Stirring the immigration pot

The un-compact Compact

The Global Compact for Safe, Orderly, and Regular Migration (here) has created a lot of heat (but not much light) in the press. This heavy-weight international agreement sponsored by the UN comes at a fraught time for the subject of migration.  Populist/nationalist politicians have made migration a dirty word. High profile waves of migration from the Middle-East and Africa to Europe and from Central America to the USA have kept the issue in the public spotlight. How migrants are treated by other countries (e.g. Australia) also highlight problems beyond the volume of the migration. And so the Compact has become a lighting rod from every angle of the debate on how to deal with immigration and immigrants. 

The compact aims to codify how countries treat and deal with immigrants of all types, albeit in a non-binding form. It has a specific focus on specifying the rights of migrants that countries should aim to uphold. Unfortunately, the agreement is incredibly tone-deaf to the political environment, to the point of being counter-productive. For countries affected by unpopular migration (e.g. in Europe, USA), the Compact represents a policy likely to be rejected outright. For unaffected countries (e.g. NZ, Canada), the Compact is seen as a mechanism for virtual-signalling, by signing-up to an agreement that has little impact on them.

My, that's a large elephant you have there...

The elephant in the room is the migrants that either cross-border without authorisation, or present themselves at the border requesting entry as refugees or asylum seekers; I call them "unwanted" migrants for want of a better word. They present a moral, social and economic conundrum for the destination country. Letting them in costs their taxpayers money, introduces "strangers" to their society with potential for societal change, and most importantly encourages more migrants to come. Detaining, mistreating, and deporting these people triggers different downsides; moral outage, dead children in the news, and divisions in society as people take different sides.

Of course, there is an infinite spectrum of policy settings between these two positions but there is no setting that is universally agreed within a single country, let alone internationally. The Compact focuses on defining and upholding rights of migrants "regardless of their migration status" lumping all migrants in together. But this ignores the conundrums mentioned above and that a large chunk of countries' electorates feel that mistreating unwanted migrants is a valid policy response. The Compact seeks to dictate that their preferred policy settings are off limits. Signing even a non-binding agreement opens politicians to accusations of betrayal or hypocrisy as they try and negotiate the conundrum.

A better elephant?

There are a lot of good ideas in the Compact. It promotes creating legal migration channels, and proactively addressing conditions in the source-countries of migration. But they are lost in the shadow of the elephant in the room.

Rather than trying to establish "hard" standards, the Compact should have focused primarily on a reporting/publication framework where key data can be compared across destination countries. That allows for meaningful comparison of the data across countries and consequent naming and shaming of poor performers. For example, key metrics would cover:

• How vulnerable is a country to unwanted migration? E.g. proximity to poor/unstable countries.
• How many unwanted migrants is it getting?
• How is it treating them?
• How easy is it for people to migrate legally to the country?
• How much has the country done to address conditions in the source countries? 

Countries that are highly vulnerable to unwanted migration,  and have done a lot to address root causes of unwanted migration, should be viewed more favourably if they fail to treat the remaining unwanted migrants well. The target outcome is for destination countries to either be vastly more generous in assisting source/transit countries to develop, or for the unwanted migrants to be welcomed and supported when they inevitably arrive at the border. Or even both.

Such data that informs the debate in a country with unwanted migration is a good thing. It brings nuance ans perspective to arguments that too often descend into binary shouting matches.

Or maybe just a different one

In a better world with these incentives, the US would eliminate trade barriers with Mexico and central America. Temporary visas for those people in those countries would allow people to work in the US and help provide for their families. Generous US assistance to help develop those countries would mean migration to the US for economic opportunities and safety would be unnecessary. Even focusing on development of Mexico would help (well, help the USA) by making Mexico the destination for unwanted migration.

The EU might have to take a more aggressive approach to conflict in the Middle-East. In Syria, the EU have had to set-up military no-fly and safe-zones to allow Syrians safe self-governing areas until a political solution in Syria was found.

The options for proactively addressing unwanted migration aren't easy, risk-free or cheap; but they allow a way out of the unwanted migrant conundrum.

Amazon mutters and backs down in Oz

It looks like Amazon has blinked in its stoush with the Australian government over the "Amazon tax".

The backdrop

Historically, the government has exempted imported goods worth under $1,000 from GST, a 10% value-added tax charged on most goods and services. This meant that $100 item purchased locally incurred $10 more in taxes compared with the same item purchased from an overseas website. This is great if you're, say, Amazon. Frustrating if you're a local retailer trying to compete with, say, Amazon.

When the government announced in May 2018 that it was doing away with the exemption to bring big web-based importers into the tax net, Amazon spat the dummy. "No", said Amazon. Rather than be required to collect GST on sales and pay it to the Aussie government Amazon geo-blocked Australian consumers from using its US-based web-site. Only it's vastly inferior local website and inventory would be available.

So here we are 6 months later and Amazon is waving the white-flag. What changed? Not much.

First of all, Amazon was bluffing. I was surprised when Amazon didn't capitulate on the day the tax change was actually introduced. I expected that they were posturing to prevent the policy becoming a reality, hoping that the consumers of Australia would turn on their politicians when faced with losing access to cheap untaxed imports. Clearly that didn't work, and the tax change arrived.

That left Amazon in an increasingly awkward position. They had just shut themselves out of sizeable market, but that was not their biggest problem.

It's the reputation, stupid

Their biggest problem is reputational. Large organisations trying to exploit tax laws between countries are looked upon more and more dimly. In this instance they're not using the Caymans, or Irish subsidiaries to shift profits, but the practical effect is the same; reduce tax payable, and increase profits. Such behaviour is likely to provoke more and more aggressive policy interventions by governments with little sympathy from consumers.

Everyone knows Amazon has the wherewithal to handle GST deductions and payments for the Australian tax. Once the policy change arrived and Amazon geo-blocked their US site, Amazon looked just like the bullying selfish corporation that it is increasing portrayed as. Amazon is already under fire for the way it treats its workers, they disingenuous way it extracted subsidies for it's "HQ2" location in the US, and it's dominant position in online sales.

Incubating the competition

Pulling out of Australia also left the market open to a competitor. Amazon's dominance in the market perpetuates its continued dominance. Stepping aside means that an existing or new competitor that is willing to serve the market and collect the tax can establish itself. Given that Australia is regional hub for Oceania, the knock-on losses are significant. Did Amazon really want to forgo access to this market from now on? Threatening to shoot yourself in the foot if you don't get your way is one thing; pulling the trigger is another.

Furthermore, VAT and sales tax collection for online sales is an idea who's time has come. More and more countries are looking at this kind of policy change. And Amazon would lose its dominance if it exited any market that implemented this change.

Why do I care

The Aussie government's policy change was entirely defensible and long overdue. A higher GST threshold made sense 20 years ago when small value imports were low volume, and technology to administer the tax collection was expensive. The world changed and policy has caught up. I really dislike corporations bullying sensible policy into oblivion. I have no problem with importing goods that are available more cheaply from overseas, but they should compete with locally sold goods on a level playing field.

New Zealand is implementing an equivalent policy change in October 2019. Australia has fought a battle (and won) that New Zealand may have lost had it gone first. This is simply a matter of size. The Australian market is small enough to establish a precedent for other small countries like NZ, but too big for Amazon to ignore. Amazon would look truly evil if it wouldn't collect NZ GST once it has infrastructure to collect Australian GST.

Three cheers for the Aussies!