Karlreiner002
A Blog For Arizona Exclusive

Ed. – I’m pleased to present readers with a guest essay from Karl Reiner. Karl recently published a great guest opinion in the Arizona Daily Star about the issue of immigration. I thought it was insightful and well-reasoned, but far too short. I asked Mr. Reiner if he would be interested in presenting a fuller account of his thinking on the issue at BfAZ. The following essay is the result.

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Karl Reiner managed international trade and economic policy analysis at the U.S. Department of Commerce in Washington, DC. He served as an acting deputy assistant secretary during the first Bush and Clinton administrations. A Vietnam veteran, he is a graduate of the Ohio State University and holds a MS degree from the Garvin School of International Management. After retiring from government service in 1994, he did consulting and authored a novel, Sgt. Bellnapp’s Secret, published in 2001.

He and his wife, Martha, moved from Northern Virginia to Tucson in May 2005. A compilation of his Civil War articles titled: Remembering Fairfax County, Virginia, will be published by the History Press later this year.

The issues of illegal immigration and border control are emotional subjects in Arizona. Many residents believe the situation is out of control and drastic measures must be taken.  Politicians are playing on people’s fears and are proposing an endless assortment of legislative solutions to appease the voters. Business has been accused of blocking effective immigration control because the flow of migrants allegedly holds down wages.  Because the constantly shifting U.S. economy has created a fear of job loss among many American workers, immigrants are seen as a threat. A heady combination of churches, international conspiracies, the Mexican government, and the global economy have all been at least partly blamed for allowing the torrent of illegal migrants to pour across the border into Arizona. About the only thing frustrated residents of the state can agree on is that current federal programs don’t seem to work.   

The problem is compounded by deep divisions in public opinion. There is a divisive political split between pro-enforcement, anti-immigration groups and those supporting humane borders and more economically sound regulation changes. Although few politicians will admit it, we have no one to blame but ourselves for the current immigration predicament. For years, the White House and Congress have let the matter slide. Mexico’s economic development was never an important foreign policy consideration despite the country’s close proximity to the United States. The development of effective border controls and a feasible guest worker program were low priority items even though the U.S. labor market was rapidly changing and Mexico’s economy was faltering. The current chaos surrounding the heated immigration debate only means we have begun to belatedly deal with some of the consequences of neglecting Mexico for so long. 

Congress is now in the process of considering legislative remedies for the thorny problem of illegal immigration. It must seriously consider a wide variety of conflicting interests as it makes its way through the growing tangle of proposed immigration alternatives. Churning in the Senate and the House are a vast array of bills that include visa regulation changes, guest worker programs, enforced deportation and border security improvements. About the only option not under active consideration is a contract to hire retired East German border guards to build a wall and man guard towers along the border.

Many of the bills ignore the fact that our relationship with Mexico is vital.  The citizens of Tucson should be worried. If Congress doesn’t come up with a workable solution, the cure could turn out to be as damaging as the problem. And as history shows, Congress makes a mistake every so often. Back in 1930, as the Great Depression was getting underway, Congress passed the Hawley-Smoot tariff bill that raised American tariffs to record high levels in an attempt to protect existing jobs and allow the unemployed to find work producing goods previously imported. It boomeranged. As other countries retaliated, U.S. exports plunged and unemployment climbed. Hawley-Smoot made the depression worse.

The consequences of an ineffective immigration reform program could hit the economy of the Old Pueblo hard. Although it is hardly ever mentioned, Mexico is our second largest export market and our third largest supplier. In 2005, combined U.S.-Mexican trade totaled $290 billion, more than $23 billion higher than in 2004.  Arizona did nearly $15 billion in export business with Mexico, and visitors from south of the border spend approximately $300 million annually in Pima County.

In his November 28, 2005 speech at Davis-Monthan, President Bush stressed the need to improve border security and establish a national guest worker program. Back in the 1990s, the now defunct U.S. Commission on Immigration Reform looked into the issue and made a number of similar recommendations. Unfortunately, neither successive Presidents nor Congress deemed it necessary to act. It is now time to face the fact that, although the U.S. has embraced the concept of the global marketplace, it has woefully failed to make provisions for the orderly movement of labor.

With the U.S. economy running at nearly full employment, it should be obvious that provisions have to be made to permit and control the movement of foreign workers. Like it or not, Americans must get used to the idea of having foreign workers if they expect the economy to keep running. For the first half of fiscal year 2006, the H-2B visa program was filled by December 15, 2005. This indicates that the regulations are not in sync with market conditions. The H-2B visa program allows employers to fill peak load or seasonal needs by augmenting their existing labor force. It is heavily used by the construction and landscape industries.

With homeland security spending now topping $30 billion yearly, we ought to have a border security program befitting our status as an industrialized nation. The U.S. government, not the states, has an obligation to control the international borders. Since the government, as authorized by Congress, joyfully manages to spend a total of approximately $2.7 trillion a year, it ought to be able reallocate funds to do the job.

Because the immigration laws were never updated and poorly administered in the past, the U.S. is now home to nearly 12 million undocumented aliens. No industrialized nation can, for national security and economic reasons, lose control of such a large number of people. These individuals will have to be registered, provided legal identification and either allowed to continue working or be deported. The impact of removing such a large number of people (the majority being gainfully employed) from the U.S. economy would be prohibitively expensive and invite enormous economic disruption. This being said, in the spirit of the Hawley-Smoot fiasco, many of the bills pending in Congress propose deportation as the solution. Hopefully, our Senators and Representatives will be able to set rabid ideology aside and consider the economic self-interest of the United States as they struggle with the matter. The most practical legislative measure introduced so far has been sponsored by the by two elder statesmen from opposite ends of the political spectrum. The measure sponsored by Sen. Edward Kennedy, D-Mass., and Sen. John McCain, R-Ariz. (S-1033 and its House companion H.R. 2330), appears to be the most workable and comprehensive solution. The measure has attracted a sizable number of co-sponsors in the Senate and is supported by many members of the House. McCain-Kennedy has provisions to legalize the undocumented, reform the family preference system and addresses the matter of temporary workers. Perhaps most important of all, it calls for policies which attack the root causes of migration.      

Although both the benefits and disadvantages of the North American Free Trade Agreement (NAFTA) were overstated at the time of the treaty’s inception in 1994, combined U.S.-Mexican trade has tripled. The feared specter of U.S. job loss never materialized; instead employment grew by 20 million. One of the underlying premises of NAFTA was that Mexico’s prosperity would increase when the economies were linked. The Mexican government, however, did not make any provisions for the known short-term dislocations always associated with opening an inefficient economy to the rigors of competition and free trade. While some sectors immediately profited from the move, others, such as small-scale agriculture, became highly uncompetitive and triggered job losses.   

Unfortunately for Mexico, there are also a number of other underlying causes pushing migrants onto the roads leading north. Mexico’s economy has suffered a series of mismanagement-caused setbacks over the years and has failed to keep pace with population growth. The migrants are on the move because the country is belatedly struggling to adapt to the pressures of economic globalization. Mexico’s inconsistent regulatory environment and the poor state of its infrastructure discourage job-creating investment.

Corruption and public safety problems debilitate a sizeable part of Mexican society, costing the nation an estimated $60 billion per year. A substantial portion of Mexico’s population, estimated as high as 45 million, has an income of less than $1,000 per year. At a time when labor market entrants number well over a million a year, the country is having trouble holding onto jobs, having lost over 800,000 to China. As the economy roils, job seekers head to where work is available. Mexicans working in the U.S. send home an estimated $17-$20 billion a year, supporting a substantial part of the population in many regions.

Mexico is struggling to reach the 7 percent economic growth rate that many economists believe is needed to eradicate the country’s widespread poverty and close the gap between rich and poor. In recent years, the government has been unable to achieve anything more than a 3 to 4 percent growth rate. Lack of reforms in the energy sector, tax system and labor regulations are thought to be hindering economic growth. Problems in the educational system are also a drag on the economy. Much of the workforce lacks the skills needed to fill jobs and factories are having problems attracting qualified workers.   

American economic policy has long touted the benefits of free enterprise, open markets and the rule of law. As such, we must put emphasis on helping our southern neighbor get its economic house in order. Of the $8 billion spent on foreign economic assistance annually, only $30 million currently goes to projects in Mexico. We need to change that policy to ensure Mexico becomes an economic success. There is no reason why it can’t become an example for other developing nations. As Congress debates the illegal immigration issue, it should also review the old programs that rebuilt Europe and Japan after World War II and consider doing some of the same for Mexico. A booming Mexican economy would do a lot ease the pressure on workers to migrate. An economically successful Mexico would also be a larger market for U.S. goods and services in the future.   

The Mexican government is striving to change things.  Last year, the country generated 750,000 new jobs. While this was admittedly inadequate to meet needs, it was a substantial improvement over previous years. The American economy ranks #1 in the world. It is linked to Canada (#8) and Mexico (#10) by the North American Free Trade Agreement. As such, Mexico should be treated as a major U.S. partner and rapidly developing country with a number of problems. Promoting a prosperous and stable Mexico should be our No. 1 foreign policy priority. Mexico’s economic development and our immigration crisis are linked. One can’t be resolved without addressing the other.

There will be seven presidential elections in Latin America this year, including a very important one in Mexico. How we handle the illegal immigration issue will have a big impact on improving or worsening U.S. relations with many of the countries in the Western Hemisphere. It is no longer an issue with only domestic political ramifications; it has also become a foreign policy matter. Since many in Latin America perceive the U.S. as an imperialist bully, an exploiter of natural resources and an unabashed supporter of right-wing dictatorships, we can’t afford to botch this matter. We need to make it clear that we understand the entire problem of economic development and are willing to push social reform programs along with the free trade agenda.

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