This discussion is becoming too hostile for Hacker News. I'll make one more attempt to explain my point of view, then I'm out:
Loosening restrictions on select people is not loosening restrictions on everyone.
Vatican City, with their tightly controlled migration policy, is not the country with the most freedom of movement simply because they allow freedom of movement to carefully chosen people.
In the Vatican, for example, a given person either has a 100% chance of migration or a 0% chance. Israel has similar numbers. In the Schengen area, it's either a 100% chance or a very small chance.
Update:
Perhaps this will be clearer. Every free country grants total freedom of movement to some group of people. In Israel, this is Jewish people. In the United States, US citizens. In the Schengen area, citizens of the Schengen area.
What does that have to do with nationalism? Nationalism is a distinction between the treatment of in-group people and out-group people.
In the Schengen area, people from the Schengen area are the in-group.