Immigration and Trade in Services - Essay Example

?Running head: IMMIGRATION AND TRADE IN SERVICES Immigration and Trade in Services Insert Insert Insert 26th April 2011 Immigration and Trade in Services Introduction According to BBC news (2001), German made a decision to relax on the immigration rules in order to be able to advance technology by facilitating the entry of the Indian software experts to German. This was also meant to be in a position to compete with countries like the United States. In this case, some of the restrictive issues in the green card process would be eliminated to ease the process of acquiring Visas for the families of the software experts. Nevertheless, in the previous year German provided 10,000 green cards to technology professionals, among them being Indians. Though such an action would pose many security threats, German was ready to improve on their security so that no terrorist can pose as a soft ware expert to be issued with a visa. However, German portrays a good example of immigration and trade services globally, with host countries having to relax on some of the restrictive visa issues in order to gain a competitive advantage as other countries. However, one of the main issues that worry citizens in many of the hoist countries is likelihood of immigrants causing job shortage in the host country. Though India is a developing country, its successive growth in information technology and software is attributed to the fact that they outsource their services to multinational firms globally, but at a reliable cost. However, the United States remains the major country that receives a majority number of software expertise from India. According to BBC news (2000), the United States had already proposed that it would increase the experts’ visas to 200,000, this shows that the rate of demand for the Indian software expertise is very high. Therefore, this third world country is has a comparative advantage in terms of software expertise. Hence, many young IT professionals have profited from such a move by German and the United States. This creates opportunities for the many graduates in third world countries, who would not have the opportunity to excel, had they been in their country. The foregoing extract introduces a concept that has prevailed across the world, where countries mainly the developing countries have to contend with trade in services, as their skilled manpower is lured my developed countries, in the form of relaxed immigration rules and other incentives. Trade in services and immigration Trade and immigration are becoming connected since, for instance, trading in goods and services, and investing is expanding due to the low costs of globalization, transport, and availability of information. The result of this is an increased urge to study, work, and travel, or even to live abroad. When people move across borders and supply services in another country, this is regarded as trade. According to Pecoud (2007, p. 14), “trade and migration are interconnected in a globalized economy and that pressures towards liberalization may one day promote a narrow trade.” The increase of immigrants in developing countries has greatly increased with time. Immigration of skilled labor is encouraged by the developed countries and restrictive measures are minimized in order to enable these experts to venture into the country. Indeed, various benefits accrue to developed countries, with the major one being the use of immigrating human capital to advance their production capacity (Kuznar, n.d, p. 12). The immigration promotion of skilled labor is as a result of lack of a skilled workforce in these countries or the need to compete with other countries. If country A has more labor than country B, then it is only wise for country A to send labor to country B, via immigration, which is a direct method, or indirectly through exporting of goods. Thus, the movement of goods can substitute for the movement of people to various countries. In developed countries, prices of goods and services, as well as labour wages are usually relatively high, thus immigrants are likely to gain from such markets if they trade their services in these foreign countries. The immigration of persons through trade in service agreement is regulated by mode 4 of the GATS agreement where several categories of skilled personnel temporarily migrate to developed countries to offer services. These categories include intra-corporate transferees, business visitors, contractual services suppliers and independent professionals (Raza, 2008). The impact of immigration of trade in services on the sending and receiving countries The main benefit of trade and immigration is the wage differential between the developed and developing countries, where skilled labor is involved. The fact of this issue is that, when developed countries opt to outsource for skilled labor, they pay these experts admirably in order to avoid poaching of these skilled personnel by other firms or countries. This is very different from the developing countries since such countries can not afford to pay these skilled employees well enough, thus leading to large skilled labor force with little pay or jobless. It is due to this factor that the developing countries agree that the developed countries should outsource labor form them, thus promoting trade in services with the movement of people. However, when the developed countries outsource, as Germans move to hire Indian skilled software expertise, there is fear that the host country’s citizens may loose their jobs. Hence, restricting immigration by the developed countries can encourage firms to outsource services abroad, but if immigration is encouraged, it may also lead to added cost. However, immigrants can be at a disadvantage of barriers when it comes to moving to other sectors in the host country. The restriction of movement of people can be a barrier to exporting of services, since immigrants provide skilled services for the host countries. Migration promotes relationships between the sending and the receiving countries, in addition to facilitating technological transfer, increasing investment flows and productivity, and promoting trade of goods and services. The source countries with the skilled labor may also be disadvantageous due to poor economic conditions, where demand for skills labour may be quite low, as investment and developmental opportunities and capabilities are relatively few. Indeed, low investments are associated with the developing countries. However, the receiving/destination countries may be faced by loss of jobs due to the skilled immigrants demand, and their likelihood of accepting low wages compared to the native labour force, a phenomenon that may also cause conflict in the host country’s labour market. In addition, due to the surge in skilled immigrants jetting into the host country, there is a possibility of criminals and terrorists who pose as skilled personnel penetrating into a country, thus threatening the security of the host country. According to Foders (2006, p. 25), real wage growth was important to the US while nominal wage growth mattered most in brazil, thus indicating how each country varies from the other in terms of what they value the most. Another arising issue that is associated with immigration is the inequity, which is evident when receiving countries increase on their restrictive immigration policies for some countries. The receiving country may be faced by imperfect competition as a result of the value of the skilled immigrants who offer cheap labor, thus disadvantageous to the local entrepreneurs. In addition, the international immigration interferes with the population ratio of both the receiving and sending countries such that, the sending countries will result to low population while the receiving country’s population increases. However, the brain drain issue comes in when the sending country sends its skilled personnel to the developed countries, but ironically, the sending countries never catch up with the developed countries economically. Nevertheless, the presence of brain circulation results to knowledge distribution thus benefiting both the sending and receiving countries. According to Patterson (2007, pp 25), “brain circulation is a set of purposive policies and investments by a developing country to increase and enhance development of its diasporas emigrant communities in core countries that maximize their ability to channel financial, human and organizational capital back to their homeland’s development.” When brain circulation is involved, then demand for skilled labor would increase since the involved countries are improved. According to International Organization for Migration (p.79), developing countries are more likely to benefit from trade in services in the sense that, the human capital that temporarily migrate to developed countries remit earnings to their original countries and return home with enormously improved skills that could go a long way in helping in development of their countries of origin; this is due to the nature of mode 4 of GATS which provides for temporary movement of skilled labor (International Organization for Migration, 2006, p. 79). In addition, the possibility of a dual citizenship could ease the trade of the involved countries, since people could have access of both countries. However, both countries would need to approve this measure. Nevertheless, the wage and employment highly depend on the share of foreign workers in the economy of a host country, since the immigrants compete in the foreign market as well (World Bank, 2005 pp 44). Migration may increase job opportunities in the receiving countries due to demand in local jobs. Sometimes host countries benefit from immigration especially when they have a shortage of labor; therefore, nations should allow temporary immigration of unskilled labor to curb the seasonal unemployment. Trade in services in general and the opportunities it offers to developing countries Services trade is an important factor in the economy globally, hence trade in services can only excel if free movement of people is permitted, as in the case of Germany and India where India was in agreement with German on permitting the skilled experts in software to work and live in Germany. However, trade in services is associated with barriers such as immigration issues especially on the restrictive measures on acquiring a visa, discriminating of the foreigner providing services and lack of qualification to conduct business. However, the host country should consider security issues when allowing immigrants into their territories. While trade in services mainly is concerned with skilled labor, there is also need to entertain unskilled labor movement such that, in case of seasonal employment, they can handle it. For instance, in Australia, most immigrants are highly educated, thus leading to an accumulation of many skilled labor forces. According to, OECD 2003, (pp 69 ) New Zealand, Hong Kong, Canada and united states are the only countries where barriers to trade in services are low. In addition, “restrictions on trade in services impose costs in form of higher price for businesses and consumers, restrictions limit domestic and international competition, decrease efficiency and permit incumbent services supplier to charge prices above those in a competitive market” ( OECD, 2003, pp 35). However, liberalization of trade in services generates income to both the host and the sending country. In addition, trade in services offers the developing nations an opportunity for their citizens to acquire experience abroad, and numerate capita, with some of the income made benefiting their original country. In addition, some of the developing economies can hardly afford to employ all the graduates in their countries, thus exporting of skilled labor to developed countries creates an opportunity for their citizens to maximize their skills and have a better future. If some of the skilled personnel remained in their original countries, their skills would go to waste since there is no room for them to practice in their area of expertise. Some of the skilled experts return to their original country at some point in life, thus they put up businesses that cover their area of expertise, hence sharing the ideas they acquired over the years abroad. This contributes greatly to development in their mother countries. World Trade Organization (WTO) is associated with aver 150 countries and its members have an agreement on the protection of the cost of services, which is the general agreement on trade in services. According to United Nations Conference on Trade and development (1999), the WTO is mandated top provide “an assessment of the impact on developing countries of liberalization under the General Agreement on Trade in Services (GATS).” However, WTO does not deal with immigration issues of human capital but focuses particularly on trade in services associated with immigrating human capital, more so between developing and developed countries (Trachtman, 2009, p. 241). In addition, the WTO has acquired a guiding principle, which is a non- discrimination among countries, in terms of trade. In this case, non-discrimination principle allows the accessibility to the lowest cost supplier. However, this agreement is overweighed by the fact that some countries import skilled labor from only specific countries or communities, thus bending the principle of non-discrimination between countries. The general trade agreement also covers issues on cross-border where a country receives services from another country, such as the Indians experts in German; consumption abroad whereby citizens of one country consume services of another country; for instance, a Mexican student pursuing a master’s degree in Liverpool University. Movement of natural persons is also discussed in the GTAS, whereby, a foreign country may venture in another country and provide services such as a healthcare (Wolfrum, 2008, pp 573). Conclusion The same way the trade of goods contributes to a nation’s economy, so does the trade in services. However, for trade in services to prosper, there must be the presence of movements of people. Therefore, it is important for countries to practice the WTO principle of non-discrimination among countries to encourage skilled labor from different countries into their country. Unskilled labor can also be encouraged temporarily incase of seasonal employment. Trade in services should benefits both the sending and receiving countries in terms of brain circulation. Finally, labor mobility should be allowed between countries in order to produce gains, thus countries should give room for the migration agreements discussions. References BBC News. 2001. Germany 'wants India's best hi-tech brains'. BBC News, Tuesday, 30 October 2001. (Online). Available from: http://news.bbc.co.uk/2/hi/south_asia/1628259.stm (accessed April 26, 2011). BBC News. 2000. Germany woos Indian IT. BBC News, Wednesday, 17 May 2000. (Online). Available from: http://cdnedge.bbc.co.uk/1/hi/world/south_asia/752242.stm (accessed April 26, 2011). Foders, F. and Langhammer, R., 2006. Labor mobility and the world economy. Berlin: Springer publishers. International Organization for Migration. 2006. World Migration 2005 Costs and Benefits of International Migration. New Delhi: Academic Foundation. Kuznar, A. N.d. International trade in services in developing countries – threats and opportunities Are developing countries competitive? (Online). Available from: http://www.etsg.org/ETSG2007/papers/kuznar.pdf (Accessed May 2, 2011). OECD. 2003. Quantifying the benefits of liberalizing trade in services. Paris: OECD publishing. Patterson, R., 2007. African brain circulation: beyond the drain-gain debate. MA: Brill publisher. Pecoud, A., 2007. Migration without borders: essays on the free movement of people. Berghahn Books Publishers. Raza, W., 2008. Temporary migration of natural persons (Mode 4) under GATS: An assessment for the EU from a labor perspective. (Online). Available from: http://www.raumplanung.tu-dortmund.de/irpud/presom/fileadmin/docs/presom/external/14th_workshop/Raza.pdf (Accessed May 2, 2011). Trachtman, J. P., 2009. The international law of economic migration: toward the fourth freedom. NY: W.E. Upjohn Institute. Wolfrum, R. and Stoll, P., 2008. WTO - trade in services. MA: Brill publishers. World Bank. 2005. Global economic prospects 2006: economic implications of remittances and migration. Washington DC: World Bank publications. United Nations Conference on Trade and development. 1999. Assessment of Trade in Services of Developing Countries: Summary of Findings. (Online). Available from: http://www.unctad.org/en/docs/poitcdtsbd7.pdf (Accessed May 2, 2011). Read More