Beat the Press

Dean Baker's commentary on economic reporting

7/26/2006

Confusion on “Free Trade”

Several comments and e-mails on my last post on trade expressed confusion about restrictions on highly educated foreign workers in the United States. (There was one complaint about repetition – as long as the press repeats the error, I will repeat the complaint.)

These restrictions take two forms. The first is formal licensing restrictions. The highest paid professionals, like medicine, law, dentistry, and accounting all have licensing requirements. These requirements present a confusing patchwork (in most areas, each state has its own requirements) that makes it extremely difficult for foreign professionals to get licensed to practice their profession in the United States.

If we applied the same rules to these professions as “free traders” did to manufacturing, we would set a single national standard in each profession that would be based exclusively on legitimate health and safety considerations, just as the W.T.O. and other trade pacts require in the case of safety standards for manufactured goods. These standards would be fully transparent and the tests would be administered throughout the world (by U.S. certified officials) so that smart kids in India, China, or Mexico could as easily become certified to practice medicine or law in the U.S. as kids raised in New York. People who do not support this standardization of licensing requirements are protectionists, not free traders.

The second point relates to rules for hiring foreign workers (including those on H1B visas) more generally. If a university or newspaper wants to hire a foreign professor or journalist, it must claim that there were no qualified U.S. citizens (or green card holders) for the job. It cannot just say that it wanted to hire a foreign worker for a lower wage than U.S. workers demand, in the same way that Wal-Mart buys foreign-made clothes because they are cheaper than U.S. made clothes.

As a practical matter, this restriction is not tightly enforced. However, no one has tried to establish Wal-Mart universities or newspapers where they completely staff the institutions with foreign workers, who might be every bit as qualified as their U.S. born counterparts, but willing to work for half the wage.

I will pre-empt one silly response. The number of foreign reporters, university professors etc. who are trained to U.S. standards (including fluency in English) might be relatively limited today, but that is because they do not have an open door to work here. No one built textile factories in China to export to the U.S. until they knew that they had an open door for their exports. Similarly, you will not see millions of Chinese/Indians/Mexicans etc. train to work as reporters and university professors in the United States until they know the door is open to them. Again, real free traders support opening this door. Those who oppose opening the door (a group that includes the top trade negotiators in both the Clinton and Bush administrations) are protectionist. Let’s see how long it takes the reporters (who benefit from protectionism) to get the story straight.

I have a fuller discussion of this issue in the "Doctors and Dishwashers" chapter of The Conservative Nanny State: How the Wealthy Use the Government to Stay Rich and Get Richer, which is available as a free e-book.

19 Comments:

  • At 10:23 AM, Blogger Dr. Tax in Sacramento said…

    There is some movement on the restrictions on professions as standards begin to move. I would agree that they are not fast enough - although there are some very interesting developments among a couple of law schools and accounting programs where there is some interesting integration. But if that was your major point - I would agree. The educational integration is coming, in part, because of the increasing integration of standards - I am skeptical of broad brush integrations (see for example the work being done in Mexico on Sarbanes like standards - which started from the US standard and then improved on it.) But I would stick by the comments on copyright and patent issues - which seemed to be the major issue of your original post.

     
  • At 10:55 AM, Anonymous Joe Populist said…

    Dr "Tax": There is some movement on the restrictions on professions as standards begin to move. I would agree that they are not fast enough - if that was your major point - I would agree.

    Of course, the standards are moving "slowly" because no-one wants them to move faster.

    You are really just trying to rationalize what benefits you personally, at the expense of others, under the rhetoric of "freedom".

    Also, you might want to consider the fact that someone's JOB is as important to them as YOUR "property rights" are to you.

    But then I suspect, as it is with most "free traders", that they support protectionism when it benefits them, and free trade when it benefits them as well.

    Of course, you can't have it both ways, unless you want to qualify for the big red "H" for hypocrite to be emblazoned on your back.

     
  • At 2:32 PM, Anonymous Jay said…

    I think it is important to distinguish between two completely separate points. Many of the responders to the previous Dean's posting would focus on disputing to what degree the various restrictions really exist as well as if the US benefits from them or not. This may be a subject of debate. The more basic point that Dean has been making over and over again is that the very existence of such restrictions constitutes a government intervention in the market system, making it less of a "free market". This has to be honestly stated before moving into discussing costs and benefits of these practices. Apparently, it is not. This has the purpose of misleading the public or results from ignorance. Papers like WP or NYT should not be misleading or ignorant, so it is certainly annoying to see these statements over and over again.

     
  • At 2:35 PM, Anonymous dale said…

    Joe,
    You can have it both ways. Perhaps not in terms of intellectual consistency, but certainly in the real world economy, investors and professionals are enjoying the benefits of one-sided globalization.

     
  • At 2:49 PM, Anonymous Erik L. said…

    I understand the point you are making and I think that is the Libertarian position on things (as long as you have no tempting welfare state). I still think you are trying to change the definition of an accepted term to serve your argument. I know the principle is the same but as far as I know the term "Free Trade" was always to mean trade in goods, not the freedom to cross national borders in search of jobs. I understand both are a type of economic freedom but I don't think it is healthy for the discussion to make up new definitions of established terms. The people engaging the the WTO trade talks knew what they meant by "free trade" going in to it and I do not think they would be shamed by some guy who wants to change the definition.

    Anyway, I think the existence of these talks at all indicate that all parties know that "free trade" is a matter of degree. If not, there would be no negotiating. It would be "free trade, all in favor say aye!"

     
  • At 3:06 PM, Anonymous kmorford said…

    erik l. said

    "I know the principle is the same but as far as I know the term "Free Trade" was always to mean trade in goods, not the freedom to cross national borders in search of jobs."

    Erik, you need to check out the existing and proposed changes to GATS, the General Agreement on Trade in Services. It has not received as much attention as GATT, NAFTA, CAFTA etc. but it needs to be more widely debated. Proposed changes in the treaty would expressly denominate the movement of workers across borders as "trade" instead of "migration." One good place to start looking at this issue is at

    www.gatswatch.org/index.html

     
  • At 7:18 PM, Anonymous Alan said…

    As a lawyer, I do not disagree with your call for standardization in my profession, nor do I want to defend existing licensing practices. Conceptually, however, I think you are glossing over the relationship between global and domestic trade barriers. It is true that a lawyer from India, no matter how well trained and experienced, who wants to practice law in California or Florida, has to take a local examination and meet other requirements. But this is also true of a lawyer from New York who wants to practice there. For lawyers from common law countries, the additional burdens from being out-of-country as opposed to out-of-state are mainly on the general immigration law side, not on the licensing side. (Lawyers from civil law countries have much greater obstacles; Inida, Mexico and China are not equivalent.) Historically, and I think currently, the chief objects of law licensing protectionism are lawyers from other states and educated laypersons, not young third worlders.

     
  • At 7:50 PM, Anonymous alan said…

    Having mistakenly written before checking my facts, I now humbly withdraw some of my comment. On investigation, I discover that in some states graduates of foreign law schools are not eligible to take the bar examination at all without going through law school all over again. Now, that's a barrier! (although it also applies to Californians who went to law schools accredited only in California).

     
  • At 7:38 AM, Blogger Dean Baker said…

    A couple of quick points here:

    1) Copyrights and patents ARE forms of protectionism regardless of whether or not they are good policies. They is a ridiculous sect of economics fanatics (many of whom write for newspapers) who equate protectionism with "evil," "stupid," and "inefficient." Many countries, including the United States, effectively used portectionist measures to develop infant industries. You are welcome to like copyrights and patents or not like them (I have written about more efficient mechanisms, so I don't like them), but they are a form of protectionism.

    On the idea of free trade applying to professional services -- the issue here is trade, not immigration. A Mexican doctor would be able to come to the United States and then work as a dishwasher without a problem. The issue is that current law makes it difficult for him/her to work here as a doctor. The issue is the ability to work providing professional services, not whether they can enter the country. It is trade, not immigration. I should also add that the numbers of highly paid professionals in the U.S. is suffiicently small, that opening the door would barely affect immigration flows. (There are 800,000 doctors in the country, @ 1.3 million immigrants enter each year.)

     
  • At 1:46 PM, Anonymous alain jak said…

    Hello Dean

    I loved your witty assertic=ve comments on reporters. A problem is, these underqualified journalists seem to write for underqualified readers. It may well be the way they justify their position and compensation. A more inquisitive or responsive readorship -of which lawyers, MD,...should be part of, would have them fired as not responding to these legitimate concerns.

     
  • At 9:16 AM, Blogger viki_25 said…

    Yes, it is true!small Wiki info. in addition: "The history of free trade is a history of international trade focusing on the developments of open markets.

    It is known that various prosperous world cultures throughout history have engaged in trade. Based on this, theoretical rationalizations as to why a policy of free trade would be beneficial to nations developed over time. These theories were developed in its academic modern sense from the commercial culture of England, and more broadly Europe, in the past five centuries. In opposition to free trade, a policy of mercantilism was developed in Europe in the 1500s and persists in various forms to this day. Early free trade theorists who were opposed to mercantilism were David Ricardo and Adam Smith. Free trade theorists offered trade as the reason why certain cultures prospered economically. Adam Smith, for example, pointed to increased trading as being the reason for the flourishing of not just Mediterranean cultures such as Egypt, Greece, and Rome, but also of Bengal (East Indies) and China.

    Free trade policies have battled with mercantilist, protectionist, isolationist, communist, and other policies over the centuries. Wars, such as the Opium Wars, have been fought primarily over trade.

    All developed countries have used protectionism, but usually reduced it as they gained more wealth. Some critics say that having more wealth guarantees that the country would benefit from free trade, although some scientists think that poor countries would also benefit from free trade.

    The Constitution of the United States explicitly prohibits state governments from enacting barriers to trade between citizens and firms of the various 50 states, making the United States the largest empirical example of free trade in the world." Wiki: http://en.wikipedia.org/wiki/Free_Trade


    Greetings,


    The Player

     
  • At 12:54 AM, Anonymous consultant said…

    Just as no government should outsource national security to untrustworthy foreigners,

    Unfortunately our government has already sold off the defence research establishment to a foreign owned company - the Carlyle Group, a US based private equity company.

    On the main topic: 'free trade' is a con. We, and everyone else, need local food and energy production as the basis for our community life - otherwise there will probably be no life worth living for our grandchildren.

     
  • At 4:45 PM, Blogger Manikandan said…

    Hi.nice blog.I am fresh jobseeker.please help me that where can i get
    links of free job posts sites.
    Thank you.....

     
  • At 6:43 PM, Blogger xiang100 said…

    ABOUT free trade,,it is all about trading of different countries that there is no limited trading.I mean any products or goods can be traded.
    _______________
    rjayred

    w York Immigration Lawyer Marina Shepelsky, located in Brooklyn, assists clients from the New York metro area and across the United States in all immigration and naturalization matters http://www.e-us-visa.com

     
  • At 6:45 AM, Blogger oli said…

    Los Angeles private equity firms borrow new money into existence in order to take these companies private. They inflate the money supply and syphon off huge sums as personal compensation. All the while, the cost of everything goes up as the value of a dollar goes down.

     
  • At 10:33 AM, Anonymous Anonymous said…

  • At 11:09 AM, Anonymous Anonymous said…

    I guess if you look up the definition of trade you could realize that this means an exchange of goods. Free means without government intervention. The USA buying everything from China and selling our debt to them is not trade and it sure as hell isn't free. The Global Corporate government (both Democrat and Republican) has won and the working person can expect to be poorer and poorer over the next decades thanks to this misnamed concept. But if you rename something like Death Tax versus Estate Tax or Free Trade versus Global Slave Labor I guess you can convince most of the yokels and academians that this is good for all Americans.

     
  • At 1:35 PM, Anonymous Anonymous said…

    As an accountant, who benefits from the protectionist restrictions mentioned, I am not too thrilled with the prospect of competing with those who would do the same work, for less. I already face tremendous pressure from talented American accountants who are younger and willing to work for less.

     
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