SEZ (Special Economic Zone)

Executive Summary

1. Create SEZs (Special Economic Zones) along the border of US and Mexico and get American corporations to move their manufacturing operations to US from countries like China & Mexico.
2. Create Guest Worker program to allow undocumented immigrants (already in US) to move to Mexico and work in SEZs located right on border of US & Mexico.
3. Use Americans for skilled jobs and use Guest Workers for unskilled labors to work in such factories.
4. These families of illegal immigrants to live in Mexico along the border, reducing pressure on our public schools and other infrastructure
5. American corporations to get tax benefits to incentivize them.

Detailed Proposal

One of the major problems faced by American workers is the lack of manufacturing jobs. Corporations have moved much of manufacturing to lower labor costs countries such as China & Mexico.

The reasons behind this movement of manufacturing for Apple and other corporations to China are two-fold. Primary reason is, of course, the substantially lower cost of labor in China. Secondary reason is the lack of middle-level technical resources in US. Manufacturing requires supervisors and technicians with adequate level of skills. Not necessarily a bachelor degree, but, specific technical skills.

However, I believe that corporations are likely to reconsider their position if we provide a solution that overcomes these inherent disadvantages of American economy.

I propose creation of Special Economic Zones (SEZs) that provide useful incentives to corporations. Under this plan, US government will set up SEZs in selected locations in US. These facilities should be right on the border of US and Mexico and can be close to cities like El Paso, TX & San Jose, CA, for example.

In these specified areas:

  • The corporations will be allowed to set up manufacturing facilities and get tax benefits.
    • Employers will not deduct & pay payroll taxes for immigrants.
    • The corporation will pay no Federal Income Tax for first 10 years, for profits attributable to such manufacturing facilities. Exempt Profit is calculated by the formula Net Sale Value of Goods Manufactured in SEZs / Total Sales * Total Pre-tax Profit of corporation.
    • After 10 years, they will pay 50% of Federal Income Tax, using the same formula for another 10 years.
    • No unions shall be allowed.
  • The corporations will be allowed to employ immigrant workers on a Guest Worker Program (GWP).
    • The GWP will allow US corporations to hire immigrant workers without complying with the Minimum Wages rules.
    • The corporations will not be allowed to hire more than 60% of the workers under GWP. The rest of the labor (i.e. minimum of 40%) should be American citizens.
    • The corporation will have to prove to the government that the total number of workers being counted for such purposes are those who are directly associated with that manufacturing facility.
    • The illegal immigrants that are residing in US now and do not have any children born in US may be given the first priority for such GWP.
    • The GWP will only provide visas for the worker himself or herself, without any dependant visas for spouses/children. This will ensure against undue burden to local governments for education etc. The dependents can live in Mexico just across the border that will allow such guest workers to be able to return to their family homes on a daily basis, while working in US.
    • Each GWP visa shall be valid for 3 years, and will allow the user to work for the hiring corporation only. Visas will be renewable indefinitely.
  • Benefits for Training Institutes that provide technical skills to American workers:
    • the US government will subsidize 50% of the cost of tuition for those institutes, which have been newly set up by any recognized universities, for the purposes of providing post-school, 2 year technical diploma courses that train young Americans for working in manufacturing industries.

Benefits

  • This plan will potentially create many American jobs in manufacturing sector. This will likely boost the middle-class, and create multiplier effect on overall employment generation.
  • As most of these units are likely to be states along the Mexican border, it will improve economic situation in laggard states such as New Mexico, Arizona, etc.
  • Corporations will benefit from lower income taxes that may lead to further investment.
  • Reduce the trade deficit and help the US Dollar.
  • Reduce the dependence on China.
  • Reduce illegal immigrants in the country, without uprooting families.

Madhup Rathi

Glen Allen, VA, 23060