chapter  4
65 Pages

Liberalization of cross- border labor mobility

Introduction As discussed in previous chapters, over the course of the past few decades phenomenal progress has been made in respect of the liberalization of global merchandise trade. Available estimates suggest that over 70 percent of merchandise production is now contested internationally, and such liberalization has brought forth extraordinary gains for the global economy (WT0, 2011; Hoekman et al., 2002). But the liberalization of the services trade, on the other hand, lagged far behind. Currently about 20 to 25 percent of services are traded internationally despite this sector accounting for more than 70 percent of global gross domestic products-more than double the contribution that may be attributed to the manufacturing sector (World Bank, 2009a, 2009b).1 In 2013, global exports of services reached $4.7 trillion, representing 20 per cent of total exports of goods and services (UNCTAD, 2014, 6), but the actual share of trade in services, when considered in terms of value-added in the global value chain (GVC), may approach 45 to 50 percent of world exports (Francois and Hoekman, 2010; WTO, 2009; UNCTAD, 2013). Available research suggests that far greater benefits would accrue to the world economy from the further liberalization of trade in services than in merchandise trade, mainly because benefits from the further liberalization of merchandise would be nominal, as the sector has already been largely liberalized (Mattoo et al., 2008; Anderson and Winters, 2008). During the period of the GATT (1947-1994), both tariff and non-tariff barriers in merchandise trade fell sharply, but not much progress was made in respect of the services trade, as the sector remained largely outside the GATT discipline As a result, in the post-GATT period, international trade in services not only remains smaller in size, but also faces greater trade protections and obstacles than trade in merchandise (Moses and Latnes, 2004; WTO, 2004; Adlung and Roy, 2005; Gootiz and Mattoo, 2009). Such challenges are still greater for what is known as the Temporary Movement of Natural Persons across borders as service suppliers, as envisaged by Mode-4 of the General Agreement on Trade in Services (GATS) of the Uruguay Round Agreement. Although the services covered by Mode-4 account for a tiny

share in global trade, it remains one of the most debated and controversial issues in the services trade, mainly due to the nature of complexities involved in such trades (Kemekliene, 2007; Dowlah, 2012; Francois and Hoekman, 2010). Understandably, cross-border labor mobility-no matter whether permanent or temporary-is a highly contentious and politically charged subject, especially in the developed countries, as most of the people who seek to migrate originate from the less developed countries (Czaika and Hass, 2013; Dowlah, 2014). Currently, approximately 3.2 percent of the global population live in a country where they were not born.2 Available demographic projections suggest that the world population will increase to 8.1 billion by 2025, and to 9.6 billion by 2050, from the current level of 7.2 billion, and almost all of the additional people will enlarge the population of developing countries, while populations of developed countries will decline considerably (UNDESA, 2013a; UNFPA, 2014). Such a dramatic transformation in global demographics will hugely increase both demand and supply of crossborder labor mobility in the future, but no credible multilateral institution exists now to serve as a watchdog for managing the evolving challenge. Presumably, the only multilateral platform available now is the GATS Mode-4, but it can serve the purpose only partially and only for the temporary movement of labor across borders. Moreover, the effectiveness of GATS Mode-4 squarely depends on the progress to be made in multilateral negotiations under the WTO. Based on a review of relevant theoretical and empirical literature, this chapter argues that: (1) a basic convergence of economic interests appears to be emerging between the labor-sending and -receiving countries for the liberalization of the temporary movement of natural persons across national borders as service suppliers; (2) despite growing anti-immigration sentiments in developed countries, credible progress is currently being made both bilaterally and multilaterally, especially under the auspices of some regional trading blocs, for promoting cross-border temporary labor-mobility; and (3) Mode-4 of GATS may actually emerge as a great window of opportunity for the liberalization of temporary cross-border labor mobility across the world by mitigating against controversial effects of permanent or other forms of labor migration. This chapter is organized as follows. The second section provides a brief description of different modes of services trade as acknowledged by the GATS. The third section examines empirical trends in global labor migration and remittance flows around the world in recent decades. The fourth section reviews the existing literature on the relationship among remittance inflows, economic development, and the brain-drain from the less developed countries. The fifth section explores the rationale for temporary labor mobility across national borders from theoretical as well as empirical standpoints. The sixth section explores the potential of GATS Mode-4 as a unique platform for promoting temporary cross-border labor mobility, as opposed to permanent or other forms of migration, and the current state of the WTO negotiations for the liberalization of Mode-4 services. The seventh section examines current trends of temporary labor mobility from both bilateral and multilateral perspectives. The eighth section concludes the chapter.