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.

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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.

The Unhappy 40th Anniversary of Nixon’s Wage and Price Controls

Forty years ago today, President Richard Nixon shocked the country and the world, not with an escalation of the Vietnam War or a political scandal, but with an edict on the economy that reverberates to this day.

In a surprise televised speech on Sunday evening, August 15, 1971, the president announced that he would immediately impose wage and price controls, slap a 10 percent duty on imports, and suspend the international convertibility of the U.S. dollar into gold. All were to be temporary measures, of course, to promote jobs, dampen inflation, and combat “international money speculators” betting against the dollar. (You can read the entire speech here.)

What came to be known in the international finance world as the Nixon Shock is worth remembering four decades later as a warning against the abuse of executive power over the economy. Nixon’s intervention failed to boost the economy in a sustainable way while causing real damage that took years to correct.

The centerpiece of the Nixon Shock was its controls on prices. In a market economy, freely fluctuating prices are the nervous system that coordinates supply and demand. Yet in one of the more chilling statements delivered by a U.S. president, Nixon told the nation that evening,

I am today ordering a freeze on all prices and wages throughout the United States for a period of 90 days.

The price controls did tame inflation temporarily, but it came roaring back within three years to double-digit levels and persisted through the 1970s because of loose monetary policy. A tight lid on a boiling tea pot can only contain the steam for a time before it explodes.

The controls continued on gasoline, causing artificial shortages (as price controls usually do) symbolized by gas lines during the 1970s. Only when President Reagan finally lifted the controls on oil and gasoline in 1981 did the specter of short supplies finally disappear. (The 10 percent import surcharge did prove to be temporary, lasting only until the end of 1971.)

Closing the gold window was arguably inevitable given the lack of monetary discipline by the U.S. central bank. By 1976, the dollar and other major currencies were floating freely, which has turned out to work rather well, as Milton Friedman predicted it would. It also turned out that pressure on the dollar to depreciate was not driven by speculators after all but by the surplus of dollars that had been created to finance the Vietnam War and the Great Society.

One lesson of the Nixon shock is that if politicians are granted “emergency powers” they will tend to abuse them in situations that were never envisioned when the powers were originally granted. A second lesson is that “temporary” measures have a habit of becoming permanent. The big lesson is that the power of politicians over the economy should be limited. Any request for temporary emergency powers should be greeted with the deepest skepticism.