Illegal Immigration and the Trade War

Following the freeze on trade talks last Friday, China’s apparently moved into full-out attack mode. After slapping new tariffs on thousands of U.S.-made products (mostly meat and vegetables), the Chinese warned President Trump, “if you want to fight, we’ll fight you to the end.”

Over these next few weeks of battle between both governments’ communications departments, will China finally pull out a major hole card it has against the U.S. on the unfair trade issue? That is, will it raise the issue of corporate labor subsidies created by America’s mass immigration system?

By pursuing a system of mass unskilled migration (unparalleled in the world), the U.S. artificially increases its supply of cheap labor. Such labor-surplus conditions work to give many U.S. companies (including U.S. exporters) a big edge on both labor costs and union obligations, in turn providing them with their own unfair advantage over foreign competitors. In the looming public-relations fight over unfair trade, China can and should raise this issue.

The U.S. has actually already teed up this argument for them. According to the U.S. Trade Representative (USTR)’s latest “Report to Congress on China’s WTO Compliance,” it is apparently “of great concern” to the U.S. government that “China does not adhere to certain internationally recognized labor standards, including the freedom of association and the right to bargain collectively.” Elsewhere, the Congressional Executive Commission on China states in its latest audit that China imposes “[r]estrictions on workers’ rights to freely establish and join independent trade unions” and that Chinese workers’ “rights to collective bargaining remain limited in law and in practice.”

While it’s true Chinese workers can only organize under its monolithic All-China Federation of Trade Unions, such pro-labor sentiments might seem rich coming from the source. U.S. unionization rights have been “limited” for decades, due in large part to the constant supply of migrant labor (both legal and not) flowing into America’s mostly blue-collar labor markets. This, of course, also applies to heavy users of “skilled” guest workers like the IT industry. Today, whole sectors of U.S. industry, including big exporters to China like the agricultural and meatpacking industries, have workforces which are close to half illegal immigrants, not just legal ones. This allows exporters reliant on this labor to operate with artificially low costs and artificially high profits.

Regarding U.S. agriculture, a big loser in the tariff war thus far, foreign-labor subsidies are especially entrenched, going back at least to the 1940s when President Truman created the Bracero guest-farmworker program. Although labor activists, such as Cesar Chavez, fought hard to educate the public about the effects of Bracero (as well as illegal-migrant labor in general), agribusiness still enjoys special access to a giant foreign labor reserve and is able to pay a (legal migrant workers, at least) mere 10 dollars an hour in most states (illegal workers get even lower).

Under the Trump administration, White House special advisor Jared Kushner together with USDA Secretary Sonny Perdue has successfully secured a giant increase in farm and non-farm guest worker visas on behalf of U.S. employers. As for the USTR itself, last year they reportedly frustrated internal efforts within the Homeland Security department to reform NAFTA’s “TN” guest worker visa; a program, which offers even less U.S. worker protections than the H-1B program.

A good indicator that China’s labor policies are strong compared to ours is its blue-collar wage growth. While ours have stayed flat or decreased over the last decade, in certain Chinese cities, lower-skilled wages have gone up four times. No doubt a big reason for this is China’s concern for labor-market dynamics, especially the threat to social stability caused by stagnant wages and widening disparities in wealth. For instance, instead of subsidizing large employers by importing workers from poor neighboring countries, the Chinese government pushes employers to innovate and become more productive -- At the same time, China also encourages rural workers to relocate to its manufacturing centers.

Japan, a country whose developmental history China has studied closely, pursued a similar policy in the 1960s. Back then, when Japan’s growing textile industry lobbied for immigrant labor, they were rebuffed. Instead, the industry was pushed to automate, focus on less labor-intensive, higher-margin synthetics, and move low-skilled production abroad.

More broadly, with the exception of the Chinese in Hong Kong, China does not allow foreigners to obtain permanent residence or citizenship, and it vigorously cracks down on Vietnamese and North Korean illegal migrants entering its southern and northern provinces, respectively. Indeed, China’s longstanding conciliatory policy toward the latter country is principally based on labor-market considerations; namely, the fear of what millions of North Korean workers would do to the wage standards of its bordering provinces should that nation suffer a Venezuela-style breakdown.

In the increasingly fraught trade situation, China has a legitimate claim to make on the immigration issue. Until the legal and illegal immigrant labor pool in the U.S. stops expanding, the Chinese government has every right to call out the U.S. for what it is: a subsidy to American business.