Trade and Immigration: The Endless Frontier Act’s Missing Elements
The United States and market-oriented democracies around the world have legitimate concerns about Beijing’s economic practices. Those concerns are centered at the nexus of international trade, technological dominance and national security. Though the Trump administration’s tariffs imposed significant costs on American families and firms and failed to change China’s practices, the administration deserves credit for correctly identifying some of the problems with Beijing’s aggressive high tech mercantilism, including the abuse of intellectual property, requiring the transfer of technology to Chinese firms as the cost of doing business in the country, cyber hacking into American commercial networks and the theft of trade secrets.
To outcompete China, the United States needs a lot more immigrants. Though the United States’ higher education system is the best in the world, our K-12 system is lagging. In international exams administered by the Organization for Economic Co-operation and Development, the United States ranks 18th and 37th in science and mathematics—the very fields that will drive future innovation and productivity growth—in educational outcomes among 15 year olds, while China ranks first in both categories. Immigrants can and do fill the gap, but we need to do more. If the United States is going to best China on the cutting-edge of technology, accepting and retaining foreigners is vastly more important than subsidies to targeted industries.
Indeed, immigrants founded some of America’s most globally competitive and innovative firms, including Google, Uber, Qualcomm, Tesla, eBay and Pfizer. About 75 percent of the Silicon Valley workforce between the ages of 25 and 44 hired for their math and computer science backgrounds are foreign-born. As a 2015 economic study found, “inflows of foreign [science, engineering, technology, engineering and math] workers explain between 30 percent and 50 percent of the aggregate productivity growth in the United States between 1990 and 2010.”
Meanwhile, a 2010 study found that immigrants are a huge driver of innovation—they’re about twice as likely to be granted patents as non-immigrants because they disproportionately hold degrees in science and engineering. The same study found that skilled immigrants have a positive spillover effect on nonimmigrants: “A 1 percentage point rise in the share of immigrant college graduates in the population increases patents per capita by 9-18 percent.” In other words, skilled immigrants directly benefit the United States, but they also help spur innovation among non-immigrants.
Despite these overwhelming benefits, legal immigration fell by about 50 percent during the Trump administration. Congress should use this opportunity to simplify the immigration system and expand dramatically the number of immigrants welcome to the country.
Likewise, policymakers are concerned about reliance on China, but that should not be an invitation to embrace sclerotic protectionism. Any serious policy that aims to challenge Beijing’s commercial practices should seek to expand rules-based commerce around the world, particularly in Asia. Though the Trans-Pacific Partnership (TPP) has become something of a political hot potato after President Donald Trump unwisely withdrew the United States from the agreement, the geopolitical and economic rationales are crystal clear. The agreement established high-quality commercial standards in a growing and increasingly important part of the world. At its core, the agreement lowered trade and investment barriers among the 12 original parties to the agreement—accounting for 40 percent of the global economy—and it was conceived to strengthen supply chains outside of China and raise commercial standards in the region. Had the United States moved forward with the agreement, it could have used potential membership in the newly formed trading bloc as an inducement for Beijing to raise its commercial standards.
Once the United States withdrew from the TPP, the remaining countries moved forward with the agreement and renamed it the Comprehensive and Progressive Trans-Pacific Partnership (CPTPP). Now on the outside of the CPTPP, American consumers face higher tariffs and other trade barriers on imports from CPTPP countries and American producers face discriminatory barriers on their products and services in CPTPP countries. Finally, by walking away from the agreement, the United States forfeited its seat at the table in the process of setting international commercial standards in Asia—and lost a vital tool of soft power.
Policymakers may be tempted to turn inward, but that would be recipe for stagnation and eventual decline. Openness to immigration and trade helped propel the United States to unprecedented wealth and global influence. Policymakers should trust these traditional strengths as they confront certain challenges posed by China.
Image: Poring Studio