820 Intemational Organization New England producers heeded this advice and increased the production of high- skill-intensive textile manufacturing;the increased use of skilled labor meant that by 1908,the association could argue that "immigration is,however,no longer as necessary to this country as it was in pioneer times."36 More recently,the Western Growers Association (WGA),which represents farmers in California and Arizona,has made a similar argument in response to foreign competition:"It is time for those anti-immigration reform legislators in Washington DC to realize that the higher the use of technology and innovation, the lower the need for foreign labor."37 Unlike the textile industry,there have been few advances in technology that would decrease the need for agricultural labor and,as I show in the next section,agriculture therefore has continued to lobby for immigration. Threatened firms may also lobby for increased low-skill immigration or subsidies to stay in business.For example,Tom Nassif,the president of the WGA,argued that "You cannot say we're going to take every illegal alien out of this country without at least factoring in the need for some foreign workers in this country.China is coming at us like a freight train.We can't compete with them."38 Even if firms do not lobby, policy-makers may increase immigration or give subsidies because they do not want threatened firms to close. The policy-maker will open LSIP or subsidize the firm if the costs of doing so are lower than the costs of losing these firms.On the one hand,if the firms close,the policy-maker loses the tax revenue and jobs it provided along with any political capital.On the other hand,the policy-maker can restrict LSIP,which makes taxpayers and nativists happier,without making the surviving firms worse off because they can hire the laid-off native labor.Additionally,opening LSIP or giving subsidies is not costless;increasing low-skill immigration will increase nativism and the fiscal costs of immigrants and giving subsidies reduces the income that can be spent on other constituents.39 At moderate levels of trade openness,it is unclear whether policy-makers will open LSIP,subsidize firms,or allow them to close.However,the amount of subsidies or low-skill immigration needed to keep firms in business increases as trade opens because greater openness reduces prices further;reduces the price of more goods; or allows the export sector to expand,further driving up costs for threatened firms. Further,recent trade negotiations have chipped away at the ability to use subsidies to protect firms,making it less likely that senators can provide firms with subsidies. As trade openness continues,more firms will be allowed to close and senators should vote for restrictions more often. 36.C1ews1908.257 37.Nassif 2006b.6. 38.Nassif2005.9. 39.This argument is similar to Mosley's 2003 argument that developed countries do not always abandon domestic policies in favor of appeasing capital markets
New England producers heeded this advice and increased the production of highskill-intensive textile manufacturing; the increased use of skilled labor meant that by 1908, the association could argue that “immigration is, however, no longer as necessary to this country as it was in pioneer times.”36 More recently, the Western Growers Association (WGA), which represents farmers in California and Arizona, has made a similar argument in response to foreign competition: “It is time for those anti-immigration reform legislators in Washington DC to realize that the higher the use of technology and innovation, the lower the need for foreign labor.”37 Unlike the textile industry, there have been few advances in technology that would decrease the need for agricultural labor and, as I show in the next section, agriculture therefore has continued to lobby for immigration. Threatened firms may also lobby for increased low-skill immigration or subsidies to stay in business. For example, Tom Nassif, the president of the WGA, argued that “You cannot say we’re going to take every illegal alien out of this country without at least factoring in the need for some foreign workers in this country. China is coming at us like a freight train. We can’t compete with them.”38 Even if firms do not lobby, policy-makers may increase immigration or give subsidies because they do not want threatened firms to close. The policy-maker will open LSIP or subsidize the firm if the costs of doing so are lower than the costs of losing these firms. On the one hand, if the firms close, the policy-maker loses the tax revenue and jobs it provided along with any political capital. On the other hand, the policy-maker can restrict LSIP, which makes taxpayers and nativists happier, without making the surviving firms worse off because they can hire the laid-off native labor. Additionally, opening LSIP or giving subsidies is not costless; increasing low-skill immigration will increase nativism and the fiscal costs of immigrants and giving subsidies reduces the income that can be spent on other constituents.39 At moderate levels of trade openness, it is unclear whether policy-makers will open LSIP, subsidize firms, or allow them to close. However, the amount of subsidies or low-skill immigration needed to keep firms in business increases as trade opens because greater openness reduces prices further; reduces the price of more goods; or allows the export sector to expand, further driving up costs for threatened firms. Further, recent trade negotiations have chipped away at the ability to use subsidies to protect firms, making it less likely that senators can provide firms with subsidies. As trade openness continues, more firms will be allowed to close and senators should vote for restrictions more often. 36. Clews 1908, 257. 37. Nassif 2006b, 6. 38. Nassif 2005, 9. 39. This argument is similar to Mosley’s 2003 argument that developed countries do not always abandon domestic policies in favor of appeasing capital markets. 820 International Organization
Trade,Foreign Direct Investment,and Immigration Policy Making 821 Low-Skill Immigration Policy Under High Firm Mobility What happens as firms become more mobile?Firm mobility is affected by several factors:the ability to control overseas agents,the legal ability to move,the fear of expropriation,and whether it is profitable to move,either to gain market access or to exploit lower costs.Regardless of why firms move,the option to move production makes the firm less willing to spend political capital on LSIP.Moreover,once firms have moved,they may support restricting LSIP at home if they move to a state that sends many emigrants to the home state.By restricting LSIP at home,the wage in the country of production will decrease as fewer people emigrate.Firms'support for open LSIP,therefore,should decrease as firm mobility increases,leading to restric- tions in LSIP. To the policy-maker,moving production overseas is the same as if the firm went out of business;both the jobs and the tax revenue associated with the firm are lost.40 As above,the policy-maker may want to open LSIP or subsidize these firms through tax breaks.As more firms find moving overseas profitable,however,the policy- maker would have to offer more subsidies to more firms.This is likely to be unsus- tainable at high levels of firm mobility and senators should be more likely to vote for restricting LSIP. As well,trade openness and firm mobility may have an interactive effect.Moving overseas is a better option for the owners of threatened firms than closing because they continue to earn profits rather than extracting what capital they can from selling the firm's assets.Under trade openness and firm mobility,one expects more firms that are low-skill-intensive to move overseas.This also decreases support for open LSIP and will lead senators to vote for restrictions more often. This trend of firms moving in the face of trade competition has even affected agri- culture,an industry previously thought to be relatively immobile.For example,the WGA argues that"For years many people have been speaking out about the threat of competition from other countries...What is not being spoken about is the lure of relocating our own operations to foreign countries or face extinction."41 To keep farms in the United States,"it is time for politicians to understand that we are serious when we say the survival of the specialty crop industry in America is at stake.We need a guest worker program.We need specialty crop support in the new Farm Bill.42 Unfortunately,for the threatened farmers of California and Arizona,members of Congress have not granted them more access to labor;a bill that would create an agricultural guest worker program has failed in every congres- sional session for the past fifteen years.In this case,it seems that it is too costly,pol- itically,to protect these firms. 40.Although it is not always the case,I assume countries cannot tax overseas production. 41.Nassif 2006a,4. 42.Ibid.,4
Low-Skill Immigration Policy Under High Firm Mobility What happens as firms become more mobile? Firm mobility is affected by several factors: the ability to control overseas agents, the legal ability to move, the fear of expropriation, and whether it is profitable to move, either to gain market access or to exploit lower costs. Regardless of why firms move, the option to move production makes the firm less willing to spend political capital on LSIP. Moreover, once firms have moved, they may support restricting LSIP at home if they move to a state that sends many emigrants to the home state. By restricting LSIP at home, the wage in the country of production will decrease as fewer people emigrate. Firms’ support for open LSIP, therefore, should decrease as firm mobility increases, leading to restrictions in LSIP. To the policy-maker, moving production overseas is the same as if the firm went out of business; both the jobs and the tax revenue associated with the firm are lost.40 As above, the policy-maker may want to open LSIP or subsidize these firms through tax breaks. As more firms find moving overseas profitable, however, the policymaker would have to offer more subsidies to more firms. This is likely to be unsustainable at high levels of firm mobility and senators should be more likely to vote for restricting LSIP. As well, trade openness and firm mobility may have an interactive effect. Moving overseas is a better option for the owners of threatened firms than closing because they continue to earn profits rather than extracting what capital they can from selling the firm’s assets. Under trade openness and firm mobility, one expects more firms that are low-skill-intensive to move overseas. This also decreases support for open LSIP and will lead senators to vote for restrictions more often. This trend of firms moving in the face of trade competition has even affected agriculture, an industry previously thought to be relatively immobile. For example, the WGA argues that “For years many people have been speaking out about the threat of competition from other countries … What is not being spoken about is the lure of relocating our own operations to foreign countries or face extinction.”41 To keep farms in the United States, “it is time for politicians to understand that we are serious when we say the survival of the specialty crop industry in America is at stake. We need a guest worker program. We need specialty crop support in the new Farm Bill.”42 Unfortunately, for the threatened farmers of California and Arizona, members of Congress have not granted them more access to labor; a bill that would create an agricultural guest worker program has failed in every congressional session for the past fifteen years. In this case, it seems that it is too costly, politically, to protect these firms. 40. Although it is not always the case, I assume countries cannot tax overseas production. 41. Nassif 2006a, 4. 42. Ibid., 4. Trade, Foreign Direct Investment, and Immigration Policy Making 821