Topic: Trade and Immigration

Family Members Use Most Employment-Based Green Cards

Many critics of American immigration policy claim there is too much emphasis on family reunification and not enough on employment. It’s not a problem that families can reunify in the United States, but those critics are right that the American immigration system highly favors families – even in the employment-based green card category set-aside for workers.

The underlying issue is that the families of immigrant workers must use employment-based green cards. Instead of a separate green card category for spouses and children, they get a green card that would otherwise go to a worker. In 2012, 56 percent of all supposed employment-based green cards went to the family members of workers. The other 44 percent went to the actual workers. Some of those family members are workers, but they should have a separate green card category or be exempted from the employment green card quota of approximately 140,000 a year. If family members were exempted from the quota, or there was a separate green card for them, an additional 81,245 highly skilled immigrant workers could have entered in 2012 without increasing the quota.

In addition, 87.5 percent of those who gained an employment-based green card in 2012 were already legally living in the United States. They were able to adjust their immigration status from another type of visa, like an H-1B or F visa, to an employment-based green card. Exempting some or all of the adjustments of status from the green card cap would almost double the number of highly skilled workers who could enter.

Here are some other exemption options:

  • A certain number of workers who adjust their status could be exempted in the way the H-1B visa exempts 20,000 graduates of American universities from the cap.
  • Workers could be exempted from the cap if they have a higher level of education, like a graduate degree or a PhD.
  • Workers could be exempted if they show five or more years of legal employment in the United States.
  • Workers could be exempted based on the occupation they intend to enter. This is a problem because in involves the government choosing which occupations are deserving, but so long as it leads to a general increase in the potential numbers of skilled immigrant workers without decreasing them elsewhere, the benefits will outweigh the harms.

Congress Likes at Least One Type of Fast Track

Seasoned observers of U.S. trade policy have been chagrined with the reluctance of Congress to pass fast-track negotiating authority. However, a small glimmer of hope appeared on March 25. That day, a statue honoring Dr. Norman E. Borlaug, recipient of the 1970 Nobel Peace Prize, was installed in Statuary Hall of the U.S. Capitol. His work in developing high-yielding grains is credited with enabling billions of people to eat better and to achieve higher living standards, objectives strongly supported by Cato. (See this 2009 post by Cato Executive Vice President David Boaz honoring the life of Dr. Borlaug.)

Capitol visitors who were fortunate to be associated with the state in which he was born (Iowa), the school where he studied (University of Minnesota), or where he spent the final years of his career (Texas A&M), were able to receive special tickets to enter Statuary Hall. These tickets were designated “Fast-Track Viewing,” which enabled the holders to bypass the long lines normally associated with a visit to the Capitol’s interior. It is gratifying to learn that Congress is willing to utilize fast-track procedures in some circumstances. Let’s hope they soon decide to apply the concept more broadly.

 

Or, is the incurable optimist in me wanting to ignore another possible interpretation? After all, a “viewing” is sometimes associated with paying respects to the deceased. Is it possible that “fast-track viewing” means that Congress thinks the concept is dead and that those who wish to pursue trade reform should do so through other means? Might be best not to overanalyze this issue.

Free Trade: Do It for the Children

Here’s a WSJ article describing a Chinese investment in France, made for the purpose of exporting back to China:

Mayor Christian Troadec is trying a new formula to revive his sleepy town in central Brittany: quenching Chinese thirst for baby milk.

On a recent damp morning at exactly 08:08—a lucky number in Chinese culture—workers broke ground on a 37-acre tract the municipality sold to Synutra International Inc., one of China’s top 10 baby-formula makers, to build a milk plant.

“In Brittany, we produce some of the world’s best-quality milk but we don’t have enough [economic] activity,” said Mr. Troadec, walking the muddy field where a dozen Caterpillar bulldozers and other earth movers lined up to start laying the foundation for the factory.

Synutra is investing €90 million ($125 million) to build what will be the region’s largest milk-drying factory and the first infant-formula plant on French soil entirely in the hands of a Chinese company.

The plant feeds two needs. China’s voracious demand for infant formula is surging as the middle class flourishes. But since a 2008 scandal, when Chinese-made formula tainted with the industrial chemical melamine killed six infants and sickened 300,000, parents have preferred to buy formula from well-known Western brands. Now, dairy companies in China, already the world’s largest importers of milk, are racing to win back consumers by tying up with producers abroad.

At the same time, Chinese investment offers a lifeline to Brittany, a farmland on the western tip of Europe that has been hurt by the unwinding of European subsidies.

Synutra plans to ship the entire output from its new plant swiftly to China. The company teamed up with French dairy cooperative Sodiaal to secure access to 300,000 million liters of milk a year over the next decade—the entire milk production of farmers within a radius of 20 kilometers of Carhaix—and 30,000 tons of whey, all of which will be transformed into dried baby milk and sent by boat.

So it’s a win-win. France gets investment; Chinese consumers get high quality products, for babies nonetheless.  It can help to put a human face on free trade, especially when it’s this one:

 

Will Republicans Make a Principled Stand Against Ex-Im Reauthorization in 2014?

Jobs are good. Exports create jobs. We create exports. Renew our charter.

Such is the essence of the marketing pitch of the U.S. Export-Import Bank, whose officials have begun ramping up their lobbying efforts ahead of a 2014 vote concerning reauthorization of the Bank’s charter, which expires in September.  Last go around, in 2012, Ex-Im ran into some unexpected turbulence when free-market think tanks, government watchdog groups, and limited government Republicans in Congress raised some compelling – but ultimately ignored – objections to reauthorization.

The ostensible purpose of the Ex-Im Bank is to assist in financing the export of U.S. goods and services to international markets. Even if that were a legitimate role of government, the public must keep a watchful eye on how much and to whom loans are made – especially given the current administration’s tendency to bet big on particular industries and specific firms, and in light of its commitment to seeing U.S. exports reach $3.14 trillion in 2014.

From the U.S. Export-Import Bank’s 2013 Annual Report:

The Ex-Im Bank’s mission is to support American jobs by facilitating the export of U.S. goods and services. The Bank provides competitive export financing and ensures a level playing field for U.S. exporters competing for sales in the global marketplace. Ex-Im Bank does not compete with private-sector lenders but provides export financing that fill gaps in trade financing. The Bank assumes credit and country risks that the private sector is unable or unwilling to accept. It also helps to level the playing field for U.S. exporters by matching the financing that other governments provide to their exporters. The Bank’s charter requires that the transactions it authorizes demonstrate reasonable assurance of repayment.

The defensive tone of this mission statement anticipates Ex-Im critics’ objections, but it certainly doesn’t answer them. The objectives of filling gaps in trade financing passed over by the private sector and expecting a reasonable assurance of repayment are mutually exclusive – unless the threshold for “reasonable assurance” is more risk-permissive than the private-sector’s most risk-permissive financing entities.  Therefore, Ex-Im is either putting taxpayer resources at risk or it is competing directly with private-sector lenders for customers in need of finance. And if the latter, then as it seeks to create the proverbial “level playing field” for the U.S. companies whose customers it finances, Ex-Im is un-leveling the playing field for the finance industry, as well as for the U.S. firms in industries that compete globally with these U.S-taxpayer financed foreign companies.

Trade Negotiations Can Be Painful to Watch

In an ideal world, governments would recognize the benefits of trade liberalization, and eliminate domestic tariffs on their own.  In the real world, though, much of the tariff reduction process comes through international agreements between countries, which go something like this: We will agree to lower our tariffs if you agree to lower yours.  Most people recognize that this is a silly way to do things, but in the end it leads to lower tariffs and it’s the only way to do so within existing political constraints, so we go along with it.

But it can be really painful to watch in action.  Here’s an article in the FT about the U.S.-EU trade talks:

The US has accused the EU of abandoning a pledge to remove all tariffs applied to goods traded across the Atlantic, in the first substantive row to hit landmark trade negotiations between the two economies.

The EU and US last year launched a push to reach a Trans-Atlantic Trade and Investment Partnership billed as the world’s largest regional trade negotiation covering economies comprising almost half of the global economy.

Much of the focus of the discussions has been on bringing regulations in line to encourage more trade and on reducing other non-tariff barriers. But both sides had also pledged to seek to remove all tariffs on transatlantic trade, and in a sign of the difficult discussions to come the US has accused the EU of backing away from that goal.

In discussions this week in Brussels, EU officials have told their US counterparts that they plan to allow US beef, chicken and pork into the EU only under a quota system. The move amounts to a stick in the eye of US negotiators who face powerful agricultural lobbies at home and a Congress that is appearing ever more sceptical about the value of trade agreements.

It also follows a concerted effort by Karel De Gucht, the EU trade commissioner, to label the US’s original tariff offers tabled last month as less ambitious than the EU’s. The EU’s original offer would eliminate tariffs on 96 per cent of goods traded across the Atlantic while the US offer promised to wipe out tariffs on 88 per cent of goods.

US officials insist they plan to negotiate their offer upward and remain committed to the goal of eliminating all tariffs. However, EU officials, they say, have told their US counterparts that they will not eliminate tariffs on beef, chicken or pork and instead subject them to a sliding system of tariff-rate quotas.

At the end of all this, my hope is that most U.S. and EU tariffs will be eliminated.  But watching everyone haggle about it, and demonstrate so much reluctance to do what is clearly in their interest, is not much fun.

E-Verify Does Not “Turn Off” Job Magnet

One of the main claims of E-Verify’ ssupporters is that it will turn off the job magnet that incentivizes unauthorized immigration.  A recent Working Paper by economists Pia M. Orrenius and Madeline Zavodny casts doubt on that.

They find that E-Verify mandates in the states have decreased wages of likely Mexican unauthorized immigrant men by about 7.8 percent and unauthorized immigrant Mexican women by 1.2 percent.  The likelihood of men being employed is not much affected by E-Verify but it does increase female employment and labor force participation – which makes sense in the context of making migration and employment decisions on the family level.  Clearly, E-Verify has diminished the anticipated wage gains from illegally immigrating to the United States.

However, E-Verify has not turned off the job magnet.  Assuming that unauthorized immigrant men and women earn the same wages, the estimated gains to coming here for the marginal Mexican immigrant is only slightly lowered.  Based on gender data from Pew and comparing the wages of identical workers in Mexico and the United States, here are some back of the envelope calculations showing how E-Verify has affected wages for unauthorized Mexican immigrants:

Unauthorized Immigrant Workers 

 

Female

Male

All

Gender

39.4%

60.6%

100.0%

Monthly Wages in U.S. (Pre-E-Verify)

 $  1,470.80

 $  1,470.80

 $  1,470.80

Monthly Wages in Mexico

      $580.90

     $580.90

     $580.90

Wages Multiple from Working in U.S.

2.53

2.53

2.53

Monthly Wages (Post E-Verify)

$1,453.15

$1,356.08

$1,394.32

Wages Multiple from Working in U.S. Under E-Verify

2.50

2.33

2.40

Sources: Center for Global Development, Pew Hispanic Center, and Dallas Fed Working Paper

E-Verify lowers the wage gain for all Mexican unauthorized workers from 2.53 times as great as in Mexico to 2.4 times as great – a whopping 5 percent decrease.  That’s not much to brag about considering E-Verify is supposed to be the lynchpin of future immigration enforcement.  It’s hard to see how E-Verify proponents can look at this small wage effect and conclude that E-Verify is worth it, given the enormous array of problems and burdens caused by it.  In practice, E-Verify does not turn off the job magnet that attracts unauthorized immigrants to our shores and will not if it is ever mandated.