The Sensible Border Fix Protectionists Will Hate
(Bloomberg Opinion) -- The U.S. is once again facing a border crisis — a wave of asylum seekers from Central America. President Joe Biden knows that the only long-term way to make the issue go away is to improve the economies of Honduras, Guatemala and El Salvador. But doing that will require more than foreign aid, it will require U.S. companies to actually put factories in those countries.
But many still do. And that leaves the question of how to actually stop the waves. Past efforts to deter asylum seekers with visible brutality failed pretty spectacularly, damaging the U.S.’ moral credibility in the process. The Trump administration’s policies of forcing migrants to stay in Mexico while they await their asylum hearing and of tightening the rules for asylum appears to have stanched the northward flow only temporarily. In the long run, if Central American asylum seekers are going to stop coming, it will have to be because they no longer want to come.
When do people stop wanting to leave their home countries? There are obviously many exceptional events, such as war and natural disasters, that can push people abroad seeking better living conditions. But otherwise there are two pretty predictable factors driving migration: high fertility rates and a medium-low per capita income.
High birth rates encourage migration because if you have a lot of young people around, it pays to send some of them to a rich country where they can find work and send money back to the family. As families have fewer children, though, aging parents need all of their kids to stay home and take care of them, or take over family businesses or other such local imperatives. Fertility rates in El Salvador are already below replacement level, and Honduras and Guatemala are headed that way. So this will reduce migration pressure in the future. But if those countries’ economies developed, their birth rates would probably fall even further, causing even fewer migrants to leave.
The other key circumstance that will reduce the need to emigrate from Central American countries is economic growth. Economist Michael Clemens has shown that as countries get richer, they initially send out more migrants, probably because people simply have the money to move in search of work. But once yearly incomes pass about $7,000 to $8,000 , the effect reverses; opportunities are good enough in the home country that it’s not worth enduring the stress, danger and dislocation of migration.
Mexico is far beyond this peak, which is one reason net migration from Mexico has halted and gone into reverse. The Northern Triangle countries in Central America, however, are all around the level where migration pressure peaks:
Biden wants to address this by making Central America richer, which is a great idea. If the GDP of these countries can be doubled, the perpetual border crises would likely vanish. The question is how to do it.
Biden’s current plan is extremely vague on how he might actually make Central America a richer place. There is much talk of “combatting corruption,” forcing countries to show signs of verifiable progress, and putting in safeguards to make sure the U.S. isn’t wasting money. These items are reminiscent of the strictures placed on foreign aid by international aid agencies.
But the problem here isn't wasting taxpayers’ cash; it’s that handing out cash is not a durable route to growth in the first place. Aid relieves poverty without leading to much investment. That means the amount of aid to Central American countries would have to be very large and permanent in order to afford poor people in these countries a significantly increased standard of living. And despite Biden’s talk of combatting corruption, there’s evidence that a decent amount of aid gets pocketed by local elites.
Instead, what helps poor countries to grow is foreign investment. The U.S. must source products made in Honduras, Guatemala and El Salvador so that companies move their factories to those countries. This could be done by providing tax breaks on the sales of products made in the Northern Triangle; this would incentivize both American and foreign companies to invest in the Northern Triangle in order to claim the tax break and win market share in America. Given the often chaotic state of these countries, the factories would start out modestly at first — they’d probably have to hire their own security and potentially generate their own cheap electricity (perhaps with solar). But if the price is right, they’ll do it.
Protectionists in the U.S. will absolutely howl over giving preferences to goods made in Central American countries, whose migrants they often see as invaders. Despite the tiny size of the countries involved, privileging products made overseas will make some people think their jobs are being shipped out.
But if the U.S. really wants to fix Central America, this is what it needs to do. Only then will the migrant waves come to a durable end.
This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.
Noah Smith is a Bloomberg Opinion columnist. He was an assistant professor of finance at Stony Brook University, and he blogs at Noahpinion.
©2021 Bloomberg L.P.