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If Trump really wants to boost US trade, here's what he needs to do first

  • Improving trade balances with countries like China and Mexico, and regaining control of illegal migration are two of the Trump administration's central policy objectives.
  • What is not often realized is that opening the border to legal migration and simultaneously strengthening U.S. legal immigration policy can help the U.S. improve its trade accounts.
  • Fix immigration and trade will fix itself.
President Donald Trump stops to talk to reporters as he walks from the Oval Office and across the South Lawn to board Marine One at the White House in Washington, DC on Wednesday, Sept 27, 2017.
Jabin Botsford | The Washington Post | Getty Images
President Donald Trump stops to talk to reporters as he walks from the Oval Office and across the South Lawn to board Marine One at the White House in Washington, DC on Wednesday, Sept 27, 2017.

A key economic focus of the Trump administration has been renegotiating trade agreements like NAFTA that are perceived as disadvantageous to the U.S. There is always room to improve and update these agreements, due to globalization and technological trends as well as structural changes to the economy.

However, by eventually shifting to a more open immigration framework the U.S. can kill two birds with one stone: it can start to address its undocumented immigration problem, and improve the competitiveness of U.S. trade. While the current policy debate in Washington seems to be moving in the opposite direction, this route is worth considering for the long term as part of broader immigration reform.

Two of the administration's central policy objectives are to improve trade balances with countries like China and Mexico, and to regain control of illegal migration. What is not often realized is that opening the border to legal migration and simultaneously strengthening U.S. legal immigration policy can help the U.S. improve its trade accounts. The reason is that restrictions on international labor flows can push trade and jobs out of the U.S. as they increase production costs and reduce the international competitiveness of U.S. exports.

Immigrants at the high end of the skill spectrum, foreign-born scientists and entrepreneurs, have historically been instrumental in the maintenance of American strengths such as technological edge, which has resulted in trillions of dollars of technology revenues overseas for U.S. companies. Overly restricting inflows of this talent pool works against the U.S.'s comparative advantages. Visas for highly skilled workers, such as H1-B, should be significantly increased above current caps and their maximum renewability extended beyond the current seven years.

"By shifting to a more open immigration framework the U.S. can start to address its undocumented immigration problem and improve the competitiveness of U.S. trade."

Lower-skilled workers also make America more competitive by providing lower cost production in services and manufacturing. They also contribute to make the U.S. labor force one of the youngest and most dynamic in the developed world. But they should not remain in the shadows of illegality.

Rather than pursue the deportation of up to 11 million undocumented workers (most of them employed), with the implied economic, social and political disruption, their employers should have the option of applying for a temporary worker's visa. These visas could be renewed every six or 12 months upon evidence of current or offered employment.

To avoid the moral hazard of rewarding those who have broken immigration laws in the past, these visa program should not lead to permanent residence or citizenship. These statuses should be obtained through current or more stringent channels.

A temporary visa program has many benefits. It improves working conditions for the workers as employers can no longer pay lower wages due to a worker's illegal status. It also helps level the playing field for workers who are American citizens or permanent residents and allows authorities to monitor the whereabouts of these individuals and collect income taxes for the U.S. Treasury.

There is some precedent for the above. The U.S. had a temporary workers scheme from 1942 to 1964 under the so-called Bracero Program, which mostly focused on seasonal agricultural workers. At its peak in 1956 the program issued permits for 445,000 workers.

One criticism of the Bracero program was that many temporary workers overstayed their visas and disappeared among the U.S. population. A temporary visa program today should be large enough to attract the majority of undocumented workers and provide enough incentives to entice them to stay in the program rather than work illegally. Examples include the ability for workers to travel back and forth between the U.S. and their country of origin. Furthermore, today's technology allows for much more efficient management of data than was available 50 years ago, thus allowing better tracking and monitoring of workers' legal and immigration status.

Ultimately, controlled immigration will improve America's international competitiveness - which over time should also improve its trade balance. Rather than close its doors, the U.S. should take advantage of its preferred status among some of the most dynamic workers and entrepreneurs from around the world. Fix immigration and trade will fix itself.

Commentary by Jorge Mariscal, the emerging markets chief investment officer at UBS Wealth Management, which oversees $1 trillion in invested assets. Follow UBS on Twitter @UBS.

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