International Organization http://journals.cambridge.orq/INO Additional services for International Organization: Email alerts:Click here Subscriptions:Click here Commercial reprints:Click here Terms of use:Click here Trade,Foreign Direct Investment,and Immigration Policy Making in the United States Margaret E.Peters International Organization/Volume 68 Issue 04 September 2014,pp 811-844 DOI:10.1017/S0020818314000150,Published online:15 September 2014 Link to this article:http://iournals cambridge org/abstract S0020818314000150 How to cite this article: Margaret E.Peters(2014).Trade,Foreign Direct Investment,and Immigration Policy Making in the United States.International Organization,68,pp 811-844 doi:10.1017/S0020818314000150 Request Permissions Click here CAMNE JOURNALS Downloaded from http://journals.cambridge.org/INO,IP address:211.80.95.69 on 13 Jan 2015
International Organization http://journals.cambridge.org/INO Additional services for International Organization: Email alerts: Click here Subscriptions: Click here Commercial reprints: Click here Terms of use : Click here Trade, Foreign Direct Investment, and Immigration Policy Making in the United States Margaret E. Peters International Organization / Volume 68 / Issue 04 / September 2014, pp 811 - 844 DOI: 10.1017/S0020818314000150, Published online: 15 September 2014 Link to this article: http://journals.cambridge.org/abstract_S0020818314000150 How to cite this article: Margaret E. Peters (2014). Trade, Foreign Direct Investment, and Immigration Policy Making in the United States. International Organization, 68, pp 811-844 doi:10.1017/S0020818314000150 Request Permissions : Click here Downloaded from http://journals.cambridge.org/INO, IP address: 211.80.95.69 on 13 Jan 2015
Trade,Foreign Direct Investment,and Immigration Policy Making in the United States Margaret E.Peters Abstract This article argues that immigration policy formation in the United States after 1950 can only be understood in the context of the increasing integration of world markets.Increasing trade openness has exposed firms that rely on immigrant labor to foreign competition and increased the likelihood that these firms fail.Increasing openness by other states to foreign direct investment(FDI)allowed these same firms to move pro- duction overseas.Firms'choices to close their doors or to move overseas decrease their need for labor at home,leading them to spend their political capital on issues other than immigration.Their lack of support for open immigration,in turn,allows policymakers to restrict immigration.An examination of voting behavior on immigration in the US Senate shows that the integration of world capital and goods markets has had an important effect on the politics of immigration in the United States and shows little support for existing theories of immigration policy formation.In addition to increasing one's understanding of immigration policy,this article sheds light on how trade openness and firms'choice of production location can affect their preference for other foreign economic policies as well as domestic policies such as labor,welfare,and environmental policies. It is a fact that foreign workers will be harvesting the food we eat in the United States...they will either be doing it within our borders with our domestic food supply or they will be doing it outside our borders and shipping us a foreign- grown food supply. -Tom Nassif,President,Western Growers Association! Business leaders have long understood that there was a trade-off between trade,the ability to move production overseas,and immigration.Yet,the field of international political economy (IPE)has largely ignored this trade-off and immigration policy more generally.2 This is understandable given that,since World War II, This work was supported by a Congressional Research Award from the Dirkensen Congressional Center. I would like to thank the anonymous reviewers,Judith Goldstein,Mike Tomz,Douglas Rivers,Justin Grimmer,Jan Box-Steffensmeier,Lucy Goodhart,Jeffery D.Colgan,David Steinberg.Ashley Jester, Margaret E.Roberts,James Morrison,and In Song Kim for their comments.I would also like to thank Cory Lunde and Tom Nassif at the Western Growers Association for giving me access to their archives and all their time and support.All errors remain my own. 1.Linden2006,16-17. 2.For example,Keohane and Milner write that"Since labor moves much less readily across national borders than goods or capital,we have not considered migration as part of interationalization...in International Organization 68.Fall 2014,pp.811-844 The IO Foundation,2014 doi:10.1017/S0020818314000150
Trade, Foreign Direct Investment, and Immigration Policy Making in the United States Margaret E. Peters Abstract This article argues that immigration policy formation in the United States after 1950 can only be understood in the context of the increasing integration of world markets. Increasing trade openness has exposed firms that rely on immigrant labor to foreign competition and increased the likelihood that these firms fail. Increasing openness by other states to foreign direct investment (FDI) allowed these same firms to move production overseas. Firms’ choices to close their doors or to move overseas decrease their need for labor at home, leading them to spend their political capital on issues other than immigration. Their lack of support for open immigration, in turn, allows policymakers to restrict immigration. An examination of voting behavior on immigration in the US Senate shows that the integration of world capital and goods markets has had an important effect on the politics of immigration in the United States and shows little support for existing theories of immigration policy formation. In addition to increasing one’s understanding of immigration policy, this article sheds light on how trade openness and firms’ choice of production location can affect their preference for other foreign economic policies as well as domestic policies such as labor, welfare, and environmental policies. It is a fact that foreign workers will be harvesting the food we eat in the United States . . . they will either be doing it within our borders with our domestic food supply or they will be doing it outside our borders and shipping us a foreigngrown food supply. –Tom Nassif, President, Western Growers Association1 Business leaders have long understood that there was a trade-off between trade, the ability to move production overseas, and immigration. Yet, the field of international political economy (IPE) has largely ignored this trade-off and immigration policy more generally.2 This is understandable given that, since World War II, This work was supported by a Congressional Research Award from the Dirkensen Congressional Center. I would like to thank the anonymous reviewers, Judith Goldstein, Mike Tomz, Douglas Rivers, Justin Grimmer, Jan Box-Steffensmeier, Lucy Goodhart, Jeffery D. Colgan, David Steinberg, Ashley Jester, Margaret E. Roberts, James Morrison, and In Song Kim for their comments. I would also like to thank Cory Lunde and Tom Nassif at the Western Growers Association for giving me access to their archives and all their time and support. All errors remain my own. 1. Linden 2006, 16–17. 2. For example, Keohane and Milner write that “Since labor moves much less readily across national borders than goods or capital, we have not considered migration as part of internationalization … in International Organization 68, Fall 2014, pp. 811–844 © The IO Foundation, 2014 doi:10.1017/S0020818314000150
812 Interational Organization policy-makers have treated migration policy as domestic policy.After the war, policy-makers,recognizing the interactions among trade,finance,and security, forged a patchwork of interlocking international regimes to govern global security, trade,and finance in hopes of recreating the nineteenth-century liberal interational order.Yet apart from provisions to accommodate refugees,provisions governing international economic migration are conspicuously absent from the Anglo- American postwar order.Scholars studying migration have similarly conceptualized migration as domestic concern,focusing on three domestic-level variables to explain changes in policy:the power of organized labor,the importance of immigrant groups, and the rise of nativism. This domestic perspective,however,fails to explain US postwar immigration policy.Briggs,for example,argues that immigration policy has been driven by vari- ation in the power of organized labor.3 Yet immigration was reopened somewhat after World War II when labor was relatively strong and was closed in the 1990s when labor was relatively weak.Other scholars focus on immigrants as an important lob- bying group.4 Nonetheless,the foreign-born have never been more than 14 percent of the population and naturalized foreign born,those who can vote,have never been more than 7 percent of the population,limiting their ability to affect politics.5 Finally,nativist backlash,which is often thought of as the conventional wisdom, has been argued to explain changes in policy.6 Yet,nativist backlash has occurred several times in US history without leading to a change in policy.In the 1840s and 1850s,there was a major outcry against Irish and German immigration,which led to the creation of nativist parties,but not restrictions.Backlash against southern and eastern European immigrants in the 1890s again led to little action on immigra- tion.Most recently,nativist backlash has led to some action on the state level,for example,Arizona's SB1070 or Alabama's Self-Deportation law,but not at the federal level.Nativism is too ubiquitous a phenomenon to be the full explanation for immigration policy.Instead,I argue that scholars must examine when firms serve as a bulwark against nativism and when they choose to stay on the sidelines of the low-skill immigration debate. This article argues that immigration policy-particularly low-skill immigration policy (LSIP)-is largely driven by the economy's need for low-skill labor that,in tum,is affected by the country's trade policy and the ability of firms to move production overseas (what I term,firm mobility.)It is generally accepted that trade closure leads to an increase in low-skill-intensive production in low-skill future work,serious attention should be given to including migration in the analysis of internationaliza- tion."Keohane and Milner 1996,258.Lake's review of Open Economy Politics (OPE)mentions "trade"seventy-eight times,"capital"twelve times,and "immigration"three times.Lake 2009.Oatley's critique of OPE mentions tariffs,monetary,and exchange rate policies and investment flows as part of OEP but not migration.Oatley 2011. 3.Briggs 2001. 4.For example,Tichenor 2002. 5.See Carter et al.2006;and Grieco et al.2012. 6.For example,Zolberg 2006
policy-makers have treated migration policy as domestic policy. After the war, policy-makers, recognizing the interactions among trade, finance, and security, forged a patchwork of interlocking international regimes to govern global security, trade, and finance in hopes of recreating the nineteenth-century liberal international order. Yet apart from provisions to accommodate refugees, provisions governing international economic migration are conspicuously absent from the AngloAmerican postwar order. Scholars studying migration have similarly conceptualized migration as domestic concern, focusing on three domestic-level variables to explain changes in policy: the power of organized labor, the importance of immigrant groups, and the rise of nativism. This domestic perspective, however, fails to explain US postwar immigration policy. Briggs, for example, argues that immigration policy has been driven by variation in the power of organized labor.3 Yet immigration was reopened somewhat after World War II when labor was relatively strong and was closed in the 1990s when labor was relatively weak. Other scholars focus on immigrants as an important lobbying group.4 Nonetheless, the foreign-born have never been more than 14 percent of the population and naturalized foreign born, those who can vote, have never been more than 7 percent of the population, limiting their ability to affect politics.5 Finally, nativist backlash, which is often thought of as the conventional wisdom, has been argued to explain changes in policy.6 Yet, nativist backlash has occurred several times in US history without leading to a change in policy. In the 1840s and 1850s, there was a major outcry against Irish and German immigration, which led to the creation of nativist parties, but not restrictions. Backlash against southern and eastern European immigrants in the 1890s again led to little action on immigration. Most recently, nativist backlash has led to some action on the state level, for example, Arizona’s SB1070 or Alabama’s Self-Deportation law, but not at the federal level. Nativism is too ubiquitous a phenomenon to be the full explanation for immigration policy. Instead, I argue that scholars must examine when firms serve as a bulwark against nativism and when they choose to stay on the sidelines of the low-skill immigration debate. This article argues that immigration policy—particularly low-skill immigration policy (LSIP)—is largely driven by the economy’s need for low-skill labor that, in turn, is affected by the country’s trade policy and the ability of firms to move production overseas (what I term, firm mobility.) It is generally accepted that trade closure leads to an increase in low-skill-intensive production in low-skill future work, serious attention should be given to including migration in the analysis of internationalization.” Keohane and Milner 1996, 258. Lake’s review of Open Economy Politics (OPE) mentions “trade” seventy-eight times, “capital” twelve times, and “immigration” three times. Lake 2009. Oatley’s critique of OPE mentions tariffs, monetary, and exchange rate policies and investment flows as part of OEP but not migration. Oatley 2011. 3. Briggs 2001. 4. For example, Tichenor 2002. 5. See Carter et al. 2006; and Grieco et al. 2012. 6. For example, Zolberg 2006. 812 International Organization
Trade,Foreign Direct Investment,and Immigration Policy Making 813 labor-scarce states,such as the United States,and a concomitant increase in wages. Without an increase in the labor supply,any advantage that firms gain from trade pro- tection may be erased because of increasing wages.One expects,then,that firms lobby for liberalizing LSIP when trade is restricted.As firms tend to be powerful, LSIP should be relatively open.Similarly,when firms are immobile across inter- national borders,because they are legally or technologically unable to move capital or because there are few safe places for investment,their need for low-skill labor at home increases as does their support for LSIP. In contrast,trade openness leads to a decrease in low-skill labor-intensive pro- duction,reducing the need for labor and,in many cases,forcing businesses to close.Businesses that close no longer lobby policy-makers,and businesses that remain open also have less incentive to lobby policy-makers for open LSIP as wages for low-skill workers have decreased.Similarly,when firms are mobile, because of open capital policies,new technologies,or greater investor protections from foreign governments,their support for LSIP decreases because of their outside option.Given the existence of groups who oppose LSIP,one expects that policy-makers will respond to less support for open LSIP by restricting it. In this article,I show how openness to trade and other states'openness to foreign capital affect LSIP through the lens of US senators'voting behavior on immigration after 1950.This case was chosen because,empirically,examining Senate voting allows one to establish causality.Although trade and capital policy are likely to be endogenous to firms'and policy-makers'preferences,I argue in this study that there are two measures-the level of tariff barriers and average world openness to capital flows-that US senators have had little ability to control since World War II.?With the Reciprocal Trade Agreements Act,Congress tied its own hands on tariff policy.Tariff rates could now stay the same or be cut;they could not be increased.Trade was also opened using international institutions such as the General Agreement on Tariffs and Trade/World Trade Organization (GATT/ WTO),which help perpetuate trade openness far removed from the influence of US senators.The ability to move production overseas during this time period was largely driven by the decision of other countries to open their markets to foreign direct investment (FDD);again,something that was beyond the influence of a single senator. Foreshadowing the results,voting on immigration in the post-1950 period can largely be explained by trade openness and the ability of firms to move overseas. There is little difference in voting behavior based on the explanations in the literature, including the party or ideology of the senators,welfare spending,unemployment, gross domestic product(GDP)growth,and the percent of foreign-born in the sena- tors'states. 7.Before 1950,the changes in LSIP and Senate voting behavior were driven by technological changes leading to the creation of a US national market,which had similar effects to the creation of the world market after World War II Peters 2011
labor-scarce states, such as the United States, and a concomitant increase in wages. Without an increase in the labor supply, any advantage that firms gain from trade protection may be erased because of increasing wages. One expects, then, that firms lobby for liberalizing LSIP when trade is restricted. As firms tend to be powerful, LSIP should be relatively open. Similarly, when firms are immobile across international borders, because they are legally or technologically unable to move capital or because there are few safe places for investment, their need for low-skill labor at home increases as does their support for LSIP. In contrast, trade openness leads to a decrease in low-skill labor-intensive production, reducing the need for labor and, in many cases, forcing businesses to close. Businesses that close no longer lobby policy-makers, and businesses that remain open also have less incentive to lobby policy-makers for open LSIP as wages for low-skill workers have decreased. Similarly, when firms are mobile, because of open capital policies, new technologies, or greater investor protections from foreign governments, their support for LSIP decreases because of their outside option. Given the existence of groups who oppose LSIP, one expects that policy-makers will respond to less support for open LSIP by restricting it. In this article, I show how openness to trade and other states’ openness to foreign capital affect LSIP through the lens of US senators’ voting behavior on immigration after 1950. This case was chosen because, empirically, examining Senate voting allows one to establish causality. Although trade and capital policy are likely to be endogenous to firms’ and policy-makers’ preferences, I argue in this study that there are two measures—the level of tariff barriers and average world openness to capital flows—that US senators have had little ability to control since World War II.7 With the Reciprocal Trade Agreements Act, Congress tied its own hands on tariff policy. Tariff rates could now stay the same or be cut; they could not be increased. Trade was also opened using international institutions such as the General Agreement on Tariffs and Trade/World Trade Organization (GATT/ WTO), which help perpetuate trade openness far removed from the influence of US senators. The ability to move production overseas during this time period was largely driven by the decision of other countries to open their markets to foreign direct investment (FDI); again, something that was beyond the influence of a single senator. Foreshadowing the results, voting on immigration in the post-1950 period can largely be explained by trade openness and the ability of firms to move overseas. There is little difference in voting behavior based on the explanations in the literature, including the party or ideology of the senators, welfare spending, unemployment, gross domestic product (GDP) growth, and the percent of foreign-born in the senators’ states. 7. Before 1950, the changes in LSIP and Senate voting behavior were driven by technological changes leading to the creation of a US national market, which had similar effects to the creation of the world market after World War II. Peters 2011. Trade, Foreign Direct Investment, and Immigration Policy Making 813
814 International Organization For the immigration literature,this article returns the focus to firms.Firms have often been conceptualized as having static preferences for openness.8 This article shows that firms'preferences can change based on their production strategies,com- petitiveness,and locational choices.In a world of increasingly internationalized firm operations,understanding how endogenous locational choices by firms affect where and how they lobby is becoming increasingly important.This article sheds light on this problem and suggests a theory for how the internationalization of firms may affect other policy areas,such as labor or environmental policy. Moreover,this article helps return focus to immigration policy as part of IPE.One of the key questions of IPE is why do countries open their borders to the free move- ment of goods and services,capital,and people.9 IPE scholars have long examined the determinants of trade policy and have increasingly examined the determinants of policies toward capital in all its forms,but,except for a nascent literature on public opinion on immigration,12 the third flow has been largely ignored.13 This in- attention is somewhat understandable given the youth of the IPE field:migration, especially low-skill migration,has played a lesser role in the current era of globaliza- tion than it did in the nineteenth century.14 But this smaller role has been attributable to policy choices,especially those made by the largest immigrant-receiving state,the United States.To better understand globalization,then,one needs a better under- standing of why low-skill immigration has not been liberalized in the post-World War II era whereas trade from and capital movements to less-developed states have been. Further,this article is part of an important trend to bring the different areas of IPE together.15 It highlights,then,that the choice of openness policies matter.Although the economists are correct that any combination of openness of the three factors- people,money,and goods-will have similar effects on the size of the economy and the return to factors,they miss the political effects of the changing composition of industry that arises.Opening trade and capital will lead those firms most reliant on low-skill labor to become more productive,move overseas,or close their doors.As such,these firms will no longer lobby for LSIP and low-skill immigration will be restricted.The choice to open trade and capital,therefore,changes the political land- scape,leading to changes in immigration policy and,likely,other areas of domestic policy as well. 8.See Freeman 1995;and Joppke 1998. 9.Lake2009. 10.For example,see Alt and Gilligan 1994;Mansfield and Busch 1995:Milner 1988;and Rogowski 1989. 11.For example,see Frieden 1991;Quinn and Inclan 1997;and Simmons 2000. 12.For example,see Goldstein and Peters 2014;Hainmueller and Hiscox 2010;and Hanson,Scheve, and Slaughter 2007. 13.Leblang and Singer would be the major exceptions to this.See Leblang 2010:and Singer 2010. 14.Hatton and Williamson 2005. 15.For example,see Broz and Werfel 2014;Copelovitch and Pevehouse 2013;Leblang 2010;and Singer 2010
For the immigration literature, this article returns the focus to firms. Firms have often been conceptualized as having static preferences for openness.8 This article shows that firms’ preferences can change based on their production strategies, competitiveness, and locational choices. In a world of increasingly internationalized firm operations, understanding how endogenous locational choices by firms affect where and how they lobby is becoming increasingly important. This article sheds light on this problem and suggests a theory for how the internationalization of firms may affect other policy areas, such as labor or environmental policy. Moreover, this article helps return focus to immigration policy as part of IPE. One of the key questions of IPE is why do countries open their borders to the free movement of goods and services, capital, and people.9 IPE scholars have long examined the determinants of trade policy10 and have increasingly examined the determinants of policies toward capital in all its forms,11 but, except for a nascent literature on public opinion on immigration,12 the third flow has been largely ignored.13 This inattention is somewhat understandable given the youth of the IPE field: migration, especially low-skill migration, has played a lesser role in the current era of globalization than it did in the nineteenth century.14 But this smaller role has been attributable to policy choices, especially those made by the largest immigrant-receiving state, the United States. To better understand globalization, then, one needs a better understanding of why low-skill immigration has not been liberalized in the post–World War II era whereas trade from and capital movements to less-developed states have been. Further, this article is part of an important trend to bring the different areas of IPE together.15 It highlights, then, that the choice of openness policies matter. Although the economists are correct that any combination of openness of the three factors— people, money, and goods—will have similar effects on the size of the economy and the return to factors, they miss the political effects of the changing composition of industry that arises. Opening trade and capital will lead those firms most reliant on low-skill labor to become more productive, move overseas, or close their doors. As such, these firms will no longer lobby for LSIP and low-skill immigration will be restricted. The choice to open trade and capital, therefore, changes the political landscape, leading to changes in immigration policy and, likely, other areas of domestic policy as well. 8. See Freeman 1995; and Joppke 1998. 9. Lake 2009. 10. For example, see Alt and Gilligan 1994; Mansfield and Busch 1995; Milner 1988; and Rogowski 1989. 11. For example, see Frieden 1991; Quinn and Inclan 1997; and Simmons 2000. 12. For example, see Goldstein and Peters 2014; Hainmueller and Hiscox 2010; and Hanson, Scheve, and Slaughter 2007. 13. Leblang and Singer would be the major exceptions to this. See Leblang 2010; and Singer 2010. 14. Hatton and Williamson 2005. 15. For example, see Broz and Werfel 2014; Copelovitch and Pevehouse 2013; Leblang 2010; and Singer 2010. 814 International Organization