Let's make a better deal: Give us your huddled masses . . . and your oil
This article appear in The Weekly Standard on July 30, 2001.
MEXICAN PRESIDENT Vicente Fox barnstormed the United States last week, urging American businessmen to support some sort of amnesty for the three million Mexicans illegally working and living in this country. And to put pressure on his American counterpart, Fox addressed rallies of his countrymen now living in the United States to emphasize that Mexicans represent a political force here, and that those eligible to vote, particularly in the key states of Texas, Florida, New York, and California, feel solidarity with their non-voting illegal countrymen.
Fox contends that these illegals -- at a Los Angeles rally a few months ago he called them "heroes" -- make an important contribution to America's prosperity. Alan Greenspan agrees. The Fed chairman has acknowledged, without exactly endorsing illegal immigration, that immigrants have helped to prevent a wage explosion in the tight U.S. labor market. This has enabled the Fed to cut interest rates without worrying too much about triggering inflation.
But there is another side to that story: Immigrants fight inflation by making it more difficult for workers at the bottom of the wage scale to wrest increases from their employers. Steven Camarota, director of research at the Center for Immigration Studies (CIS), estimates that the more than ten million natives who lack a high school degree "face significant competition from Mexican immigrants," and that unskilled Mexican immigrants have reduced the wages of these native workers by about 5 percent.
Harvard immigration economist George Borjas agrees that native-born unskilled workers "have much to fear from the entry of large numbers of less-skilled immigrants" and that employers of unskilled gardeners, pool cleaners, housemaids, and hotel workers have benefited to such an extent that "immigration can be viewed as an income redistribution program" -- good news for suburbanites with wide lawns and swimming pools; bad news for the mowers and pool cleaners.
And bad news for taxpayers. The CIS estimates that over his lifetime, the average adult Mexican immigrant consumes $ 55,200 more in social services than he pays in taxes.
Still, Fox's message is important: the free movement of labor across borders undoubtedly adds to the overall efficiency with which the economy operates. That increased efficiency, the reduction of wage pressure that allows the Fed to go for growth with lower interest rates, may well offset the net social cost of Mexican immigrants.
Besides, there isn't very much that the United States can do (or has the will to do, according to some critics of our immigration policy) to stem the tide. The Immigration and Naturalization Service reports that it apprehends about 1.5 million illegal border crossers each year. But short of draconian measures of the sort that made the Berlin Wall infamous, the inbound flood will remain substantial. We want to stop illegal immigration, in good part simply because we want to stop anything illegal. Yet, at the same time we are appalled at the increasing number of border-related deaths (about 400 last year), and establish water stations so that people slipping across the border do not die from dehydration in the Arizona desert after being abandoned by the so-called coyotes who smuggle them in.
So is there room for a deal with Mexico? Only if the president becomes a more savvy negotiator. Fox wants Bush and Congress to grant some sort of amnesty to the three million illegals. The administration, bowing to conservative opposition to a blanket amnesty, and to the fact that there is already a queue of law-abiding applicants for residence rights and citizenship, says that its policy review has the more limited objective of seeking ways of providing "legal rights and protections" for these workers, whose illegal position gives them no protection against substandard working conditions. Meanwhile, "the INS has largely abandoned its former tactic of worksite raids, and its de facto policy since 1997 has been 'once you are in, you are in,'" according to Pia Orrenius, an economist at the Federal Reserve Bank of Dallas.
Leave aside questions of whether these illegals, by voting with their feet, have shown that even the worst working conditions in the United States provide material advantages over what is available to them on their side of the border, and therefore need no "protection," especially since such government intervention would reduce the number of jobs available to them. Leave aside, too, the political question of whether there are indeed more Hispanic votes to be had by a Republican administration that extends its famed compassion to illegal immigrants.
Concentrate instead on the hypocrisy in Fox's position when he says that our border with Mexico should be seen "more as a joining line than a dividing line" and that immigration policy "should be based on the same principles that drive trade and business investment."
The advantages to all parties of free trade are too well known to need explication here. But it is less obvious that we should do what Fox asks without demanding some reciprocal recognition of the advantages of open borders. Fox proposes to off-load his excess labor supply onto the United States, while at the same time restricting the supply of his oil to this country. Mexico, after all, is the linchpin in the OPEC oil cartel that is keeping oil prices in this country at multiples of the price that would prevail in a more competitive market.
Those prices have eased in recent weeks, but they still contain an element of monopoly profit that amounts to more than 40 percent of the tax cut that the president and his team are hoping will put our economy back on a growth path. Add in the impact of higher oil prices on profits, output, and other energy-sensitive variables, and it becomes obvious that the growth-drag created by monopoly oil prices offsets a significant portion of the growth-push that the president's tax cuts are supposed to produce. And the finger of blame points squarely at Mexico.
Although not a member of OPEC, Mexico has promised both Venezuela and Saudi Arabia, key suppliers of the U.S. market, that it will not fill any gaps created by their price-raising production cutbacks. It was that agreement, boast the Mexicans, that led to the new cohesion in the OPEC cartel, and the run-up in oil prices. Worse still, the Mexicans contend that their history and nationalistic pride preclude American investment in their nation's oil industry, despite the fact that it is a lack of investment and the woeful inefficiency of Mexico's monopoly oil producer that prevent it from increasing productive capacity. And if history and pride are insufficient justification for Mexico's policy, we have the defense offered to me by a leading Mexican official: "Oil is still cheaper than Coca-Cola."
In short, Fox wants to send us his poor and his hungry, who remit an estimated $ 4-$ 7 billion to the poorest parts of his country every year, but at the same time he will cooperate with a cartel that is stifling economic growth in America, not to mention in his own country. Before Bush strikes any deal to facilitate the free movement of labor, he should insist on a companion deal that facilitates the free movement of goods (oil from Mexico) and capital (dollars of investment in Mexico's oil resources).
And he should include in any agreement provisions to offset the social costs of immigration. There is no question that freer immigration adds to economic efficiency. But neither is there any question that it poses three distinct problems: creation of an internal alien culture; rising welfare costs; and a rising non-citizen jail population.
Americans were unhappy when Mexican immigrants booed our national anthem when it was played at a soccer game in Los Angeles. And they are unhappy too -- or at least should be -- that many Mexican immigrants have not learned English, essential if they are to assimilate into the economic and political life of the nation. It would not be unreasonable for the admini-stration to insist that any illegals granted regularized status have one year in which to become demonstrably competent in English, or lose their preferred status. No regularization without assimilation suggests itself as a reasonable policy posi-tion.
Nor would it be unreasonable to tell Fox that Mexico, rather than the United States, must bear any net welfare costs imposed by the legalized immigrants during their stay here, or until they become citizens. Payment in cash or oil accepted. This would do much to defuse the hostility of natives who resent the social costs incident to immigration.
Finally, there is the question of crime. We need not debate whether the incidence of criminality is higher among illegal immigrants than among the native population and legal immigrants, or decide whether regularization of the illegal status of immigrants would reduce any criminality to which that group might be prone. We need only insist that a condition of regularization be that the beneficiaries stay out of jail, and that if they don't, Mexico will not refuse to accept any that we deport.
These conditions should satisfy conservatives who believe in free trade in goods, labor, and capital, who oppose multiculturalism and bilingualism, and who resist impos-ing new welfare costs on hard-working Americans. Fox wants to do a deal with us, one that will shore up his popularity at home and help his poverty-ridden economy. We should agree, but only on the condition that Mexico's new devotion to free trade extend from people to oil, and that we can be insured against most of the social cost asso-ciated with immigration. Otherwise, our cowboy-boot-wearing president will have been out-Foxed by their cowboy-boot-wearing president.