Another Immigration Message from Arizona

Last year sometime, when the Arizona immigration law S.B. 1070 was big news, I was preceded on a cable TV talk show by an Arizona state senator who had sponsored the legislation. As I sat in a remote studio in Washington, I could hear the senator in another studio rattle off what seemed an unending list of people in his state who had allegedly been killed by illegal immigrants. Knowing that the state’s violent crime rate has actually been declining and is the lowest it has been in 40 years, I thought to myself, “This guy is a first-class demagogue.”

Apparently his constituents agree.

Gov. Perry and Those DREAM Act Kids

Texas Gov. Rick Perry has been beaten up in recent GOP presidential primary debates over his signing of a bill in 2001 giving in-state tuition to illegal immigrant kids in Texas. Look for the issue to come up again at tonight’s debate in New Hampshire.

In a free society, so-called DREAM Act legislation would be unnecessary. Opportunities for legal immigration would be open wide enough that illegal immigration would decline dramatically. And higher education would be provided in a competitive market without state and federal subsidies. But that is not yet the world we live in.

With Friends like Sen. Sessions, Free Trade is in Trouble

According to a story in Politico today, Sen. Jeff Sessions of Alabama has been whipping his Republican colleagues to vote in favor of the China currency legislation that appears to be headed for passage in the Senate. (My Cato colleague Dan Ikenson has explained  why raising tariffs on imports from China would be a mistake.)

The Politico story says that Sessions is “traditionally a proponent of free trade,” but his actual voting record indicates otherwise.

Finally, a Vote on the Three Trade Agreements

Almost a thousand days into his term, President Obama has at last submitted the trade agreements with South Korea, Colombia, and Panama for an up or down vote in Congress.

All three agreements appear to have majority support in both the House and the Senate. Organized labor is putting up its usual anti-free-trade fight against all three, with AFL-CIO boss Richard Trumka coming out swinging in a Politico op-ed this week. He makes the standard union argument that Colombia is an unworthy free-trade partner because of ongoing violence against union members in that country.

In a Free Trade Bulletin earlier this year, my Cato colleague Juan Carlos Hidalgo and I examined the commercial benefits of the agreement with Colombia as well as the hollowness of the union charge. In the past decade, Colombia has made tremendous progress against violence in general, and especially violence aimed at union members. In fact, as we write in the FTB:

The statistics on the number of killings against union members vary depending on the source, with the figure from the government’s Ministry of Social Protection being lower than that of the National Union School (ENS for its acronym in Spanish), a Colombian nongovernmental organization affiliated with the labor movement. However, both sources show a steep decline in the number of killings since 2001. Moreover, when compared with the total number of homicides in the country, killings of union members clearly have dropped at a faster rate than those of the general population.

Critics of the FTA fail to recognize that violent crime affects all levels of Colombian society, not only trade unions. What is more, the statistics show that union members enjoy more security than the population at large.

Looking at the homicide rate as defined by the number of murders per 100,000 inhabitants, the rate for the total population in 2010 was 33.9 per 100,000, whereas the rate for union killings was 5.3 per 100,000 unionists that same year (using the statistics of the ENS). That means that the homicide rate for the overall population is 6 times higher than that for union members.

Having just returned from a speaking trip last week in Medellín, Colombia, I can vouch that, after a difficult period of battling Marxist guerrillas and drug cartels, Colombia has once again become a normal country with a growing economy. Medellín is a bustling, business-oriented city with the usual challenges of traffic congestion. The students I spoke with at EAFIT University seemed eager for closer ties with the United States, and they do not understand why it has taken almost five years since the signing of the agreement for Congress to schedule a vote on it.

As I explained in an interview with the city’s leading newspaper (conducted in English, but translated here in Spanish), the politicians in Washington have run out of excuses for not establishing free trade between our two countries.

[Our Cato colleague Doug Bandow made the case for a trade agreement with South Korea in a study we released last year.]

Post-9/11 Visa Delays Hurting U.S. Exports and Jobs

The terrorist attacks of a decade ago left their mark on U.S. trade, travel and immigration policy, as I contemplated in my modest contribution to the flood of 9/11 retrospectives this week (see “9/11 tested America’s openness to trade and immigration,” posted over at The Daily Caller).

In the wake of the attacks, it was necessary to tighten U.S. visa policy in a way that made it far more difficult for a terrorist to ever enter our country again in the disguise of a tourist or student (as in shutting down the “Visa Express” program for young men from Saudi Arabia).

One unintended consequence of the tightening, however, is that we have also kept away millions of potential visitors who pose no threat whatsoever to the security of our homeland. As the Wall Street Journal reports today, long waits for visas have discouraged potential tourists to the United States from emerging markets such as China, Brazil, and India. As the Journal reports:

The backlog especially has deterred tourists from emerging-market countries with fast-growing pools of people looking to travel overseas, travel executives say. Waiting periods for a Brazilian to get an in-person interview for a visa to enter the U.S., for instance, can exceed four months.

Those delays have imposed a real cost on the American economy. Between 2000 and 2010, according to the story, the number of overseas arrivals to the United States barely budged, from 26 million to 26.4 million. During that same period, global long-haul arrivals grew from 152 million to 213 million—an increase of more than 60 million fueled largely by the growth of the middle class in those emerging economies. But that also means all those new travelers went elsewhere, reducing the U.S. share of long-haul visitors from 17 percent to 12 percent.

That loss of market share means the loss of tens of billions of dollars in tourism service exports, and fewer jobs for Americans in the domestic tourism industry. If President Obama and Congress are serious about promoting economic growth and employment,  they should find a way to make America more hospitable for peaceable foreign tourists who only want to come here to enjoy the best our wonderful country has to offer.

Griswold debates Romney on trade with China

Mitt Romney says we need to get tough with China over trade to put Americans back to work. Here’s my response, as quoted today by Bloomberg Businessweek:

Daniel Griswold, who studies trade policy at the libertarian Cato Institute in Washington, said China can only be pushed so far.

“If we go down the road to trade confrontation with China, it could cost Americans jobs in terms of our exports and investments,” he said. “There’s definitely a wing of the Republican Party which is really itching to pitch a trade fight with China.”

Griswold added: “These are good applause lines. They won’t do a thing to put 14 million unemployed Americans back to work.”

For the record, I actually said “pick a trade fight,” but I don’t think we should pitch one, either.

“America is not a stagnant country”

We have a lot to concern us as Americans on this Labor Day 2011, but this bullish quote from Daniel Chung, CEO of Fred Alger Management, in the latest issue of Barron’s Weekly is right on the mark:

America is not a stagnant country. We have a relatively youthful population. Our technology and media industries are the envy of the world, and the Internet is most dynamic in those areas. Europe, China and Japan, for all their attempts, have not been able to replicate our success in innovation of technology and media. We are still a great engine of innovation and growth.

By the way, of the 39 Fred Alger employees assigned to its offices on the 93rd floor of One World Trade Center on September 11, 2001, 35 of them died in the terrorist attacks. Chung was one of four out of the office that day.

For U.S. Multinationals, More Jobs Abroad Mean More Jobs at Home

We haven’t heard politicians complain much lately about “tax breaks for U.S. companies that ship jobs overseas,” perhaps because the next federal election is still more than a year away.

An article in the Financial Times today shows why that charge rings pretty hollow anytime in the election cycle. In an interview with CEO Doug Oberhelman of Caterpillar Inc., the FT notes that the Peoria, Ill.-based maker of earth-moving equipment has been thriving even though the domestic U.S. economy has been stuck in low gear.

Like many U.S. multinational companies, Caterpillar has been expanding its sales and profits by selling its products in rapidly growing emerging markets while spreading its production facilities around the world. Here’s the key passage for those politicians who complain about U.S. companies investing and hiring abroad:

In recent months, [Caterpillar] has announced plans for new factories in Singapore, Thailand, China and Brazil.

In the US, it is building a new distribution centre in Washington state while expanding its factories in North Dakota and Kansas.

Caterpillar has hired about 29,000 people worldwide in the past 20 months, some 13,000 of them in the US, with most of the rest in China, Brazil, Mexico and the UK.

The Caterpillar experience shows that job creation is not a zero-sum game, where jobs created abroad by U.S. companies must come at the expense of production and employment in the United States. In fact, as I show in my 2009 book Mad about Trade (pp. 100-104), the Caterpillar experience is not unusual. U.S. employment by parent companies will typically rise and fall in synch with employment at their affiliates abroad. For U.S. multinationals:

Foreign and domestic operations tend to complement each other and expand together. A successful company operating in a favorable business climate will tend to expand employment at both its domestic and overseas operations. More activity and sales abroad usually require more managers, accountants, lawyers, engineers, and production workers at the parent company.

As for those “tax breaks for shipping jobs overseas,” I explained why they are not a problem in an op-ed in the New York Post during the last election cycle. Keep it handy for when the demagoguery starts flying again next fall.

A Congressional Tutorial on the Benefits of Free Trade

A survey released this week found that almost 80 percent of members of Congress have no academic training in business or economics. Yet they debate and pass all kinds of legislation seeking to steer the economy, business and trade in one direction or another.

For those four out of five members, my column in the Washington Times this morning, “Free Trade 101 for members of Congress,” offers a crash course in the benefits of free trade and globalization for Americans. Here’s an excerpt from the lecture, er, column:

Protectionism is really a tax on the poor. Our highest remaining trade barriers unfairly tax products made and grown by poor people abroad and consumed disproportionately by poor families at home. We still impose unconscionably high tariffs on imported food, clothing, and shoes — the basics of a poor family’s budget. The $26 billion we collect each year from duties on imports represent the federal government’s most regressive tax. Free trade is a tax cut for the poor.
Trade is not about more jobs or fewer jobs; it’s about better jobs. Trade only accounts for 3 percent of job displacement. Technology and internal competition displace far more workers. Just ask folks laid off from Borders, Blockbuster or Kodak. (Bought any film lately?) Our high unemployment today has nothing to do with trade but with our “Made in the USA” housing bubble and failed stimulus.

Members of Congress who have any questions are welcome to visit with me during my normal office hours.

Deport Criminals, Not Students and Needed Workers

Tea Partiers of all people should understand this concept: The federal government’s resources are limited and should be focused on its core duties of administering justice and protecting basic rights. In that light, the Obama administration made a sensible decision this week to concentrate on deporting illegal immigrants who threaten the health and safety of Americans.

At the latest count, there are still 11 million people living in the United States without government authorization. The government would be incapable of deporting them all, and even if it could, it would cause tens of billions of dollars in damage to the American economy, as Cato research has demonstrated. Even the 300,000 illegal immigrants currently being processed through the deportation pipeline are clogging the system and drawing resources away from more important business.

In a letter to Senate leaders, Department of Homeland Security (DHS) Secretary Janet Napolitano said the administration would from now on concentrate on deporting those in the system who have committed serious crimes or who have any connections to crime or terrorism. As the secretary explained:

From a law enforcement and public safety perspective, DHS enforcement resources must continue to be focused on our highest priorities. Doing otherwise hinders our public safety mission—clogging immigration court dockets and diverting DHS enforcement resources away from individuals who pose a threat to public safety.

That sounds pretty reasonable. The flip side of the policy change is that hundreds of thousands of peaceable, otherwise normal immigrants who are working and studying in the United States without the right documentation will be allowed to stay and possibly even apply for legal status. Included in this group are undocumented spouses of U.S. military personnel, immigrants who were snared in the system when they actually reported crimes to police, and students who came to the United States as young children with their undocumented parents—students who would be eligible for legal status should Congress pass something like the DREAM Act.

Conservatives such as Rep. Lamar Smith (R-Texas) complain that the administration should be enforcing the law rather than ignoring it, but as I’ve argued for long time, the law as it is currently written is unenforceable and needs to be changed.