Education

Former President Bill Clinton has always had an impressive ability to explain complicated issues in a way that leaves his audience thinking, “duh, of course”--even if they’d never quite had the same thought before. I came away with that feeling again from the keynote speech he delivered at the annual conference of the U.S. Export-Import Bank. The reason for the speech was to encourage Congress to reauthorize the bank--which is critical for funding U.S. exports to developing countries of big ticket items like airplanes, locomotives, satellites, and power plants. If Congress does not act by May 31, and it has failed to do so already once, the bank will be prevented from offering any new financing. Other countries are already lining up to lure the business away from the United States. Allowing Ex-Im Bank’s funding authority to lapse would be another in a growing list of self-inflicted economic wounds. But the real brilliance of the speech was his simple analysis of the relationship between globalization and growing income inequality in the United States. Citing the seminal CFR working paper by my Renewing America colleague Michael Spence, he noted that there has been essentially no job growth over the past two decades in the tradable sectors of the economy, like manufacturing and business services. The job growth has all taken place in non-tradable sectors like health care and government. And while productivity growth has accelerated in the tradable sectors, it has been largely stagnant in the non-tradable sectors. What does that mean for American workers? “Americans who work in the tradable sectors of the economy are likely not only to get jobs with higher starting pay, but pay that increases with the growth of the companies," Clinton explained. "People who work in the non-tradable sectors are much more likely to get jobs not only with lower starting pay, but without pay raises that keep up with inflation and economic growth.” The consequences can be seen in Roland Stephen's superb analysis of North Carolina and its efforts to respond after import competition decimated once successful manufacturing industries. The trend of the past two decades--with fewer people working in the higher-wage, high-growth sectors of the economy, and more working in the lower-wage, low productivity sectors -- is not a recipe for economic success. The stakes are even higher, Clinton argued. If the United States continues to create jobs only in low productivity, non-tradable sectors, the economic foundations of its leadership will erode. “If America once again wants to lead the world towards shared prosperity, we have to be able to change the internal dynamics of growth in this country,” he said. “And one key component of that must be to increase employment in the tradable sectors, which means increased exports.” “In more common language that would be appreciated in my home state of Arkansas," he continued, "If you’ve got 4 percent of the world’s people and you want 20 percent of the world’s income, you’ve got to sell something to somebody else.” The speech captured how important trade has become both to America’s standard of living and to its status in the world. Since the end of recession, exports have accounted for fully half of U.S. economic growth. The strong performance has some analysts, including Tyler Cowen of George Mason Univerity and Hal Sirkin of the Boston Consulting Group, predicting a manufacturing revival in the United States. Clinton has long been out front on these issues. He was critical in leading the Democratic Party to support the North American Free Trade Agreement, and he largely did it without sugar-coating what was at stake. As he wrote in his 1996 book Between Hope and History: “Open markets mean products come into America that are made by people who work for wages Americans can’t live on. This can cost some American workers their jobs and keep others from getting a raise.” But he believed, and all the evidence shows he was right, that globalization was inevitable, and that Americans would have to find a way to compete successfully in this new world. That remains the challenge today. More than ever before, success in trade is critical to raising living standards for Americans. As he has done so often before, Clinton makes that seem self-evident.  

Education, perhaps more than any other issue, captures the worries over the precarious U.S. competitive position in the world. It is no exaggeration to say that the United States became the world’s most successful economy because, by the middle of the 20th century, it was educating more of its young people to a higher level than any other country in the world. That investment in human capital helped propel the greatest economic success story of the last century. The waning of that advantage over the past several decades has quite rightly been and continues to be a subject of tremendous hand-wringing. The Council of Foreign Relations new Independent Task Force on U.S. Education Reform and National Security, co-chaired by former Secretary of State Condoleezza Rice and former New York City Schools Chancellor Joel Klein, takes that concern to a new level. (Full disclosure: I was an observer to the Task Force, which meant that I participated in some of the deliberations but was not asked to endorse the final report). It makes a compelling case that the failure of the United States to maintain its leadership in education ultimately threatens not just U.S. prosperity but its national security. It concludes that too many of our K-12 schools are simply failing to give students the basic preparation they need to engage in a modern, technologically sophisticated economy. There are a number of striking illustrations in the report, but perhaps the most telling are three charts that look at the percentage of Americans attaining a college degree, broken down by age group. Among those aged 55 to 64, some 40 percent have a college degree, which is tied for the highest in the world along with Canada. Among those aged 45 to 54, the college completion level is also 40 percent, in 3rd behind Canada and Japan. Among Americans aged 25 to 34, the college completion rate remains just above 40 percent. But that now puts the United States in 10th place, behind such countries as Korea, New Zealand and Australia. The story is not so much one of the United States falling back, but of standing still while others move ahead. The education advantage has clearly been lost, as is demonstrated by the more familiar statistics on K-12 education, which show American students in the middle or lower ranges among developed countries in reading, math and science achievement. What to do? Here the report has already triggered a significant debate largely because of its embrace of the idea of greater school choice, a position that was lauded by the Wall Street Journal. But it also caused a number of spirited and thoughtful dissents from some of the Task Force members. I hope that the choice issue does not detract from the report’s other important recommendations, including the expansion of core curriculum standards to include science, technology, and foreign languages as well as math and reading. Both proponents and opponents of greater school choice have some compelling arguments. The opponents can rightly point out that the best performing school systems in the world are nationally-directed, public systems like Finland, and that the U.S. experiment with charter schools to date has shown mixed results. The proponents can rightly argue that the United States already has a school choice system for some--the wealthy who can afford to live in better public school districts or send their children to private schools. Why should poorer families not have the same choices? Both sides agree that the United States must be a society that rewards talent and effort over pedigree, something that is impossible without quality schooling being available to all. But in some ways the debate over school choice misses the real issue. There is plenty of evidence, and rather solid consensus, that the single best way to improve learning is to recruit and retain high-quality teachers. And the key issues there have little to do with school choice, but instead with teacher training programs, with hiring, pay, advancement, and tenure rules within the schools, and with inculcating a greater respect for teaching as a profession in American society more broadly. The report makes a persuasive case that the best performing countries are the ones focused on teacher quality, but that observation gets somewhat lost in recommendations that emphasize the combination of national standards and school choice as keys to reform. The Task Force offers a powerful diagnosis of the problems in our educational system, and a stark warning of the consequences of failing to address them. But finding greater consensus on how to move forward clearly remains an enormous challenge.

While it’s not a competition that any state would want to win, no state was hit harder by the collapse of U.S. manufacturing employment over the past two decades than North Carolina. In 1990, more than one-quarter of the workforce was in manufacturing, nearly twice the national share and higher than such iconic manufacturing states as Michigan and Ohio. By 2010, the number had dropped to just over 11 percent, a loss of more than 400,000 jobs. Today, the Renewing America initiative released its first Working Paper, "After Manufacturing: Lessons for a New Reality from North Carolina." The author, Roland Stephen, is a senior economist with the Center for Science, Technology and Economic Development at SRI International, and has for many years been a fellow with the Institute for Emerging Issues in North Carolina. He knows the state’s economic history intimately and does not sugar coat the challenges it still faces. Unemployment in the state, at 10.4 percent in January, remains among the highest in the country. Median income, which approached the national average in the mid-1990s, has fallen back. The regions that were most dependent on textiles and furniture production in the western part of the state have fewer jobs than they did two decades ago. Despite those discouraging numbers, however, the state has begun to build the foundations for a prosperous economy with a  much smaller manufacturing workforce. In the two decades from 1990 to 2010, North Carolina added 729,000 jobs despite the collapse in manufacturing employment. In comparison, Ohio created just 168,000 jobs in that period and Michigan actually lost 68,000 jobs. Some regions of the state are success stories--Raleigh-Durham  has seen robust growth in education and business services employment, while the mountainous region of Asheville has attracted tourism and health-related industries. What are the lessons? Every state faces its own challenges, and there is no blueprint. As Stephens writes: “What is required is a toolbox for action that meets the needs of these fragile economies--regions struggling to make the most of their particular mix of assets following the decline of manufacturing employment.” Nonetheless, there are policy choices made by North Carolina that should be relevant to other states that are trying to manage a similar transition. Invest in infrastructure. North Carolina has an extensive road system, for example, built largely with funding from its gas tax, which is among the highest in the nation. Invest in education.  The state has increased K-12 spending faster than the national average, and was among the first to back testing to raise standards. And North Carolina has one of the country’s most impressive state university and community college systems, with per pupil spending the 3rd highest in the country. Pursue open-ended initiatives and show patience in waiting for payoffs. Rather than trying to attract specific industries, states would be wiser to create a supportive environment for innovation through generic investments with multiple uses. Stephen points out that the Research Triangle was never envisioned as a successful biotech cluster; instead, the idea was to pool talent on the theory that good things would then result. Create institutions--regional partnerships, technology centers--that are focused on regional development. Perhaps the most politically controversial recommendation in the paper is that state governments should back winning initiatives rather than spreading investments across the state.  The reality is that some regions are better positioned to prosper in a post-manufacturing economy. The Raleigh-Durham region has become a hub for internationally competitive businesses like information technology, biotechnology, and software. The Asheville region was able to leverage its natural beauty to expand in sectors like tourism and healthcare aimed at retirees.  But the Hickory region has not been able to attract or build new industries and suffers from chronic unemployment and slow growth. The paper offers no silver bullets. But it is a practical, realistic set of lessons for states trying to find a strong footing in an economy where the old manufacturing jobs have disappeared and are unlikely to return.

Is there a skills shortage that is hampering the still modest, but encouraging recovery of U.S. manufacturing? That is increasingly the consensus among many economists, and surveys of manufacturing employers also suggest it is a big problem. When President Obama went to Milwaukee recently to laud the uptick in manufacturing in the state, the biggest complaint he heard was the difficulties those companies face in finding properly trained new workers. What has really persuaded me, though, is hearing about the problem through the eyes of a union leader, Phil Neuenfeldt, president of the Wisconsin AFL-CIO, which whom I shared a stage Tuesday night for the Fireside Forum on Foreign Policy at the University of Wisconsin-Milwaukee. Neuenfeldt, a longtime member of the International Association of Machinists and Aerospace Workers, understands the ins and outs of the labor market for manufacturing and has been national leader in developing workplace training models. He pointed out that the increasing disappearance of manufacturing jobs in the United States, which accelerated tremendously over the past decade, has had two pernicious effects on the remaining manufacturing labor force. One, and the data bear this out, is that manufacturing is a graying occupation. Most of the skilled jobs--welding, precision machining, tool, and die making--are held by older employees. Many fewer young people have been hired in recent years, and those who were became generally the first fired in the downturn. As a consequence, the pipeline for training skilled manufacturing workers has dried up. Companies that used to have large apprentice programs shut them down because there were no jobs for the apprentices after training. Young people, even in heavily manufacturing states like Wisconsin, got the message and, where they were able, trained for other careers. The result, no surprise, is that companies can no longer find the employees they need. We talked about some of the conventional remedies--expanded community college opportunities, which the Obama administration and some states have embraced, revival of apprentice programs, adoption of the German model that favors work-sharing over layoffs in downturns and thus preserves a skilled labor force. But the bigger problem that Neuenfeldt's comments brought home to me is the need to build a greater degree of trust among companies, governments, and unions (not an easy task in Wisconsin, where Governor Scott Walker's decision to strip bargaining rights for public sector unions has prompted an unprecedented recall election). The United States has been in a vicious circle in which companies shed workers and shut down training programs, and the educational system responds by not preparing young people for jobs that no longer exist. And now as companies are again looking to expand, they cannot find the workers they need. Creating a virtuous circle will require a longer term view. A clearer commitment by the big manufacturing companies to expand production in the United States (even as they may also be expanding abroad) would have positive ripple effects. Rising demand for skilled workers will encourage young people to pursue manufacturing careers, in turn encouraging community colleges and other educational institutions to step up training. The labor unions, said Neuenfeldt, are willing and eager to partner in such efforts. The alternative is a worst of both worlds scenario--companies that want to expand here but can't find the employees they need, and Americans who desperately want those jobs but can't acquire the training and skills they need.

I am heading to Wisconsin tomorrow for a series of events on the topic of "Free Trade and Jobs," organized by the Institute of World Affairs at the University of Wisconsin-Milwaukee. I will be doing a radio interview Tuesday morning with WUWM, speaking at a Rotary Club luncheon, meeting with the editorial board of the Milwaukee Journal Sentinel, and then speaking in the evening at the Fireside Forum on Foreign Policy.  The timing is excellent, following President Obama's recent visit to the resurgent Master Lock plant in Milwaukee, and the key Republican primary vote tomorrow in neighboring Michigan, another state that is highly dependent on manufacturing and heavily exposed to international trade competition. The Journal Sentinel printed on Sunday an op-ed piece I wrote setting up the event, which is reprinted below. It is also available on the newspaper's website here: International trade is not very popular in the United States. Slight majorities nationally opposed the recent congressional ratification of free trade agreements with South Korea, Colombia and Panama. In Wisconsin, an Institute of World Affairs poll found that 51% thought free trade had hurt the U.S. economy, with only 34% saying it had helped. In the report of the Council on Foreign Relations new Independent Task Force on U.S. Trade and Investment Policy, we argue that the debate over trade is not going to be won or lost in the abstract. The bipartisan group, which included former members of Congress and the administration, senior business and union leaders, called for a trade policy "that brings to more Americans more of the benefits of global engagement." The skepticism over trade is not terribly surprising. The past decade has been a hard one on many U.S. workers, and it has coincided with a rapid expansion of global trade, especially China's entry into the World Trade Organization. While we all benefit from the cheaper television sets and higher-quality imported electronics that come from an integrated global economy, they are no substitute for a steady job and a reasonable paycheck. Trade has done too little to provide those; since 1990, according to the work of Nobel Prize-winning economist Michael Spence, there has been virtually no job growth in the tradable sectors of the U.S. economy, such as manufacturing, agriculture and many business services. Over the past decade, real incomes have grown only for the most highly educated, such as lawyers, doctors, MBAs and PhDs, while everyone else has lost ground. For an economy like Wisconsin's, which is heavily dependent on exports of industrial and electrical machinery, medical instruments and agricultural products among many others, succeeding in trade matters immensely. Unlike most of the country, Wisconsin actually runs a small trade surplus. The recent uptick in manufacturing employment in the state is an encouraging sign, one celebrated by President Barack Obama in his recent visit to the Master Lock plant in Milwaukee. But it needs to be kept in perspective. While Master Lock has added workers, its 412 employees in the city are just one-third the number employed in 1997, when the company announced it would begin importing locks from China and two years before opening a factory in Mexico. In the report, we argue that the U.S. needs a clearer strategy for succeeding in the global market. Our key recommendations: * A trade negotiating agenda that opens markets for the most competitive U.S. goods and services, and in the biggest and fastest growing emerging markets such as India, Brazil and China. * A "National Investment Initiative" - the counterpart to Obama's National Export Initiative - which would encourage the location of high-wage, high productivity jobs in the U.S. Wisconsin has been a significant beneficiary of expanding foreign direct investment from Canada, Germany, Spain, Australia and elsewhere. * A robust trade enforcement effort, with a more active government role in identifying and acting on trade-distorting practices by U.S. competitors. The president's recent creation of an administration-wide Trade Enforcement Unit is an encouraging sign. * A comprehensive worker adjustment and retraining policy to provide a stronger safety net and return individuals to the workforce as quickly as possible. Such proposals are controversial on both sides. Many Democrats remain skeptical that freer trade can be made to work for a greater number of Americans; many Republicans are suspicious of the more active government role that will be required for the U.S. to compete in a world where other governments are not afraid to take the side of their companies and their workforce. But there is little choice. There is no stop button on the global economy. The living standards of current and future generations will depend on the U.S. becoming a far more successful trading nation.

While it’s only February, I feel safe in making the following prediction: the new issue of the Harvard Business Review contains the most important thinking on the issue of U.S. competitiveness that will be published this year. It should be read in every corporate boardroom, by every member of Congress, by every senior official in the Obama administration, and by every economic adviser to the Republican presidential candidates. The debate over competitiveness is often muddied because the word is used in so many different and often incompatible ways. Economist Paul Krugman famously dismissed the notion entirely as a “dangerous obsession” in a 1994 Foreign Affairs piece, arguing that “the world’s leading nations are not, to any important degree, in economic competition with each other.” Krugman doesn’t appear to have changed his mind recently, but perhaps a careful reading of this issue will cause him to reconsider. Michael Porter, who has led much of the Harvard Business School’s work on this issue, offers the best definition I have seen. He writes: “The United States is a competitive location to the extent that companies operating in the U.S. are able to compete successfully in the global economy while supporting high and rising living standards for the average American.” What this means is that “competitiveness” is not a synonym for “economic growth.” It refers only to the ability of the United States to succeed as a high-wage location for operations in internationally-traded sectors. Competitiveness so defined is not an issue for much of the U.S. economy. Most jobs are still in non-tradable sectors (health care, retail trade, government) that do not face significant import competition. But the share of the U.S. economy exposed to international competition--not just in manufacturing but in service sectors as well--has grown immensely over the past several decades, and the pace will only accelerate. And these sectors really matter. As my colleagues on the recent CFR Independent Task Force on Trade and Investment Policy, Laura D’Andrea Tyson and Matthew Slaughter, point out in the issue, the 27 million U.S. employees of multinational companies are well-paid, with compensation 25 percent higher than average. Yet they write, building on the work of the Task Force, that U.S. employment in these companies has fallen sharply in the United States over the past decade even as it has grown abroad. Porter and his colleague Jan Rivkin penned the key article in the issue, entitled “Choosing the United States.” Based on surveys of some 10,000 Harvard Business School alumni, it concludes that the United States is attracting a far smaller share than it should of high-value-adding activities. The reasons are varied, including corporate misperceptions of the gains that come from outsourcing, but two stand out: U.S. policymakers “are not addressing weakness in the national business environment and are doing little to fight economic distortions that disfavor location in the United States.” And for those skeptical of the importance of manufacturing, like my CFR colleague Jagdish Bhagwati, I would recommend the article by Gary Pisano and Willy Shih that builds on their work showing that economies that do not make things also tend to lose the ability to innovate in manufacturing. While they are quite rightly opposed to targeted industrial policies, they recommend a big increase in government support for R & D in the manufacturing sciences, as well as tax, regulatory, and training policies that encourage investment in manufacturing. Porter and Rivkin raise another important point. While the United States must do far more to attract and retain investment, our standard of living will fall if the primary means for doing so are wage cuts, a weaker dollar, or boosting productivity by firing workers and demanding more of those who remain. This is the “race to the bottom” that globalization skeptics have long feared, and there is some evidence that the otherwise encouraging recent uptick in manufacturing employment is in part the result of falling U.S. wages, coupled with rising wages in China and other offshore locations. Instead, the goal must be to make the United States a compelling investment location despite its relatively high costs compared with emerging markets. Much of the rest of the issue is concerned with how best to do this, in areas such as education and skills training, finance, fiscal policy, entrepreneurship, and the green economy. There is too much here to summarize easily, and some of the ideas are better than others. Read it for yourself. Restoring American competitiveness, as Harvard Business School dean Nitin Nohria writes in the introduction, matters to all of us.

If I had a billion dollars to spend, I can think of no better way to do it than what the Obama administration plans to include in its upcoming budget: a new Civilian Conservation Corps (CCC) that will employ about 20,000 jobless veterans to build trails and shelters, reduce invasive species in our national parks and forests, and otherwise do useful work that would never get done any other way. I admit to a selfish bias here; my pleasure in life has been greatly enhanced by the legacy of the Depression-era CCC. Most of my vacations with my wife and kids have been spent camping and hiking in the National Parks and forests across the United States (and Canada). And almost everywhere we go we have benefited from the legacy of Roosevelt’s CCC. The projects we have enjoyed range from the spectacular--the magnificent hiking trails along the flanks of Mt. Rainier, or the stunning Timberline Lodge on Mt. Hood--to the utilitarian such as the hiker shelters along the 2,100-mile Appalachian Trail (and no I have not hiked the whole thing, only selected bits). Much of the Appalachian Trail itself, the most famous footpath in the country, was built by CCC workers during the Depression, as was the panoramic Blue Ridge Parkway which we and thousands of others drive to access the trail each year. And we have stumbled across the legacy of the CCC in far less famous areas. In the winters, for instance, we have several times gone camping in the beautiful Florida State Parks. In almost every one of these parks, there are trails, bridges, swimming pools, cabins, and other amenities that were built in the 1930s and continue to be used today. I would encourage readers to share their own stories about CCC projects in the comments, because there are doubtless many of them that I know nothing about. So, to be clear about my biases, I would support a new CCC whether or not there was an unemployment crisis among young people in this country. But the Obama proposal goes one better because it calls for hiring in the new CCC up to 20,000 recent veterans. The unemployment rate among young veterans, at 13.1 percent, is scandalously high, and in real terms probably higher still because many have given up looking for work.. These are individuals who risked their lives overseas for their country, and have come back home to an economy that has no place for them. A new CCC program would provide them decent work at decent pay to help to help make life more pleasant for millions of Americans. What’s not to like? And if the Congress wants to find offsets, I'm happy suggest many places in the budget where $1 billion would not be spent nearly as well. I would actually favor a much bigger CCC program, one that included refurbishing inner city parks, building and renovating playgrounds, planting trees in urban neighborhoods and in countless other ways improving the quality of life in this country. But this plan would be  an excellent place to start. I hope my grandchildren will enjoy the results for many years, much as my life has been enriched by the legacy of my grandfather's generation.

Reading the New York Times wrenching investigation into unsafe and inhumane working conditions in the Chinese factories that make Apple’s iPhones and iPads--and Apple’s indifference to the problem--made me recall a forgotten footnote in the recent history of U.S. trade policy. Twice during the George W. Bush administration, in 2004 and 2006, the AFL-CIO filed what is known as a Section 301 petition asking the U.S. government to take action against China over persistent violations of labor rights. The petition charged that China had failed systematically to adhere to such basic international requirements as barring child labor, permitting free association, and enforcing minimum wages, working hours and occupational health and safety standards. Twice, the Bush administration refused even to investigate the allegations. The AFL-CIO petition was thorough, with voluminous documentation of labor rights abuses in China, and a sophisticated analysis of the impacts of those violations on U.S. workers. Section 301(of the U.S. Trade Act of 1974) requires evidence that an allegedly unfair foreign practice “burdens or restricts U.S. commerce” before the government can take action. While it is certainly possible to quibble with the petition’s methodology, it clearly demonstrated that workers’ rights violations in China had played some significant role in losses of employment and wages by U.S. manufacturing workers. The past five years, during which nearly 3 million manufacturing jobs disappeared in the United States,  have only reinforced that conclusion. Recent work by economists David Autor, David Dorn and Gordon Hanson, while it does not look specifically into the effects of lax labor standards, found that Chinese import competition accounted for a sizable percentage of that job loss. Low wages, poor working conditions, and weak safety standards are all ways for companies to save money and gain cost advantages over other potential suppliers. While investments in new technology can narrow the cost difference, U.S. companies too often are forced out of business, or must cut wages and workers to remain competitive -- precisely what the AFL-CIO petition alleged. But the Bush administration refused to pursue an investigation that, at the least, could have resulted in stepped up pressure on the Chinese government to improve working conditions in its factories, and at the most might have led to some sort of temporary trade sanctions against China to force action on the problem. Instead, enforcement has been left in the hands of the private sector, of the U.S. multinationals that source from China. As the Times story notes, some companies like Nike, Intel and Hewlett-Packard, have better records in overseeing their suppliers. But the story, and a similar investigation last year by Wired magazine, underscores the basic problem in leaving enforcement to the private sector. Even for Apple, the most profitable brand in the world and one that basks in public adulation, the costs of enforcement are seen as too high. It would mean policing hundreds of suppliers, and refusing to buy from those that persistently fail to adhere to proper standards for their workforce. That could raise costs for Apple and make it more difficult to keep delivering new generations of products to consumers with the same regularity. As one former Apple executive is quoted in the NYT story: “We’ve known about labor abuses in some factories for four years, and they’re still going on. Why? Because the system works for us. Suppliers would change everything tomorrow if Apple told them they didn’t have another choice.” President Obama, in this week’s State of the Union address, announced the launch of new internal task force to investigate unfair trade practices in China and other countries. The AFL-CIO should dust off and update its petition and present it again to the administration. And this time, it deserves a serious investigation.

The Council on Foreign Relations has published today the first Policy Innovation Memorandum (PIM) coming out of the Renewing America initiative, "Faster, Safer, and Smarter: A Modern Visa System for the United States." We will have several others ready to publish shortly, looking at issues such as Chinese foreign investment in the United States, foreign language education in U.S. schools, and ways to move forward on critically needed infrastructure programs. The memo, co-written by myself and Liam Schwartz, one of the world’s leading consular attorneys, calls for reforms to U.S. visa procedures to ease travel to the United States, but in a way that does not increase security risks. The 9/11 terrorist attacks exposed serious weaknesses in the U.S. system for granting foreign visas, an issue I wrote about extensively in my book, The Closing of the American Border. In the aftermath of 9/11, the U.S. government implemented a range of measures to try to ensure that visas would not again be granted to terrorists. But many of those measures also resulted in long delays or arbitrary refusals for legitimate visa applicants, which kept consular lawyers like Liam extremely busy trying to help clients navigate the cumbersome procedures. The visa statistics quite clearly show the consequences. Nonimmigrant visa approvals plummeted from a record 7.5 million in 2001 to fewer than 5 million in 2003, before beginning a slow recovery (the fiscal year ends September 30, so the effect of the attacks did not show until later years). The costs have been high. The U.S. tourist industry says that 1.3 million jobs could be created, and $850 million added to the economy, if the U.S. share of foreign tourism could just be restored to its pre-9/11 levels. There is also considerable evidence that visa hassles have discouraged foreign investment in the United States, but making it difficult for business travelers to come here; the U.S. share of total inward investment has fallen by half over the decade. The State Department and the Department of Homeland Security have worked hard in a variety of ways to address the delays, and the numbers demonstrate real progress. The government initially made a priority of timely visas for students, and has gradually been working on other aspects of the problem. Over the past several months, the administration has significantly reduced the long wait times for consular interviews in big countries like China and Brazil. President Obama’s announcement last week that the volume of visa processing is rising even as wait times are falling was possible only because of tremendous effort by State Department officials. But maintaining that progress, we argue, is going to require more sophisticated use of technology. The delays associated with security background checks, in particular, have remained a chronic problem, especially from India. Screening technology has been developed by the government that can speed up background checks without compromising security, but it remains stuck in pilot phase. There are other technology improvements that will deter individuals from overstaying visas, and make it easier as well to assess the risk that an individual visa applicant will overstay. There is simply no need for the current congressional requirement that all new visa applicants must have face-to-face interviews with consular officers. The paper, I like to think, reflects one of the great strengths of the Council on Foreign Relations. It is the product of several off-the-record meetings and numerous conversations among individuals, inside and outside government, with real expertise and experience on visa issues. I hope it will be a useful addition to the ongoing effort to create a visa system that is, as the title of the PIM suggests, “faster, safer and smarter.”