is provided by Demidova, Kee and Krishna (2006). That study finds the firms that take advantage of the less-restrictive ROOs of the EU (as compared with the US) are less productive than the firms that export to the US.

These results suggest the gains from this opportunity for developing countries as a group – or even for just the LDCs amongst them – are meagre at best, and possibly negative in aggregate for developing countries. And as with preferential FTAs, the cost associated with this opportunity are likely to be relatively high because it would encourage resources to move to activities which subsequently become uncompetitive following the next FTA or WTO agreement. Hence this opportunity does not warrant a formal benefit/cost calculus.

# **_Prospective benefits of freeing up international labor movements_**

The challenge in high-income countries of a shortage of low-skilled workers has been eased by merchandise trade with and FDI flows to labor-abundant developing countries, most notably China in the past two decades. But that has been far from sufficient to equalize wages across countries. Historical experience in the 50 years to World War I showed that by far the fastest way to bring about a convergence in living standards is through international migration (Williamson 2002). Notwithstanding the liberalization of much merchandise trade post-World War II, and the opportunity through the WTO’s Doha round to reduce those and services trade barriers further, the CGE analyses by Winters et al. (2003) suggest that this will still be the case in the foreseeable future. When coupled with an aging population in high-income countries, there is a compelling case for them to expand their quotas on immigrants from developing countries. Indeed Mattoo and Subramanian (2003) argue that this would be essential if the Doha round is to deliver on its promise of being developmentfriendly.

None of the studies listed in Table 1 consider the possibility of the services negotiations including provision for more temporary movement of labor (Mode IV in the WTO’s General Agreement on Trade in Services, GATS). Yet if trade liberalization in goods and other services proves too difficult politically to achieve in the next few years, the benefits of formally liberalizing international labor flows as a possible substitute for goods trade is worth contemplating – not least because otherwise illegal migration is likely to increase (Hanson 2006). Current immigration laws are very strict, such that labor flows are much less significant across borders than flows of goods, other services and financial capital. Presumably this helps explain why the dispersion of pay for similarly skilled workers across the globe so greatly exceeds the dispersion of prices for goods and financial capital (Freeman 2007). This in turn signals an additional opportunity for reducing inequality and poverty. Freeman discusses some radical policy options for making such a commitment more palatable in receiving countries (e.g., auctioning off visas and using the revenue to compensate any losers among current residents), as does Prichard (2007) in his provocative book _Let Their People Come._ Meanwhile Schiff (2007) explores which policy measure might be optimal among the three options of permanent, guest-worker or GATS Mode IV flows.<sup>24</sup> An early attempt to measure the gains from freeing international migration was made more than two decades ago by Hamilton and Whalley (1984). Moses and Letnes (2004) have updated that study, and find a reduction in international migration

> 24 See also the contribution on migration to the first Copenhagen Consensus project, by Martin (2004).

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