America needs more than free trade. It needs free immigration, too.
The Trans-Pacific Partnership — the mammoth free trade deal the Obama administration is negotiating with 11 other countries — has proven extremely controversial, splitting Tea Party conservatives from the GOP establishment and liberal Democrats from the White House.
In the right-wing media, some of the TPP-related flurries of angst have to do with immigration. The fear is that the TPP is a Trojan horse for letting more foreigners into America legally. Apparently, this fear is based on an earlier outline of the TPP deal that included measures that could, maybe, swell L-1 visas, which serve as an alternative to the more well-known H1-B visas for high-skill immigrants.
Lawmakers in Congress say this notion is bogus. The Senate Finance Committee even released a memo, citing U.S. Trade Representative Michael Froman, stating quite clearly that "no provision in TPP will require changes to U.S. immigration law, regulations, policy, or practice."
But here's the thing: If the TPP were to increase that kind of immigration, that would be really good!
For some forms of economic activity (say, selling shoes), looser or "freer" trade just requires changes to regulations, laws, and tariffs for physical goods that cross the border. But for other forms of economic activity (like, say, health care), it's trickier. We'd need doctors to be able to physically cross borders. For some goods and services, the people involved don't need to move around. But for others, they do.
Here's the important part: There's a significant class divide hiding in those two categories of economic activity. The forms of trade that go hand-in-hand with immigration mainly involve high-skill, well-educated workers: doctors, lawyers, engineers, programmers, IT workers, and the like. Meanwhile, the sectors where you only have to move goods tend to be blue collar and working class, like manufacturing.
When trade deals make the exchange of goods easier, but not the exchange of people, they create a lopsided dynamic — subjecting middle- and lower-class workers in the United States to the pressures of foreign competition, but not America's upper-class workers. That drives lower-class wages down, and props up the prices of the goods and services the upper class provides. Everyone's income is someone else's expense, after all. So the middle and lower class get a double whammy: less income, while many of life's necessities become more expensive.
As economist Dean Baker just pointed out, this has been a feature of U.S. trade policy for a while. Globalization didn't just "happen." Our government chose which laws and regulations to normalize with other countries. We structured where those competitive pressures went.
Trade deals could have focused on developing clear standards that would allow students in Mexico, India, and China to train to U.S. levels and then practice as professionals in the United States on the same terms as someone born in New York or Kansas. This would have provided enormous savings to consumers in the form of lower health care costs, legal fees, and professional services more generally. The argument for free trade in professional services is exactly the same as the argument for free trade in manufactured goods. [Center for Economic and Policy Research]
How did it end up like this? The divide in political clout between the upper class and the lower class played a big role. "Doctors and lawyers have much more power than autoworkers and textile workers," Baker observed. "Therefore the politicians won't consider subjecting them to international competition." If you want to know why median and lower-class wages have stagnated or dropped over the past few decades, why we're producing lots of low-wage jobs and lots of high-wage jobs, but few in the middle, and why some of the central needs of American life — like health care and higher education — have become precipitously more expensive, this lopsided form of international competition is a big part of the story.
H1-B visas are supposed to help. But the government only issues 85,000 of them a year, and recipients have to be sponsored by an employer and can only stay in the U.S. for a limited amount of time. Not exactly free trade in professional services. A better approach would be to just make it easier, quicker, and cheaper for people to legally immigrate to the U.S. period, rather than creating weird carve-outs, and pair those changes with the TPP. (And, of course, include other worker-friendly provisions in the deal, like rules against currency manipulation and better labor and environmental standards.)
Ironically, America's middle and lower classes may well have been better off over the last few decades had we simply had more open borders for low- and high-skill immigrants alike. High-skill immigrants with educations are the ones most likely to abide by our immigration laws; they're going to have opportunities elsewhere if they can't get here legally. Workers from Mexico, Central America, and other impoverished countries, however, are much more desperate, and will come here whether it's legal or not.
More open borders mean more low-skill immigration, yes. But it would also mean a lot more high-skill immigration. The competitive pressure applied to American workers at all levels of the income ladder would be more equal.
And that brings us to another big problem the U.S. economy faces: The share of national income going to workers of any stripe is getting smaller, as owners of capital gobble it up. Equalizing the share between high- and low-skill workers with more foreign competition won't fix that, and frankly, would probably exacerbate it. That's why we need to pair trade deals and immigration reforms with other policies that increase bargaining power and full employment for all workers — educated and not, foreign and not — including stronger unions, better monetary policy, better fiscal stimulus, reformed labor laws, and a bigger social safety net.
We should make it as easy as possible for poor and low-skill people to immigrate to America as a matter of simple moral decency. They are suffering and struggling, and letting them come here will make their lives better. And if they do depress wages for low-skill workers already here, we can offset that in myriad other ways — including stiffer foreign competition for more privileged Americans.