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January 2003, Volume 10, Number 1

Migration, Trade and Development

The UN Population Division defines a migrant as someone outside her country of birth or citizenship for 12 months or more, and estimated that the number of migrants rose 46 percent in the 1990s, from 120 million to 175 million. These migrants include refugees and asylum seekers, foreign students and other long-term visitors, unauthorized foreigners, and naturalized foreign-born citizens of Australia, Canada and the US.

Many migration researchers contrast the steady global march toward freer trade with continued restrictions on migration, and some argue that more migration would increase the world's GDP, arguing that border controls are analogous to trade barriers. Economists Hamilton and Whalley (1984) divided the world into seven regions, assumed full employment in each region, and asked what would happen if workers migrated from lower to higher wage countries. Their projected result: world GDP would more than double, a result that prompted economist Dani Rodrik to argue that "even a marginal liberalization of international labor flows would create gains for the world economy" far larger than prospective gains from trade liberalization.

Some migration researchers argue that immigration restrictions thus reduce the size and growth of a country's GDP, protecting certain domestic interests. Advocates of fewer migration restrictions argue that global firms need to move personnel easily over borders, and that trade in services demands fewer restrictions on the movement of "natural persons."

Critics of liberalizing migration make two points. First, the volume of migration that would affect GDP significantly would have to be huge, and thus the required economic adjustments would be large, such as sharp reductions in wages in receiving countries to maintain full employment; the models tend to underestimate the downward pressure on wages that could result from a huge influx of migrants.

Second, critics emphasize that people are unlike goods, which do not care whether they are consumed in one country or another. People have rights, and once migrants enter a host society, governments must decide whether they are "them" or "us," or at what point the status of migrants changes. This has proven to be very difficult.

ILO. The International Labour Organization is the oldest UN organization, and operates with labor, business, and government representatives setting and enforcing minimum labor standards, including standards for migrant workers. In June 2004, the focus of the annual International Labour Conference will be on migrants, and the goal will be to explore what the ILO can do to promote orderly migration and protect migrants with ILO standards.

The ILO notes that migration for employment is a response to demographic and economic inequalities, and that the labor force is expanding in developing countries, where 2.6 billion of the world's three billion workers are, more rapidly than the number of good jobs. As a result, foreign-born or migrant workers, are already about 10 percent of the 400 million workers in rich countries.

The ILO emphasizes that the problems with migrants seem to be concentrated at the ends of the skills spectrum- industrial countries are eager to import foreign professionals, and grapple with an influx of unskilled foreign workers. The movement of professionals has been considered win-win in some circles, as migrants fill vacant IT jobs and send home remittances, eventually building bridges between Silicon Valley and budding high-tech centers in their countries of origin.

Unskilled foreign workers are more problematic, in part because they tend to be employed by industries that may have an unsavory labor history, such as agriculture. It is often asserted that migrants who find jobs in host nations are by definition "needed," but this may overlook the fact that, if wage and other labor laws were enforced strictly, the jobs would disappear, replaced by machines or imports.

Cooperative Management. The EU is attempting to manage migration by signing readmission agreements with migrant countries of origin, and has discussed granting additional visas to countries that cooperate in accepting the return of their nationals.

The EU received 680,000 non-EU migrants in 2000, giving it 13 million non-EU migrants in a population of 380 million.

Migration and Development. Economist Jagdish Bhagwati, in Foreign Affairs, argues that "migration lies close to the center of global problems," citing EU proposals to link cooperation on migration management with foreign aid, Australia's policy of detaining foreigners who arrive by boat to seek asylum, and renewed discussion of the brain drain as IT professionals move from India and China to the US and Europe. Bhagwati asserts that "borders are beyond control and little can be done to really cut down on immigration…[so] governments must reorient their policies from attempting to curtail migration to coping and working with it to seek benefits for all."

Bhagwati says there are three key migration issues: the brain drain, unskilled migrants and involuntary migration. The brain drain from developing countries is considered an example of "countries competing for markets by creating and attracting technically skilled talent." The US leads in the competition for developing country talent because it educates so many foreign students who want to remain in the US. Bhagwati approves foreign study, and urges countries such as India to let their best and brightest emigrate and become dual nationals, so that they have rights to vote in both countries, as well as an obligation to pay taxes to both.

Foreign professionals are likely to earn higher than average wages and to integrate abroad easily. Bhagwati also wants industrial countries to accept unskilled immigrants, arguing that a combination of NGOs protecting migrant rights and employers who want to hire unskilled foreign workers makes it impossible to prevent their entry, stay, or employment. Bhagwati argues that unskilled immigration cannot be stopped, so such workers should be dispersed throughout the host country and their children provided with education. World Migration Organization should be established, he says, to compile and compare country migration policies to encourage liberalization.

The major problem with Bhagwati's argument is that it does not consider the symmetries that lie at the heart of economics. Migrants can move from poorer to richer countries, or the labor-intensive products they produce can move between countries, that is, trade can be a substitute for migration. In a world in which rich countries provide about $55 billion a year in foreign aid, and spend $255 billion a year supporting farmers, it should come as no surprise that millions of unskilled migrants are employed on rich-country farms.

There is an alternative to the Bhagwati proposals. If rich countries were to reduce the demand for migrants inside their borders, by, for example, drastically reducing barriers to trade (particularly agricultural trade) and enforcing labor and immigration laws, and perhaps increasing foreign economic development aid, Bhagwati's double taxation and rolling legalization proposals would be unnecessary.

Jagdish Bhagwati, "Borders Beyond Control," Foreign Affairs, January-February 2003. Hamilton, Bob and John Whalley. 1984. Efficiency and Distributional Implications of Global Restrictions on Labour Mobility. Journal of Developmental Economics Vol 14, 61-75.