional information would be a distraction, with too much time being spent on marginal points.  It’s worth noting that, in spite of any information U.S. government trade lawyers may or may not have received, the U.S. lost the case. Thus, like most NSA spying, any spying here was probably of limited value.

2. Regardless of its value, this kind of spying is likely to be pretty offensive to our trading partners. The WTO has detailed rules of procedure for its disputes, one of which says the parties must act in good faith (“all Members will engage in these procedures in good faith in an effort to resolve the dispute”). It’s hard to see how receiving confidential information about your opponents’ arguments, if that happened, satisfies this requirement. It will be interesting to see if this gets discussed in upcoming WTO meetings.

3. I wonder whether all of these revelations about spying will accelerate proposals being made by foreign governments to develop non-U.S.-based communications networks: “German Chancellor Angela Merkel said on Saturday she would talk to French President Francois Hollande about building up a European communication network to avoid emails and other data passing through the United States.”

Immigration Restriction on a Kuznets Curve: Switzerland and Arizona

Bryan Caplan has an interesting post on the recent Swiss referendum to restrict immigration from the European Union.  Tyler Cowen also blogged on the same issue twice.  Caplan’s point is that the Swiss imposed restrictions because there was insufficient immigration rather than too much.  Areas of Switzerland that had fewer immigrants voted to restrict immigration while areas with many immigrants voted to keep the doors open.

A similar theory could explain why immigration quotas were first imposed in the United States after World War I.  That war substantially reduced immigration from Europe.  From 1904 through 1914, almost 1 million immigrants arrived annually in the United States – a total of 10.9 million.  This large population, combined with their children, opposed numerous legislative efforts to restrict immigration from Europe.

  1st Gen % 2nd Gen % 1st+2nd Gen %
1870 14.4 14.0 28.4
1880 13.3 18.3 31.6
1890* 14.8 ? ?
1900 13.7 20.9 34.6
1910 14.8 21.0 35.8
1920 13.4 21.9 35.3
1930 11.8 21.4 33.2
1940 11.8 18.2 30.0
1950 9.6 16.6 26.2
1960 6.0 13.7 19.7
1970 5.9 11.8 17.7
1980* 6.2 ? ?
1990^ 8.7 8.8 17.5
2000 12.2 10.3 22.5
2010 13.7 11.3 25.0
*Data unavailable
^1990 = 1993
 
Source: iPums

World War I erupted in August 1914, slowing immigration and causing the percentage of immigrants to decline more than the increase in the second generation.  During the four years of the war, slightly more than one million immigrants arrived.  That minor decline, especially in the 1st generation, might be part of the reason why anti-immigration politicians succeeded in passing the first immigration quotas in 1921.  During that time many non-citizens could vote and it was much easier to naturalize than it is today. 

The post-war U.S. recession, the continuing blockade of Germany, and chaos in Europe prevented immigration from rebounding until 1921 when 805,228 people immigrated – the same year that numerical quotas restricted immigration for the first time.  If the pre-war pace of immigration was uninterrupted by World War I, 4.6 million additional immigrants would have landed in America by that time – boosting the immigrant share of the population to somewhat less than 17.7 percent of the total population and the second generation by a smaller amount too.  Combined, the first and second generations would have been equal to around 40 percent of the American population.  Supporters of immigration restrictions might have understood this and known that immigration from Europe was about to rapidly accelerate, meaning that they only had a narrow window to approve restrictions before the changing nativity of the population made that more politically difficult.

Several reasons would have made it more difficult to achieve the 1921 vote to restrict immigration if there were that many more immigrants.