The State Senate Budget vs. International Competitiveness

If there’s one thing that you should know by this point about the State of Trade blog, it’s that we’re equal opportunity defenders of Washington’s international competitiveness. So, while we’re more than willing to share our thoughts on how the Governor’s budget might negatively impact our state’s success in the global marketplace, it’s not a partisan thing. Which means that, if the State Senate – which is run by a different party than the Governor – releases a budget that might negatively impact our international competitiveness, State of Trade is there to call it out.

For this edition, we’re going to focus specifically on one aspect of our state’s international competitiveness that the Senate budget proposes to raise taxes on: foreign students.

As this Seattle Times article effectively summarizes, Senate leaders are proposing a 20 percent surcharge on international college students. Our state’s colleges and universities are highly attractive to foreign students, and we’ve benefited greatly from that interest…to the tune of more than $463 million a year in economic impact in 2011. Not to mention that those foreign students paying out-of-state tuition are helping to fund slots for our own state’s residents.

The problem, of course, goes back to the same issue that we mentioned in our last post: elasticity of demand. Let’s be honest with ourselves. Our colleges and universities aren’t so attractive that foreign students – who come from a wide range of incomes – will pay anything we charge them. At a certain point, another state’s colleges will win out on the cost-benefit analysis of education quality vs. cost. And then we will lose those foreign students and all of the benefits that come with them.

And it’s not just the economic benefits that we’re risking. As we pointed out in the International Competitiveness Strategy, the long-term impact of foreign students in our state is more subtle but just as important: these students either stay here – contributing to our diverse workforce* – or they leave to become successful foreign business and government leaders (in either their home countries or elsewhere)…ones with special ties to, and knowledge of, our state. Because international trade is all about relationships, those foreign leaders with special ties to Washington are significantly more likely to invest here, trade with us and visit here for business and pleasure (increasing our international tourism exports). Washington State University just did an article on this very topic.

All of this to say that we should think very, very carefully before we start giving the impression that our state isn’t welcoming to foreign students, especially when our schools rely on them to help make up the difference for the severe cuts in state support they’ve sustained over the last five years. The economic, cultural and trade benefits of international students to our state hang in the balance.

 

 

*Currently, many of these students are forced to leave because of U.S. immigration policy, but positive developments in Congress make it more likely that we’ll soon see a “stapling” process in our immigration system: stapling a green card to a foreign student with a STEM degree, so that our economy benefits from the investment we’ve made in giving that student skills for the industries that our state benefits from.

 

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