Cross-border labor mobility. A critical assessment of WTO's GATS Mode 4 vis-à-vis regional trade agreements

• Pages: 2-18
• Published date: 11 March 2014
• DOI: https://doi.org/10.1108/JITLP-12-2012-0020
• Date: 11 March 2014
• Author: Caf Dowlah
• Subject Matter: Strategy,International business,International business law

Cross-border labor mobility

A critical assessment of WTO’s GATS Mode 4

vis-a

`-vis regional trade agreements

Caf Dowlah

Department of Social Sciences, Queensborough College,

The City University of New York, New York, USA

Abstract

Purpose – The purposeof the paper is to examine convergenceof economic interests – bothempirically

and theoretically – among labor-abundant (labor-sending)and labor scarce (labor receiving)countries, in

the contextof Mode 4 of the General Agreement on Trade in Services(GATS) of the WTO. The paper also

exploresregional trade associationsas an interim alternativeforum for promotingtemporary cross-border

labor mobility inthe backdrop of failure of multilateral tradenegotiations under the Doha Round.

Design/methodology/approach – The research methodology of the paper involves literature

review, an analysis of databases and theoretical findings, and a critical examination of pertinent

empirical and secondary information on the subject matter.

Findings – Thefindings reveal that althougha convergence of economicinterests seem to existbetween

the labor-sending and receiving countries for promoting cross-border labor mobility, this sector faces

formidable trade and non-trade barriers across the world, especially in the developed countries.

As multilateral trade negotiations under the Doha Round have failed to make any progress toward

liberalizationof this sector, regionaltrade associations, especiallythose pursued by the USA,Canada and

Australia,seem to provide a crediblealternative vehicle,as an interim measure, for furtherliberalization of

this sector. These RTAscan serve as examples for other RTAs to promote regional mobilityof labor.

Research limitations/implications – Cross-border temporary labor mobility, as envisaged by

GATs of the WTO, is a burgeoning field. Although some serious works are available, especially

sponsored by the World Bank and some leading universities, there is a considerable dearth in this

field, especially in respect to contribution from individual scholars and researchers. This paper fills the

void to some extent by ascertaining factors and forces that help or hinder cross-border mobility, by

pointing out limitations of multilateral trade negotiations under the WTO, and by exploring the

regional trade associations as an interim measure for promoting cross-border labor mobility.

Practical implications – This paper points out factors and forces that help or hinder cross-border

mobility,ascertains cruciallimitations of multilateraltrade negotiationsunder the WTO, and explores the

RTAs as an interim measurefor promoting cross-border labor mobility – all these would have practical

policy implications.

Originality/value – The originality of the paper lies with its critical and careful review of existing

literature and available databases, with the determination of factors and forces that help or hinder

cross-border mobility in the contemporary world, in pointing out the limitations of multilateral trade

negotiations under the WTO, and in exploring the RTAs as an interim measure for promoting

cross-border labor mobility.

Keywords Cross-borderlabor mobility, GATS Mode 4, Regionaltrade associations, Remittanceflows,

Service sectorliberalization, WTO negotiations,Workers’ remittance, Regionaltrade agreements

Paper type Research paper

The current issue and full text archive of this journal is available at

www.emeraldinsight.com/1477-0024.htm

This paper is an outgrowth of a research project on cross-border labor mobility undertaken by

the author as a Visiting US Fulbright Scholar in 2012-2013. The author is grateful to the US State

Department for sponsoring the project. The author is also grateful to anonymous referees for

their highly constructive comments and suggestions, which improved the paper significantly.

The author, however, takes full responsibility of the contents of the paper.

Received 28 December 2012

Revised 21 September 2013

Accepted 20 January 2014

Journal of International Trade Law

and Policy

Vol. 13 No. 1, 2014

pp. 2-18

qEmerald Group Publishing Limited

1477-0024

DOI 10.1108/JITLP-12-2012-0020

JITLP

13,1

2

I. Introduction

Liberalization of merchandize trade has brought forth extraordinary gains to global

economy over the course of last few decades[1]. Recent research findings, however,

suggest that liberalization of services trade promises even greater benefits to the world

economy[2]. Although services trade has been growing more rapidly than merchandize

trade since the 1980s, currently only about 20 percent of services are traded globally

despite this sector accounts more than half of global GDP and exceeds 75 percent of

GDP in high-income countries (UNCTAD, 2012)[3]. Cross-border temporary movement

of natural persons as service suppliers – as envisaged by Mode 4 of the General

Agreement on Trade in Services (GATS) of the World Trade Organization (WTO) –

also promises significan t gains for the world econo my. Currently, however,

cross-border labor mobility remains mired in a complex quagmire of domestic as

well as international trade restrictions and other non-trade barriers in both developed

and developing countries. Based on an assessment of the patterns of remittances flows

across the world and the economic rationale for liberalization of temporary movement

of natural persons as service suppliers across borders, this paper argues that given

rising anti-immigrant sentiments in the developed countries and the Doha Round’s

abysmal failure in liberalizing this sector, regional trading agreements (RTAs) may

provide a credible interim vehicle for furthering liberalization of this sector.

The paper is structured as follows: Section II presents economic rationale for

cross-border labor mobility by looking into recent trends of remittances flows,

economic research findings, and political-cultural impediments to labor migration.

Section III explores GATS Mode 4 as a credible compromise, as opposed to permanent

or other forms of migration, to promote cross-border labor mobility. Section IV looks

into the dynamics that led to the failure of multilateral trade negotiations under the

Doha Round. Section V examines some of the leading RTAs as an interim vehicle for

promoting global labor mobility. Section V1 concludes the paper.

II. Economic rationale for cross-border labor mobility

The number of the world’s migrants has increased nearly threefold between 1960 and

2009 – from 75 million to about 200 million – still only about 3.2 percent of the world’s

population currently lives in countries where they were not born, compared with almost

10 percent during 1874-1914 (The World Bank, 2012, p. 23)[4]. An overwhelming

85 percent of contemporary global migrant stock is economic migrants – migration is

high and increasing in some regions, such as Northern America, Western Europe,

Australia and New Zealand, it has been decreasing in some regions, such as

South America, Central America, and Eastern Europe (Czaika and Haas, 2013). The

share of more developed nations in international migrants was 60 percent in 2005,

while that of the less developed and the least developed countries (LDCs) were 33 and

7 percent, respectively, (Lowell, 2007, pp. 7-8). Migrant workers and migration, however,

can no more be viewed as a unique South-to-North phenomenon – in recent decades the

South-South migration has also been rising remarkably (The World Bank, 2012).

Recent trends in remittance flows

During 2002-2011, remittance flows increased almost threefold – from $170 billion to

$468 billion in a decade, and more than 75 percent of the remittances accrued to

developing countries (Table I). Strikingly, the top remittance recipient countries were

Cross-border

labor mobility

3