The Economic Implications of Liberalising Mode 4 Trade

1. The Economic Implications of Liberalising Mode 4 Trade L Alan Winters University of Sussex WTO-WB Symposium

2. Approaches to TMNP • The polar forms: • International trade models • International migration models • Intermediate approaches: • sectoral studies • business plan model WTO-WB Symposium

3. scale specialisation technology competition high barriers threat to competition pervasiveness of services size of services Trade Models WTO-WB Symposium

4. Trade and Factor Rewards • factor price equalisation • trade and migration are substitutes • BUT wage differences could persist: • productivity • scale • taxes • more factors than goods; complete specialisation; factor intensity reversals WTO-WB Symposium

5. Migration Models • TMNP is NOT permanent migration • but labour forces change similarly • especially in ‘revolving door’ TMNP WTO-WB Symposium

6. Wages before Mobility WB MPLA MPLB WA OB OA L0 WTO-WB Symposium

7. Wages after Mobility WB MPLA a W b MPLB c WA OB OA L0 L1 WTO-WB Symposium

8. Winters WN WS 1/4 LN M0 M1 WTO-WB Symposium

9. Quantifying the Barriers • wage in S • additional costs of supply: • transport, accomodation, visas, registration • ‘QRs’ • excessive regulation • immigration controls • price comparisons - difficult even under easier conditions WTO-WB Symposium

10. Business Plan Model WN WS+C WS LN M0 M1 WTO-WB Symposium

11. Business Plan Model WN WS+C WS LN M0 M1 WTO-WB Symposium

12. Intersectoral Mobility • wages across sectors are either • (a) rigidly related • because of perfect mobility • (b) quite independent • because refer to quite separate factors • for long run (a) is pretty good • search is for intermediate position WTO-WB Symposium

13. Walmsley and Winters • standard CGE model - GTAP • perfect competition, no externalities • modify for TMNP WTO-WB Symposium

14. Temporary and Permanent Workers Home Country LFm PLm TM TW PLs LFs Host Country Allocation Module WTO-WB Symposium

15. Allocation of Temporaries Home region 1 Pool Supply of Temporary Migrants =Demand for Temporary Workers Host region 1 Host region N Home region N Sector 1 Sector J WTO-WB Symposium

16. The Experiment • quotas increased by 3% of host work force • skilled and unskilled separately • supplied by labour exporters pro rata to work forces • Table 1 gives flows • USA: +2.7m unskilled; +2.4m skilled • China: -2.4m unskilled; -.5m skilled WTO-WB Symposium

17. Host vs Home ConceptsLabour Flow from A to B Income Host Home Source Concept Concept PL B B B K B B B T T TL retained B A B TL remitted A A B PL A A A K A A A WTO-WB Symposium

18. Table 3: Economic Welfare II III IV V VI Welfare of Welfare of Welfare of Welfare Welfare temporary temporary by home by host permanent b residents Workers Migrants region region III + IV II + IV Dev’ed 175960 68577 6982 75559 182942 Co.s Dev’ing -5002 98984 -20685 78301 -25688 Co.s WTO-WB Symposium

19. Table 4: Percentage Changes II III IV V VI % change % change % Change % Change % Change in Real in Real in Rental in Real in Terms c Wage of Wage of Price of GDP of Trade Skilled Unskilled Capital Labour Labour Dev’ed -1.02 -0.61 0.78 1.05 -0.24 Co.s Dev’ing 5.13 0.12 -0.52 -0.91 0.53 Co.s WTO-WB Symposium

20. Table 5: Skilled vs Unskilled Liberalisation II III IV V VI VII Welfare of Welfare of Welfare of Welfare of Welfare of Welfare of temporary temporary home home permanent permanent workers workers migrants migrants region region (unskilled) (skilled) (unskilled) (skilled) (unskilled) (skilled) II + IV III + V Dev’ed 6,860 121 50,587 17,989 57,447 18,111 Co.s Dev’ing 13,097 -33,781 37,676 61,309 50,773 27,528 Co.s WTO-WB Symposium