Saturday, December 03, 2005

Open Letter: Why Free Trade Might Work in Sandy Point, Shelburne County, Nova Scotia, Canada

August 3, 2005

Open Letter: Why Free Trade Might Work in Sandy Point, Shelburne County, Nova Scotia, Canada

Shelburne may be the third best harbour in the world, but must certainly be ranked as the most under-utilized for that purpose. Most of its first immigrants were drawn to the location due to the understanding that the British would make it a free port, and considering its strategic location nearly touching the transatlantic cargo routes of the past and the present, it remains a diamond of future opportunity in the rough.

Current policies on immigration to Nova Scotia (As of 2005) are not as effective as they could be. First of all the current political environment should readily adapt to a long-term perspective on the future of viable manufacturing or industrial inputs to the local economy which stimulate infrastructural, research and development, and the attraction of semi-skilled workforces willing to relocate families to a place like Shelburne County, Nova Scotia. As in, value-added industries could be a reasonable focus. Main competitors are every developing nation on earth.

To attract business people, in today's global climate, the incentives that work on the borders of the US would appear to be the Mexican free-trade economic zones on their southern border, whose existence were ratified and affirmed through the NAFTA aggreements. Their attractiveness to US mid-sized and other foreign companies have been due to several factors not limited to:

a) Low set up costs.
b) Investments in infrastructure paid for sometimes within three years.
c) Ready supply of cheap labour.
d) No environmental safeguards built into the agreement.
e) Active recruitment by internal agencies of targeted companies.

In reality, many of these companies merely export commodities and part-finishing of products, and re-import for immediate sale. Free trade zones in Asia, in particular, South Korea, have allowed primarily US and European multinationals to engage start-ups to tap:

a) Highly skilled/trained workforce.
b) IMF imposed regulations to maintain fair-trade.
c) Start-up potential for leap-frog to China.
d) Increase international competitiveness of local workforces.

Sandy Point, Shelburne, Nova Scotia is already a well located potential free-trade zone which has gone un-noticed and under-developed for a few centuries. There are many stumbling blocks which would include:

a) Environmental standards which are non-competitive.
b) Union interests and wage concerns which are uncompetitive.
c) Local industry concerns over local trade loss potential.
d) Local populations which might not understand long-term future of global trade.

Nova Scotia immigration policy needs to be fully developed in concert with the attraction of:

a) Large-scale FDI from MNCs.
b) The inclusion of a migrant worker nationalisation program hinged to agreed place of residence.
c) A training program concurrent with migrant labour employment, ideally vetted through employment in a free-trade zone.
d) A form of "green alternative" sold to the same companies which would seek to relocate south of the US border otherwise put-off by environmental concerns.

A recent article in Businessweek illustrates the vast gap between public policy and legislation versus business and economic benefits in the USA. Please read the article and decide where Nova Scotia policies would be able to change or adapt to realize similar results if even on a radically smaller scale:

Consider also the banking benefits based upon remittances of funds to home-countries, local purchases of goods and services, local consumption of foodstuffs and produce, local construction, etc. A Nova Scotian free trade zone which employed significant numbers of migrant workers, from whatever country reasonably open to rotating arrangements (probably Mexico, since they already signed a free-trade agreement with Canada), should provide the kinds of impetus and economic environment which would improve provincial balances of payments.

National standards for production and labour would have to be subverted to international ones. For example, regulation would be understandably more easily implemented, for reference, please read Hernando De Soto. ILO labour standards would be enforcable, but other benefits to migrant workers would also include micro-credit, for reference, please read Mohammed Yunus, "Banker to the Poor". Nova Scotia NGOs operating internationally would then have the opportunity to fully localize some of their efforts and provide greater opportunity for public involvement and scrutiny of their efforts.

There are plenty of global examples of developing nations spurring growth through such free trade zones. Considering that local Nova Scotia business initiatives always appear to focus on the Boston market for some reason, the benefits for such business relocations could include:

a) Regionalized subsidiary source production.
b) Regional relocation minimization.
c) Effective monitoring.
d) Ease of transport of goods.

Please remember that Walmart's imports to the US from China account for approximately 20% of that trade. Revaluations of RMB and potential trade barriers could play in your favour. While the real wages in Mexican free trade zones fall far below Canadian minimum wages, the shorter transport costs from southwest Nova Scotia by barge or freighter might allow those costs to be redeemed in higher local wages for migrant labourers. This would be a double win, for employer, and the ability to skim the highest educational levels from participants.

A 100,000 Canadian dollar minimum investment cap and all the associated restrictions are going to be only the first reason why current NS immigration initiatives as they stand are doomed to failure. Nova Scotia needs more young, willing workers, with a reason and a will to bring their families over in time. The process of a well guided free trade zone, which turned over labour based on skills training, microcredit, and local increases in consumption of goods or services alone could guarantee a migrant labour force and a cheap source of free trade zone labour, and a well located and locally interested immigration pool for generations to come.

And no, that is not unethical. That is business. That is securing supply, and meeting demand. That is exercising Canada's competitive advantage of being next to the world's largest consumer of goods and services, and (not yet) providing any free trade zones to meet that market.

Sandy Point, Shelburne, Nova Scotia, Canada's first free trade port and production zone ! Really as close to the past as was the original idea of the Nova Scotian future, that was one of the very reasons for initial Loyalist and English settlement, and far too good an idea to be simply relegated to the parking lot. Please run with it.

A Friend to Shelburne County and a Friend to the Poor Immigrants of the World.

Retrieved from ""


Finance & Economics
Economics focus

Be my guest
Oct 6th 2005
From The Economist print edition

The economic case for temporary migration is compelling; the historical record less so

LABOUR is globalisation's missing link. The flow of workers across borders is heavily impeded, leaving the global market for labour far more distorted than those for capital and commodities. The world price of capital may be set in America, and that of oil set in Saudi Arabia. But there is no such thing as a world price of labour. Wages can differ by a factor of ten or more depending only on the passport of the wage-earner, according to Dani Rodrik, an economist at Harvard.

Relaxing the movement of labour even a little would thus generate large efficiency gains. Mr Rodrik calculates that letting poor workers into rich countries, in modest numbers (equivalent to 3% of the hosts' labour force) for a limited period, could reap benefits to the developing world worth $200 billion a year. With numbers like that, he and other economists wonder why so much energy is spent freeing trade and capital, and so little expended freeing labour.

As if in answer to that rebuke, Kofi Annan, the secretary-general of the United Nations, set up the Global Commission on International Migration almost two years ago. The commission, 19 members of the great and good from around the world plus a secretariat in Geneva, was charged with inspiring debate and reflection on all aspects of international migration and policy. On October 5th, it published its report.

Of its 33 recommendations, the most consequential is indeed a call for more temporary migration from poor countries to rich ones. Guest-worker programmes would realise some of the efficiency gains identified by Mr Rodrik. Opening up new avenues of legal migration might also help reduce the flow of illegal migrants, the report hopes.

As the commission acknowledges, history lends little support to their optimism. The Gastarbeiter programme in Germany—which invited Turks, Yugoslavs and others needed at the time to fill the factory jobs created by the country's post-war economic miracle—failed, at least on its own terms. Many of Germany's “guests” never left, and their families soon arrived. The bracero programme in America—which, from 1942 to 1964, recruited Mexican field hands to pick cotton and sugar beets in Texas and California—fared no better. The entry of hundreds of thousands of farm workers provided camouflage for a substantial flow of undocumented labour.

Nonetheless, the logic of temporary migration appears irresistible. Rich countries want migrants' labour, but do not want to look after these newcomers when they grow old. Ideally, rich countries would like a constant rotation of workers, arriving while they are young and active, leaving before they grow old and dependent. For its part, the commission argues that “temporary and circular migration” is also better for poor countries. One reason is remittances: the longer an immigrant stays away from home, the smaller the share of his wages he sends back.

If temporary worker programmes make a comeback, how should they be designed? In a paper written for the commission, Martin Ruhs, of Oxford University, explores the options. Some countries set a simple quota, filled on a first-come, first-served basis. The British government is more calculating, allocating visas to specific sectors, such as food processing, that express a need for cheap labour. Singapore is the most ambitious. Its ministry of manpower sets “foreign worker levies” that employers must pay to hire an immigrant. The levies differ by industry and by skill. To hire a skilled foreigner in construction, for example, an employer must pay S$80 ($47) a month. To hire an unskilled migrant, the employer must pay S$470. With these levies, the ministry can fine-tune the demand for immigrant labour.

Governments often claim they want to tailor rules on immigration to the needs of the economy. But the economy's needs also adapt to those rules. Philip Martin, of the University of California, Davis, and Michael Teitelbaum, of the Alfred Sloan Foundation, provide two striking examples. California's ketchup industry relied heavily on Mexican braceros to pick its tomatoes in the 1960s. The industry insisted it could not survive without these cheap hands. But when the bracero scheme was ended in 1964, farmers replaced the migrants with machines. Engineers invented a harvester that could shake tomatoes from plants and distinguish red fruit from green. Crop scientists developed new, ovoid tomatoes that the machines found easier to handle.

In Germany, Mr Martin and Mr Teitelbaum argue, the same phenomenon happened in reverse. The availability of cheap guest-workers in German factories slowed the adoption of new labour-saving technology. As the saying went at the time: Japan is getting robots while Germany gets Turks.

Some economists argue that governments should simply set a quota of visas and auction them. Alternatively, they could set a price for the permits designed to achieve more or less the same number of sales. The principal virtue of both schemes is that they allocate visas according to private perceptions of their worth, not government guesses about need.

Auf Wiedersehen, pet
How can governments ensure that guest workers do not overstay their welcome? In South Korea, temporary workers contribute to a special account that is refunded to them if they leave on time and forfeited if they linger. The British government is thinking of asking some migrants to post a bond, like a defendant on bail, which they will lose if they choose not to return.

If the economic gains to migration were not so great, the huddled masses would not be so reluctant to leave the rich world when they get there. “There is nothing more permanent than temporary migration,” cynics always say. But equally persistent are the market forces and demographic pressures that make temporary migration worth considering anew.

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