Free Trade Nation

WHAT’S HAPPENING IN THE FREE TRADE NATION (updates and new stories marked with an *):

• Does ASEAN want trade: The Southeast Asia trade group is looking to firm up ties with Australia, according to the Canberra Times, a matter of discussion on Free Trade Nation. And, while pursuing a deal with India, it has already reached agreement with China and South Korea on reducing some tariffs. But dealing with the EU will be a trickier matter, reports the Bangkok Post. Reportedly, the EU wants to expand talks to include discussions over government transparency and environmental regulations. Thailand, in particular, isn’t interested in covering such matters under any negotiations; Myammar — which has been a particularly nasty actor on the world stage over the past few months — is probably even less likely to subject itself to extensive talks.
• Are bilateral deals real steps towards free trade? So asks Mark Flandreau of ResourceInvestor.com, who takes a look at the history of such deals — including the first treaty to grant Most Favored Nation status to another — and concludes otherwise.
• When will the U.S. approve the UN Convention on the Law of the Sea: Democrat bigwig Leon Panetta and retired admiral James Watkins poses this question to the Democrat-controlled Senate in the San Francisco Chronicle. The possibility of underwater oil resources, along with the push to claim them by Russia and other countries, is making that question more important than first thought. Meanwhile Japan is using the law to clarify its own anti-piracy rules, according to The Daily Yomiuri.
• How is Europe hurting Africa today: Oxford’s Paul Collier argues in The Guardian that the ban on the import of genetically modified foodstuffs has caused African nations — which depend on Europe as a market — to not use the seeds that can help them boost agricultural production. As a result, the food shortages faced by the continent has been exacerbated by thoughtless, inflexible animus against progress. The Guardian’s lefty, anti-GM readers, respond as expected.

Next step: Hit Expedia for cheap tickets.

HOW MUCH CHEAPER is it to get a medical procedure done outside the United States than within the 50 states? The Economist gives us a sobering answer in this chart to the right. Perhaps it may be time to fly to New Delhi for that hernia surgery you need to get.

Coming in. Leaving out. Ships such as this one in San Francisco Bay bring the cargo America needs and sends out the imports the world wants.

What’s happening in the free trade nation. Updates and new stories are marked with an *:

• How not to handle imports: As part of its latest move to improve safety from terrorism, the U.S. Customs and Border Protection Bureau is attempting to enact a rule called 10+2, through which it would collect 10 new categories of detailed information on shipments — including physical location of the cargo aboard ships — coming to and from the country within 24 hours of being transported out, according to The Detroit News. The problem? It could lead to delays in gettingFree Trade Nation › Edit — WordPress cargo to companies, especially those manufacturing on a “just in time” basis. Now the National Association of Manufacturers and other groups are looking to delay or scrap the law altogether.
• More perspective on Doha: This time, from legendary Columbia University economist Jagdish Bhagwati and his colleague, Arvind Panagariya, in the New York Sun. Noting that the more successful Uruguay Round took longer to resolve itself, they contend that there is plenty of room for compromise by Indiana and the United States on the matter of allowing for the former to get the use of one of those Special Safeguard Mechanisms to protect its farmers. What Bhagwati and Panagariya fail to mention is the battling within the G-7 over the bound rate — or maximum tariff they can charge over the amount agreed during another World Trade Organization negotiation session — that each can have. Compromise may not be so easy after all.
• Why Southern Africa’s trade regime may not work: Corrupt, theft-prone kleptocrats. A leading nation with leadership unwilling to ride herd on its allies over anything. And, of course, Mugabe and Zimbabwe. And this isn’t even considering the theatrics of the King of Swaziland, who isn’t known for any restraint. No wonder why Cape Times columnist Hans Pienaar isn’t placing bets on the success — or even the survival — of the newly-launched Southern Africa Development Community. The battling with the European Union over the replacement of special arrangements these nations have had with the far larger trade block may also play a part in deciding SADC’s future.
• Reminding people of the benefits of free trade: The Consumer Electronics Association has put together “America Wins With Trade,” a national tour on which politicians are introduced to companies with major overseas sales. Among them: Kimber Cable in tiny Odgen, Utah, for which foreign sales account for more than 75 percent of weekly sales.
• Protecting German businesses from foreign acquisition: Earlier this year, the Japanese began putting together renewed efforts to keep multinationals from buying its domestic firms. Australia is weighing the same effort. And now, Germany — long a fan of keeping foreign ownership to almost nil — is proceeding with its own efforts, according to Forbes. The German government plans to review any acquisition of interests in German firms greater than 25 percent by firms not based in Europe . Essentially, the rule will target American, Brazilian and Chinese firms (the latter of which are flush with cash from domestic growth and rise in commodities prices) as well as sovereign funds controlled by Singapore, Dubai and Abu Dhabi. As if Germany, a country struggling to improve its economic growth, can afford to spurn any form of foreign investment.

Global nomads such as documentarian Frances Darwin are among the thousands of young men and women who can help bring an understanding of world culture to the West and the East -- and ultimately, bring more understanding of each other. (Photo courtesy of TCKid.com)

Giving you the reporting and commentary needed for a free trade nation. Updated throughout the day (new stories and updates marked with an *):

• Expanding trade on their own, mon: The 15-nation Caribbean Community is putting together its own trade pacts, this time forming an Eastern Caribbean trade pact that would include Trinidad and Tobago, according to domain-b.com. This follows moves being made by ASEAN, India and the Southern African Development Community to put together their own multilateral deals. As Doha looms as something between distant memory and ever-present source of hope, more nations are just simply passing by WTO in order to pull together their own arrangements. The question becomes how much of this is due to frustration with Doha or an overall dissatisfaction with an international trade negotiation (and economic community) structure that includes slow-growing European nations (and Canada) and leaves out India and China, the fastest-growing long-term potential economic giants.
• And the group of Doha negotiators gets smaller: Crawford Falconer will end his service as agriculture chairman overseeing Doha negotiations, according to Pakistan’s Daily Times. He’ll probably miss the meals, but not the rest of the negotiating madness.
• More H-1B bounce for the ounce: TechRepublic’s Jason Hiner explains why the nation is limiting its economic growth through the use of H-1B quotas and limits on foreign skilled worker visas. From his perspective: “The real issue behind the H1B opposition is usually a bit of unbridled nationalism.”
• Immigration lawyer Angelo Paparelli looks at Judge Faith Hochberg’s ruling on the Programmers’ Guild lawsuit and is bemused that USCIS is using arguments that have been made by employers and others supporting the expansion of H-1B visas and consideration of special circumstances such as employing the foreign students at the heart of this case (some of which have been rejected by the agency itself in administrative rulings). Writes Paparelli: “If USCIS won’t listen to employers, foreign citizens and immigration lawyers, maybe they’ll listen to themselves.”
• On the side: Vdare’s Web site, of course, has a different take on Hochberg’s ruling. Take a guess on their position.
• And on the right: Same for the folks at Slashdot, but for different reasons. Some argue, rightfully, that H-1B visas are too inflexible and limit the right of foreign workers to change jobs at will. This is true and H-1B needs to be amended to be more flexible (while also dealing with the reality that employers bear the cost of processing those visas in the first place). Doing so, however, would lead to opposition from the Vdare crowd. Sometimes, the best solution for a problem is a better version of the status quo.
• *What is the difference between a flat-screen monitor and an LCD television? This isn’t a silly question. As Trade Diversions points out today, the United States and Taiwan are battling with the European Union over whether one of these can be taxed based on the kind of new technologies that may have been added to them. Fun.
• Another benefit of globalization — Third Culture Kids: The sociological term for expatriate children, many of whom return to their home countries with wide exposure to different cultures, may be a horror to anti-globalization types who rather have people stick to their indigenous cultural norms that become worldly. But, as seen in Daily News Egypt’s piece on the these kids, TCKs are more diverse than one may think. Some actually remain more attached to their native cultures than one would expect. Others feel out of place in Egypt’s Muslim-yet-secular culture. The good news, however, is that by feeling so out of place, these kids may be able to move the nation’s culture — an autocracy which teeters on becoming more fundamentalist — further toward Western norms such as equal rights for women and a more pluralistic religious society. And what can be so wrong about abandoning the barbaric?
• Meanwhile, check out Frances Darwin’s bio-doc on her time growing up in China. And check out her YouTube site as well.

*Sing to the melody of “If You Don’t Know Me By Now.”

Then why has the nation gained from it. A perusal of Commerce Department trade statistics shows that America’s exports to NAFTA partners Canada and Mexico increased by 65 percent between 1998 and 2007. Between 2003 and 2007, U.S. exports increased by 44 percent. For farmers in Indiana, NAFTA has opened up a new market for their white corn crops, even as Mexican and Canadian firms have also increased their U.S. sales. And since American firms are firmly entrenched in the Canadian and Mexican economies through their divisions based there, the U.S. continues to gain in any case.

While one would argue that imports from NAFTA countries into the U.S. increased by 94 percent and 45 percent respectively during those periods, those growing imports are signs of two things. The first? That Canada and Mexico are now improving their respective economies, which means growing prosperity for North America; this, in turn, improves the chances that they may eventually be able to contribute even more substantially to improving security against terrorists and nation-based threats. The second? That more Mexicans, depending on how the nation handles its problems of drug lord-related lawlessness and whether it unbounds its domestic economy from oil and telecom monopolies, can see eventual improvement in their economic lives. And again, since U.S. firms also own large-scale operations in those companies, it can be said that the U.S. benefits, even if it doesn’t always show up on Commerce Department information sheets.

Essentially, it is better for all three countries that the U.S. actually helps these countries — and our other allies — through the buying and selling of goods than through such subsidy arrangements such as foreign aid and indirectly, expanding border security.

The big issue when it comes to America’s future in the global marketplace, especially in dealing with NAFTA’s partners, lies not with any trade deficit, but with America’s educational system (which is woefully inadequate) and dealing with both current and long-term budget deficits caused by increasing federal and state-government spending. Then there is the long-term cost of sustaining Medicare, Medicaid, Social Security and public employee pensions — the last having been heavily underfunded for the past three decades.

All that is happening inside — and outside — the free trade nation. Update throughout the day (new stories and updates marked by an *):

• Third-world country with first-world munitions: For all of Russia’s bluster and wielding of military might last week during its invasion of Georgia, the Bear remains a second-rate power, notes Shopfloor.org. The nation remains America’s 30th-largest source of imports, according to the U.S. Department of Commerce, far behind Canada, Mexico, China and Japan. Meanwhile the U.S. exports plenty of beef and nuclear reactor parts to Russia, which, by the way, has difficulty maintaining either its military or its atomic weapons arsenal.
• Time to cut tariffs: So declares The Australian to Prime Minister Kevin Rudd and his administration. From where the paper sits, the local car industry shouldn’t get A$2 billion in new subsidies nor should it be coddled any longer. After all, why keep around an industry that controls just 20 percent of its own market, sells most of its cars to the government anyway, and is outsold by tiny Japanese automaker Mazda and other foreign manufacturers? Drivers have already voted against domestic manufacturers with their feet — and keys.
• Throw some water on Doha*: Peter Gallagher checks out some of the proposals bandied about at Doha. Needless to say, he’s not impressed. America, the EU, Japan and Canada would have still extended their protectionist farm quotas at the expense of the rest of the world. Says Gallagher: “Barriers to farm trade would have remained high as part of the deal.”
• Should governments determine wine quality? Or should global markets?: Such a question — one of many — come up in this International Herald Tribune report on the battle between vintners and the French government over the classification of wine. This isn’t a new battle. From the battle over what watches should be classified as “Swiss Made” (versus “Swiss Parts Movement” and other wording that notes that a watch was partly made elsewhere, even though a good number of such watches have parts that come from other countries) to cheese, the classification issue will be a major focus within countries and on the global market for years to come, even though no one believes that one country has a monopoly on any quality good.
• Want to solve food shortages? How about some free trade*: So suggests Universidad de San Andrés professor Kkatchik Der Ghougassian in a Turkish Weekly column to Lula, Hugo and the rest of the leaders of Latin American nations. From where he sits, the leftward shift in economic policy that has taken place over the past decade has done little more than further fuel destabilizing coca production and resulted in more food stress.
• One solution for reviving the housing market — increase skilled immigrant quotas*: So suggests former Federal Reserve chairman Alan Greenspan to the Wall Street Journal’s David Wessel. By bringing in new households with the money to afford homes, the housing market can improve itself. Just as importantly, from where I sit, luring more skilled workers to this country will also improve its overall economic profile and make it more competitive in the global economy. Some anti-immigrationists, of course, will disagree. So why don’t they offer some ideas?
• For the library*: Lukasz Adam Gruszcynski takes a look at the latest array of trade preferences being put together by the EU. To say that the Europeans are trying to get around the WTO by using other measures is an understatement. Enjoy.
• And feel free to check out my latest piece for The American Spectator, this time, on how Reason magazine’s rating of Chicago as the most nanny-statelike city in America doesn’t fully consider all the problems of the City of Broad Shoulders. For most people, the Second City’s status as first in the nation when it comes to corruption is far more disconcerting than its anti-liberty coddling and toddling.

Japanese auto giant Honda's factory in Alabama, which employs 1,500 workers. One of the benefits of free trade at work.

All that is happening in the free trade nation. Updated throughout the day (new reports and updates are *):

• Back to Doha: Considering the number of times talks at the Doha Round have collapsed (usually over ‘whine’ and ‘cheese’), it is amazing that so many have called the latest breakdown in talks an end to globalization as we know it. But bilateral trade deals were being reached long before Doha — largely because they are easier to pass than broad global deals — and will continue long after. As Peter Clark notes today in the National Post , talks are going to start up again, some compromises will be reached, and ultimately, it will achieve little because of the complications arising from food and energy protectionism.
• Meanwhile the Times of India reports that India — whose demands for protecting its farmers from food imports helped trigger the latest breakdown in negotiations, wants to get back to the table. The nation’s Commerce and Industry MInister, Kamal Nath, admits that: “”Ruled-based multilateral system is very important for everybody, including India… more so important for India because we are engaging more (with the world).” Earlier, India and Britiain crafted a joint statement calling for all players to be more willing to negotiate terms. The question, of course, is by whose rules will everyone play. India and China, of course, want the rules that will protect their industries and growth.
• There is, however, room for skepticism as to whether any negotiations will happen this year. Both Crawford Falconer — who chairs the agriculture negotiations — and Don Stephenson (who oversees negotiations over non-agricultural products), there was “little or no convergence” on a number of the various issues discussed at Doha. Especially in regards to setting the Special Safeguards Mechanisms that led to breakdowns. Worse, of all, on that subject, according to Falconer’s report, “within the G7 itself there simply proved to be unbridgeable differences regarding the triggers for breaching the pre-Doha bound rate.” That is, no country could agree to what would be the difference between the tariff applied by each nation in order to protect their farming interests during periods of higher-than-politically-acceptable imports and the tariff each country agreed to apply to imports during earlier WTO negotiations. Falconer argues that future negotiations will only work if leaders of each of the leading negotiating countries worked hard to reach deals and that the meetings were “invested with realism as regards what happened and why.”
• Either way, negotiations will happen — and things will remain a mess.
• Australia’s protectionism: Peter Gallagher takes a look at the World Trade Indicators and learns that while the rest of the world has cut down their food producer protection schemes, the Aussies remain as protectionist as ever.
• And the Economist* reveals the latest benefit of globalization and free trade: The ability to seek out better medical care, no matter who you are. The magazine also notes a rebound in American exports (likely driven by a less valuable dollar) and the benefits of those rising sales for the world economy and China.

Is immigrant teachers such as Flora Gaskin helping school districts bring down their labor costs? Or do they actually fulfill the need for highly qualified teachers this nation needs. (Photo courtesy of the Washington Post)

Norm Matloff — he of the eponymous Immigration Forum – didn’t take too well to my latest report in The American Spectator on the teacher quality reasons for expanding the H-1B visa program and sensibly reforming immigration overall. As far as he was concerned, the piece was lacking, largely because it allegedly failed to admit evidence that somehow the skilled visa program was merely a tool for school districts and tech firms “to save on labor costs.”

The problem with Matloff’s assertion is that ultimately, he didn’t bring the evidence. Especially on the education front, an area I have covered for the past four years. As yours truly will make clear on Free Trade Nation, anyone can say anything about any subject. What matters most is the facts of the case. One may disagree with conclusions derived from facts, but the facts speak for itself.

When a study doesn’t say what you say it says: Let’s start with one of the two “Congress-commissioned reports” Matloff mentions, a Government Accountability Office study, released five years ago during another round of battling over expanding the program. At best, the GAO report simply concluded that more study was needed. The report couldn’t conclude whether H-1B visas had a negative impact on salaries, as opponents of H-1B proclaim. As GAO concluded: “Much of the information policymakers need to effectively oversee the H-1B program is not available because of limitations of [the Department of Homeland Security's] current tracking systems.”

The report itself has problems, largely because GAO couldn’t get a hold of most of the 135 employers it attempted to contact for its research. The employers they did manage to speak to said that they used H-1B to fill engineering positions. As a result, GAO admitted its results on this front may have been affected by a self-selection bias inherent in any such survey.

Certainly the GAO report did note that many H-1B hires were made by firms outside of the tech sector. But, as noted by the report, tech-related positions accounted for 65 percent of all approved H-1B petitions in 2000 and 40 percent of hires in 2002, as the nation recovered from recessions in the tech industry (and the overall economy). Essentially the evidence shows that tech firms do have a need for high-skilled labor that cannot always be easily filled by native-born Americans. And the fact that tech firms aren’t the only users of H-1B visas merely proves that there are numerous beneficiaries from the program itself.

As for reductions in science- and engineering-related positions mentioned in the report at the time? One must also remember that the recession of the early 2000s adversely affected the tech sector the most; after all, it was the epicenter for growth throughout the late 1990s as companies such as Cisco Systems and dotcom outfits were hiring. It also shows another reality that has been the target of those opposed to lowering trade barriers and globalization: The outsourcing of tech jobs during this decade as firms such as India’s Infosys began handling such operations from their offices in Asia. Companies who cannot hire skilled workers they need will find a way to do so — even if it means moving some of their operations offshore.

And a study that hardly merits attention: Then there is the Urban Institute report, also cited by Matloff as a refutation of the arguments made by myself and others favoring H-1B expansion. Let’s just say that some of the data used by Urban in the report is, well, not worth the paper upon which it is printed doesn’t stand up to scrutiny when closely examined; its overall argument, therefore, begins to fall apart.

[By the way: This is a general problem with data cited by opponents of immigration; the information itself may be ostensibly credible, but doesn't hold up when more closely scrutinized and then compared with other data that can stand up to scrutiny. You can cite anything you want, but it better stand up to the harsh light that is criticism.]

For example, the report proclaims that more 18-24 year-olds have graduated with a high school diploma then during the 1970s, based on the infamous Current Population Survey conducted by the U.S. Census Bureau. Infamous? Yes, infamous, because the survey has numerous holes. For one, institutional populations — the military on one side (which has a large number of GED recipients and thus, a large population of high school dropouts) and prisons (another haven for dropouts and GED recipients) — are not counted in the survey.

As Nobel laureate James Heckman points out, CPS also has a low coverage of population problem; that is, it leaves out large numbers of population groups. For example, it leaves a large portion of the young black and latino male population — groups whose graduation rates are, in general, lower than the overall population. As a result, notes Heckman: “As a result, the overall graduation rate based on the CPS data is
14 nearly 2 percentage points higher than a Census-based estimate” the same group. Essentially, CPS leaves out a large pool of dropouts, thus skewing the percentage of Americans leaving the K-12 education system with a sheepskin; therefore it also skews how many people attend and complete college.

This is why the leading scholars on graduation rates and high school completion — Jay Greene of the Manhattan Institute, Chris Swanson of Education Week (a former Urban Institute scholar), Robert Balfanz of Johns Hopkins University and Michael Holzman of the Schott Foundation for Public Education — never use CPS in their research. They look at actual scholastic enrollment, which is more accurate because schools are actually paid based on the number of children in school.

And based on that data, no one is truly sure what the dropout rate really was in 1972. At best, we know that graduation rates have been in decline since the 1980s. And if one wants to use available data, as Heckman has done by using decennial Census data in his studies of high school completion ( I wouldn’t recommend it), it has declined from 80 percent to 75 percent over the past five decades. As a result, college completion rates have remained essentially flat.

[By the way, Heckman isn't exactly a fan of the Greene/Swanson/Balfanz/Holzman camp; he argues that both the Greene camp and those using CPS data (which also includes noted graduation rate skeptic Lawrence Mishel, who also uses the even less useful NREL data) overstate their case. Having covered the nation's dropout crisis for quite a while, I would disagree. But the fact that his own study essentially counters the argument made by Urban speaks for itself.]

CPS is also not reliable because of the self-reporting bias inherent in it. Those being surveyed must be willing to own up to being dropouts or graduates. Since those being surveyed may fudge that bit of data, the surveys are of questionable accuracy on that front.

This self-reporting bias becomes a major factor depending on what part of the nation in which one lives. There is less of a stigma against dropping out in Indiana — a state long-dependent on traditional manufacturing and less-focused on education — than in states with traditions of college completion such as a Wisconsin.  So those in such states may have more incentive to conceal their lack of a sheepskin.

Meanwhile the other assertion made by Urban — that students are doing better on math and science tests — hardly stands up. The very chart it uses in its own report — of data from the National Assessment for Educational Progress — speaks for itself. Average scale scores for 17-year olds scoring in the 90th percentile — essentially students in the “advanced” category — have remained flat between 1978 and 2003; average scale scores for those scoring in the 25th percentile increased by just ten points during that same period and have been flat for other percentiles. Average scale scores for 13 year olds have increased by only 6 percent during that same period.

The best test for comparison, however, may be between American students and those of other countries, whose academic performance has improved steadily over time to the point that in most tests, America’s best students trail its rivals. On the 2006 Programme for International Student Assessment, for example, ten countries — including Chinese Taipei, Korea, Hong Kong, Switzerland, Finland, Belgium, the Czech Republic and Liechtenstein — have high-performing students with better math test scores than our country’s best students.

Meanwhile Matloff simply suggests that teacher positions — especially in math and science — would be filled if salaries for those posiions were increased. On this front, I would have to partly agree. One of the biggest challenges in education lies in the archaic and inefficient system of teacher compensation, in which teachers are generally paid based on seniority and the number of graduate course work they accumulate over time. Such a system not only fails to reward teachers for improving academic performance, but doesn’t even allow for pay to be differentiated based on scarcity. As a result, science and math collegians pursue positions in better-paying fields.

The system doesn’t save money for school districts at all; they still must pay the teachers the salaries given to native-born colleagues along with the 10 days of sick leave that can be used at any time. If anything, the system benefits, borne during the emergence of the NEA and AFT in the 1960s –  when teacher performance couldn’t be measured at all (versus not so easily measured today) — benefits rank-and-file teachers and unions at the expense of school districts (which benefit from the labor peace the system brings, but lose out on the ability to improve academic performance in a meaningful way), parents and ultimately, students. This is why the system still exists.

Enacting teacher pay differentials rewarding those teaching math and science would help alleviate the shortages. Allowing mid-career professionals to enter teaching through alternative certification programs would also help. But it may not fully relieve those shortages. After all, one assumes that there is a large pool of math and science students who want to teach; given the high attrition among teachers with less than two-to-three years experience (especially in light of the fact that they can usually achieve tenure — and near-lifetime job security) within that time, there may never be enough of such skilled native-born workers willing to go into — or stay in — the profession.

Teaching isn’t for everyone; you must not only have a wide and deep range of subject-matter competency and strong instructional method, you must also care for children that aren’t your own and be patient with them in getting them up to speed on a subject. Not everyone can hack it.

Ultimately, in any case, the evidence speaks for itself.

Which comes back to my original argument: Expanding the H-1B visa pool would help expand the pool of high-quality teachers — especially in those scarcity positions needed in America’s woeful public schools. Just as importantly, the marketplace for talent is no longer just a nation-based affair; talented workers need freedom of movement in order to exploit their “means of production” for their own gain. Organizations need the ability to seek out the best talent available to meet their needs.

This means a full overhaul of an immigration system that is Byzantine, antiquated, originated from mistaken (and sometimes, bigoted) notions of what being American means and built on the fears of a few instead of the realities of the modern world.

Not to say that H-1B itself is perfect: The rules, crafted in response to opponents of immigration who don’t want any new citizens here of any kind, is too much like a guest worker system; the rules should give high-skilled workers the ability to decide whether they want to become full-fledged Americans as previous emigres have done or not, as well as transfer freely from one employer to another. Such flexibility, however, is unlikely given the opposition — from the rather calm views expressed by Matloff to the demagoguery of the Center for Immigration Studies — to any pro-free market version of immigration reform.

But the current system doesn’t work; the overall immigration system is a mess and needs reform. Of the right kind.