|
European
Economic Perspectives 24
Trade
and Migration
Does
trade liberalization discourage migration from poorer to richer
countries? In the longer term, yes, but economic analysis and historical
evidence suggest a more nuanced view.
International
migration is the absentee in the current wave of globalization. Helped
by falling communication and transportation costs and by the reduction
in policy barriers to commodity and capital flows, trade flows and
foreign direct investment have increased in the last 20 years at a
faster rate than world production. Migration flows, on the other hand,
have shown little change over the same period, excluding the temporary
surge that followed the collapse of communism in Eastern Europe. This
contrasts sharply with previous integration episodes: in the 19th and
early 20th centuries, and in the 1960s, international labour mobility
played a central role in fostering economic integration.
The
changing stance towards migration policies goes a long way to explaining
these trends. At the start of the last century, the attitude toward
immigration was quite liberal. Similarly, in the 1960s, governments in
receiving countries often took an active role in encouraging migration.
Nowadays, the policy imperative has become to limit or even to stop any
further immigration. In part, this new attitude reflects the fears that
immigration may aggravate unemployment and worsen the domestic income
distribution by widening the wage gap between the skilled and unskilled.
But
there is little evidence that these concerns are well founded.
Nevertheless, in receiving countries, the common view is that migration
is excessive and therefore detrimental to the welfare of natives, and
somehow that this provides a reason for highly restrictive policies.
Clearly, the negative attitude toward immigration reflects more than
simple economic concerns. Those opposing immigration fear that it may
exacerbate social tensions and erode national identities in host
countries, as well as aggravating domestic economic problems.
Pressures
to tighten immigration laws have been quite strong, particularly in
Europe. Yet immigration policies remain a highly divisive issue in many
receiving countries. Attempts to tighten policy have typically led to
bitter conflicts among domestic constituencies. Moreover, they also
irritate relationships with the sending countries, many of which rely on
emigration to alleviate structural imbalances in their labour markets
and earn valuable foreign exchange through workers’ remittances.
Finally, and perhaps more crucially, immigration controls have so far
proved to be quite ineffective in stemming undesired population inflows.
Are
there more palatable alternatives to migration policies? If trying to
control the symptoms does not work, treating the problem directly by
promoting equitable and sustained growth in origin countries might be
more effective. Trade integration seems a particularly desirable
strategy to alleviate migration pressure for at least two reasons.
•
First, trading goods represents a way to exchange the services of the
factors embodied in those goods. To the extent that barriers to trade
are eliminated and commodity trade increases, the exchange of factor
services will also increase and therefore the incentive for factors to
move should diminish, in which case trade in goods and the international
mobility of factors are ‘substitutes’.
•
Second, deeper trade integration is often advocated as a means to
achieve faster convergence between countries with different income
levels. The experience of the EU, where poorer regions have been rapidly
catching up with relatively better off regions, is often cited as
evidence. US and, to a lesser extent, EU policy-makers seem to be
convinced by these arguments and have negotiated integration agreements
with their relatively poorer neighbours.
Yet,
as research in a new CEPR volume demonstrates, both theoretical and
empirical evidence on the effectiveness of trade integration is far from
being conclusive. This analysis suggests that trade liberalization will
not always alleviate the incentives for migration from the poorer to the
richer countries.
Overall,
the research in the volume suggests several observations. First, initial
conditions matter. Trade liberalization of high-income countries with
middle-income countries is more likely to foster convergence and
discourage migration, though liberalization in investment flows could
alter this outcome. By the same token, integration of goods markets
between economies with very different initial conditions could lead to
the opposite outcome: the fall in trade costs could lead to more
polarization of production and more migration, this because it is
possible that out-migration is impeded by a financial constraint that is
relaxed by trade liberalization.
There
are therefore good reasons to be relatively optimistic about the
migration outlook from Eastern Europe to Western Europe: these are
middle-income countries, demographic conditions are stable and, provided
that the transition to a market economy is successful, massive
migrations should not constitute a significant threat.
Second,
short-term effects may be important, even when integration is between
countries that are not at the extremes, as in the case of Mexico and the
United States. For example, it would appear that the North American Free
Trade Agreement encouraged migration, at least in agriculture, in the
short term. Disruption of Mexico’s maize production to the benefit of
its US counterparts has put downward pressure on unskilled wages on both
sides of the border. This is so because maize is a highly protected
sector in Mexico and is also very labour-intensive there, while very
capital-intensive in the United States. This may be a special case, but
it serves to point out that even if technology is available to all
‘off-the-shelf’, the same technologies are not always profitable
everywhere at the same time. In the longer term, though, improved
conditions in the Mexican economy would still stem migratory pressures.
The
policy message is therefore clear. Trade liberalization and migration
controls are not alternative policy strategies as suggested by a
straightforward application of factor endowment trade theory. They work
with differing effectiveness over different time horizons. Migration
controls are likely to be somewhat more effective in the short term and,
in any case, remain the main tool to avoid massive, and largely
undesired, immigration in receiving countries.
But
if their objective is to stem migratory pressures, policy-makers’
reliance on migration controls in the short run should not stop them
from searching for more forward-looking strategies to alleviate
migration pressure in the medium term. Despite theoretical ambiguities
and policy disputes, the evidence continues to point towards benefits
from trade liberalization.
This
article discusses research reported in ‘Migration:
The Controversies and the Evidence’ edited by Riccardo Faini,
Jaime de Melo and Klaus Zimmermann, and published for CEPR by Cambridge
University Press (CUP). Related questions of globalization are discussed
in ‘Market Integration, Regionalism and the Global Economy’ edited
by Richard Baldwin, Daniel Cohen, André Sapir and Anthony Venables, and
also published for CEPR by CUP.
|