TRADE LIBERALIZATION EARNS MIXED MARKS AS FIGHTER OF POVERTY
May 17, 2005
While China and some Southeast Asian nations have lifted millions out of poverty through jobs created by foreign investment and exports, Latin America, which has followed the same free-trade model, remains impoverished, says the Wall Street Journal.
Decades of global trade talks have already slashed trade barriers, so there is less to gain by further liberalization. The Journal proposes a different policy: opening the borders of wealthy nations to more temporary workers. Consider:
- If rich countries allowed in enough temporary workers to increase their overall work force by three percent, global income would increase by $150 billion annually, with the bulk of the gain going to low-income workers.
- The North American Free Trade Agreement helped lift average Mexican wages by about 10 percent, but a Mexican who finds work in the United States earns, on average, about 2.5 times as much as he did in Mexico.
- Overall, migrant workers who wire some of their salaries to their families remit about $100 billion a year, a sum that dwarfs foreign aid.
The gains from migration come at a cost, of course, says the Journal. Many of those who leave poor nations never go back, draining talent from home nations. Families are separated for long periods of time and some families get too comfortable receiving checks from abroad, which breeds a welfare mentality. A migration surge would also further undermine wages for low-skilled native workers who compete for low-end jobs.
But World Bank economist L. Alan Winters says even a relatively small change in labor mobility is worth at least as much as any reduction in quotas and tariffs.
Source: Bob Davis, "Trade Liberalization Earns Mixed Marks As Fighter of Poverty," Wall Street Journal, May 16, 2005.
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