Student Visas

February 24, 2017

The subject of student visas aggravates me as much as illegal immigration (although we’re finally getting some great news on that front).

Why?  “What’s the problem with student visas?” you might ask.  For most, the topic probably conjures up images of foreign exchange students coming to the U.S. to experience life here and return home to spread the news about what a great place the U.S. is and to help spread our value system around the world.  Or maybe you envision students coming here for an education that can be put to work back home in some underdeveloped country, helping to raise living standards there.  But the reality of the situation is nothing like this.  The student visa program boils down to money.  It’s a system designed to suck trade dollars back into the U.S. economy and to prop up inflated tuitions.

Let’s begin with some data.  Here are the statistics for non-immigrant visas issued from 2011 through 2015.  (The data for 2016 is not yet available.)  Student visas are primarily “F” visas.  “M” visas are for vocational students.  Taken together, they totaled nearly 700,000 in 2015.  These are “non-immigrant” visas, but don’t be fooled.  A large percentage of these students receive immigrant visas (leading to permanent status) almost automatically upon graduation.

Where do these students come from?  About 280,000 came from mainland China.  75,000 came from India.  28,000 came from Saudi Arabia.  27,000 came from South Korea.  17,600 came from Vietnam.  An equal number came from Mexico.  17,000 came from Japan.  The rest are spread across the remaining nations of the world.  The significance of this list will be discussed later.

To get an idea of what the student visa program is really about, take a look at this web site, which provides information for foreign students for how to apply:

https://www.studyusa.com/en/a/33/how-to-get-your-u-s-student-visa

What it boils down to is this:  you have to explain why you want to study in the U.S. and, more importantly, you have to prove that you can pay for it.  There’s no student loan program here, at least not through U.S. agencies.  If you can get scholarship money from your native country, fine, but regardless of how you get the cash, you have to be able to pay your way.  You must also declare your intent to return to your home country when you’re finished with your studies.  But that’s a formality, one easily skirted when you actually get your degree.

In 2015, over 677,000 “F” visas were issued.  223,000 applicants were refused.  In other words, about three quarters of all applicants are accepted.

Now, let’s take a look at some interesting findings about the student visa program published in a study by the Brookings Institution in 2012.  Here’s the link:

https://www.brookings.edu/interactives/the-geography-of-foreign-students-in-u-s-higher-education-origins-and-destinations/#/M10420

“From 2008 to 2012, 85 percent of foreign students pursuing a bachelor’s degree or above attended colleges and universities in 118 metro areas that collectively accounted for 73 percent of U.S. higher education students. They contributed approximately $21.8 billion in tuition and $12.8 billion in other spending—representing a major services export—to those metropolitan economies over the five-year period.”

Got that?  They paid full tuition and living expenses, bringing over $33 billion into the economy.  And that was through 2012.  In 2015, when 25% more visas were issued than in 2012, that figure rises to over $42 billion.

Two-thirds of foreign students pursuing a bachelor’s or higher degree are in science, technology, engineering, mathematics (STEM) or business, management and marketing fields, versus 48 percent of students in the United States.

Remember how tech companies claim that they depend heavily on immigrants to provide the advanced skills that they need?

Forty-five (45) percent of foreign student graduates extend their visas to work in the same metropolitan area as their college or university.

In other words, these students then go on to become the H1-B visa workers that the tech industry (and many others) claim that they need.  So the “non-immigrant” nature of student visas, and the declaration of intent to return to their home country, is truly a joke.  Here’s further evidence that student visas are used as the pipeline for H1-B visas:

http://www.h1base.com/content/f1visa

These companies who claim that they’re dependent on immigrants for the skills they need are trying to pull the wool over your eyes.  What they need are STEM graduates and they get them from American universities.  They like the fact that foreign students contribute to a glut of labor that helps to keep their payroll costs suppressed.  When Apple claims that, if immigrants aren’t allowed to travel freely to work in the U.S., then they might need to relocate to where they can have easier access to immigrant labor, that’s a “crock” and they know it.  Go ahead, Apple, move to Yemen or  Iran or Libya or one of those other countries, and let’s see how successful you can be there.  What you really need are the STEM graduates of American universities.  You won’t find them in those other places.  But what you will find are poverty, illiteracy and oppressive governments.  But you say you can do better there.  So prove it.  Just leave.  Go ahead.  Go.

There’s a mind-numbing amount of information in these links.  Let’s boil it all down:

  • Immigrants currently fill 1.2 million of the seats available in American universities.  That’s a significant percentage of the seats available.
  • Approximately three quarters of foreign students who apply are accepted.  Compare that to the acceptance rate for American students at most prominent universities, where only 10% or fewer attain admission.
  • Why the preference for foreign students?  Because they pay full tuition, propping up the ridiculous rate of tuition increases.
  • Foreign students are given preference over American students because of their ability to pay.  This effectively shuts American students out, especially from STEM curricula.
  • The influx of foreign students actually counts as an export of services.  Can you believe that?  It’s one of the tricks used by the government to draw trade dollars back into the U.S. economy and to keep our trade data from looking even worse than it does.
  • University sports teams have also gotten in on the act, now recruiting foreign students through the “student” visa program, denying athletic scholarships to deserving American athletes.  When it comes time for the Olympics, those athletes, trained in America, compete for their home countries, leaving the American teams thin.
  • Almost half of foreign students then go on to work in America, shutting American students out of those jobs as well.
  • The student visa program feeds into the H1-B visa program, which then begins to feed many of the other immigrant categories such as immediate relatives and family-sponsored preferences.

OK, remember the above list of countries that send the most students?  Did you notice anything about that list?  Did you notice that it includes the countries with whom America has the biggest trade deficits?  That should give you a clue as to where these foreign students are getting the money they need for tuition.  Their parents are getting rich on manufacturing for export to the United States.  What this means is that, in addition to taking your job, they then use your money to pay for their kids to come over here and take your kids’ jobs too!  Can this scheme possibly get any more outrageous?

If you’re an American student who hasn’t been able to get accepted into the school or program of your choice, the student visa program is probably the main reason.  If you’re a recent graduate and find yourself now saddled with crushing student loan debt, you can blame the student visa program for propping up ridiculous tuition rates.  And if you now find yourself struggling to find a job, you can once again blame the student visa program.

The student visa program is an outrage perpetrated on unsuspecting parents and students, depriving them of opportunities to help America out of its trade-created cash crisis, to help greedy universities prop up inflated tuition rates and to help corporations suppress wages with a labor glut.  It has to stop.  No foreign student should be admitted until every last American kid who wants a college education has gotten a seat in a university.  President Trump … please … take a close look at the student visa program and rein it in.


America’s Worst Trading Partners in 2015

May 19, 2016

It’s time for my annual ranking and analysis of America’s best and worst trading partners for 2015.  No surprise, it was another dismal year for American manufacturers, racking up the 40th consecutive year of trade deficits and setting a new record in the process – a deficit of $648 billion.  That surpasses last year’s record deficit by a whopping $109 billion.

Since the surpluses of trade with our best trade partners is overwhelmingly swamped by the deficits with our worst partners, let’s begin there.  This year I’m going to first present the list in the most basic terms – a list ranked in order of the sheer size of the deficits. Check out this list of America’s twenty worst trade partners in terms of our deficit in manufactured products:  Top 20 Deficits, 2015.

The nations at the top of this list should come as no surprise to anyone.  Trade with China dwarfs them all with a deficit of $367.5 billion – more than four times larger than our second largest deficit with Japan.  That’s not surprising when you realize that China has ten times as many people as Japan.  China actually accounts for about one fifth of the entire world’s population.  The following are some other key observations about this list:

  • Look at the population density of these nations.  The average population density is 737 people per square mile.  That’s eight times the density of the United States.  With only one exception – Sweden – every nation on this list is more densely populated than the U.S.  Most are much, much more densely populated.
  • Eight of these nations are wealthy European nations.
  • Over the past ten years, our trade deficit has worsened with 17 of these nations.  Most have worsened dramatically.  The nation with whom our balance of trade has improved the most (that is, with whom the deficit has declined the most in the past ten years) is Sweden – the only nation on the list less densely populated than the U.S.
  • Our trade deficit with Japan has actually declined by 18% over the past ten years.  Why?  Simple.  South Korea is “eating their lunch.”  Imports of South Korean cars – Hyundais and Kias, along with imports of South Korean appliances like those made by LG, Samsung and others – has cut into Japan’s market share.  Remember when President Obama signed a new trade deal with South Korea in 2012, proclaiming it a “big win for American workers?”  In three short years our trade deficit with South Korea jumped 50%.
  • Our fastest growing trade deficit is with Vietnam, growing by 440% in the last ten years.  Some may point to the fact that at $6100 per person, Vietnam has the lowest purchasing power parity of any nation on this list – only slightly better than India – and that this is the reason for the explosive growth in our trade deficit with them.  However, our second-fastest growing trade deficit is with Switzerland, a nation that is actually more wealthy (with higher wages) than the U.S.  What Vietnam and Switzerland do have in common is a high population density.  It’s the one thing that (nearly) all of these diverse nations have in common.

Many people will look at this list and quickly conclude that, when it comes to our trade deficit, the problem is China and so that’s where we should focus.  Somehow, some way, they’re obviously not playing fair with us.  They’re manipulating their currency, they’re ignoring workers’ rights.  They’re trashing the environment.  And so on.  So let’s get tough with China.

The problem is that China can legitimately complain that of course our deficit with them is big, simply because they are a big nation.  Person-for-person, our trade deficit with Japan is worse.  OK, so in an effort to be fair, let’s broaden our efforts to include Japan.  “Not so fast!” the Japanese will complain.  “What about Germany?  Their surplus with you is nearly as large and they have only half as many people as we do!”

The point is that in determining the root cause of these enormous deficits in order to formulate an effective trade policy, we need to factor out of the equation the sheer size of these nations.  Let’s determine who are really our worst trade partners on a person-for-person basis.  So here’s a list of our worst trade partners in terms of the per capita trade deficits:  Top 20 Per Capita Deficits, 2015.

Now we can see what a mistake it would be to simply conclude that China is the problem.  In per capita terms, they barely make the list of the top twenty worst deficits.  In fact, there are now ten European nations on this list and, in per capita terms, our trade deficit in manufactured products is worse with all ten of them than it is with China.  Here are some more key observations about this list:

  • Once again, all but two of the nations on this list – Sweden and Finland – are more densely populated than the U.S.  Most are far more densely populated.  Only three have population densities less than the median population density of the world, which is 184 people per square mile.  One – Ireland – is right on the median.  The other 80% of the nations on this list are much more densely populated.
  • Most of these are wealthy nations, with an average purchasing power parity of $44,370 per person.  In fact, the top of the list is dominated by the wealthiest.  Clearly, the argument that low wages cause trade deficits doesn’t hold water.  If anything, the cause and effect is exactly the opposite.  Running large trade surpluses makes nations wealthier.
  • There is one nation on this list that is a net oil exporter – Mexico.  I point this out because oil is priced in U.S. dollars, and every dollar spent on oil produced by foreign countries must be repatriated to the U.S., since that is ultimately the only place where they are legal tender.  Those dollars are repatriated in several ways, primarily through the purchase of American bonds or through the purchase of American goods.  The latter tends to make net oil exporters strong buyers of American products, which usually means that the U.S. enjoys a surplus of trade in manufactured products with such nations.  But not Mexico.  What this means is that the large trade deficit in manufactured goods that we have with Mexico is actually even worse than it appears.  For a nation whose population density is one of the lowest on the list – less than twice that of the U.S. – it means that something beyond population density – such as some unfair trade practice – is at work here.  Ditto for Ireland, which has fashioned itself into a tax haven for manufacturers, virtually bankrupting itself during the “Great Recession” of a few years ago.

If you are seeing such data for the first time, it may be a little early, based on this data alone, to conclude that population density is the driving force behind trade imbalances.  More proof is needed.  If such a relationship exists, then we should see exactly the opposite at the other end of the spectrum.  We should see a list of America’s best trade partners – those with whom we have trade surpluses – loaded with nations with low population densities.  We’ll take a look at that list in my next post.

If you’re already acquainted, however, with the relationship between population density and trade imbalances, which I explored thoroughly in Five Short Blasts, then this data is just further proof that population density is, in fact, the driving force behind these trade imbalances.  Such deficits are inescapable when applying free trade theory, which fails to account for large disparities in population density, to such nations.  It will only get worse with each passing year, exactly as we have seen.

 


America’s Worst Trading Partners

January 12, 2016

I have finally finished tabulating the trade data for each country for 2014.  (2015 data won’t be released by the Bureau of Economic Analysis until sometime in March.)  What took me so long?  This is no small task.  Since the BEA doesn’t track “manufactured products” as a category, I have to take the data for hundreds of product codes for each of 165 nations and subtract out the categories of raw materials in order to arrive at a figure for manufactured products.  I maintain a massive spreadsheet for each nation and then compile the results for all on an even bigger spreadsheet.

Anyway, the results are in and over the next couple of weeks or so, beginning with this post, we’ll break down and analyze the results.  I like to begin by listing America’s 20 worst per capita trade deficits in manufactured goods.  In essence, this is a list of America’s 20 worst trade partners.  These trade deficits are expressed in per capita terms in order to put the citizens of all nations on an equal footing.  For example, our trade deficit with China, when expressed in dollars, dwarfs that of every other nation because they represent one fifth of the world’s entire population.  But when it comes to trade, borders are meaningless and China could just as easily be 100 smaller nations instead of one.  It would have no effect on our total trade deficit whether we draw a line on a map around 1.3 billion people, or draw 100 lines around clusters of 13 million people each.  Expressing the deficits in per capita terms eliminates the sheer size of nations as a factor.

If you’re new to this web site, you probably expect to see this list populated with poor nations.  You’d be wrong and, by the end of this post, you’ll understand why.  So let’s take a look at the list for 2014:  Top 20 Deficits, 2014.  Some observations are in order:

  1. The key take-away from this list is that 18 of these 20 nations are more densely populated than the U.S.  Most are much more densely populated.  The average population density of this list is 539 people per square mile.  This compares with the U.S. population density of about 87 people per square mile.  This average is up from the average population density of 504 people per square mile on the 2013 list.
  2. Instead of poor, low wage nations, this list is populated by rather wealthy, high wage nations.  The average purchasing power parity (PPP) of the nations on this list is $40,700 per person, up from $35,330 in 2013.  Only one nation on this list has a PPP of less than $10,000 – Vietnam, at $5700 per person.  Only three other nations have a PPP of less than $20,000 – Costa Rica, Mexico and China.  By comparison, U.S. PPP was $54,400 in 2014.
  3. Though our trade deficit with China has exploded since they were first granted “Most Favored Nation” status in 2000, their position on this list has barely budged since I published Five Short Blasts in 2007.  They were 19th on the list in 2006 and have risen only one point to 18th in 2014.  That’s because our trade deficit with nearly all of these nations has grown just as rapidly.  To illustrate this, I’ve included a column on the chart that shows the percent change in our balance of trade with each nation over the past ten years.  Our deficit with China has grown by 82%.  But the results with some other nations have been even worse.  In 2006, Costa Rica didn’t even appear on this list.  In fact, in 2005, we had a trade surplus with Costa Rica.  That has now reversed into a large trade deficit, big enough to move them to number 8 on this list.  The same is true for Vietnam.  In 2005 they were nowhere close to being on this list but, in the past ten years, our deficit with Vietnam has worsened by almost 500%.  Our deficit with Switzerland has worsened by over 200% in the last ten years, moving them to 2nd on the list.  It’s worth noting here that Switzerland is the one nation on the list that is even wealthier than the U.S.  But the one thing all of these nations have in common is a high population density.
  4. In case you’re tempted to conclude that Costa Rica, Vietnam, Mexico and China are on this list because of low wages (low PPP), consider this.  In the past ten years, their PPPs have risen by 41%, 136%, 50% and 184% respectively.  If wages are a factor in trade imbalances, then such rapidly rising wages should tend to slow or even reverse our trade deficit with these nations.  Instead, each is accelerating.
  5. It’s also worth noting here than one of the only two nations on the list less densely populated than the U.S. – Sweden – is slowly sliding off of this list.  Our trade deficit with Sweden has actually improved by 44% over the past ten years – the only such improvement on this list.  As a result, they’ve slid from no. 2 on the list in 2006 to no. 12 in 2014.
  6. Another nation that has slid noticeably on this list is Japan.  They were no. 4 on the list in 2006, sliding to no. 10 in 2014.  Why?  Other nations, most notably South Korea and Germany (who have each risen on the list), have cannibalized their auto exports.  This explains why Japan’s economy has been mired in recession for years.

In 2014, the U.S. suffered a total trade deficit in manufactured goods of $539.9 billion.  The trade deficit in manufactured goods with just the twenty nations on this list was $728.3 billion.  In other words, these twenty nations account for our entire trade deficit in manufactured goods, and then some.  It should be clear to anyone that it’s the large disparity in population density between the U.S. and these nations that drives our trade deficit.  It’s just as clear that low wages play no role whatsoever.  Any trade policy that fails to take into account the role of population density in driving trade imbalances is doomed to failure, just as U.S. trade policy has been for decades.

Those who blame trade imbalances on low wages either don’t understand trade or are simply lying.  So too are those who blame currency valuations – something we’ll examine later.  And those who tell you that we simply need to be more competitive are playing you for fools.  The only way to restore a balance of trade is by applying tariffs to counteract the effect of population density.

Not enough proof?  Stay tuned.  In my next post we’ll take a look at the opposite end of the spectrum – America’s twenty best trade partners – and see if population density is a factor there too.

 

 


The Start of a New Asian Financial Crisis?

May 29, 2008

http://www.reuters.com/article/reutersEdge/idUSSP14158120080529

One of my predictions for 2008 regarding the global economy was that another currency devaluation war would erupt in Asia, as intensifying competition for the export markets of Europe and the U.S. leads Asian nations to turn to currency devaluation to gain an upper hand on their Asian rivals.  This wasn’t on anyone’s radar back in November of last year but, with an understanding of what a high population density does to per capita consumption, it seemed clear to me that this would be inevitable as Asian nations became ever more dependent on exports to sustain their bloated work forces.  Now it appears to be starting:

… Some observers are even pointing to a potential currency crisis, given Vietnam’s growing current account deficit, weakening fiscal position and limited foreign exchange reserves, on top of 25 percent annual inflation, the second-worst in Asia.

Some of Asia’s largest economies are also grappling with the same risks. Although none look as vulnerable as Vietnam, some are set for their sternest test since the Asian financial crisis of 1997.

The article goes on to blame the price of oil for increasing trade deficits in Vietnam, the Philipines and other Asian nations.  But another way of looking at their trade deficits is to focus not on their imports of oil but on their exports – their inability to sustain exports at a high enough level to fund their oil purchases.  By the way, why is that a trade deficit is a bad thing for every economy in the world except the U.S.?  When the U.S. complains of its trade deficit, Asian nations are the first to deride us for not seeing the imaginary benefits of free trade with them and to admonish us for any thoughts of a return to protectionist tariffs.

This is something that bears watching.  Currency devaluation among Asian nations would be proof positive that we can’t rely on currency valuation as a means of reversing a trade deficit that is rooted in a gross discrepancy in population density between the U.S. and these nations, and has nothing whatsoever to do with currency evaluation.  I’ll keep you posted with further developments on this.