XII. Globalization: International Trade and Migration, Page 2

(Continued from Page 1)

Despite the many risks of economic globalization, most countries have been choosing to globalize their economies to a greater extent. One way to measure the extent of this process is by the ratio of a country’s trade (exports plus imports) to its GDP or GNP. By this measure, globalization has roughly doubled on average since 1950. Over the last 35 years of the 20th century world exports increased about twice as fast as GNP (see Figure 12.1). As a result, by the end of the 20th century the ratio of world trade to world GDP (in purchasing power parity terms) had reached almost 30 percent—on average about 40 percent in developed countries and about 15 percent in developing countries (see Map 12.1 and Data Table 4).

The growing role of international trade in the economies of most developing countries (see Figure 12.1) has not yet resulted in a considerably increased share of developing countries in total global trade as compared with what this share was in the 1980s. Developed countries still trade mostly among themselves. In 1999 only 23 percent of world imports went to low- and middle-income countries, of which 9 percent went to East Asia and the Pacific and only 1 percent to Sub-Saharan Africa and 1 percent to South Asia. The Middle East and North Africa received about 2 percent of world imports, while Europe and Central Asia and Latin America and the Caribbean received 5 percent each. Even though developing countries have increased trade among themselves, developed countries still remain their main trading partners, the best markets for their exports, and the main source of their imports.

Most developing countries’ terms of trade deteriorated in the 1980s and 1990s because prices of primary goods—which used to make up the largest share of developing country exports—have fallen relative to prices of manufactured goods. For example, between 1980 and 2000 real prices of wheat and rice dropped about twofold, prices of cocoa more than threefold, and sugar about fivefold. Even petroleum prices went down fourfold between 1980 and 1998 (although by 2000 they grew about twofold). There is still debate about whether this relative decline in commodity prices is permanent or transitory, but developing countries that depend on these exports have already suffered heavy economic losses that have slowed their economic growth and development.

Generally speaking, a country that would attempt to produce almost everything it needs domestically would deprive itself of the enormous economic benefits of international specialization. On the other hand, narrow international specialization, which makes a country overly dependent on exports of one or a few goods, is too risky because unfavorable changes in global demand can significantly worsen such a country’s terms of trade. Thus a certain diversification of production and exports is considered to be desirable. Every country should constantly search for its own best place in the international division of labor based on its dynamic comparative advantages and on considerations of economic risk minimization.

In response to the recent unfavorable changes in their terms of trade, many developing countries are increasing the share of manufactured goods in their exports, including exports to developed countries (see Figure 12.2). The most dynamic categories of their manufactured exports are labor-intensive, low-knowledge products (clothes, carpets, some manually assembled products) that allow these countries to create more jobs and make better use of their abundant labor resources. By contrast, developing country imports from developed countries are mostly capital- and knowledge-intensive manufactured goods—primarily machinery and transport equipment—in which developed countries retain their comparative advantage.

A popular debate in many developed countries asks whether the growing competitive pressure of low-cost, labor-intensive imports from developing countries pushes down the wages of unskilled workers in developed countries (thus increasing the wage gap between skilled and unskilled workers, as in the United Kingdom and United States) and pushes up unemployment, especially among low-skill workers (as in Western Europe). But empirical studies appear to suggest that although trade with developing countries affects the structure of industry and the demand for industrial labor in developed countries, the main reasons for the wage and unemployment problems are internal and stem from labor-saving technological progress and postindustrial economic restructuring (see Chapters 7 and 9).

International Migration

The increased international mobility of people is an important aspect of globalization. In 1985-1990 the annual rate of growth of the world’s migrant population was 2.6 percent, more than twice the level recorded in the 1960s. There was a certain slowing of migration in the first half of the 1990s as the result of restrictions introduced by many high-income countries, but beginning in 1997-98 the flows of migrants accelerated again.¹ The major destination countries, rated by the size of migrant inflows in 2000, are the USA, Germany, Japan, Australia, Canada, the United Kingdom, and Italy. Rated by the share of the foreign and foreign-born population in the total population, the leaders are such traditional immigration countries as Luxembourg, Australia, Switzerland, Canada, the USA, Austria, and Germany, while in Japan and Italy, the new immigration countries, the proportions of foreigners are still relatively low (see Table 12.1).

Over 60 percent of the world’s migrants moved from developing to developed countries, and this South-North migration is expected to grow in the future owing to economic as well as demographic reasons. The enormous and still growing gap between per capita incomes in developed and developing countries (see Chapter 4), the rapid population growth in developing countries (see Chapter 3) with job creation failing to keep pace, the aging of developed countries’ populations (see Chapter 8) with a resultant reduction in the size of their labor force, and the declining costs of migration (information and transportation costs) – all these factors are likely to contribute to a drastically greater supply of, and demand for, international migrants over the next several decades.

Employment-related migration is on the rise relative to other types of migration, such as migration of refugees or people seeking political asylum. And workers moving from developing to developed countries tend to be clustered at the extremes of the skills and education ladder-- either more or less qualified than most residents of the host countries. A significant feature of recent years has been the particularly rapid rise in migration of qualified and highly qualified workers, most notably in response to labor shortages in the information and communications sectors of developed countries, but also in the research and development, health, and education sectors. For example, according to some estimates, there is a shortfall of some 850,000 IT technicians in the USA and nearly 2 million in Western Europe. Against this background, many high-income countries are competing to attract the needed human capital and adjusting their immigration rules to facilitate the entry of ICT specialists, scientists, medical doctors, and nurses. At the other extreme, demand is also high for low-skilled foreign labor for tasks resistant to automation, such as care of the elderly, house cleaning, agriculture, and construction.

There are reasons to believe that international migration of labor can be beneficial to both the receiving and the sending countries. While in the receiving countries migrants help meet labor shortages in certain industries, the sending countries benefit from easing of unemployment pressures and increased financial flows in the form of remittances from migrant workers to their families staying behind. Remittances to developing countries increased by more than 20 percent during 2001-03 and reached $93 billion, which was about one-third more than the total sum of official aid received from developed countries (see Chapter 13).

However, concerns are growing about the damage done to the development aspirations of the poorer countries by emigration of the most qualified professionals--the so-called “brain drain.” Professionals from the developing world contribute to expanding knowledge-based industries in high-income countries, while their countries of origin struggle with a shortage of qualified staff to provide basic health and education services and find themselves unable to reach the critical threshold levels of research and development staff needed to succeed in the most productive, high-technology industries. At the same time, increased immigration from developing countries remains a politically sensitive issue in receiving countries, with some real issues related to cultural assimilation of foreigners as well as some exaggerated fears and misconceptions.

Dealing with all the stresses of increased international migration is a global challenge, requiring closer cooperation between sending and receiving countries. Solutions should take into account the interests of all the countries involved as well as those of the migrants themselves. For example, tighter controls on labor migration introduced in one receiving country will affect not only the sending countries but also other potentially receiving countries. In many cases it can also lead to higher illegal migration, most often associated with discriminatory and exploitative treatment of migrant workers.

The advice currently offered to developed and developing countries on managing international migration flows is incomplete and sometimes disputable.

For example, developing countries are advised to develop mechanisms for encouraging retention and return migration of their qualified workers. Returning migrants bring back foreign knowledge and experience (converting “brain drain” into “brain circulation”) and can play an important role by facilitating the transfer of foreign technologies or by helping the development of cultural and economic ties with other countries.² Further, developing countries are advised to facilitate and reduce the cost of remittance of funds by their migrant workers.

As for developed countries, they are counseled to improve their immigration laws, policies, and practices for ensuring orderly migration and to strengthen enforcement of minimum labor and workplace standards so as to discourage illegal migration and employment. To ease the political tensions and to facilitate the integration of immigrants, governments are advised to assist the latter in learning the language of the host country and to fight all forms of racism and discrimination (in employment, housing, schooling, and all other areas).

Sometimes it is also suggested that both developing and developed countries should encourage temporary rather than permanent migration, so as to allow sending countries to benefit from the new knowledge and skills of returning migrants and simultaneously reduce some existing anxiety in receiving countries.

Are you personally concerned with international migration in any way? In your opinion, what should governments do to better manage this process?

¹ According to some estimates, there are currently about 150-160 million migrants in the world (if migrants are defined as people living in foreign countries for more than one year).

² China is known to have some success in stimulating the return of former migrant engineers and researchers educated abroad.

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