13 LABOR MOBILITY Sherry Stephenson and Gary Hufbauer
Of all the liberalization dimensions of international trade, the opening of labor markets is probably the most sensitive. As a result, agreements to open (generally, only partially) labor markets are not as plentiful as other liberalization agreements, and they are typically more restrictive. They are also less well surveyed. This chapter presents an overview of provisions for opening labor markets that are found in preferential trade agreements (PTAs). Movement of labor is one of the four fundamental economic freedoms, along with free movement of goods, services, and capital. Of the four, it has met with the least receptivity on the part of countries in the international economy, whether developed or developing. Even the most spirited free traders—Chile; Singapore; the United Kingdom; and Hong Kong SAR, China, for example— have been reticent about opening their borders more to admit labor from abroad. These economies and many others shy away from significant opening for natural persons from other countries, even in the face of labor shortages at home. The contrast between the desire to promote capital mobility and investment flows and the reluctance to envisage corresponding labor mobility is stark. More than 2,800 bilateral investment treaties have been signed to date, but nothing equivalent exists in the area of labor (Vis-Dunbar and Nikiema 2009). The number of trade agreements covering services is growing rapidly, yet willingness to incorporate meaningful provisions on labor mobility into the services package is limited, and most agreements contain very modest market access opportunities for foreign workers. Several recent free trade agreements (FTAs) contain no provisions at all in this area. Leaving aside formal bilateral and regional trade agreements, it is extremely difficult to determine the number of bilateral agreements worldwide that incorporate arrangements for temporary worker programs. There appears, however, to be not more than a handful. Information is scarce, and no single
institution has been designated as a repository of agreements and promoter of labor mobility. And whereas most governments sponsor investment promotion agencies to encourage inward flows of capital and foreign direct investment, there is no similar institution for workers. In nearly all countries, the agency that deals with the influx of foreign labor is the immigration authority, whose concern is to regulate and restrict, not to promote. To complicate matters further, immigration authorities are primarily focused on setting rules for permanent rather than temporary migration. Temporary migration, however, is the object of international trade policy and is the focus of this discussion. The problems with the present situation are twofold. The first has to do with its unbalanced nature. Developed economies have a comparative advantage in the export of capital and thus benefit tremendously from the openness of capital markets and the welcoming character of most investment regimes. That kind of receptiveness does not exist for labor movements. Developing countries have a comparative advantage in the export of their people, but they are constrained from realizing the gains from trade that they might otherwise enjoy. The second problem is that the entire world suffers from a loss of potential income that could be realized through greater mobility. Depending on what assumptions are made by researchers, the potential gains could be quite substantial and could easily surpass the combined gains anticipated from freer trade in agriculture and manufactured goods—as currently proposed in the Doha Development Round sponsored by the World Trade Organization (WTO). Nevertheless, proposals for greater market access for foreign workers are limited, and this has been a central obstacle to progress in the services component of Doha Round negotiations. It has been argued by many, including, prominently, Lant Pritchett and L. Alan Winters, that greater mobility of 275