Archive for the ‘Trade and Immigration’ Category
“A Full Range of Views”
It’s not often (especially these days) that a trade news item makes me laugh out loud. But, via an article in Inside U.S. Trade today, I saw a letter from United States Trade Representative Ron Kirk to Rep. Michael Michaud (D, ME) that did the trick.
Representative Michaud leads the House Trade Working Group, which is indeed working very diligently to stymie any hopes of meaningful trade liberalization. They wrote a letter in January to the USTR outlining their concerns about the upcoming Trans-Pacific Partnership negotiations. (I, too have concerns, but not the same ones as the HTWG.) Ambassador Kirk wrote back a fairly anodyne response that did not commit the administration to much of anything, except to follow up on the comments they have received from the Federal Register Notice.
Towards the end, though, came the punchline:
We are conducting follow-up meetings with these groups, including the AFL-CIO, the United Steelworkers, the Sierra Club, Oxfam, and Global Trade Watch, among others, to ensure we are hearing a full range of views on these issues. (My emphasis)
Senator Graham’s Inexplicable National ID Support
Compromise is catnip in Washington, D.C. That’s my best guess at why Senator Lindsey Graham (R-SC) would endorse New York Senator Chuck Schumer’s (D) widely reviled plan to create a mandatory biometric national ID system.
Schumer’s national ID plans have no more definition today than when he wrote about them in his 2007 campaign manifesto Postitively American. Among the thin gruel of that book is a two-page lump displaying more ignorance than understanding of how identity systems work and fail. Schumer doesn’t know the difference between an identifier—a characteristic used to distinguish or group people—and an identification card or system, which does the entire task of proving a person’s previously fixed identity. (My thin gruel on the topic is the book Identity Crisis: How Identification is Overused and Misunderstood.)
“All the national employment ID card will do is make forgery harder,” says Schumer.
No, that’s not all it would do: It would also subject every employment decision to the federal government’s approval. It would make surveillance of law-abiding citizens easier. It would allow the government to control access to health care. It would facilitate gun control. It would cost $100 billion dollars or more. It would draw bribery and corruption into the Social Security Administration. It would promote the development of sophisticated biometric identity fraud. How long should I go on?
Senator Graham’s take is equally simple: “We’ve all got Social Security cards,” he said to the Wall Street Journal. “They’re just easily tampered with. Make them tamper-proof. That’s all I’m saying.”
No, Senator, that’s not all you’re saying. You’re saying that native-born American citizens should be herded into Social Security Administration offices by the millions so they can have their biometrics collected in federal government databases. You’re saying that you’d like a system where working, traveling, going to the doctor, and using a credit card all depend on whether you can show your national ID. You’re saying that bigger government is the solution, not smaller government.
The point for these senators, of course, is not the substance. It’s the thrill they experience as nominal ideological opponents finding that they can agree on something, securing a potential breakthrough on the difficult immigration issue.
They’re only ”nominal” ideological opponents, though. Chuck Schumer has always been a big government guy—and long a supporter of having a national ID, despite the lessons of history. Lindsey Graham is not really his ideological opponent. Typical of politicians with years in Washington D.C., Graham is steadily migrating toward the big-government ideology that unites federal politicians and bureaucrats against the people.
Filed under: Cato Publications; Telecom, Internet & Information Policy; Trade and Immigration
A $1.1 Billion Re-Election Campaign. For the Senate.
When Rep. Collin Peterson (D- Minn. and Chairman of the House Agriculture Committee) pronounces that a farm program is too generous, you know you’ve crossed a line.
But that’s what happened recently after Sen. Blanche Lincoln (D-Ark), Senate Agriculture Committee Chairwoman and — oh, hey, how about that? — facing a tough re-election battle in November proposed an extra $1.1 billion in emergency farm aid be added to a jobs/tax/unemployment/kitchen sink bill going through the Senate this week. These extra handouts would flow despite the fact that the 2008 farm bill contained ”reforms” (the so-called ”permanent disaster” program) ostensibly to put an end to politically-motivated ad hoc emergency aid of just the type that Senator Lincoln is pushing now.
For those who can stomach it, this excellent article by Dan Morgan, one of the nation’s best agriculture journalists, contains plenty of background information.
Sen. Schumer’s Immigration Reform Is a National ID
So reports the Wall Street Journal:
Lawmakers working to craft a new comprehensive immigration bill have settled on a way to prevent employers from hiring illegal immigrants: a national biometric identification card all American workers would eventually be required to obtain.
It’s the natural evolution of the policy called “internal enforcement” of immigration law, as I wrote in my paper, “Franz Kafka’s Solution to Illegal Immigration.”
Once in place, watch for this national ID to regulate access to financial services, housing, medical care and prescriptions—and, of course, serve as an internal passport.
Filed under: Cato Publications; Telecom, Internet & Information Policy; Trade and Immigration
Will Taxing Foreign Visitors Promote Tourism?
President Obama is taking a break today from promoting a more federalized health-care system to sign a bill creating a federalized tourist promotion campaign.
In a closed ceremony at the White House, the president signed the Travel Promotion Act. After gaining final passage by the Senate last week, the bill will raise an estimated $200 million a year by imposing a $10 tax on visitors to the United States from countries where they are not required to obtain a visa. The revenue will be used to create and fund a new agency, the Corporation for Travel Promotion, that would work with the U.S. tourism industry to promote the United States as a global travel destination.
I’m all for promoting tourism to the United States. Tourism is an important “service export” that generates more than $100 billion a year in earnings from foreign travelers to the United States. But a new federal agency and a new tax on travel are not the right way to drum up more tourism business.
First, just on principle, promoting a particular industry should be the business of that industry, not the business of government. Americans also export billions of dollars worth of farm goods, semiconductors, machinery, aircraft, pharmaceuticals, and chemicals, along with financial, education, insurance, and other services. None of those industries deserves their own tax-financed promotion board either. If the payoff from promotion is so huge, the industry should be willing to bear its cost without the aid of the government.
More practically, it goes against basic economic logic to promote tourism to the United States by imposing new costs on tourists. Granted, $10 is not a large amount, but the demand curve for tourism is downward sloping – as it is in every other market. A higher price will lead to less demand, not more. As a spokesman for the International Air Transport Association told ABC News:
It’s absolutely counterintuitive. To us, we’re saying we’d love to see more people visit the United States, but we’re going to charge you more for the privilege of entering the country. We are in favor of increased tourism and visitation… but let’s look at our priorities. We don’t think that videos and billboards are necessarily a priority. Instead, we should be focusing on how to make customs and immigration easier for people.
As I argued in a previous post, the U.S. government should be doing more to keep dangerous people off flights to the United States instead of making it even more difficult for perfectly harmless tourists and business travelers to get on those same flights.
A Clash of Worldviews on Free Trade
If you want to witness the clash of two worldviews on trade, check out the online debate I’m having with Ian Fletcher of the U.S. Business and Industry Council. A self-described protectionist, Fletcher has written a new book with the unambiguous title, Free Trade Doesn’t Work: What Should Replace it and Why. In the opposite corner, I argue for eliminating barriers to trade, drawing on my own recent book, Mad about Trade: Why Main Street America Should Embrace Globalization.
The debate is being hosted by the International Economic Law and Policy Blog. We’ve already filed two 600-word posts each, with a third to come at the end of this week and concluding arguments early next week.
Should the U.S. Withdraw from NAFTA?
Rep. Gene Taylor, D-MS, thinks so. According to CongressDaily, Taylor is about to introduce a two-page bill that would withdraw the United States from the North American Free Trade Agreement.
Taylor blames the agreement with Canada and Mexico for the loss of 5 million manufacturing jobs since it was enacted in 1994. This is a popular but false charge. Manufacturing jobs have declined in the past 15 years for one big reason: soaring productivity.
Overall output at U.S. factories was actually 37 percent higher in 2009 compared to 1993, the year before NAFTA took effect, according to Table B-51 in the latest Economic Report of the President. We are producing a higher volume of stuff with fewer workers because individual workers are so much more productive than they were in the early 1990s.
As I’ve argued before, NAFTA has spurred more trade and deeper integration among the three partner countries. It has created new opportunities for American companies and their workers to raise their competitiveness in global markets. It has strengthened ties to our two closest neighbors.
The U.S. government would be foolish to withdraw from an agreement that continues to pay huge dividends.
When Bipartisanship Is Good News
Usually when I hear that a policy proposal has bipartisan support, I instinctively check for my wallet. But I greeted with pleasure the news on Wednesday that two lawmakers — Rep. Scott Garrett (R, NJ) and Rep. Patrick Murphy (D, PA) — had introduced a bill to shut down the USDA’s Market Access Program, which the congressmen rightly paint as “corporate welfare to big business.”
I yield to no one in my abhorrence of trade barriers, here and abroad. But this program is less about addressing market access per se, and more about taxpayer funding of marketing campaigns, trade shows and other promotions, which surely are the responsibility of the firms/industries concerned.
Incidentally, the Market Access Program is a line item in one of many agricultural programs identified by our Tax and Budget team as being ripe for the chopping block.
Filed under: Tax and Budget Policy; Trade and Immigration
India Explicitly Rejects Bringing Environmental Issues Into WTO
An article today in BRIDGES Weekly Trade News Digest (What? You don’t subscribe??) contains an explicit rejection by India’s trade minister of the idea that carbon border tax adjustments belong in the WTO’s agenda. Border tax adjustments in this context refers to de facto tariffs that would “level the playing field” for domestic producers competing with foreign producers not subject to climate change policies of an equivalent rigour, also called “border carbon adjustments” or variations on that theme.
While Minister Khullar predicts that these sorts of measures will be in place in 2-3 years time, he rejects that the WTO is the forum to deal with environmental issues.
Furthermore, countries introducing such measures can expect litigation:
India and other developing countries will undoubtedly challenge the true impetus behind the [border carbon adjustment] measures.
“Such measures imposing restrictions on imports on the grounds of providing a ‘level playing field’, or maintaining the ‘competitiveness’ of the domestic industry, etc are likely to be viewed as mere protectionist measures by the developed world to block the exports of the poorer nations,” [a recent report from an Indian think-tank closely connected with the Indian government] reads. “This is because there is little empirical evidence that companies relocate to take advantage of lax pollution controls.”
The [report] argues that such unilateral trade measures will inevitably lead to tit-for-tat trade retaliation that could spiral into an all-out trade war. Such warnings have also been raised by China and several think tanks following the issue.
I’ve written before on the dangers of introducing climate change issues into the WTO (and Dan Griswold has written more broadly on why labor and environmental standards don’t mix well with the aim of freeing trade) but this is yet another firm, unequivocal warning to developed countries that their proposals (and they are still just proposals at this stage) will have consequences. Developed country politicians who insist on forcing rich-world standards on the poor world should listen carefully.
Filed under: Energy and Environment; International Economics and Development; Trade and Immigration
Symbols, Security, and Collectivism
The state of Nevada is one of few that is tripping over itself to comply with the REAL ID Act, the U.S. national ID law.
It’s worth taking a look at the sample license displayed in this news report, especially the gold star used on the license to indicate that it is federally approved.
The reasons for “improving” drivers’ licenses this way are complex. The nominal reason for REAL ID was to secure the country against terrorism. The presence of a gold star signals that this the card bears a correct identity and that watch-list checking has ensured the person is not a threat.
Don’t be too thrilled, though. The weakness of watch-listing was demonstrated again by the Christmas-day attempt on a Northwest airlines flight. The underpants bomber wasn’t listed, so checking his name against a watch-list didn’t do anything.
The real reason for REAL ID, though, was anti-immigrant fervor. If the driver licensing system distinguished between citizens and non-citizens, the theory goes, possession of a driver’s license can be used to regulate access not just to driving, but to working, financial services, health care, and anything else the government wants. Illegal presence in the country could be made unpleasant enough that illegal immigrants would leave.
Alas, human behavior isn’t that simple. If ‘driven’ to it—(I had to…)—people will get behind the wheel without licenses—and without the training that comes with licensing. Then they’ll crash. When the governor of New York briefly de-linked driver licensing and immigration status in 2007, he cited public safety and the likelihood that insurance rates would fall, to the benefit of New Yorkers. (When the state of New Mexico de-linked driver licensing and immigration status, uninsured vehicle rates in the state dropped from 33 percent to 17 percent.) But the governor suffered withering criticism from anti-immigrant groups and quickly reversed course.
Like linking immigration status and driving, linking immigration status and work through an ID system imposes costs on the law-abiding citizen. Complications and counterattacks raise costs on workers and employers while reducing the already small benefits of such programs. I articulated those in my paper on employment eligibility verification.
Filed under: Cato Publications; Foreign Policy and National Security; Telecom, Internet & Information Policy; Trade and Immigration
Unions, Productivity, and the 2010 Economic Report of the President
I’ve become a fan over the years of the annual Economic Report of the President, released around this time each year by the Council of Economic Advisers. The more than 100 tables in the back of the book provide an invaluable picture of the economy over many decades, covering all the major indicators from output and employment to interest rates and trade. Each report also contains chapters explaining the economic thinking behind administration policies.
Chapter 10 of the latest report focuses on “Fostering Productivity Growth through Innovation and Trade.” For critics of trade, it offers sound economic reasons why trade raises U.S. productivity and, thus, over the long run, U.S. living standards.
One of ways trade promotes growth is “Firm Productivity.” Economists have come to appreciate that firms within an industry will differ in their productivity. Those that are more productive will tend to grow and prosper in larger and more competitive global markets. As a result,
when a country opens to trade, more productive firms grow relative to less productive firms, thus shifting labor and other resources to the better organized firms and increasing overall productivity. Even if workers do not switch industries, they move from firms that are either poorly managed or that use less advanced technology and production processes toward the more productive firms.
The report doesn’t mention this, but one reason why firms differ in their productivity is unionization. As I spell out in an “Economic Watch” column in today’s Washington Times, and explore in more detail in the latest Cato Journal, unionized firms tend to lose market share to non-unionized firms:
The weight of evidence indicates that, for most firms in most sectors, unionization leaves companies less able to compete successfully. The core problem is that unions cause compensation to rise faster than productivity, eroding profits while at the same time reducing the ability of firms to remain price-competitive. The result over time is that unionized firms have tended to lose market share to non-unionized firms, in domestic as well as international markets.
Compared to equivalent non-unionized competitors, unionized firms are associated with lower profits, less investment in physical capital, and less spending on research and development. By exposing an industry (say, automobiles) to more vigorous international competition, trade accelerates the shift from less competitive unionized firms to more competitive non-unionized firms.
Economists serving a Democratic administration would be understandably reluctant to say such a thing explicitly, but it is certainly there between the lines in Chapter 10 of the new Economic Report of the President.
The Maytag Repair Man Would Make a Better USTR
Ron Kirk hasn’t exactly been burning the candles at both ends as U.S. Trade Representative. And I don’t expect he’ll be racking up the frequent flier miles anytime soon, given his recent assessment of the trade policy scene. Here’s what he had to say, as reported by Jerry Hagstrom of Congress Daily:
Speaking at the USDA Annual Outlook Forum, Kirk said members of Congress “are more open and receptive” to the idea of creating a trans-Pacific agreement because it could be written from scratch.
The Trans-Pacific Partnership comes “without any of the biases of the three [agreements] under consideration,” he said. Kirk added members of Congress also like it because it would take 18 to 24 months to develop and would not come up for approval until after the 2010 elections.
Basically, Kirk’s planning to hang his trade expansion hat on some future trade agreement that’s still in the conception phase and years away from a shot at reality, while giving up on the already-signed agreements with Korea, Colombia and Panama because those agreements are too much of a burden politically for Congress, who would prefer to start from scratch.
That’s trade leadership from the Obama administration!
At this point, though, likening Kirk to the Maytag repair man might be too optimistic an analogy. The USTR hinted that he might find something to do on the enforcement side of his job description. According to Hagstrom:
Kirk stressed the administration’s commitment to enforcing trade agreements, saying that “enforcement is not protectionist.”
Raising an Eyebrow at LaHood’s Toyota Remarks
In response to the large recalls affecting several Toyota models, Transportation Secretary Ray LaHood yesterday advised Americans to “stop driving” their Toyotas. In testimony before the House Appropriations subcommittee on transportation, LaHood said:
My advice to anyone who owns one of these vehicles is stop driving it, and take it to the Toyota dealership because they believe they have the fix for it.
Later in the day, he elaborated:
I want to encourage owners of any recalled Toyota models to contact their local dealer and get their vehicles fixed as soon as possible. NHTSA will continue to hold Toyota’s feet to the fire to make sure that they are doing everything they have promised to make their vehicles safe. We will continue to investigate all possible causes of these safety issues.
As Transportation Secretary in an administration that is politically vested in the success of General Motors (recall how taxpayers were forced to take a 60% stake in GM for $50 billion+), was LaHood exploiting an opportunity to tip the scales further in GM’s favor? I guess we’ll never know for sure, but as long as GM remains nationalized, any comments by administration officials on matters affecting the auto industry should be viewed skeptically and through this prism, as they can irresponsibly move markets.
Filed under: Government and Politics; Trade and Immigration
Change You Can Be Deceived In
This priceless quote from Barack Obama comes from 2007 apparently, but is depressingly instructive:
We need to stand up to the special interests, bring Republicans and Democrats together, and pass the farm bill immediately
From Jacob Sullum at Reason, via Megan McArdle
Time to Lose the Trade Enforcement Fig Leaf
During his SOTU address last week, the president declared it a national goal to double our exports over the next five years. As my colleague Dan Griswold argues (a point that is echoed by others in this NYT article), such growth is probably unrealistic. But with incomes rising in China, India and throughout the developing world, and with huge amounts of savings accumulated in Asia, strong U.S. export growth in the years ahead should be a given—unless we screw it up with a provocative enforcement regime.
The president said:
If America sits on the sidelines while other nations sign trade deals, we will lose the chance to create jobs on our shores. But realizing those benefits also means enforcing those agreements so our trading partners play by the rules.
Ah, the enforcement canard!
One of the more persistent myths about trade is that we don’t adequately enforce our trade agreements, which has given our trade partners license to cheat. And that chronic cheating—dumping, subsidization, currency manipulation, opaque market barriers, and other underhanded practices—the argument goes, explains our trade deficit and anemic job growth.
But lack of enforcement is a myth that was concocted by congressional Democrats (Sander Levin chief among them) as a fig leaf behind which they could abide Big Labor’s wish to terminate the trade agenda. As the Democrats prepared to assume control of Congress in January 2007, better enforcement—along with demands for actionable labor and environmental standards—was used to cast their opposition to trade as conditional, even vaguely appealing to moderate sensibilities. But as is evident in Congress’s enduring refusal to consider the three completed bilateral agreements with Colombia, Panama, and South Korea (which all exceed Democratic demands with respect to labor and the environment), Democratic opposition to trade is not conditional, but systemic.
Globalization: Curse or Cure?
Globalization holds tremendous promise to improve human welfare but can also cause conflicts and crises. How will competition for resources, employment, and growth shape economic policies among developed nations as they attempt to maintain productivity growth, social protections, and extensive political and cultural freedoms?
In a new study, Cato scholar Jagadeesh Gokhale offers policy recommendations for developed nations to reduce globalization’s negative effects and, indeed, harness it for solving economic challenges.
Obama’s SOTU Export Promise: Bold and Unrealistic
In his State of the Union speech, President Obama vowed to double U.S. exports in five years to (all together now) “create jobs.”
Exports are dandy, and they do support higher-paying jobs, but the president’s pledge was unrealistic and raises false hopes that it will make any dent in the unemployment rate.
U.S. exports have not doubled in dollar terms during a five-year period since the inflation-plagued 1970s, not exactly a golden era for the U.S. economy. In real terms, according to the U.S. Bureau of Economic Analysis, exports have not come close to doubling during any five-year stretch in the past 40 years. The fastest growth in inflation-adjusted exports came in the second half of the 1980s, when they grew by two-thirds from 1985 to 1990. Other periods of robust growth were the mid-1990s, and during the second term of George W. Bush, when five-year export growth approached 50 percent.
Export growth is certainly enhanced by a weaker dollar and lower trade barriers abroad, but the primary driver of export growth is rising GDP and demand abroad, and that is something outside even this president’s direct control. The key to reducing U.S. unemployment is not primarily selling more to growing markets abroad, but selling more in a robustly growing market at home.
Other Obama policies will actually make it more difficult to achieve his export pledge. The president renewed his misguided pledge last night to raise taxes on U.S. multinational companies that “ship jobs overseas.” Yet, as I pointed out in a Free Trade Bulletin last year, U.S.-owned affiliates in other countries sold $4 trillion worth of U.S. branded goods and services in 2006. A large chunk of our exports go to those affiliates to help them make their final products for sale. Forcing U.S. firms to cut back their foreign operations will douse an important source of demand for U.S. exports.
The only major foreign market that has recently doubled its demand for U.S. exports in a five-year span is China. Yet President Obama has needlessly antagonized potential customers in our fourth-largest export market by imposing tariffs on Chinese tire imports and threatening other trade-reducing actions.
We can best promote more open markets abroad by setting a good example ourselves.
Filed under: General; Government and Politics; Trade and Immigration
That’s Quite a Multiplier
Via Cato’s Director of Government Affairs, Brandon Arnold, comes this [$] bold claim by the National Journal’s Congress Daily (although, to be fair, they are just quoting the study):
U.S. wheat promotion programs increase sales more than programs for other grains and agricultural products, according to an analysis of wheat export programs released this week.
The study by Cornell University professor Harry Kaiser showed that for every dollar spent on wheat promotion, U.S. producers get $23 back in increased net revenue, Kaiser told U.S. Wheat Associates, which commissioned the study.
With that sort of return on “investment”, the U.S. government should devote all of its revenue to wheat promotion as an ultra-quick revenue raising measure. Right after they’ve bought the swampland in Florida that the U.S. Wheat Associates has to sell them.
Alternatively, since it is such a great deal, perhaps U.S. Wheat Associates should pick up all of the tab for the program, instead of saddling U.S. taxpayers with half the cost.
Agricultural Exceptionalism
House Agriculture Committee Chairman Colin Peterson (D, Sugarbeet Farmers) announced yesterday [$] that he would begin hearings on the 2012 Farm Bill this spring. I’m still recovering from the traumatizing 2008 Farm Bill fight, so I heard this news with some trepidation.
But wait! Put those red pens away, folks, because Chairman Peterson plans to keep on spending on agricultural programs. Heaven forbid that agriculture should take any of those “cuts” we’ve been hearing so much about :
House Agriculture Committee Chairman Collin Peterson, D-Minn., said… he is determined to write a bipartisan bill that is within the funding baseline that exists in 2012.
The funding baseline is the amount of money that the Congressional Budget Office determines would be spent on all programs in the farm bill if the same programs were to continue after 2012. CBO projects the funding levels based on spending in programs in past years.
Peterson said at least initially he expects each major farm bill section — the farm program, conservation and nutrition — to stay within its 2012 baseline.
He also specifically pledged to fight off any attempts to lower direct payments, which flow to current or past farmers of certain crops year-in-year-out, regardless of whether they still farm or not.
Some further details on his plans for the next farm bill can be found in this National Journal article [$ again, sorry] but the gist of it is that Chairman Peterson doesn’t want reformers interfering the way they did last time, even if farmers were left practically unscathed from the battle.
In a speech to the National Association of Wheat Growers and U.S. Wheat Associates, Peterson said that reformers “who don’t understand how this works … defined what reform is” in 2008. Peterson said there should be changes to the farm bill, but he ridiculed one of the reformers’ biggest goals: limitations on payments to big farmers.
The campaign to lower payment limits “is not reform. It’s an ideology,” he said. Reformers want Congress to decide what size farms should get subsidies, a notion that Peterson rejects. “We are not smart enough in government to decide what farm size is,” he said.
(Sidebar: Isn’t it cute how Chairman Peterson couches his opposition to farm payment limits in libertarianish terms about how government “isn’t smart enough.” His support for a 80+-year-old suite of government interventions suggests he is not as skeptical about government’s smarts as he indicates in this little political aside. But I digress.)
And in a charming dismissal of the importance of free trade (he’s an old-hand at dismissing international obligations in this area), Chairman Peterson offered this:
Peterson said he did not think pressures to comply with trade agreements would be too much of a problem in the farm bill because “the trade situation is dead in the water,” and negotiators realize they cannot get approval from Congress if agriculture is not satisfied. “We’ve got some power over that system,” he said.
“I am not going to turn myself into a pretzel to accommodate this latest trade agreement,” he said.
A disappointing start to the 2012 Farm Bill fight, to be sure, but my hope is not dashed. With any luck, the recent signs of voters’ disgust with Washington will translate into some extra political support for those of us working for real reform. (see examples here and here.)
Unions Fading in Private Sector But Not in Government
At the end of last week, the Labor Department reported that the share of private-sector workers who belong to labor unions fell to its lowest level in more than a century.
In 2009, the “union density” in the private sector fell to 7.2 percent, the lowest it has been since 1900. The recession caused the number of private-sector union members to fall by 10 percent last year, with the heaviest losses in manufacturing and construction.
Not surprisingly, union membership held steady in the public sector, with the share of government workers belonging to unions actually inching up to 37.4 percent. Unionization is more viable in the public sector because the additional costs imposed by unions can be passed along to captive taxpayers.
The economics of unionization are much different in the private sector, as I argue in an article in the latest issue of the Cato Journal now available online. In a competitive market, producers cannot pass the costs of unionization on to consumers without the real risk of losing market share to non-unionized rivals. This is a major, self-serving reason why organized labor typically opposes competition-enhancing trade agreements with other countries. (See the chart below from my Cato Journal article.)
The drop in union members was also another piece of bad news for the Democratic Party last week. As labor unions have become relatively more important as a constituency within the Democratic Party, they have become increasingly irrelevant in the private economy. Unions will find it more and more difficult to generate the funds for their political activities if the number of dues-paying members continues to slide.
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