The Impact of Liberalizing Labor Mobility in the Pacific Region

Due to the lack of political consensus at the previous General Agreement on Trade on Services (GATS), negotiations on the temporary movement of natural persons (Mode 4) have stagnated. The growth in the economic literature surrounding this issue has also been lackluster; despite the large welfare gains that have been demonstrated to result from relatively small multilateral liberalizations on such transitory movements. This paper implements a CGE model of bilateral migration flows to quantify the benefits of liberalising GATS Mode 4 in the Pacific region. The results indicate that an increase in the labor forces of Australia and New Zealand from elsewhere within the Pacific region would raise welfare in both Australia and New Zealand. However the results show that while the Pacific Islands economies could gain substantially from the movement of unskilled workers, the loss of scarce skilled workers could lead to significant declines in the welfare of those remaining. Agreements regarding the movement of unskilled labor could therefore potentially constitute significant development policies which warrant further attention from policy makers.