Liberalising the Movement of Natural Persons: A Lost Decade?

Abstract

Liberalisation of international trade in services through the Movement of Natural Persons (Mode 4) remains one of the least negotiated issues of trade policy among the 144 members of the World Trade Organisation. Economists believe that there is a basic convergence of economic interest between the developed and the developing world for liberalising Mode 4. Yet the multilateral trading system has not facilitated greater worker mobility between the labour‐surplus and labour‐scarce countries. Is there any economic logic as to why cross‐border movements of workers have not followed the pattern predicted by international trade theory? Or are there strong socio‐political barriers that have come in the way of liberalising Mode 4? These are some of the questions the paper attempts to answer. The paper shows that the economic arguments against the free movement of natural persons are based on the narrow perspective of the welfare of domestic workers while ignoring the benefit it brings to the economy as a whole. Further, non‐economic arguments miss the point that the movement of workers under Mode 4 of GATS is temporary in nature, and so unlikely to have any lasting social and cultural spillovers. The paper gives specific illustrations from the recent past where temporary import of workers from labour‐surplus countries has enabled both developed and developing countries sustain their economic growth. It concludes by arguing that the environment for renegotiating WTO commitments under this important sector of international trade in services is better than ever before, even though the current world economic slowdown may delay actual negotiations for a while.