Crossing National Borders: Europe

Crossing National Borders: Connecting People to Economies

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Introduction by Maureen Marlowe and Bill Emmott Presentations: - Jorge Braga de Macedo - Hans-Ulrich Klose - Demetri Papademetriou Questions & Answers
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Introduction by Jessica Mathews Temporary Workers in North America Full Agenda Speakers' Bios

MR. EMMOTT: Ladies and gentlemen, can I ask you take your seats. We're resuming. Thank you. I'm going to ask Maureen Marlowe, president of the Reuters Foundation, to introduce this second session of the morning.

MS. MAUREEN MARLOWE: Welcome back, much diminished audience. Reuters, like The Economist, is 150 years old as well. I think this is both of our birthdays this year, and we have been reporting on events that affect economies for 150 years. Just a little sideline is that Reuters was founded, by the way, by a German immigrant who immigrated to the U.K. And his first really big beat, which made him famous, which put Reuters on the map, was when he reported on the death of President Lincoln. And he beat all of the other European news agencies by a week. And, of course, the death of Lincoln moved markets. So early economic issues were being covered by Reuters.

And we continue to report on economic issues today. I don't know if you know that we have 2,000 journalists in 160 countries and 190 cities. So the economic issues that we cover are truly global. And through Reuters Foundation, we seek to foster debate on those issues and, thus, our sponsorship of this forum today. I'd like to pick up on just a few of the things that Joseph Rees mentioned, and that's the Statue of Liberty and dinner parties. I've been to quite a few lately, because I've tried to stagger them, rather than invite everybody at once.

And we have had a few discussions about the Statue of Liberty and how we might change Emma Lazarus's poem, because, as you know, it's not about the tired and poor anymore. And we tend to substitute things like doctors, nurses, teachers, computer programmers; and that brings us to discussions about the drain brain. And whereas we, on the one hand, don't want unskilled workers when we take away the skilled workers, we leave a much more impoverished country.

So, in the first half, we talked about the Western Hemisphere, and this panel will discuss the movement of economic refugees in Europe where the same problems exist. The refugees don't speak Spanish. They come from Eastern Europe. They come from Bosnia, Serbia, Africa, Asia. They too are not welcome. I'd like to hand over now to Bill Emmott, who will introduce you to the speakers, who will move the discussion out of North America, and make it more global.

MR. EMMOTT: Thank you very much.

We have two very expert speakers, both from Europe, but one very much heading a worldwide organization, and we're going to start with them. Jorge Braga de Macedo is president of the OECD Development Center in Paris. He is a former minister of finance of Portugal. He has had many distinguished years in the Portuguese National Assembly and also is an economist and former professor. Maybe you were never a former professor. Are you, Jorge? No, exactly. Over to you, George.

MR. JORGE DE MACEDO: Thank you, Bill. Once a professor, always a professor. Once a

MR. JORGE DE MACEDO: Thank you, Bill. Once a professor, always a professor. Once a migrant, always a migrant. I studied in the U.S. I was a non-immigrant, but I studied in the U.S. for some time, and so these matters have a very strong personal resonance to me. It is in the U.S. that I met most of the Latin American friends that I have. One of them was president of Mexico until recently, and, over and above, it's here that I learned Spanish. So it's here that I learned that my name could sound Jorge. I didn't know that back in the old country.

It's a pleasure to be here, in a certain way, standing in for Ignacio, who was well known for his taking advantage of the book that recently came out from the OECD, Trends in International Migration. It's a reference in the statistical work on migration, together with work from the United Nations that has already been mentioned. And I will be making reference to some of his findings, together with other people from the OECD. What I will add is a development perspective, as I say in the title of my talk. My PowerPoint presentation will be distributed to you as I open.

What I wanted to start with is what we heard about Mexico -- "Far away from God, close to the United States." Israel was "Close to God and far away from the United States." And I was trying to think whether Europe was close to God and the United States or far away from both at the same time. And, I mean, the idea here is a lot of what is happening in Europe now has lessons for the United States that maybe are a little bit difficult to bring out. I'll certainly try doing this by commenting on the data that the OECD has assembled.

But let me start out with a particular way of looking at migration, which will be unabashedly economic. And that's, of course, my training -- once a professor always a professor -- but also because I think, in matters that create a lot of emotion, it's helpful to have a well defined framework. And economics has that. That's certainly not the only way or the best way to look at migration, but it's a very important way. And so my approach -- the development perspective I'll take is very much an economic approach.

The economic approach suggests that the concerns that exist, both in immigration countries and in emigration countries, in originating and receiving countries, that those concerns which exist and are profound, do not make for an unmanageable problem. So the basic message I want to bring out to you is the statistics that we are gathering and that we are looking at suggest that the economic impact is manageable. Does that mean it's easy to manage? No, probably it's harder in some cases than others, but it is manageable.

That does not mean, however, that there aren't more severe problems about immigration in the countries that send the migrants. And that problem, which, you know, could be seen as a new form of the brain drain in a similar looking volume on perspectives of the U.S. economy. The economic reports that the OECD is most well known for, in '97, the one on the United States was precisely focusing on as a special chapter on immigration issues. And, of course, it had the Statue of Liberty: "Give me your tired, your poor, your huddled masses yearning to be free." And the line that Joseph Rees said was, of course, what the secretary-general of the OECD mentioned, you know, "Send me your IT engineers, and your nurses, and your doctors."

And that, of course, gives a completely different idea, namely one where you are trying to exploit precisely the budding middle class of countries that are trying to govern themselves by giving them an incentive that may appear to be irresistible. And even though you may want to distinguish what happens when the taxpayer has helped create that education from a situation of the private sector where, you know, mobility is, of course, all right. Nevertheless, the border between public and private in many of these countries that are emerging, that are trying to create institutions that support development, is much thinner. And so you really have to wonder at the costs to these countries that have sort of a purely free migration or advertisements attempting to recruit, for example, Australian teachers in the U.K. That is creating an uproar in Australia, a country member of the OECD.

South African doctors -- nurses, apparently -- Canada has a major program of recruiting nurses from the commonwealth. These are severe problems that I don't think we have touched upon, and I want to flag them, rather than what I would call this social dimension, this xenophobia, where I will quote the competition. It's a Wall Street Journal correspondent in London who has written a book called Global Meet. And as you can see, even though I don't want to stress the economic dimension, I do want to branch out to other aspects of social science.

We all are becoming a little bit global. And so his point is that mixture -- mongrelization he calls it -- is in the order of the day. You have multiple allegiances, several professions; you can really benefit from interaction in a personal way. It has lots of interesting stories about that. I recommend the book. And I think it suggests the dimension of globalization. That's very different from a movie I saw way back when I was working at the IMF, right near here, called Bread and Chocolate, which was exactly the opposite situation. A poor man came from Italy to Switzerland, and when he was in Switzerland he felt Italian; when he was in Italy, he felt Swiss. And the movie is just a really difficult problem for this immigrant.

Okay, so now enough of introduction. Let me follow very quickly with the six findings of this document that the OECD Economic and Social Department put out. And, you know, in the presentation, you can see some economic analysis results, some work I did way back, again, on this. So there are six points I want to stress, and in a certain way they go against conventional wisdom. The first point is that there are gains to the host country. Using various methods that I want to get into, we know that there is a gain, for example, to the U.S., which has been estimated at .1 percent of GDP. Those are small gains, but they are gains, and this is undisputable.

The problem, of course, is the distribution of the gains, where there may be sectors of society that lose, and they may feel compensated. So the low skilled Americans may lose, but, on the whole, the gains to the host country are well established.

The other second point -- and that's illustrated in figure one, which you may have trouble reading -- the axis is 20 percent on the unemployment, and that's the vertical axis, 25 percent on the horizontal axis. That's a percentage of the population that immigrates. This shows that there is no relationship. Contrary to popular belief, there is no relationship whatever between immigration and unemployment. And, on the contrary, there can be a positive effect, to the extent that immigration is a way of introducing flexibility, surely not the best way, but certainly better than nothing.

The third point, which I already alluded to, is the one that has to do with this targeting skilled immigration. And what seems like it may make sense, perhaps from the perspective of the host country, can have a very negative "brain drain" effect in the less developed countries. And the story there -- I compared the two largest recipients of immigrants -- that's the U.S. and Germany -- amongst the OECD countries. They are the only ones that have a legal migration arrivals rate, which is over 500,000. It's, of course, much larger if you take into account illegal migrants, but those are just the two major cases.

You can see that, still, a very strong effect, especially, I would say, in Germany, of the past demand for unskilled labor. And you can see in table one that the foreigners have -- you know, nearly half of the foreigners do not have complete primary education; they are really quite unskilled. At the same time, you also see that, in the U.S., you start having, you know, an amount of schooling on foreigners that is 41 percent already at college level education. So, again, the change there is quite significant. But you still have a tow from the low demand for unskilled workers that was characteristic of the previous times.

An important finding I want to stress -- that's the fourth point -- is that budgetary impacts are negligible. This is important, because there was this fear that migrants would be holding onto the welfare state, and that they would create a very strong burden. That's not right. I mean, there are effects on both sides, both on expenditure and on revenue. All told, no big deal, manageable. But then there's the other news -- and this was mentioned in the previous session -- that maybe migration can dampen the effects of declining in aging population. And that's true, too. But by itself, it cannot solve the problem.

Jessica mentioned at the beginning that we are talking about a common regime, which is, perhaps, very daring in this matter. And I agree. But this is a case where we find that globalization makes the most sense in thinking about the savings of aging economies and the investment opportunities of emerging markets. So whatever you do to people, you know, in that common regime, the point of the matter is that financial globalization brings into contact the savings of aging societies and investment opportunities of emerging markets. And unless you get that right, then it's not just migration that loses, but maybe trade and capital movements as well.

So let's not forget that for a global economy to work, you don't just have trade in goods and in financial assets, you also need to have the supporting regime, and that's people. So again, I come back to the idea that some aging difficulties may be solved by migration, but it will not be the full problem. Nothing can replace the existing trade and financial set-up. That's the fifth one there.

And the sixth point, in a way, again comes back to this fear that countries that are not like Mexico, that are not the OECD member countries, countries that are emerging may be at the losing end of this. I mentioned South Africa; you could mention others.

You can find that budding middle class is destroyed by an irrational migration policy, because, once again, you could not distinguish where the tax system has benefited those people in their training and the case where it is just a private matter. So that's a matter for concern.

Okay, very quickly, I will go through the trends, as discussed in the OECD reports and, again, in the U.S. We know this has been a historically important country recipient, the largest gross recipient of immigrants in absolute terms. But still, the point to be made here is that relative to the population, the gross rates are now above half of what they were at the time of the Statue of Liberty. And we economists have a great fondness for Paul Douglas, who later became a senator. He has the name of a production function that's been used in the work I cite here and many other ways. And in 1919, he was worried about the diminished skill levels of immigrants, and so on. That's, again, in the OECD report on the United States.

So let's not exaggerate these problems. And even when we talk about the origins, comparing the United States and Germany -- table two there -- you see that the stock and the flow of Mexicans is around one-fifth. But this was mentioned yesterday, I think. Chinese and Indian immigration is -- the flow is the double of the stocks. So we're really having a very strong change in the composition of migrants in the U.S. And the same is true in Germany where the stock is mostly Turkish, but the flow is very low, whereas for Poland and the Russian Federation you have a very strong increase in the number of migrants.

So this idea that, you know, there are bilateral problems -- well, of course there are, but there is also a great change in the composition. But when you take a foreign population being greater than or equal to 10 percent of the total, you find the countries where this is most significant are Australia, with about a fifth; Canada, 16, 17 percent; Switzerland, 15 to 19 percent; and the U.S. barely around 10 percent, for an average of the OECD, which is 6 to 7 percent. So there again, what you find is that these numbers are sizable, but there's no dramatic increase. And as figure two shows right next to it, the scale is 1,600 people -- you find that for Japan, it's negligible; for the U.S., there's a sort of an upward trend; and for the Europe, what you find is there was a very substantial increase in the '80s, and then it came down, and it is a little bit sort of ups and downs.

So, in conclusion, I want to stress two points, one coming from the previous session and one that's still very much in the future, and we will see what can happen. The one coming from the previous session has to do with the experience with temporary workers. That's, of course, a very European, especially German, experience, also French. Most Portuguese workers went up to France and to Germany in the '60s; they are now prosperous entrepreneurs. And so this system of temporary workers that Europe had in the '60s, and it stopped with the oil crisis, is very interesting.

There's a forgotten book by Charlie Kindelberger, who applies the story of economic development with unlimited supplies of labor, which is a very typical development economic story by Arthur Lewis. He is the Nobel Prize-winner who's foreign born. And he worked at Princeton. He was a colleague of mine there. And I think there's a statistic in the U.S. report. About a quarter of Nobel Prizes, or prominent scientists, or artists are foreign born. So that should calm down the people who are worried about the unskilled labor.

Anyway, the Lewis story, applied to Europe, is very interesting, because what you see -- and you may already see a little bit of what was meant by NAFTA Plus earlier this morning. What you see is that when there is major migration, it's from outside the area. So Portugal and Spain were outside the European Union, and they migrated in great numbers in the '60s to Europe. They don't migrate anymore so much. And now what is happening is you get migration from the south of the Mediterranean or Eastern Europe.

And you can imagine a situation where people are, as it were, the first way in which you get awareness of some institutions and some realities that later become accessible to everybody. So the idea of the migrant as kind of a pioneer, in some sense, which is part of the American dream, I would surmise, is true and existing in Europe. Now, you may have a lot of trouble seeing that happening in NAFTA, but in Europe it has happened. Portugal and Spain are amongst the non-founders of the European Union, and Greece could be included as well. The only ones that are in all the variable geometry institutions, the Eurozone and also the Schenken Agreements.

And that's my last point-- the Schenken Agreement where the U.K. -- that's not so surprising -- but Ireland are not. Ireland being, you know, the darling of the Eurozone and of the growth in Europe, is not in all these schemas, and Portugal and Spain are. So that shows to what extent those countries that used to supply labor are now part really of the arrangement. That's, I think, a good story.

So the last point I want to leave with you is there are discussions, a little bit inconclusive at the moment, on how to have a common asylum and immigration policy in Europe. You know that the Schenken Agreement was a voluntary agreement that included only a few countries. When the Amsterdam Treaty was signed in 1999, it was included, now in the so-called third pillar of justice and home affairs. But we don't know whether that route, which would be the communitarization of immigration and of asylum policy, will go on or whether you'll have a special deal, as it were, like you have with the Euro.

The advantage of the first one is that being part of the community, there are common policies. That's, of course, the advantage. The disadvantage is that it may take a long time, because you need unanimity. And the alternative is that it will go faster, like the Euro did, but then you may have major players outside, such as, of course, the United Kingdom -- the global, special relationship, I would say.

Thank you.

MR. EMMOTT: Thank you very much, George, for proving that neither professors nor economists need lack of social dimension, and a very, very comprehensive look.

And our next speaker is Hans Ulrich Klose, chairman of the Committee on Foreign Relations at the German House of Representatives, the Bundestag, a senior member of the SPD, the leading party in Chancellor Schroeder's governing coalition, and a former mayor of Hamburg.

MR. HANS ULRICH KLOSE: Good morning ladies and gentlemen. I apologize at the beginning for the mistakes that will probably occur to me. And if I miss a word, please don't blame me. I would like, at first, to give you a short sight at the demographic situation in Europe as a whole. In all countries of Western Europe, you have a decline of population, in consequence of very low birth rates. And all the Western European societies are fast aging societies.

In Germany, the birthrate is about 1.4 per woman; in Eastern Germany it's 1.0. And the average expectation of life is, for men, in the meantime, almost 76 years, and for women, 81. But this is a statistical number, because you must know that only 60 percent of one generation of birth is reaching an age beyond the fifties. So those who reach that age are getting much older, so we have a real increase of very old people beyond the 80, beyond the 90, and even beyond 100. The development in Europe is going on now for more than a decade. There is no indication that the tendencies will change in the next future. So you can foresee the development of the population pretty close in all the estimations that have been made and proven correctly.

There is, according to our experience, no possibility to influence this tendency by means of family policies. Some countries in Europe have tried to do so. They all failed. There's no political means to change this natural trend. So the only possibility for politics to influence the composition of the population is migration. And the truth is that we in Europe -- all countries, especially Western Europe, need immigration. And for the first time, the new line in Europe is that we, at least the politicians, are about to accept this fact and dare to explain it to the public so that the public starts to accept it too, which is quite a difficult job.

Now, talking about Germany. Germany has been an immigration country for 30 years. In the last 20 years, more than 15 million immigrants came into Germany; about 7 million left at the same time. The immigrants came as guest workers until the mid '70s. Then they came as asylum seekers with a peak point in the beginning of the '90s of more than half a million a year. Then they came as refugees from the former GDR, communist countries, and in the latest 10 years from the former Yugoslavia.

Then, a lot of people of German origin came from the former Soviet Union, Poland, but also from Romania. This is quite a number, almost 3 million, in the meantime. That explains the increase that is coming from Russia and Poland that was mentioned. We have about 2.5 million people coming from other EU countries in Germany, and we have almost 5 million people coming as a consequence of immigration. They're coming to reunite families, to complete families, which is a humanitarian task that is due to the law.

Today, Germany has a population of 75 million Germans and 8 million foreigners; the largest foreign minority is Turkish and Kurdish, about 2.5 million legally. I would like to stress what you said. Migrants, that is true, have added to our wealth, especially those who came in from the European Union, the East, as guest workers. They have stabilized the social system. This is true. But they also, to some extent, contributed to problems.

And one point I don't agree with what you have said -- there is a labor market problem, because 60 percent, in some cases 70 percent of those who come as working people are unskilled people, and they are pushing into a labor market that is not very wide in Europe, that is getting smaller. And there is a heavy competition with those unskilled people in Europe, in Germany, and other places. And this causes, of course, a situation of competition and sometimes creates political tensions and sometimes even something like hatred. It is true. We have to admit this. If you really want to discuss the problem, you also have to touch those things that are not so good.

At this moment, I would like to try to give you an explanation why we have these rightist, extreme activities in Germany and especially in Eastern Germany. It's my personal explanation. I think there are two main reasons for this. The first one is the official anti-fascist propaganda by the communists. People were forced to be nice to the anti-fascists, and the sooner the pressure was taken away, there was a shift in public opinion in Eastern Germany, and it did exactly the opposite that it was supposed to do before. That's one explanation. The other one is, connected with the unification of Germany, you did not only have winners on both sides, you also had losers, especially on the Eastern Germany side. And if you are a loser, you need somebody who is responsible for this, who is guilty and who is inferior. And this is a source of hatred that concentrates sometimes against foreigners. That's my explanation for the situation. I just wanted to give you a little insight into this, because it's an interesting point in the discussion of the United States, as I know.

But it's also true, and I would like to add this. Of course, we have these activities not only in Eastern Germany, but also in Western Germany. We have to be very open in all of the Western European countries. We have it in Spain. Just imagine the situation down in Almeria when the public chased the immigrants from Morocco, and the local authorities, including the police, didn't do anything. We have the problem in France. Think of Le Pen. You have the problem in Belgium. Nothing to that extent is in the Netherlands. We have it in Germany. We have it in Denmark. Just listen to the discussion that's going on right now during the election campaign. Most of the parties are talking in a way that looks like a poor orphaned child. That's the truth.

We have it in Sweden. We have it, of course, in Austria. We have it in the Czech Republic. Remember the story of this town in the Czech Republic where the local authorities built a wall between the Czech population and the Roma population. So we have to admit, to be realistic: we have a problem with this. There is no excuse for this; we have to work on this. But there's a lot of work to do to diminish tensions and have changes for the future.

The most difficult immigration group that we have in Germany is the Turkish group. Five to ten percent of these immigrants, who are highly educated -- they passed high school gymnasium, went to universities -- they don't have any problems at all. That's like in all societies. But for the rest of the 85 to 90 percent, there is difficulties, because we have not been able to integrate these people into the German society. Instead, we have witnessed the development of parallel societies, big enough that they don't need to be integrated in the German society.

We have this unconcerned society. Already, we have Turkish newspapers; we have Turkish television; we have Turkish movies; we have Turkish parties. Everything is Turkish, so why the hell should they take care of the German society. I know what I am talking about, because I have been living for more than 16 years in a community in Hamburg with more than 40 percent of Turkish inhabitants. You can learn a lot.

I was told I'm too long, although I'm just -- I take the time he did, okay?

[Laughter.]

MR. EMMOTT: He sets a very bad example.

MR. KLOSE: Then I still have 10 minutes. [Laughter.] Okay, the best thing I can tell you for Europe as a whole and Germany today is the following. For the first time, we have an open debate about immigration. The Germany government has installed a commission for immigration. They have the task to make proposals for immigration legislation. A report is expected before the summer break of this year, and government has announced that we will try -- and Parliament also -- try to pass this new legislation within this year. And the most important thing about this is that finally, a majority in Parliament is willing to accept the reality, which is that we are an immigrant country, one of the biggest, in relationship to our population of the world, and are trying to discuss the consequences.

So far we have been an immigration country at random. And now we will try to learn from other immigration countries, classic, like the United States or Canada, Australia. The Canadian example seems to be helpful for us. The general line will be asylum seekers and humanitarian immigration, no change in the present situation, which is very liberal. Labor immigration has to take into account the situation of the labor market and the demands of our economy. That is parallel to the situation in Canada. And efforts to integrate are imperative for both immigrants and the German society.

Basic to achieve this is a core of common values and rules agreed for; a common language, which, in Germany, has to be German; equal chances and opportunities for both Germans and those who come; and a respect for cultural difference and identity. The question I was asked in a letter before was, "Is Germany ready to achieve all of this?" My answer is, no, not yet, but we are trying very hard.

Thank you so much.

MR. EMMOTT: And we have our final speaker, who is Demetrios Papademetriou, co-director of the International Migration Policy Program here at the Carnegie Endowment and formerly a director of immigration policy and research at the U.S. Department of Labor, who will give a short response.

MR. DEMETRIOS PAPADEMETRIOU: I already have two minutes less, so I'm in good shape. [Laughter.] It's a bit disconcerting to me not to be able to be contrary when it comes to European migration issues. It seems that for much of the last 10 or 15 years that I have spent much of my time trying to have people across the table or next to me on the table, whether it at the OECD or elsewhere, acknowledge certain simple facts.

And it seems that today, in the two presentations that we have already heard, those facts are finally being acknowledged. It does not mean that Europe is, in necessity, much closer to developing and certainly implementing the policies that will allow it to make progress on this issue. But to have senior officials speak so clearly about the two issues on which they had referred to be absolutely deaf on -- namely, that Europe is an immigration space and the EU, in particular, an immigration space of the first order, on a per capita basis as large an immigration space as the United States and Canada.

And I want you together -- and I want you to think about that. Think about it. And the second part, to have a senior member of the German government acknowledge that immigration, number one, has been one of the strong elements, foundations of Germany's prosperity and that Germany ought to start thinking about how to not only acknowledge these acts, but also to pursue an immigration policy. These, I must admit, are nothing less than revolutionary. I know that now the newspapers have made this debate almost seem banal, almost unnecessary. But these kinds of comments you could not have had a year or a year and a half ago when Herr Klose and a couple of us were spending some time, on a Monday morning I believe, discussing these issues at the Carnegie Endowment.

Let me make for those of you -- and my apologies if I -- if you take and look at this table three that has been given to you from Jorge's presentation, since I am, I guess, the discussant, in some ways it is important to understand because, you know, those tables sort of have lives of their own, you know, sort of get shared in all that. This is not a foreign born totals. This is each European country's self-definition of who is an immigrant or not. When the standard becomes a single standard, namely, foreign born, the same way that you and I understand it, taken in a census that counts foreign born persons in the population -- those figures explode.

Instead of having only four or five countries above that cut off of 10 percent, you have about eight or nine countries that go above that. And the average for the OECD becomes very close, if you take away Japan and Mexico, because Mexico is a member of the OECD. All of the sudden, the average of the OECD jumps to just about where the average of the United States.

That tells you how significant the revolution, as it were, is or has been and how long it has taken for people to acknowledge the facts. And that's going to take me to a couple of remarks that I wanted to make that have to do with facts and facing the facts, looking at them straight in the eyes, if facts could have eyes, and basically say, "What are we going to do now?" Since I'm sort of the last speaker here, I will take the liberty to also to address myself to some of the issues that were raised this morning. It is all right for people to be totally tied to the one or two ideas that they have held forever on the issue of immigration, but it is more important for them to actually think outside of what has made them comfortable for 15 or 20 years on this issue.

This issue, in fact, I suspect that many other hot issues -- we seem to be enjoying our losses almost as much as we enjoy our victories. I'm reminded of some of the causes behind the disillusion of the ex-Yugoslavia and Serbia and how places in that part of the world sort of seem to enjoy thinking about an extraordinary loss in the 1500s, and 1300s, and the 1700s. In the immigration debate, we seem to be fighting too much in the last war, or we fight in a war that's already over, but nobody has told the combatants about it. And this is quite extraordinary.

We talk about temporary programs, permanent programs, more legal immigration, less legal immigration, as if these are all either or propositions. And if there is one thing that I will hope that all of us can come out with out of this meeting, is that these are elements of a package that will be negotiated, or should be negotiated, between the two governments, between the United States and Mexico, or, in the case of Europe, between Europe and some of its standard suppliers of people, namely North Africa, namely Eastern Europe. But if we get stuck in trying to only think about a single option, then we will constantly allow the perfect to become the enemy of the good, the enemy of progress.

So what should we all be thinking about, including the United States and our friends in Europe and other players in the immigration game, as they try to come to terms with the phenomenon, which, I believe -- you don't have to take my word for it -- I believe is going to grow larger in the years ahead. And I'm not going to say larger because there's going to be much more legal immigration; rather, larger because we all are going to want to have larger legal immigration.

Seven propositions. Now, if you don't like them, they're not propositions; they're sort of like seven deadly sins, if you are already committed against change. The first one is it seems to me that we should do something that non-immigration does; namely, have rules that are transparent, measured, enforceable and administered, and that are administered consistently. Maybe the tax system is less transparent than the immigration system, but that may be the only part of the system that is less transparent than that.

We always do other things than the ones that we say that we do. For instance, we continue to utter that somehow we have a level playing field in which both countries have a fair and sort of equal chance to send immigrants to the United States. Nothing could be further than the truth. Not only is it not equal, and equitable, and fair, but we constantly make exceptions. We make exceptions for the Irish, for the Russians, for Africa and for every other part of the world, depending on whatever the interest of the moment is, or the interest -- with all due respects to you, Bruce, the interest of the key legislators of the issue, period. Once you accept that, the only thing that you need to get moving on is -- he says you only have, really, two more minutes.

[Laughter.]

Okay so, it's not transparent, it's not measured, and it is certainly not administered consistently. And it is quite remarkable to me that we continue to talk about employer sanctions, and somehow we think of them -- and that's a concept that's European, that we imported here, and it has become sort of part of the national myth. And we keep insisting that if we only put some more money, change the personnel, change the name, whatever it is, it's going to do any better than it has done to date. And it can't. It can't because we are not prepared to pay the price for making it happen. Should we have in our books or in the European books laws that literally litter the statute books or not?

Some other kinds of things that we ought to be considering about -- let's try to figure out how the labor market works. And after we understand that, let's try to figure out what the role of immigrants are in the labor market. Ultimately, if you go against the labor market and you fail to develop rules, channels through which legitimate employers will find the employees that they need, some of these employers will go outside of the system. What you have is illegal immigration. What you have is the argument of Holland, or of Russia, or of Mexico that basically says, "Okay, you're telling me that I should stop my people from coming over, but it is your employers who are employing my people."

In fact, there is variable unemployment. If we don't want to do that, or if we want to do that plus something else, we should always keep in mind what Joseph said, which is "border controls." It keeps any program in any system honest. It basically undergirds the integrity of a system. Now, as the Germans in a sense have done with Poland -- the three months visas to give a sort of free hand and a wink to Poles that want to come to Germany and sort of work for three months, okay. Maybe that's what we are going to do. I hope that's not what we are going to do, but maybe that is what we're going to do with Mexico. But the fact remains, again, that you have to be absolutely serious about controls or, somehow, do something different.

And that, in fact -- an ability to control the border to the degree that makes us comfortable and that we can afford -- becomes, in a sense, sort of the entry shot, the first shot of sitting around the table and starting a conversation about what you might be doing instead. And the final point, since my two minutes have expired a long time ago -- nothing can in a sense undermine an immigration system and, more generally, a society. A receiving society is what I'm thinking of, but I suspect a sending society too. Then, failing to offer people, foreigners, conditions in the labor market, in social terms and, over time, depending on the rules of a particular society, in political terms that put them on an absolute equal footing with everybody else -- full membership for those who choose to become full members -- should still be fundamentally the number one priority for that immigration system.

Thank you.

Play the video.

MR. EMMOTT: Thank you very much, Demetrios, for rounding things off so skillfully. We now have some time for questions from the audience. And we start immediately with the lady there. May I remind you to tell the panel who you are and where you're from, and keep your question short.

MS. OSTRY: My name is Sylvia Ostry (ph). I'm from the University of Toronto.

I wanted to raise the question that the -- I can't remember if it's Jorge who said that the unintended consequences are by far the most important. But I want to do it in a different way. I think that the spillover, that the reason the flow of human capital is so profoundly different from the flow of anything else across quarters is that the spillover is quite different. In Europe, I think that the social and political consequences are of profound importance, but they will have an effect on policy, a long-term effect on policy, if this goes on. But I'm more interested in the OECD approach. I haven't seen the publication.

I think that there's a profound difference between the unskilled and the highly educated. I think that if you did a study, you would find that the effects of the highly educated took a long time to be felt in the economy. They produce innovation; they produced new industries; they have a variety of spillovers that affects the whole growth rate, productivity, blah, blah, blah. So, if the effect on the receiving country is long term and not measured by a one-year border, they are, in fact, an investment; it's a form of investment.

If you look at the sending country, and again there's enough data on this, but just in the case of Canada, you find the effect is going to be to push for convergence of a model, that the country which receives them has a certain systemic model, and that, in addition to the investment effect, the pressure of the brain drain will profoundly affect Canadian macro and micro policy. And I think that those consequences, that the deeper integration of globalization is now one step much more deep -- I don't like the term globalization -- by the flow of human capital. And nobody has looked at this.

A friend of mine calls it globalization of the mind, and that's a bit much. But there's a profound difference between capital flows, widget flows, service flows, foreign investment, and human capital in terms of both the receiving and the sending country, and the distribution around the world. And I wonder whether the OECD is thinking of looking, over the longer term, into this spillover?

MR. EMMOTT: Jorge, are you?

MR. DE MACEDO: Thank you. Yes, I am. [Laughter.] No, no, no, because I want to react to something you said. You didn't disagree with me. You disagreed. And if we go back to the figure one, you see that Germany and the U.S. are very close in terms of their position there, which attempts to suggest that there is not a clear relationship between immigration and unemployment. But let me add that the studies made in Germany do suggest that there is a slight difference between unskilled and skilled workers, very much along the lines of what Sylvia was saying.

So blue collar workers' wages go down a little bit as a consequence of immigration, but white collars' increase. So that is the uneven distribution I mentioned. But, hey, that's a consequence of the less flexible labor market in Germany relative to the U.S. I did say that immigration was a way of introducing flexibility. The more rigid the market, of course, the more these effects can be detrimental to some groups. And the policy issue, of course, is how you compensate.

So I do want to speak to my numbers. I think they show that on a broad cross-section, there is no effect, but there are distributional effects of great importance. But again, they may suggest that the German labor market is too rigid. That's no news to anybody, including you.

Let me come back to Sylvia. What we are doing at the development center, which is very much taking into account the brain drain I mentioned a couple of times, is on e-commerce, which is a very narrow dimension of where a technology can really make a dramatic difference when used in developing countries.

I mean, the usual statistic, that a woman with a cell phone in an Indian village -- infant mortality drops by half. It was presented in a new economy conference. Everybody mentions this statistic. We are trying to look into that. So when I say I am, that's what I meant. It's a narrow dimension, but we've got to start someplace.

MR. KLOSE: I just want to introduce my dates. The dates are the following -- they are end of the '80s. From those foreign people who came to Germany to work in Germany, two-thirds came without professional training. The exact dates were: Turkey, 70 percent; Yugoslavia, 57 percent; Italy, 68 percent; Greece, 73; Spain, 77; Portugal, 57. In comparison to this, 17 percent of the German labor force is without professional training.

MR. EMMOTT: Sir.

MR. RICHARDSON: I'm John Richardson with the European Commission.

A question, particularly, I think, for the OECD statistics. In the European Union, we deal with internal migration through a whole series of policy instruments, including citizenship rights, rather large transfers of resources to the countries of immigration, et cetera; quite different policy mix to dealing with immigration from non-members. In order to make sense therefore of policy-making and other statistics, wouldn't it be a good idea also to give the breakdown for European Union members of the non-national populations, according to whether they're EU citizens or not? Of course, this will create a problem in the future with enlargement, but that's in the future.

MR. MOHAR: Thank you very much. That's an excellent point, page 31 of the report, that little box on intra-European mobility. [Laughter.] I really had to focus on a couple of things. But when I made the allusion to NAFTA Plus, I think what this comparison between North America and the European Union, from which we can learn, is exactly the idea that the Europeans have had problems of immigration amongst groups that are now part of the Union. And I gave the example of Kindelberger's study. I mean the way the Portuguese and the Spaniards and the Greeks went to France or Germany in the '60s may not have been very different from the Turks.

But now they are in all of the schemas. They are in the monetary union; they are in the Schenken Agreement. And so it can happen, even when you don't think it happens. And that, I thought, was the most important comparison for this group where the NAFTA Plus, from what I gathered, created a sense of "How can we, you know, have a NAFTA that goes beyond what's happening? Well, in Europe 30 years ago, there was also that skepticism.

So you're quite right: there are very different problems nowadays. That's why I mentioned the Common Asylum and Immigration Policy. How could you dream of this even before the Amsterdam Treaty? Well, it's being discussed. But, so, I didn't have a chance to develop that more. There should have been somebody from the commission at this table. He should have been here. [Laughter.]

Q: -- and I'm with the Inter-American Development Bank.

Earlier today, we heard Doris Meissner mention that temporary worker programs are fraught with problems. And I was hoping that the panelists could comment on the lessons that governments of North America can draw for establishing future temporary worker programs.

In particular, I would be interested knowing if temporary workers have later become permanent immigrants or if they have returned to sending their countries. Also, if legal immigration has declined after these temporary worker programs were adopted, or if networks that encourage future immigration were created? And last, about the labor market effects of these programs: what happened to the wages of low skilled workers after they were implemented.

MR. EMMOTT: Would you like to answer that, Hans-Ulrich?

MR. KLOSE: I can try to answer at least part of it. Well, the whole philosophy of so-called guest workers was the philosophy that these people would stay in Germany or in Europe for some years, and then return. This was one of the biggest mistakes we made, because behind this philosophy was these people were guests for a while; we don't have to take care of them; they will not be integrated, because they will return. Nothing of this happened.

All of these people, when they came to Germany -- well, not all, but most of them, 95 percent, decided to stay. And they had the problem that, at this stage, they were neither accepted as full citizens in Germany, nor were they accepted anymore as full citizens of those countries where they came from, which is the basis for a lot of integration problems that we have.

We just were naïve in this question or not honest. So, yes, most of the temporary workers who came into Germany changed into permanent. We have some temporary workers on a different juridical scale that are those mentioned by Demetrios, coming from Poland and some other former Warsaw Pact countries, all together I think in the number of 50,000 or 60,000, who have an opportunity to work in Germany for three months, especially in the field of construction, to learn skills and Western European labor organization and organization management, [who take] back the experience into their countries so that the country can profit by the philosophy.

As far as wages is concerned, it's true, the labor market in Germany is not quite as flexible, thank God, as in the United States. [Laughter.] And that means that even those unskilled people who are not working in really high skilled jobs must get, to some extent, decent earning so that they can live by it. It doesn't make too much sense to work and not earn enough money to live on. So, in this respect, we are not quite as flexible as you are.

MR. PAPADEMETRIOU: And let me add, Doris Meissner was exactly right. Most of the temporary labor programs that we have established around the world since the 1950s have indeed, in one way or another, not done what it is that we thought they were going to do. In other words, when Herr Klose says that the German guest worker programs failed, that they were a mistake, they were a mistake only because the German government and other European governments thought that they could keep people temporarily there; that indeed, they would engage in the transport of workers rather than people, in order to paraphrase the Swiss comment that was made, which was actually, you know, from a play that goes back the 1960s.

In other words, if that is the expectation with which you enter into a temporary worker program, you're going to be surprised. And in places that indeed have the kind of networks that you talked about and the kind of demand and the kind of unregulated labor market that we have, you're going to be surprised very much. But there is a policy principle here, too, which says that we should learn from the mistakes of the past. There certainly have been enough analyses of what has gone wrong with earlier American or U.S. programs, or European programs for us to be able to create things that at least stand a chance of addressing those circumstances that we, in advance, do not want to have happen to us.

Finally, recall one of the sort of admonitions toward the end of my presentation. You have to go with the labor market. I'm not saying the market rules. The people stayed in Germany not simply because people like to stay -- they develop new familial relationships, they enjoy the country, and things continue to be far better in the receiving country from the sending country that they left 5, 10, 15 years ago. But because there was something that Senator Gramm said, and this was an important recognition by a senior Republican recently, where he basically said "We are all complicit in what happens with such programs."

Germany, including the German people, who could enjoy services and products at reduced prices; the German government that could see its overall economic growth and might and export machine continue to do well; the employers who could get those people, in one sense, at a discount. I don't subscribe to what Joseph said. I don't remember what it was -- cheap labor. But a temporary labor program is always a program at a discount, even when you pay people wages that are higher than the minimum wage, because they do not cost the employer, in terms of total expenses, as much as an American worker or a German worker would. In the case of Germany, the differential is enormous. In the case of the United States, it's much smaller.

So as long as you know what you are looking for, as long as you don't isolate, and then think that somehow the solution to all the problems that you have between two countries are going to be taken care of by a silly temporary worker program, however large, then I am of the view that you should try to see how such a program, with the proper protections, and with a system for making those people who meet the rules, permanent legal residents of the recipient country, is something that we ought put in the mix in all of our negotiations -- the Europeans with Eastern Europe, as with Mexico, et cetera, et cetera.

MR. EMMOTT: Thank you. Probably time for two more questions.

Q: Hi, I'm Andrea with Senator Bob Graham. And I have a question in regard to how to bridge the demographic-economic necessities and the social-political questions here. And in Germany, for example, as you said, we do have a problem with integration, I would say, on two levels. First of all, there is no real social integration that happens. On the other hand, the perception of the Germans that Germany is a country of immigration. I think one of your colleagues said 60 percent of the Germans will not support that.

So we do have two problems of integration, I would say. And I wonder how to address that on a European level, if even the national address so far in the past has not been that successful?

MR. KLOSE: Well, I think we are in a difficult process. We are now in the process of correcting some of the basic mistakes that have been made in the past, trying to recognize that we are an immigration country and explaining it to the public -- I underline this point -- explaining it to the public, which is an everyday job, 12 hours a day. And if you are going on to a marketplace in a city of Germany and start discussing immigration legislation and the consequences that are coming from this, you can learn a lot about humanity.

But we're trying to, because we know, I repeat it, we need immigration, and we must start to tell this to our people, and we must tell it to the immigrants: you are welcome, because we need you, and we want to have you in this country and become part of this society, which, so far we never said. And those countries sending people outside must let go of these people. That's the other side of the problem. They must let go of these people and say, "Okay, you decided to go into a new society, another country, so be part of this country and take your responsible share in this country." That's the only possibility to do it.

The key for all of this is education, is what we are doing in our schools and our professional training programs, which are pretty good; what we are doing in our universities, which is not as good as it used to be. [Laughter.] But we are trying to change that also. So I cannot really give an answer to your question. We are in the middle of a difficult discussion, and I think it is a great achievement of this government that they dare to do so; and it's also an achievement of the opposition, at least as far as the question of democratic union is concerned, that they are on their way of changing their minds also. S, for the first time, we have a pretty good chance in Parliament to have a solid majority.

MR. EMMOTT: Final question from Jessica Mathews.

MS. MATHEWS: We've heard this morning about two enormously complex sets of policies and two very different geographic arenas that are in a time of tremendous ferment and change, which is exciting and unusual. But I wondered whether, at the same time of trying to cope with all this change, there is anybody who is wondering about the interactions between migration policy and the information revolution. To wit, whether in a very short space of time, 10, 15 years, governments are going to find it virtually impossible to tax money and transactions and are going to be left with taxing what they can see and put their hands on, which is real property and people. And if so, how does that affect the direction that policies are moving?

MR. EMMOTT: Who, on the panel, would like, briefly, to address that? Would you like to address it, Jorge?

MR. DE MACEDO: Sure, with pleasure. I think it's a good example of what Sylvia called earlier the -- and we are very used to it as economists -- the unintended consequences. It is the fact that you tax the fixed factor, and if your tax base goes away, you have to tax it less, or at least the same as others. So that creates a pressure for international coordination on matters that are very often seen as, perhaps, the last remnant of national sovereignty. That, by the way, applies still to the European Union, where there's always a lot of debate about whether you could relieve the unanimity law on tax matters.

So I think that the link between the information revolution and migration is quite crucial. This is why mentioned, at the beginning, this idea of the global meet. I mean, it's more than a slogan from the Wall Street Journal correspondent in London. It has to do with the idea that at the same time we want to move more, but we may need to move less, because there is a lot of ways in which you can organize production worldwide without movements of people that are over and above what is necessary.

And that allows me, perhaps, to come back in the rescue of the guest worker program. I think Joseph Rees made a very compelling case. I know you can do it wrong, and maybe in Europe, in the '60s, it was done wrong. But the idea of eliminating a tool that is more flexible because it's temporary, at an age where you don't expect a job for life even in the domestic no-migration state, seems to me foolish.

And so I would hope that the consequences of this very interesting seminar, very ambitious, would be that this temporary worker program that the U.S. and Mexico are attempting to look into may be a good idea, where you can import from the European experience and avoid the mistakes. But still, to do without that, you know, idea that you may want to stay for a while and then go back -- that would seem to me to be really wrong.

One more point along the lines of unintended consequences. You know, we have a big program about fighting corruption at the OECD. And the dictum there is, you know, the minister from Africa comes and says "Okay, I want to fight corruption. How do I do it?" Short answer: liberalize trade. Again, an example of unintended consequences. So you could say, disingenuously, "Okay, I want to make my labor market more flexible, perhaps not as flexible as the U.S., but more. Immigrate." Wrong, wrong. Sometimes it works, sometimes it doesn't.

There is no alternative to facing the problem of flexible labor markets in Europe. That's why, in figure three, the German is a lot higher than the U.S. The level of unemployment is a lot higher because, of course, the European labor markets don't work as well. Does that mean the Americans are perfect? Far from it. But, I mean, they work better as labor markets.

And so I think you deal with the labor markets as labor markets and you don't try to deal with them through immigration, because that helps the flexibility. But, of course, it has other effects, other unintended effects. So, together with a plea for thinking over the temporary workers, I would stress this unintended consequence of difficult and
popular reforms, like the one of the labor markets in Europe. But let's not think that immigration does the trick. Immigration is a problem that has to be addressed, common policy on the side of immigration, as I indicated, and flexible labor markets, which I believe are needed in Europe, including in Germany, that should be dealt with, you know, because of its own merits. I'm not trying to provoke you. [Laughter.]

MR. EMMOTT: Would you like to reply?

MR. KLOSE: No, I just want to make two remarks, just to make it clear that there is no misunderstanding. I did not say that the guest worker program of Germany was a mistake. The mistake was the philosophy that it was a temporary worker. That was the mistake. The guest worker program, as a whole, if you consider all the consequences and take into account the benefits and the disadvantages of the program, shows me that the benefits are much bigger than the losses we suffered from.

As far as flexibility of labor markets is concerned, I'll make one brief remark that might give a base for compromise. Let's agree, at least, on one point. If a working man and an entrepreneur goes before court, either in the United States or in Germany -- see what I mean? The inflexibility of our labor markets, to a large extent, is consequence of our labor legislation as it is managed by the courts. And if I look at the situation in the United States, I don't see much difference between the United States and Germany.

MR. DE MACEDO: Very subtle, very Germanic. [Laughter.]

MR. KLOSE: Thank you, sir.

MR. EMMOTT: Well, ladies and gentlemen, the time has come to an end. And I would just, with this great spirit of Portuguese-German friendship next to us, I would like to also thank all our speakers for their contributions. It's been a very, very stimulating morning, helped very much by you, as an audience as well. Since Jorge has been promoting the Wall Street Journal so shamelessly, I'm going to promote -- since you all have an interest in migration, I shall promote today's edition of The Economist, which has a large special report on a different migration issue, which is that of internally displaced people, refugees within their own countries.

I recommend that to you. And we are actually planning a big piece on this broader issue of migration, with a study of European immigrant labor as well, in the next few weeks.

Thank you very much, and thank you to the speakers.

[END OF SESSION.]