The Impact of Liberalizing Labour 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. However the recent labour shortages in several labour intensive sectors, particularly agriculture, in Australia and New Zealand has recently provoked a serious debate over the implementation of policies that would facilitate the supply and employment of guest workers. This paper implements a CGE model of bilateral migration flows (GMig2) to quantify the benefits of liberalizing GATS Mode 4 in the Pacific region. The results indicate that an increase in the labour forces of Australia and New Zealand from elsewhere within the Pacific region would raise welfare in Australia and New Zealand. However, the results also demonstrate 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, which could offset the gains from the movement of unskilled labour. Agreements regarding the movement of unskilled labour could therefore potentially constitute significant development policies which warrant further attention from policy makers.