Free Immigration Agreements?
The idea of Free Trade Agreements (FTAs) is becoming increasingly popular around the world. Australia already has agreements with New Zealand, Singapore, Thailand and America and is currently negotiating several more. These agreements allow for the relatively free flow of goods and services between the member countries in the recognition that such an agreement is in their mutual interests.
The same rationale applies for immigration and the free movement of labour. Indeed, the argument for Free Immigration Agreements (FIAs) is probably stronger than the argument for FTAs, as the option of a truly free movement of people around the world is not viable and so there is not an alternative multi-lateral approach (like the WTO).
The economic benefits of FIAs are unambiguous — with a free trade in labour leading to a more efficient labour market and a more efficient allocation of resources. This results in higher average incomes and lower prices for consumer goods. But there is also the possibility of signficiant social benefits as people are more free to choose between lifestyles, communities, jobs, political jurisdictions and environments.
The spectre of more immigration scares many people, but it would be possible to introduce FIAs in a way that removed most of the costs sometimes associated with immigration — such as abuse of welfare, undermining democracy, crime & rapid social change.
FIAs could be negotiated with countries that share our basic values (rule of law, democracy) and only in situations where there is no expectation of a surge of immigration. In most cases, this would require that the partner country has a standard of living similar to Australia. Migrants between FIA countries would have the rights of a permanent resident, but would retain the citizenship of their home country (so can be deported if necessary).
Australia already has an “open-door” policy with New Zealand and people move relatively freely between Australia and New Zealand to the benefit of both countries. Good candidate countries for an FIA include Singapore, Canada, Hong Kong, the UK, Ireland and the Netherlands among others.
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Ludwig Von Mises wrote about this idea in 1927 in “Liberalism”. Interestingly he chose to make reference to Australia as an example worthy of special mention.
http://www.mises.org/liberal/ch3sec8.asp
Clearly the writing shows that it is of another era. Interestingly he goes on to suggest that if labourers are restricted from moving freely to areas with more favourable economic circumstances then an increased occurance of wars may be one likely consequence.
John,
what evidence do you that economic benefits FIA are unambiguous? Here are three examples:
One dominant and one silghtly less dominant country — like Australia and New Zealand. Despite the relatively small difference, you get large numbers of professional groups moving. It seems to me that the long term effect of this movement is very hard to determine — which is why peole argue about it.
Poor and rich EU countries — Almost all EU countires have demographic structures that are getting more and more aged. This problems is made worse with FIAs, because what you find is that as soon as the small poor countries get FIAs, a large chunk of the young and well educated members move (moreso than Aus & NZ). Its hard to imagine this isn’t going to cause problems in the long term for these countries — can you run a successful country with piles of old people and poorly educated young people? What happens if one these countries goes broke because of it? We’ll find out the answers to these in a decade or two.
Small rich countries & big poor countries. Hong Kong could have a FIA with China if it wanted, and the big Chinese cities could have FIAs with other poor places in China (freedom of movement/work is somewhat restricted). The problem with this is that cities basically get swamped (Shenzhen, for example), and infrastructure gets overwhelmed, and thus there are potential losses all round.
What kind of loss occurs if the demand for capital rises? There can only be a loss if there is some legislation blocking investment or all resources are exhausted under true full employment and we lose our ingenuity to organise resources or come up with new ideas.
Are those who moved and who were originally there better off or at least have a better set of choices?
Conrad – I could be wrong but I don’t think there is any real debate in relation to the relatively free movement of citizens between New Zealand and Australia. It seems to me that it is quite widely accepted in both countries.
In terms of disruptive structural adjustments these are the flip side of economic improvement. You can’t improve economic outcomes without structural adjustment and so when you see large scale structural adjustment disrupting the status quo it generally means that economic outcomes are going to be better.
In terms of preventing failed micro-states in the pacific region (mostly polynesian) I think it would make sense to include many of them on Johns FIA list even though they are relatively poor. Their populations are too small to swamp us in any significant way and when over here they typically work hard to repatriate income to families at home. I’m thinking of places like Tonga, Fiji and the Solomon Islands. Of course they may not wish to strike such an agreement in which case we should just leave the offer on the table.
Actually, if we lived in an ideal world of free trade and free markets, we would become more Australian, not less. We would be economically motivated to find niche corners in which we could specialise, such as opal mining, or kangaroo-herding. As Adam Smith pointed out, it made more sense for the Scots to export their whisky, and import foreign wines, than try to do everything themselves. So, as a patriotic Australian, let’s specialise!
Mark – wages are a function of the capital to labour ratio. If you get an influx of labour with no change in the amount of capital then you would expect wages to decline. This is why labour already inside the tent won’t generally welcome new comers. As China and India have joined the world markets they have initially diluted the capital to labour ratio especially in the low skill arena. This is good for unskilled Chinese and Indian workers but during the transition period it is less good for unskilled workers in the developed world. Capital formation can however be remarkably quick given the right conditions and the ratio will ultimately deliver a better outcome for everybody.
It is interesting to note that the rationalisation for the White Australia policy was essentially an attempt at preserving the ratio for insiders in the days when being something other than white meant you came from a poor place. This form of argument for isolationism is not without merit (although the use of a racial construct is disappointing) but I agree that we should seek to limit it’s application. FIAs seem to me to be a good marriage between political pragmatism and libertarian idealism.
Good candidate countries for an FIA include Singapore, Canada, Hong Kong, the UK, Ireland and the Netherlands among others.
The Scandinavian countries, Belgium, Germany, Austria, France and Italy are also possible candidates.
In addition to the criteria nominated, it would be advisable to take into consideration each country’s own immigration policy. For example, France has had a policy of admitting large numbers of immigrants from francophone Africa, which is leading to social problems of various kinds. We would not want to import such problems ourselves.
John,
I’m not sure how well accepted the benefit of the FIA is accepted by the average NZ citizen — perhaps economists yes, but the average citizen trying to find a doctor I’m sure thinks the opposite. If you look in the kiwi papers, there are constant complaints and scare-mongering (brain drain etc.), although I see this as very East-Germanesque mentality, in that Australia is also nice enough to take the whole spectrum of kiwis — versus just the smart ones, who would leave even if there wasn’t such an agreement (I don’t think some people realize this).
As for those little failed states — actually, at a practical level, I think a FIA would make little difference — A large proportion of their population is going to end-up in Australia/NZ one way or another in any case.
Conrad – in negotiating any such agreement (eg NZ) I think we need to let the other party (eg NZ) determine if the deal makes sense for them. It is good to negotiate with a win/win scenerio in mind however it does not make much sense to negotiate from both sides of the table.
As Conrad diplomatically alludes to, we already basically have an FIA with New Zealand and absorb all their Maori bouncers
I don’t see the harm in having agreements with far richer countries than NZ which may have human capital of a different niche.
Does that mean we’ll be bouncers, or will we be able to send our Maori bouncers to them? (International trade sure is hard on the brain!)
Real wages are not a function of the capital labour ratio. The share of factor income is. Real wages are a function of productivity which is related to the capital labour ratio. The “workers” are scared of sloppy mathematics.
Our labour doesn’t compete with Chinese labour – Australian labour does not perform the same type of labour intensive assembly tpe work. Our workers have higher levels of capital-labour interactive productivty as well.
Tien and Shan showed that Australian immigration reduced commodity prices in genral and therefore housing pricing by more than land was made scarce and made more expensive. Also, migrants of various skill levels did not “rob jobs” – immigration and economic growth both drive (Granger-cause) each other. Any unemployment observed was due to strucutral adjustment. (Australian Economic History Review, July 1999).
John
I’m not familiar with the agreement between Aus and NZ. Is anyone permitted to move to either country? If so, this sounds like the agreement within the EU where all citizens of member states (except Bulgarians and Romainans) are free to move around as they please (though most dont for cultural and language reasons).
FIAs could be negotiated with countries that share our basic values (rule of law, democracy)
This sounds politically tricky.
Who would decide this? What criteria would be chosen? Wd immigration between FIA countries be unlimitted? How cd this be constructed so that it doesnt look like a way of only admitting citizens of 1st world countries?
The immigration policy on the LDP website looks good and fair to me. I dont see how FIAs improves the situation from Australia’s perspective and i only see trouble as the media will view this as a racist policy.
I can’t understand your objection pommy. First, “free-immigration agreements” are already in the LDP policy (by a different name). Second, how could it be racist if 2 of the countries first mentioned are Hong Kong and Singapore? Do you mean we’d be accused of pro-Chinese racism?
We already have an FIA with New Zealand and it didn’t cause any problem. The EU FIA isn’t called racist and isn’t “politically tricky”. And these problems are exactly the same problems that exist with FTAs, and they don’t cause problems. Indeed, the last 20 years seems to indicate that people are more willing to liberalise bilaterally because they see it as a smaller step with lower adjustment costs. For example, note the growth of FTAs and the failure of the WTO Doha round.
And if the media wanted to start a controversy about the LDP being pro-Chinese racist then I’ll gladly take the publicity and all the potential Chinese votes.
Don’t you mean, John,… ‘all the potential votes of all those Australian voters of Chinese ancestry’? I don’t think we’re yet part of the Greater Chinese Co-prosperity Sphere. If we are, nobody told me.
John
The politically difficult aspect of this policy is that the net effect of FIAs is for Australia to admit only people from 1st world countries. That means a handful of Asian countries (Sing, Japan, S Korea) and the ‘white’ countries of Europe and the Anglosphere. This looks like the White Australia Policy (plus the ethnic Chinese) by the back-door to me.
Why only open FIAs to people from democratic countries? How do you define ‘democratic’? Many would argue with you whether HK is democratic. I see it as a political minefield and a great way to antagonise Australia’s trading partners.
This is nothing like the current LDP policy, which does not seek to differentiate based on an immigrant’s country of origin.
I agree with you that immigration policy needs to adapt to prevent “abuse of welfare, undermining democracy, crime & rapid social change” but i dont see why FIAs are needed to achieve this.
Pommy — I am baffled by your position on this.
First, the goal of FIAs isn’t to reduce the costs of immigration, but to increase immigration in a politically acceptable way. And bilateral agreements are more acceptable — look at FTAs.
Second, Australia would still accept just as many people from non-1st world countries. Just because we have an FTA with America doesn’t mean we have stopped trading with China. Likewise, just because we have an FIA with New Zealand doesn’t mean we have no immigrants from South Africa or India. If we entered an FIA with Singapore that would have no negative effect on any other country but would allow more efficient allocation of resources between Australian and Singapore. I really don’t think any sane person would try to call that a “New White Australia policy”.
Third, regarding how we pick the countries — that is a non-issue. We don’t refuse all FTAs on the grounds that we don’t know which FTA we want. We look at each option on it’s merits… doing one at a time and studying the impacts.
Forth, are you really suggesting we should abandon our current FIA with New Zealand? Or do you agree with an FAI with New Zealand but oppose one with Singapore? That’s a strange position to take if you’re worried about racism.
Fifth, FIA are certainly part of current LDP policy. To quote: “The LDP would establish more mutual “open-door” agreements where its citizens were automatically permitted to live and work in Australia and vice versa. Examples of countries with which it would initially seek to establish such agreements include Japan, Korea, Singapore, Canada, the UK, Ireland, the Netherlands, Germany, Sweden, Denmark, Norway, Finland, France and Italy.”
Sixth, on what grounds do you say an FIA would annoy our trade partners? I haven’t heard any complaints about our FIA with New Zealand. Surely free trade agreements would be more of a concern for trade partners… but again, there is no problem there. Has America or China (or anybody) complained about the EU FIA? This concern seems entirely fictional.
Singapore John?
I don’t see how we share the same ideals as Singapore. We believe in free speech and the right not to be hanged to death.
John
i) I dont see how FIAs are more politically acceptable. I can only see scope for upsetting countries where we dont seek agreements. it may be interpreted as a sign that we dont want their people.
iii) ‘looking at each country on its merits’. i dont see how this can be practically implemented. immigration is the most politically sensitive issue. trade isnt. by your definition, if Aus doesnt pick a country to form an FIA, it wont have ‘merit’. Presumably indonesia wont be selected but Sing will. Malaysia?
iv) wd the FIA with NZ be drawn up in today’s politicised climate?
v) im queasy on this part of the LDP policy
vi) Free Trade Agreements dont arouse such passions because most of the leftist media dont even believe in their value (to their shame). Look at the Democrat hopefuls – nearly all are threatening to roll back free trade in some shape or form. It’s not seen as a major plus by the public or the media to be invovled in a FTA with another country.
John – bottom line – FIAs may make economic sense for Australia. Im not arguing against that. Im just worried that other parties and the media will exploit them for political gain to make racist accusations against the LDP.
In todays ultra-sensitive and PC climate, even a whiff of racism (even if totally unfounded) can kill a party stone dead. Look at how the UKIP in Britain has been destroyed by a left-leaning media. I dont want to see that happening to the LDP.
Ben
Exactly. The scope for disagreement as to what constitutes an ideal partner is enormous.
Sing has the death penalty and arguable democracy (the country is a benevolent dictatorship run by Lee Kuan Yew’s family and friends)
HK has little democracy.
Where do you draw lines?
I’m with John on the exclusionary criteria.
1) I fail to see how FAIs with some countries creates friction with others that are not involved. If we let HK and Singapore in is Indonesia really going to complain? I doubt it — this is exactly how the EU started — a bunch of rich countries got together based on being rich and geographically close — yet the other countries didn’t complain.
2) Even if it happens to be the case that you don’t happen to like the government (e.g., Singapore; really crazy dictators R’ Us exlcuded) I don’t see why you would want to restrict the movement of individuals from/to those countries anyway. If individuals want to go/come to a certain country, who cares what their government thinks? and for that matter, its hard to see why the free movement of people wouldn’t be beneficial for political liberalization in countries like Singapore.
3) On a practical note, its worth noting that apart from a pile of bureacracy that takes years to wade through, Australia already has FAIs with many countries for a good chunk of people of adult age (i.e., people with degrees that speak English) — and these restrictions are sure to get weaker as the population ages.
Conrad
I dont think the comparison with the EU is valid. The EU was founded in the wake of two traumatising World Wars. There was enormous political will to make sure it didnt happen again. At the time of its inception, Europe was broke, reliant on loans from the US for its survival. The EU’s immigration policy has nothing to do with economics and everything to do with politics.
The argument that FIAs could be considered racist is absurd. I might as well claim that your inhaling breath is racist — the logic is the same (ie none). To argue that an FIA with NZ is OK, but extending it to Singapore is racist is beyond belief. Especially when we would continue to accept just as many (if not more) people from other countries.
I find it very hard to believe it would be raised, but I certainly hope it is. I would love to be involved in a debate about how our policy of allowing more Singaporean (and more people in general) to work in Australia is racist. That is political gold. I hadn’t thought of that positive, but if you think somebody will attack this policy as racist, then it just got better.
FIAs are more politically acceptable because they involve small incremental change in immigration and give us benefits from their reciprication too. This is the same reason that FTAs are more politically acceptable than unilateral free trade.
The possibility that FIAs will cause problems with other countries is not only absurd and totally without reason — but contradicted by reality. We have an FIA with New Zealand and nobody was upset. That is reality. And do I really need to mention the EU again? And many other countries have discriminatory arrangements with different countries. You have given no evidence that CER (the agreement between Aust & NZ) or the EU has created any serious complaints by external countries. That’s because there is no evidence. And that’s because it just isn’t true. And given there is no serious problem with causing offense, it is very simple to pick countries the same way we pick countries to join FTAs and security agreements.
Today’s political environment is no different to the political environment when CER was signed. And CER has worked well.
It is simply untrue that trade is not a politically sensitive issue. There is an entire anti-globalistion movement upset about trade. Australia has liberalised immigration in the past 10 years, but hardly done anything to liberalise trade.
So if we all agree FIAs are good for the country and evidence overwhelmingly proves that it will not cause international problems and it is impossible for a sane person to call it racist and they are an interesting and innovative idea (exactly what you NEED as a minor party*) then what is the problem?
P.S. Singapore has free speech and half of Australia agrees with the death penalty. We can consider and debate each country on it’s merits (like we do with FTAs) but the reality is that few people will have a problem with Singapore. And if you think “where do you draw lines” is a good argument then I guess we abolish all tax and all FTAs and everything else that requires judgement.
* This isn’t the LDP blog, and LDP policy is a side-issue to whether FIAs are a good idea.
Pommie — the EU has since expanded. While the people movement has caused debate inside the EU, no country outside the EU complained. And nobody complained about the CER between Aust & NZ. And nobody complains about the various other discriminatory immigration regimes around the world.
In contrast, we have real economic and social benefits to be gained. Surely good policy matters.
“No countries have a problem with the EU”
i)Turkey
ii) Russia
So sensitive is this issue becoming in Turkey that it is threatening to alienate a largely secular population against Europe.
In Russia, the rise of Putin’s autocratic regime is largely a reaction against all its old satellite states signing up to the EU.
The basic idea behind this is sound. People who are highly skilled and unlikely to be a burden on the taxpayer should ideally be the first to have almost absolute freedom of movement. These people tend to come from well off countries.
Russia has complained about the entire EU… not particularly the people movement section. Their real concern is the security issue and their loss of allies. And despite their complaints, the new countries did join the EU because it was in their interest. Good! Are you suggesting that EU free trade and free people movement is a bad thing because of Russia?
The fact that Turkey wants to join the EU is good — but I doubt anybody in Turkey has a complaint about the inclusion of Latvia in the EU. Secular Turkey is not being turned off Europe. Indeed, they are working hard to fix the remaining problems in their political system so that they can achieve EU requirements. Once again — good!
Do you really suggest that the EU shouldn’t have free trade and free people movement?
PG,
Luxemburb, Belgium and The Netherlands were the first members of what became the EU (BENELUX), and they did this solely on economic grounds, trying to compete wedged in between the big three Western European nations of Britain, France and Germany.
We could be unilateral with immigration from the South Pacific (or anywhere for that matter) if we wanted to, there is no reason why we can’t simply allow visa-free travel and the right to work for citizens of a foreign nation. Australia is a sovereign nation and may independently decide who is allowed to work here. This would also prevent us from being entangled in any treaty conditions regarding the ability to deny access to individuals or deport them.
As with trade, you are still better off if you don’t raise trade barriers, even if others do.
Any reason you left out the US?
I originally suggested the FIA concept be part of LDP policy and it is an idea I have long believed in. The “F” stands for free which is an essential component of freedom. I think the concept is central to creating governments that are more accountable to their people. If people are free to come and go then governments can not as easily impose any old burden they please. The brain drain argument in New Zealand creates political pressure to reduce taxation and cut red tape. Free movement is a force for better government.
I think the name “FIA” is great and it slots in easily with the concept of an “FTA”. I think John has done a really terrific job of articulating the merits of the idea and in packaging it.
It is somewhat natural to look at an idea that is unfamiliar and to be concerned about the downside. However I think the downside articulated here thus far is largely imagined.
Nobody here would argue that reducing free movement between Australian states would be any sort of an improvement. The notion that freedom needs to be tightly contained is an odd notion of freedom.
FIAs are not racist, would not alienate third party countries and would promote better government, lower taxation and more freedom overall. They offer the one of the best features of competitive federalism without all the negative features.
Just so people understand. Our FIA with New Zealand does not do away with the need for customs, passports and immigration checks. It just does away with the need to apply for a visa, or if you’re visiting long term it does away with the need to formally immigrate. And a person coming to Australia under an FIA would not suddenly become an Australian citizen, they would be a resident only.
Mark,
When you say that wages are a function of productivity and productivity is related to the capital to labour ratio I have trouble seeing that as being overly different to me saying wages are a function of the capital to labour ratio.
Regards,
Terje.
The share of factor (wage) income is determined by the captial labour ratio.
Real wages are not the relative factor shares of total income however. The capital labour ratio has increased since the industrial revolution, as has the share of labour’s income from total production capital rents relative to labour have decreased continutally. But both real wages and real capital rents have increased. But real and relative incomes are related as well.
Therefore the fruitful discussion revolves around adjustment costs, as Tien and Shan imply by saying that structural adjustments are the only significant factor in affecting unemployment rates.
So to paraphrase you are saying that as the capital to labour ratio rises then workers get more of the pie, however big that pie may have become.
Further more you are saying that even though capital is getting a smaller slice of the pie, the pie has grown enough to more than compensate.
Is that a fair summation.
Yes it is. Adjustment costs are the only real worry. They don’t really matter unless you choke off immigration for decades for political reasons.
This is also a fairly sterile view of the world, not taking in entrepreneurial ability and so on.
[...] John Humphreys argues that if we can make free trade agreements with other countries, why not also have free immigration agreements? [...]
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Free movement of people is fundamentally different to free trade of goods.
The point of free movement of people is to give them access to a (presumably better) economy. If they do not pay for it then it is not trade at all – it is a gift. “The F stands for Free..” Do you also believe in free love and free lunches?
At the very least immigrants should be charged for the right of entry. This has the effect of attracting those who can best utilise our first world economy.
A chinese worker makes $20 per week (basically nothing) in China and can make k$50 for working life here. Net present value should be worth at least k$500, perhaps more. They can pay it back like HECS. Let them bid on line (blind), close the bidding at the end of each month, take the highest 10,000 people and announce the minimum successul bid. Better luck next month.
Chris… your suggestion makes sense in situations where there is high demand to move to Australia, but it is less valid with regards to countries with a similar standard of living. In those cases, restrictions are likely to prevent mutually beneficial migration for no reason.
And “free immigration” has nothing to do with a free lunch. It’s about the freedom to move anywhere voluntarily without government involvement. It is necessary to have some limits in Australia (because of the high demand to move here from some countries, eg China) but where possible and viable we should be seeking to remove restrictions to people’s freedom.
Not to mention the fact that freedom (including free movement) gives a real economic and personal benefit. The economic effect of allowing free trade or allowing free movement of factors (ie capital & labour) is the same. Both are positive.
And JC — I didn’t mention the US because I think there would be other easier, less controversial examples to start with, but of course it would be appropriate to explore an FIA with the US at some stage too.
Chris – I agree that for many countries an entry fee makes sence. I don’t think it makes sence for New Zealand and I think that where other countries of similar living standard are willing to reciprocate we should lower that fee to nil.
Chris – why don’t we just hit up foreign firms for the discounted value of trade if you want to do the same to immigrants?
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hello
i am student of faculty of commerce in egypt . i hope to continue my education in usa , and work also to feel self confidence. and that i can live and make money depending on my own effort. also i wanna to see the high tech. and deal with many people with different cultures
finally , thanks for your listening
Singapore doesn’t have freedom of speech, nor is it an ideal partner for either ‘free’ trade (due to the government control of it’s economy through GLC’s like Temasek) nor free migration as it has a openly racist and pro-chinese migration policy in place to this very day. For more details visit the blog http://www.asianracism.blogspot.com