Kevin J. Fandl Immigration and Trade
Development of U.S. Immigration Law • 1790 – First immigration law passed – required residence for 2 years to be naturalized. • 1862 – First restriction on immigrants passed – prohibited Chinese “coolies” from entry. • 1864 – Immigration control passed to the State Department as a foreign affairs matter. • 1875 – Prostitutes and criminals banned from entry. • 1882 – 1943 – Chinese Exclusion Act banned Chinese immigrants.
Development of U.S. Immigration Law • 1891 – Immigration Act created the Bureau of Immigration within the Dept. of Treasury (first comprehensive immigration reform). • First enactment of rules of deportation. • 1907 – President given authority to ban immigrants if their presence would affect U.S. labor market (first linkage between immigration and labor market). • 1921 – Quantitative restrictions begin based upon 1910 census. • 1940 – Immigration becomes a national security matter.
Modern Immigration Law • 1952 – The Immigration and Nationality Act (INA) is passed, with broad sweeping reforms. • 1965 – Quota system dismantled. New labor restrictions, including labor certification, begin. • 1986 – Immigration Reform and Control Act grants amnesty to immigrants present since 1982 and increased enforcement. • 1996 – Antiterrorism and Effective Death Penalty Act (AEDPA) and Immigration Reform and Immigrant Responsibility Act (IIRIRA) passed. Border security becomes a priority.
Latest Changes • USA Patriot Act of 2001 increased border enforcement and embedded terrorism in immigration investigations. • Homeland Security Act of 2002 dismantled the Immigration and Naturalization Service (INS) and created U.S. Immigration and Customs Enforcement (ICE) and U.S. Citizenship and Immigration Services (USCIS).
Flower Trade • Envision the following scenario: • Colombia is a major exporter of flowers. They have an environment suitable to a variety of flowers and maintain low-cost labor to grow, pick, cut, pack, and ship flowers to various countries. The U.S. is a major destination for these flowers.
Flower Trade (cont.) • Flowers, like all goods, exported to the United States are subject to a tariff, or tax, upon entry. Many tariffs vary based upon certain agreements with exporting countries. In the case of flowers from Colombia, they enter the United States duty free under the Andean Trade Preference Act (listed as Special “J” in the USHTS).
Result – productive trade • Flowers are more affordable in the U.S. because they are imported from a low-cost producer. Flowers produced in the U.S. that are less competitive are forced to improve their efficiency, reduce costs, or otherwise innovate to remain competitive.
Modified Scenario • Rather than flowers, now envision the same trade route, but with people. Colombia produces individuals at lower cost (surplus labor) that can be competitive on the U.S. market, that can help lower prices on consumer goods through lower production costs, and that can be supplied in bulk. Should trade preferences lead to the import of more individual workers from Colombia?
Protectionism • If the U.S. put a quota-limit on the import of Colombian flowers, they would be in violation of their obligations under the WTO and the GATT. Yet because migration is viewed as distinct from goods trade, immigration laws that limit the number and type of people permitted into the United States are accepted and rarely challenged under international trade law.
Why is labor treated differently? • Migration is distinguished from goods trade primarily for political, rather than economic reasons. • 1) Immigrants are seen as job-stealers; however, economists largely agree that increased immigration has little impact on existing jobs and may in fact increase the number of available jobs; • 2) Immigrants are seen as a resource-drain; however, working immigrants, especially those with special skills, contribute through taxes and by laboring at jobs that might otherwise be vacant; • 3) Immigrants are seen as a challenge to the cultural makeup of the country. This is certainly understandable, so the question becomes whether a diverse country of immigrants like the U.S. wishes to continue diversifying based on labor market changes, or whether it wishes to remain constant in its current cultural makeup.
Labor Liberalization • Major trade studies conclude that removing immigration barriers will create economic growth benefits far exceeding complete goods trade liberalization. • Labor liberalization would also greatly benefit the goal of redistributive wage rates, allowing countries that often send migrants to see real wage gains, possibly offsetting future exports of migrant workers.
Are People Goods? • If migrants are treated in the international trade system as goods, they acquire all the protections that goods have: • Most Favored Nation status – migrants from all countries will be treated equally • National Treatment – domestic workers will not be favored over foreign workers • However, migrants tend to be treated in the services category, which relegates them to a different category of trade.
GATS • The General Agreement on Trade in Services is the first international attempt to integrate migrant labor into the world trade system. • GATS encompasses three “modes” of services: • Mode 1: Cross-border supply is defined to cover services flows from the territory of one Member into the territory of another Member (e.g. banking or architectural services transmitted via telecommunications or mail); • Mode 2: Consumption abroad refers to situations where a service consumer (e.g. tourist or patient) moves into another Member's territory to obtain a service; • Mode 3: Commercial presence implies that a service supplier of one Member establishes a territorial presence, including through ownership or lease of premises, in another Member's territory to provide a service (e.g. domestic subsidiaries of foreign insurance companies or hotel chains); and • Mode 4: Presence of natural persons consists of persons of one Member entering the territory of another Member to supply a service (e.g. accountants, doctors or teachers). The Annex on Movement of Natural Persons specifies, however, that Members remain free to operate measures regarding citizenship, residence or access to the employment market on a permanent basis.
GATS Mode 4 • The most applicable mode of GATS to immigration is mode 4, which applies to the movement of natural persons on a temporary basis to provide services in another member state. • In theory, GATS distinguishes between temporary and permanent residence, allowing countries to regulate the latter but not the former. • GATS also includes exceptions allowing countries to regulate their borders and control immigration within labor markets integration agreements.
U.S. Immigration Law under GATS • The U.S. has interpreted its commitments under GATS to include an expansion of the number of available work visas for highly-skilled workers that do not displace an American worker. No mention about relieving rigid laws limiting less-skilled workers has been made. • Highly skilled workers in the United States are granted H-1B and H-2 visas, which allow them to remain in the country for roughly six years under the sponsorship of an employer and after an extensive labor certification process.
Problem: Economic gains from the free movement of people are being impeded by immigration laws.
People are more valuable than goods, economists conclude • A 2002 study by economists Alan Winters concluded that a 3% increase in temporary foreign labor in host countries would expand global economic growth by $156 billion, whereas full liberalization of goods trade would provide an increase of $104 billion. • According to Marion Panizzon of the World Trade Institute, the main reason that politicians overlook this fact is that goods trade is reciprocal (both countries have things to import and export), whereas with immigration, there is little demand for workers in developing countries, and little motivation to export labor from developed countries.
Policy Problem • The gains from labor liberalization are potentially lucrative for developed and developing countries. However, politics has driven immigration policy as labor unions and some lobbyists in developed countries advocate for more protectionism against cheap foreign labor. • Consumers are losing this debate and paying more for their goods and services than full liberalization would allow.
Legal Problem • U.S. immigration law currently has only a few opportunities for migrant workers to enter: • Professional visas (H-1B, H-2) requiring labor certification and a sponsor; • Investor visas (E1, E2) require substantial investment in the United States; • NAFTA visas (TN) allow work in a specially-negotiated industry in the NAFTA annex; • Intra-company Transferee visas (L-1) allow transfers to branches of major multinationals for temporary work. • Less skilled workers may only enter under special guest-worker programs (H-2A visas). • Most worker visas require certification that an American is not available to take the job.
Policy Proposal • Open the borders and tax the immigrants as they enter. • This idea originates with economists such as JagdishBhagwati and Howard Chang and was proposed as long ago as 1983, before IRCA and IRIIRA, but it never gained traction in Congress. • In order to offset losses to American jobs and the U.S. social security system, immigrants could be taxed at the border as if they were goods paying a tariff.
The Immigrant Tariff • All employment-bound immigrants would be subject to a tariff, and the level of the tariff would vary with the level of skill and demand for workers in that profession. • Rather than subjecting immigrants to rigid visa applications, labor certification, or dangerous clandestine border crossings, this approach would allow all immigrants (following security and criminal checks) to enter after the payment of a tax that will reimburse the public bursary and compensate displaced American workers. • Illegal immigrants found on the interior once this policy takes effect would simply be fined as if a good came into the country without paying the appropriate tariff – a fine and the original tax would be levied.
Why is this solution reasonable? • Illegal immigration is a large and growing problem and is only relieved when adequate worker programs are in place. • Consider the Mexican Bracero program of 1942-1964, which allowed thousands of guest workers from Mexico to enter to work in agriculture. When the program was terminated, the number of undocumented immigrants in the U.S. substantially increased. • In 1986, President Reagan gave amnesty to millions of illegal immigrants that had accumulated in the country and fallen out of status since 1964. • In 1996, President Clinton had to again provide amnesty for those that accumulated since 1986. • Now, Presidential candidates Obama and McCain have each supported amnesty to at least part of the estimated 12 million undocumented workers in the U.S. • Under past and proposed immigration policies, immigrants will be either removed temporarily or allowed to remain under rigid conditions. If they remain (or when they return), no compensation will be provided for their usage of social services or their potential displacement of American workers. And they will be followed by millions more looking for work. • The immigrant tariff works to fund public services that both immigrants and citizens will utilize, and provides investment funds to send displaced workers to school or job training programs without curtailing the growth of industry.
The Candidates’ Political Positions Senator Obama Senator McCain • Secure borders – personnel and technology. • Expand number of legal immigrants (more visas). • Current illegal immigrants can register, pay a fine, and become legal. • Revision or elimination of worksite enforcement program to focus more on employer sanctions. • Promote economic development with Mexico. • Secure borders – physical (fence) and virtual. • Improve the employer verification program. • Expand the temporary worker program. • Registration program for undocumented workers – criminals will be deported, others must pursue residency.
Political Positions Senator Obama Senator McCain
Conclusions • Domestic conclusions: • The current structure of U.S. immigration law is not realistic. Regardless of the limit we place on immigrant visas, the number of legal and illegal entrants remains steady and high. Comprehensive reform must focus on supplying U.S. businesses with the best labor from anywhere in the world and regulating migrants through tax and registration systems upon entry. • Global conclusions: • Trading nations recognized the importance of migration in trade during the Uruguay Round discussions. GATS was meant to be the first step toward the de-regulation of national immigration policies, which serve only as protective mechanisms and limit the realization of global economic gains. Countries must take more serious steps toward open immigration policies if they are to remain competitive in the 21st century.