October 2017

October 8, 2017 9:38AM

There Is No Public Safety Justification for the “Travel Ban”

The Trump administration’s newest argument in favor of the travel ban is that foreigners from the eight banned countries are disproportionately crime prone. Indeed, the administration’s new travel ban proclamation references “criminal” risks or “public safety threats” from foreigners from those eight banned countries a total 34 times. However, the incarceration rate for people from the travel ban countries is below that of native-born Americans and foreign-born folks from countries that were not on the travel ban list.

The average incarceration rate for those born in the travel ban countries is 0.32 percent, almost half of the 0.59 percent incarceration rate for those born abroad in non-travel ban countries (Figure 1). There are some exceptions by nationality-at-birth as Somalis have a high incarceration rate just below that of native-born Americans and the Yemeni rate is right above that of the non-travel ban countries. The numbers of people from Chad and North Korea who are incarcerated or in the population as a whole are not reported.

The government has many categories of countries that are marked as terrorist threats. These categories of countries are divided by their level of sharing of immigration and travel security with the U.S. government, the operation of foreign terrorist organizations on their soil, whether they are sponsors of terrorism, whether they border terrorist safe havens, if they refuse to accept deportees, and other criteria. The incarceration rate for folks born in the countries in these categories varies dramatically (Figure 1). 

The foreign-born incarceration rate for nations without E-Passports is 0.82 percent—the worst showing of these categories. The foreign-born incarceration rate for those from countries that refuse deportees is 0.38 percent, barely above those of the travel ban countries. The foreign-born incarceration rate for state sponsors of terrorism, terrorist safe havens, nations that border countries with foreign terrorist organizations, and countries with foreign terrorist organizations operating on their soil are all below the average incarceration rate for the travel ban countries. Of the eight countries, only Yemen and Somalia have incarcerations above those categories of countries. 

Figure 1

Incarceration Rates by Country of Origin, Ages 18-54

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Source: Authors’ analysis of the 2015 1-year American Community Survey data.

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October 6, 2017 5:13PM

What’s Good and What’s Missing in the 702 Reform Bill

My colleague Pat Eddington has already taken a first pass at the newly unveiled legislation aimed at reforming Section 702, the controversial foreign intelligence surveillance authority that empowers warrantless surveillance of foreigners outside the United States.  While Pat focused primarily on the defects of the bill, I'd like to start by briefly surveying what I think it gets right, and then note a few other elements I was disappointed not to see included.  

Probably the two most salient features of the "USA Liberty Act" for civil libertarians are that it partially closes the so-called "backdoor search loophole" in 702, and that it codifies the recent end of Upstream "about" collection.  For those not steeped in electronic surveillance law, both of those will require a bit of explanation. 

The "backdoor search loophole" is explained well and in some detail here by the Brennan Center's Liza Goitein, but here's the essence of it:  Section 702 permits the warrantless targeting of foreign persons located outside the United States, subject to broad procedures for selecting targets and "minimizing" the information obtained.  With more than 100,000 persons targeted for surveillance annually, the scope of communications collection under this authority is, as one might expect, enormous, and includes messages the targeted individuals exchange with American citizens.  This provides a roundabout mechanism for obtaining the communications of Americans, which would normally require a particularized Fourth Amendment search warrant based upon establishing probable cause before a judge: That vast database of warrantlessly collected communications can now be queried using search terms associated with Americans, and their communications with foreign targets obtained. We know that the CIA and NSA query the 702 database for terms (such as e-mail addresses) linked to Americans thousands of times each year—and that the FBI does so even more frequently, though unlike their bretheren agencies, they have not provided any estimate of how often. This sets up a sort of constitutional shell game, where an authority sold as a counterterrorism and intelligence tool targeting foreigners with no Fourth Amendment rights can ultimately be used by ordinary criminal investigators to sift through the emails of citizens.  

The Liberty Act addresses that concern in part by requiring a warrant to access the contents of a U.S. person's communication that was found by querying a search term linked to an American—again, an e-mail address being the simplest case.  This would, then, limit the ability of criminal investigators at the FBI to turn to 702 as a way of evading the need to establish probable cause for surveillance of their domestic targets.  I say it addresses the issue only "in part" for two reasons.  

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October 6, 2017 3:49PM

With Back‐​to‐​Back Bombshells, Trade Terrorism Hits the Global Aircraft Industry

This afternoon, the U.S. Department of Commerce announced the preliminary results of its antidumping investigation in large civil aircraft from Canada, launched at the request of the Boeing Company in May. Commerce “calculated” dumping margins of 79.82 percent for Bombardier—the only Canadian aircraft producer in this market—which becomes the rate of duty that any U.S. purchaser would have to post with U.S. customs upon importation. This penalty comes on top of last week’s assessment of 219.63 percent subsidy margins in the companion countervailing duty case.

It goes without saying that neither Delta Airlines (the intended customer) nor any other U.S. carrier is going to pay a 300 percent tax to purchase these aircraft. Unless the U.S. International Trade Commission rules in February 2018 that Boeing is not threatened with material injury by these proposed Bombardier sales, the orders will go into effect (requiring approximately 300 percent duties, although those figures will change—but probably only slightly—between the Commerce preliminary and final), putting the U.S. market out of reach to Bombardier, and Bombardier aircraft out of reach to the U.S. carriers, who need these smaller planes (which Boeing doesn’t even produce) to serve less-travelled routes efficiently.

In a previous post, I described some of the methodological shenanigans that Commerce was likely to perform in this case. Confirmation of those and other capricious decisions will be possible after the official analysis memo is released.  But, if the ITC finds “threat of material injury” to Boeing by reason of these “unfair” prospective Bombardier sales, and AD and/or CVD orders are imposed, in all likelihood, there will be some major issues that Bombardier or Delta will want the U.S. Court of International Trade (or a NAFTA Chapter 19 panel) to review and determine whether Commerce acted beyond its authority.

Even if the ITC goes negative in February—finds no threat of injury—the market for the next 5 months will be in a state of suspended animation.  Uncertainty will rule.  Bombardier will not know how to proceed.  Should it build the aircraft in anticipation of exoneration?  Should it seek other markets? Will it be able to service its debt and keep its workforce? Delta and the other airlines will have to put off plans to modernize their fleets, while remaining unable to perform reliable cost-benefit analyses. The specter of a long adjudicative process offers only distant relief, with plenty of distortions and inefficiencies to endure in the interim.

The U.S. trade laws are a form of economic terrorism. They are deployed unexpectedly and with stealth; they cripple their intended targets, while generating enormous amounts of collateral damage to other companies, industries and jobs; and they cast a long shadow of uncertainty over the costs and conditions of operating in the market prospectively. 

Maybe the political and economic fallout from this case will bring scrutiny of these laws to the level they have long deserved.

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October 6, 2017 9:43AM

Singapore’s Free Trade Success Story

Viewers of Anthony Bourdain’s CNN series Parts Unknown last weekend were treated to the raconteur’s visit to the city‐​state of Singapore. Along with Bourdain’s usual noshing, imbibing, and bantering about the food culture with knowledgeable locals, he also made time for drinks with Donald Low to discuss the country’s economic and political culture. Among Singapore’s hallmarks according to Low, an Associate Dean at the Lee Kuan Yew School of Public Policy, was the desire to attract foreign capital and an “understanding that free trade is good for everyone.” 

Low’s remarks will not come as a surprise to readers of the Economic Freedom of the World annual report co‐​published by the Cato Institute, Canada’s Fraser Institute, and a number of other international think tanks. In the report’s 2017 edition Singapore earns a second‐​place ranking among the 159 jurisdictions examined for overall economic freedom, and a #1 ranking in the category of “Freedom to Trade Internationally” owing to its score of 9.25 (out of 10). Amazingly, this actually represents one of Singapore’s lower ratings since 1980, with the island country receiving a stunning 9.9 score in the category in 1990.

The results of Singapore’s free trade embrace have been spectacular, strongly contributing to its status as home to the world’s second‐​largest container port, stunning visual transformation, and dramatic rise in GDP per capita since earning its independence in 1965. 

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Singapore’s success is, of course, multicausal, with free trade being just one of several key ingredients that have made the country the wealthy economic hub it is today. Such caveats aside, the country nonetheless stands as a rebuke to those who cling to protectionist policies and insist that such measures are necessary to ward off the alleged threat of foreign competition.

October 5, 2017 5:40PM

Iran, Decertification, and the Dangerous Alternatives

Late on Thursday afternoon, the Washington Post reported that President Trump plans to undermine American involvement in the Joint Comprehensive Plan of Action (JCPOA) by “decertifying” Iranian compliance with the deal and kicking the issue to Congress.

This move is hardly unexpected: when he last certified Iranian compliance with the deal 90 days ago, President Trump reportedly told staff “he wants to be in a place to decertify 90 days from now and it’s their job to put him there.” Yet as that quote suggests, the President’s decision is not based on any reality‐​based assessment of the deal. Iran is in fact complying with the deal, a fact verified repeatedly by the International Atomic Energy Agency.

Many of Trump’s own advisors disagree with his decision. On Tuesday, Secretary of Defense James Mattis told Congress that he believed it was in the U.S. national interest to remain in the deal. They are undoubtedly aware that the President’s choice will most likely undermine or end U.S. participation in the nuclear deal, split us from our European allies, reduce the constraints on Iran’s nuclear program, and reduce America’s global credibility and negotiating power.

In a newly published Cato Policy Analysis, my colleague John Glaser and I examine the grounds for retaining the nuclear deal, and explore the alternatives that the Trump administration could decide to pursue. Our analysis suggests that the prospects for a better approach are bleak.

We examine four key alternatives to the JCPOA:

  1. Increased or Renewed Sanctions: Though the United States possesses an impressive and far‐​reaching sanctions infrastructure – including so‐​called ‘secondary sanctions’ – it is highly unlikely that new sanctions will force further concessions from Tehran. European allies will push back strongly against any new sanctions, and neither Russia nor China is likely to cooperate in creating a new sanctions regime when the United States is responsible for destroying the current deal.
  2. Challenging Iranian Influence in the Region: The United States could instead choose to push back against Iranian proxies across the Middle East, such as Hezbollah. But there are few groups or states that are practical partners for such a strategy, meaning the burden would fall most heavily on U.S. troops. The risk of blowback – endangering the lives of U.S. forces in Iraq, Syria, and elsewhere – is a serious concern. This option also does nothing to prevent Iranian proliferation.
  3. Regime Change “from Within”: A popular idea among some anti‐​Iran hawks, this strategy would see the United States use sanctions and funding for pro‐​democracy groups inside Iran to destabilize the regime. The lack of any good group to support is one key problem with this strategy. Yet the bigger problem is simply that research shows that regime change rarely works, and even when it does, it tends to produce worse outcomes.
  4. Direct Military Action: Targeted strikes on Iranian nuclear or military facilities is perhaps the most extreme option we examine. Put simply, there are no good options for a military strike on Iran; this was a key aspect of the Bush and Obama administration’s decisions to pursue diplomacy. Any military strike would likely escalate to a costly, large‐​scale war, further destabilizing the region and ironically most likely encouraging other states to seek a nuclear deterrent.

Contrary to the Trump administration’s statements, the nuclear deal with Iran is working. Though it has not solved – and was never intended to solve –every problem in the U.S.-Iranian relationship, the deal has halted Iranian proliferation and opened lines of communication and negotiation which can be exploited to defuse future tensions and improve relations over the long‐​term.

By decertifying Iran, President Trump is starting down a dangerous road towards a strategy which is far more uncertain, risky, and costly.

You can check out the whole report on alternatives to the JCPOA here.

October 5, 2017 5:09PM

Data Breaches — It’s Not Just Equifax

All eyes have been on Equifax these past few weeks, as the extent of its data breach has unfolded. But, private entities like Equifax are not the only ones collecting huge swaths of data. The federal government also has extensive personal data on large numbers of Americans. And the government is no more secure than Equifax or any other company. In fact, government employees found out in 2015 that the Office of Personnel Management had been breached, exposing the most sensitive personal data to hackers. Just last week, the Securities and Exchange Commission (SEC) revealed that its online filing system, EDGAR, had also been hacked. 

Somehow, even in the face of these massive breaches, federal agencies seem reluctant to reconsider the type of data they collect. SEC Chairman Jay Clayton has said that his agency will move forward with the Consolidated Audit Trail, a data collection program that will place even more sensitive data in the hands of the SEC. 

In 2015, my former colleague, Mark Calabria, testified to just these risks. Focusing on data collection efforts by the Consumer Financial Protection Bureau (CFPB), he warned the House Financial Services Subcommittee on Oversight and Investigation that the Bureau’s plans to collect transaction‐​level data would risk exposing millions of consumers’ personal and financial data to hackers. This is despite the fact that the CFPB could fulfill its obligations with aggregate data that would pose no such risk to individual consumers. And yet, the CFPB has shown no signs of heeding these warnings, even in the wake of multiple high‐​profile data breaches in the intervening years. 

I’m sure that each agency believes it is taking steps to protect the data, but I’m equally sure that Equifax thought it was taking steps to protect its data. I’m sure OPM believed it was taking steps to protect its data. (OPM announced only this week that it was hiring a new Chief Information Officer, specifically citing the need for increased cyber security following the breach more than two years ago.) The problem is that as hard as these organizations try to protect their data, the hackers will be trying just as hard to crack it.

There may be legitimate needs for some data collection. But, given the demonstrated risks, there is no excuse for using a dragnet approach. Agencies should be held accountable for the data they claim to need. They should be required to demonstrate, with particularity, why they need the data they say they need. Whenever any part of the government either requires disclosure of or seeks control of individual‐​level data, it should also be required to explain why aggregate‐​level data would be insufficient for the stated data collection purpose. These explanations should be publicly available, so that the people can decide whether the government has met its burden of proving that it should be permitted to hold the data it is requesting.

Requesting information is always easy. It requires little effort on the part of the requestor, and it gives the appearance of diligence and near‐​scientific rigor. Who doesn’t like data‐​driven solutions? But it is far from costless. It’s time the government justified imposing these costs on the people it is supposed to serve.

October 5, 2017 2:00PM

Recognizing the Upside of China’s Infrastructure Push

The Atlantic Council has released a new report on a key Chinese effort to develop infrastructure in Asia and beyond which deserves the attention of policymakers in Washington. Entitled “Silk Road 2.0: US Strategy toward China’s Belt and Road Initiative,” the Gal Luft‐​authored paper highlights some of the direct economic benefits U.S.-based businesses may realize through the China‐​led project:

The Trump administration is deeply committed to the development and upgrade of US domestic infrastructure, but little attention has been paid to the benefits for the US economy offered by infrastructure development abroad. Increased prosperity in the developing world will enable more consumers to demand American goods and services. US engineering, construction, and equipment‐​manufacturing companies like Bechtel, Caterpillar, John Deere, Honeywell, and General Electric could win lucrative contracts, and US defense and cybersecurity companies can help protect critical infrastructure worldwide. 

With more energy terminals, pipelines, storage facilities, and free‐​trade zones constructed around the world, the US energy industry would enjoy more destinations for its oil, gas, and coal. And with 80 percent of the people in the developing world not connected to the Internet, American tech companies like Google, Amazon, and Facebook can win numerous new users, as more people become connected to the World Wide Web via energy and communication infrastructure. In seeking new growth engines and job‐​creation opportunities, Washington would be remiss to ignore the benefits to US businesses offered by the [Belt and Road Initiative].

Such analysis comports with some of my own thinking expressed in a paper published this week. As the section focused on China’s infrastructure initiatives notes: 

U.S. businesses, workers, and consumers, bearing no direct financial risk from [One Belt, One Road] or the [Asian Infrastructure Investment Bank], stand to benefit from those initiatives to the extent that they succeed in spurring more trade and greater prosperity in the region…policymakers should recognize that, although China may not be operating directly out of the preferred U.S. playbook, its efforts could serve to advance the broader U.S. objectives of peace and prosperity in Asia.

During the Obama administration, the U.S. evinced concern over China’s effort to establish the Asian Infrastructure Investment Bank, which is a key element in the country’s strategy to improve and expand the region’s infrastructure. The administration’s stance was viewed as a mistake by a variety of analysts, and President Obama later attempted to finesse the issue by claiming it was just a misunderstanding. President Trump, for all of his strident anti‐​China rhetoric on the campaign trail, dispatched a member of his National Security Council to attend China’s first Belt and Road Forum last May, and is reported to have made comments favorable towards China’s infrastructure push. 

Such developments provide encouragement that the U.S. is trending away from its initial skepticism, if not hostility, towards China’s infrastructure initiatives. If so, it is a welcome shift, and one that we should hope continues. These are yet early days, but China’s leadership on this and other economic initiatives in the region could help to literally pave the way towards expanded trade and prosperity.