Trade, Migration, and Economic Development - Migration, Trade, and Development: Proceedings of a conference hosted by the Federal Reserve Bank of Dallas, October 6, 2006

F rom the founding of the Bretton Woods exchange rate system in 1944 through the conclusion of the last round of General Agreement on Tariffs and Trade/ World Trade Organization (GATT/WTO) talks in the 1990s, the postwar international order has been marked by multilateralism and the building of liberal regimes for trade and finance. These regimes have reduced the risks of openness for national economies and stimulated international exchange across the board. Like portfolio and foreign direct investment and trade, international migration increased dramatically in the postwar period. Yet, with the notable exception of refugees, no liberal regime for migration has emerged. Why has migration continued at such high levels in the absence of a regime and in the face of cyclical downturns, and why have states been willing to risk openness to migration? Economists have long argued that exposure to trade leads to increased competition and efficiency, resulting in greater specialization in production and a wider and cheaper range of goods available to consumers. Likewise, mobility of productive factors (labor and capital) and the reduction of transaction costs are seen as essential to the smooth functioning of markets. In the case of trade, the GATT/WTO regime was constructed through a multilateral process, with most favored nation status (MFN), nondiscrimination, and reciprocity as the organizing principles. In the case of international finance, exchange rate stability has been pursued unilaterally by the U.S. during the early Bretton Woods period and multilaterally through the International Monetary Fund (IMF) and World Bank. Both institutions have worked to solve problems of liquidity and adjustment as they