New World, New Policy: Entrepreneurial Money Produces Residency Permits

A successful Chinese entrepreneur, showed me a news article. It reported that wealthy Chinese could buy an American passport and become US citizens. Is this really true? What are the implications of this visa program?

The US Employment Based Fifth Preference (EB-5) program was established by the U.S. Congress in 1990, to link investment, employment and residency. Three years later, the program language was relaxed from “to create ten direct employment opportunities”, to “directly or indirectly create 10 job opportunities.” This is broad and flexible wording. It is designed for entrepreneurial and wealthy investors outside the US, who fund a new commercial enterprise of  at least $500,000 for investments. Under the program, those entrepreneurs, their spouses and their unmarried children under 21 years old can apply for green cards permitting residency.The objective is to attract foreign investments to the U.S., and to stimulate economic development and job creation.

EB-5 demand has increased rapidly. In 2012, President Obama extended the program. In May of 2017, Congress extended the EB-5 Program until September 2017. There are many supporters.

In 2014, 10 thousand EB-5 petitions were filed with the United States Citizenship and Immigration Services (“USCIS”). Overall, 5,115 have been approved. Over $2.5 billion investments were attracted. An additional $6.2 billion are awaiting federal adjudication. EB-5 capital is also an attractive low cost funding tool for project developers in the U.S. It offers foreign investors a way to permanent residency that is not backlogged by other applications and does not require sponsorship by a US employer.

Throughout the world today,  numerous programs like the EB-5 have been established. In Australia for example, foreign investors are granted the opportunity to immigrate, but only receive temporary residency for four years. An investment of AUD $1.5 million in an Australian company ( U.S $1.2 million) is required. France allows foreign investors to obtain residency for 10 years by making a “long term  and non-speculative investment of at least € 10 million (U.S $11.8 million) in industrial or commercial assets.”

There is a standard moral objection to the EB-5 program: The United States should not be in the business of selling the right to live there. This claim suffers from a slight misunderstanding. In effect, the government gives the visas away — to profit-making businesses that have jumped through the program’s requisite bureaucratic hoops. Then the companies can solicit investment based on the promise of permanent residency. In spite of ten thousand slots a year, 40,000 investors still wait for a green card. Obviously investor needs have not been met.

Investment immigrants are in high supply. The U.S government should use the opportunity and open the gates to them. The U.S. has an immigration culture, with a spirit willing to absorb both elites and  refugees of the world.

However, change must come; the program needs to be refined in terms of size of investment, number of jobs generated, industry direction, geographic location, and job recipients. I believe that the investment minimum should be $2.5 million, and the American job creation shall be at least 25. Then we can continue this program helping both investors and employees; a noble outcome!

News from the USTR: Expiration of the Generalized System of Preferences Program

United States Trade Representative Michael Froman issued the following statement regarding the July 31, 2013 expiration of the Generalized System of Preferences (GSP) program.  GSP is a 37-year-old trade preference program designed to promote economic growth in the developing world by providing preferential, duty-free entry for up to 5,000 products when imported from one of 127 designated beneficiary countries and territories.

 “Beginning August 1, U.S. businesses and consumers will pay more for thousands of goods imported under the GSP program, including many inputs for U.S. manufacturing,” said Ambassador Froman.  “The Obama Administration urges Congress to extend this important trade program, which increases U.S. competitiveness, keeps costs low for U.S. consumers, and benefits some of the world’s poorest countries.”

Read more here. What is your opinion about the expiration of the GSP? Post your view in the comment section below!

Weekly News – U.S. aims to invest more in Africa

Photo: U.S. State Dept./Flickr

U.S. Secretary of State Hillary Clinton’s recent trip to South Africa echoes the passage of the renewal of the third-country fabric (TCF) provision (under the African Growth and Opportunity Act (AGOA)) by Congress last week.

Although there are other players on the continent, we should not fear the competitions. As a recent article at New York Times points out, we should be grateful to China for its investments in the infrastructure. Thanks to its investments, we are now able to ship products faster and more cheaply from the local markets in Africa to Walmart warehouses in the U.S.

The TCF provision lifts the import duties of fabric and apparel and helps to support jobs and the manufacturing industry in the Sub-Saharan Africa region.

For more information: http://www.ustr.gov/about-us/press-office/blog/2012/august/weekly-trade-spotlight-third-country-fabric-provision-agoa

The G20 Supremacy: Fact or Wishful Thinking?

The G20 meeting in Pittsburgh has ended with a grandiose self promotion of the event and its future relevance. The participants declared the meeting from now on to be the world’s principal economic gathering. But designation alone is not enough. The real question is how the impact of the meeting will change.

Time was, that the host of an international summit could use the meeting to not only discuss pertinent issues but also initiate policy action. Such potential was also there for the Pittsburgh meeting. For example, as President Obama raised a global trade vision for economic recovery, job creation, and environmental sustainability, he could have demonstrated a commitment to these principles through the announcement of promising policies.

Yet, the Obama Administration’s decision to invoke safeguards and impose tariffs on Chinese tire imports dealt a major blow to such a vision. Many U.S. trading partners were hoping that ‘Buy America’ provisions of the economic stimulus legislation and the U.S. failure to live up to its NAFTA obligations on Mexican trucking were products of an increasingly trade-phobic Congress. Widespread expectations that the Administration could keep legislators on a leash, were far from met. The recent decision against tire imports from China was President Obama’s own, driven by union pressure. It reveals more precisely and loudly than any trade policy speech ever could, the details of the direction of U.S. policy.

It says that the U.S. now views the rules-based global trading system, which successive U.S. Administrations—both Republican and Democrat—placed at the center of U.S. global economic policy, as outdated and expendable. This takes place despite of the fact that rules are in large measure responsible for the post war global economic success.

It says that the U.S. has now created a subclass of economic interests. Manufacturers of auto parts, exporters of poultry, producers of aircraft are now at constant risk of international retribution. For example, in retaliation of the tire decision the Chinese are now threatening not to buy U.S. goods which are in demand and competitive. Motivated workers in successful industries now have their legitimate interests subrogated to the trade agenda of the major U.S. unions.

It says that the U.S. had its fingers crossed when signing on to the anti-protectionist pledge, and raises real doubts about future adherence.

It says that the “Yes we can” Administration has lost confidence in the American model of competitiveness.

China is absolutely right to choose this ground to challenge the U.S. on protectionism. While trade lawyers can argue the letter of the WTO commitment—it is absolutely clear that the spirit of the Safeguards Agreement has been violated in this case.

Unquestionably, there are numerous issues on which the U.S. can challenge China’s approach to trade—including subsidies, exchange rate issues, disregard for intellectual property rights and denial of equal treatment. But a safeguard action addresses none of these. It doesn’t identify any fault with the Chinese—only with the ability of U.S. workers to compete. When faced with competition from Chinese tire producers, the U.S. could not point to dumping or government supports, so the Administration went to the “no we can’t” option.

Larry Summers has said that the long term formula for U.S. economic recovery will be to become an export oriented economy. To do that, U.S. products will have to compete aggressively and successfully with other countries for world markets. Trading partners will also need to be convinced to open up their markets to international products.

There will have to be a reversal of the deepening slide into protectionism heralded by the tire decision. America needs to participate in a trade agenda that gets the world working again. Only then will the next G 20 meetings be relevant and of impact.