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International Trade Negotiations and the Trans-Border Movement of People: A Review of the Literature


In recent decades the economic integration of countries has intensified considerably. Large increases in international trade, foreign investment, information exchange and communication, diffusion of technologies, and a growing cross-border movement of people are the main forces of this globalisation. Of course the world has experienced earlier waves of globalisation, but with respect to people movement there is a big difference. During the previous epoch of globalisation of the late 19th century (e.g., Williamson, 1996), visas and work permits were not required for most movements of people between countries and for the employment of foreigners (Ng and Whalley, 2005). In contrast, the present epoch coincides with persistent control of international movements. While mobility of the highly skilled and within economically integrated areas is facilitated, countries try to keep out what are considered to be undesirable immigrants, given perceived negative economic and social impacts and, more recently, given growing security concerns.

Of course it can be argued that, prior to 1913, the relatively high costs of travel and communication acted as natural barriers to the movement of people. As these barriers have diminished over time, increased regulation has attempted to strengthen sovereignty and reduce the perceived costs of a large influx of foreigners on host populations. However, barriers to international migration tend to be much higher than barriers to trade. Since the 1960s, the increase in the worldwide ratio of immigrants to population has been relatively modest (notwithstanding a large increase in the number of immigrants in some countries), while the ratio of imports to GDP has doubled (Hatton, 2007). This report is concerned with the growing tension between the benefits of growing economic integration of markets for goods, services and capital and the commensurate need for greater cross-border movements of people.

Traditionally a distinction is made between migration, defined as a permanent or long-term change of residence (12 months or more), and temporary movement of people. This distinction is becoming increasingly blurred as migrants may continue to travel internationally and maintain strong links with their home country (e.g., McCann and Poot, 2008). They may also be employed under temporary work policies extending over more than twelve months, or have an intention to migrate again to another destination, or back home. Conversely, short-term visitors may become migrants after some time in the host country for business, education, or a working holiday. In New Zealand, most of the principal applicants approved for residence had work, study or visitor permits in the past.[1] Hugo (1999) refers to the greater complexity and fluidity of types of international movement as a new paradigm of migration. In this survey of the literature, we consider this paradigm in the context of the links between migration and international trade in goods and services.

Migration and trade policies are generally not well integrated at present: they tend to be designed and negotiated by government agencies with differing areas of focus and concern. However, neglecting to coordinate these policies can create problems (Keely, 2003). For example, granting concessions to foreigners to provide services domestically may be a useful negotiating position in trade talks, but it may not link well with the assessment of labour market shortages that may guide immigration policy. Unlike the case of international trade, where the World Trade Organisation (WTO) offers a multilateral forum for negotiations, no comparable institution exists for negotiations on the permanent and long-term migration of people.

Pasquetti (2006) argues that such an institution is now needed in economically integrated areas such as the European Union, where labour mobility among member states is unrestricted. In such a situation, it is clearly important that governments impose the same restrictions on migration from outside. This is also relevant in the case of Australasia where the Australian government believed that lesser immigration requirements in New Zealand led to a considerable flow of 'backdoor' migration to Australia of immigrants to New Zealand who, after obtaining New Zealand citizenship, benefited from unrestricted trans-Tasman migration to Australia. This was one trigger for removing in 2001 eligibility for some types of social security in Australia to new 'special visa' holders from New Zealand. Poot and Sanderson (2007) found that this policy change did reduce 'backdoor migration' to some extent.

Pasquetti (2006) argues that multilateral international regulation is also necessary at a global scale, i.e. a case can be made for a 'World Migration Organisation' (WMO) alongside WTO. While there are already two International Labour Organisation (ILO) Conventions on migrant labour (dating back to 1949 and 1975) and a 1990 United Nations (UN) Convention on the rights of migrant workers and their families, these conventions are generally seen as benefitting sending countries rather than host countries and have consequently only been ratified by a limited number of primarily sending countries. In general, countries are free to set immigration policy as '...an accepted exercise of national sovereignty' (Freeman, 2006a). Therefore almost all countries impose barriers that significantly limit the opportunities for foreigners to reside permanently or long term within their borders.

Migration policy intersects with trade policy at present only in terms of the temporary movement of persons to provide services abroad, such as covered by the so-called 'mode 4' of the General Agreement of Trade in Services (GATS) administered by the WTO. However, mode 4 has to date not yet facilitated a significant rise in cross-border labour movements (World Bank, 2006). The extent to which entry under agreements along the lines of mode 4 can substitute for, or complement, immigration policy in the future will be explored later in this report. We will argue that the scope for mode 4 to play a major role in immigration policy is limited.

The interaction between trade agreements and the movement of people appears likely to become increasingly important over time. This is in part because barriers to the settlement of people across international borders remain high, while barriers to international trade have been significantly reduced over time. Closer economic integration may coincide with the introduction of relatively free labour movement (such as in the European Union) or an open border for labour may precede economic integration (as in Australasia). In addition, the temporary movement of professionals working for trans-national corporations is already permitted in most countries. The increasing demographic pressure of high population growth in developing countries, combined with relatively low population growth and shrinking domestic workforces in rich countries, is likely to lead to greater incentives for people to migrate in coming decades, as well as pressure on governments by employers to accommodate such migration. The rapid growth in the number of opportunity-seeking young people in developing countries, along with large income gaps between countries and increasing demand for services in sectors such as aged care, domestic services, cleaning and tourism, make migration an increasingly significant labour market issue (World Bank, 2006). In addition, large diaspora created by migration surges since the 1980s, with some 200 million people now living outside their county of birth, have helped to reduce the costs and risks of migration of those considering a move in the future (World Bank, 2006).

The movement of people that is likely to intersect with trade agreements 'will benefit from negotiators achieving a better understanding of the different policy contexts or perspectives, particularly those of trade, immigration, and labour market development' (Henry, 2003). Figure 1 shows a representation of how these areas may interact. Henry argues that the overlapping nature of these policies means that trade officials need to consider immigration and labour market perspectives, while immigration and labour policy officials need to pay attention to trade policy issues. There are many areas of potential policy friction, and officials from the various areas may, at times, need to remember that they 'are partners, not adversaries' (Henry, 2003). Given the increasingly important interactions between these policy areas, officials may need to adjust 'to a new mindset' (Lambinon and Oriani-Ambrosini, 2005). Concerns that some trade agreements seem 'to confuse... migration with international trade' (Francois et al., 2005) may become less relevant in the future, with bilateral and regional trade agreements perhaps addressing these kind of broader issues as a matter of course. Crump (2007) suggests that dynamic interactions between negotiations with rich potential linkages is an 'underdeveloped area of study within the field of negotiation': improved understanding of negotiation linkage dynamics may help negotiators to better manage the opportunities and challenges arising from multiple complex and interacting international agreements.

Figure 1. Intersecting policy contexts

Figure 1: Intersecting policy contexts

Source: Adapted from Henry (2003)

While there exists an extensive literature on trade negotiations and, similarly, a large literature on immigration policy, research that explicitly links the two is relatively sparse. However, this literature does appear to be expanding and evolving as the topic grows in importance. For example, there is an emerging literature on the movement of people for trade in services under the WTO framework that will be considered in this report (following reviews such as Mattoo and Carzaniga, 2003). However, this area remains 'under explored' (Mattoo, 2003), with Hatton (2007) questioning whether there is even sufficient basis for WTO-style negotiations on migration. Bhatnagar (2004), Bhatnagar and Manning (2005) and Banda and Whalley (2005) discuss the movement of 'natural persons' in their analysis of free trade areas (FTAs) involving ASEAN countries.[2] Nielson (2003) offers a useful examination of labour mobility in 20 regional trade agreements. There is also a developing literature in the area of modelling the impact of trade liberalisation and international migration (including Walmsley and Winters, 2005; World Bank, 2006; and in a trans-Tasman context: Nana and Poot, 1996).

In this review, we examine literature on the implications of trade for the temporary and permanent movement of labour, and vice versa, with a focus on issues of particular relevance to New Zealand where possible. In Section 2, we begin by assessing the extent to which migration is explicitly considered in current international economic agreements. The next section focuses on the impact of trade on migration. Then Section 4 examines how migration can impact on trade and foreign direct investment. In Section 5 we briefly review some of the key benefits and costs of migration (a topic that is addressed extensively elsewhere, for example: Smith and Edmonston, 1997; Borjas, 1999a, 1999b; Poot and Cochrane, 2005; Productivity Commission, 2006). The penultimate section considers the relevance and implications of the reviewed literature for New Zealand, with the concluding section drawing together some general findings.

[1] The Department of Labour 2005/06 report on migration trends notes that 87 percent of principal applicants approved for residence that year had previously held a temporary visitor, student, or work permit. Moreover, approximately 30 percent of work permit holders and 20 percent of international students gain permanent residence within five years of being issued their first permit (Department of Labour 2006, p.1).

[2] In jurisprudence, a natural person is a human being perceptible through the senses and subject to physical laws, as opposed to an artificial person, i.e. an organisation that the law treats for some purposes as if it were a person.