All Roads of Regulation Lead to Isolationism – Common Thread between Illegal Immigration and Our Trade Deficit with China

June 13th 2006

Ford Factory Worker

Is there a link between the problems of illegal immigration and the trade deficit? Illegal immigrants come to this country because they can make as much in one hour as they can in one day in their home country. Manufacturers can make products overseas because the cost of labor is less. The answer to the question is obvious: Wages are higher in this country compared to other countries.

So why are wages so high in this country? It is not because we lack regulations, that is for sure. The Federal government passes over 1000 bills (laws and regulations) per year. The state of California passes roughly the same number ever year as well. The good thing about the high wages is that it makes it easier to buy goods from other countries. The bad thing about high wages is that it makes it harder for American companies to sell overseas.

The high cost of our labor has prompted some Americans to call other countries salary levels, “slave wages”. So how can China and India bring the cost of goods higher? Regulation is the answer.

American businesses are burdened with many regulations that overseas companies are not burdened with. Businesses in the US must withhold income tax, pay half of an employees SSI, pay workman’s comp and unemployment insurance, comply with collective bargaining laws and regulations placed on them at the state and local level. All of this is added to the cost of labor.

So what is the solution to this problem? Many isolationists promote the idea of tariffs and / or bans on imported goods from counties that are more competitive than the US. This is an effort to prevent Americans from purchasing imported goods. Their solution, in essence, is a regulation to fix problems caused by other regulations. Comment on this article at our Forum

The problem is not that China pays to little, but American companies pay too much and have become uncompetitive. There are other problems associated with high wages as well. High wages fuel an even higher cost of living. It fuels illegal immigration as well.

China was once a communist country. Communism is the ultimate regulation. Their system did not work, so they experimented with free enterprise in one province of their country. Freedom worked, so they expanded it most of their country.

Some isolationists are advocating building a great wall here in America to separate the countries of Mexico and the US. This will not solve our “high wage problem” though. In fact, it could drive wages still higher making us even less competitive.

We have two choices as I see it. We can either remove regulations so we can become more competitive, or we can isolate ourselves from countries that have fewer regulations. We can either become more isolated like North Korea, or a Freedom zone similar to Hong Kong.

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