could generate the same proportional comparative static gain as the Doha Round might achieve via goods trade liberalization.

The migration opportunity is of course not necessarily an alternative to the Doha opportunity. Indeed if Doha were to also embrace (as part of a GATS Mode IV agreement) the migration scenario described above, the resulting greater international economic integration would boost the gains from Doha enormously. The additional gains from Doha may not be exactly the sum of the two scenarios, as the net effect would depend on the degree to which product trade is a substitute for this form of ‘trade’ in labor services. But given the smallness of the proportional changes in the aggregate size and skill composition of the workforce involved in that extra migration shown in Table 9, and the expected complementarity between trade in products and trade in such productive factors (Markusen 1983), adding those net benefits would be a reasonable approximation.<sup>25</sup>

# **Quantifying Economic Costs of Reducing Trade and Migration Barriers**

The above benefits from reform are not costless of course. And the costs associated with trade reform differ from those associated with migration, so they are considered in turn.

## **_Costs associated with Doha trade reform_**

Expenditure on trade negotiating, and on supporting policy think tanks and the like to develop and disseminate a convincing case for trade reform, could be expanded many fold before running into declining returns. But even with a substantial expansion in those activities, the overall cost would be trivial compared with the global gains from trade reform (a fraction of 1 percent of the benefits).

Of much more significance are the private costs of adjustment for firms and workers as reform forces some industries to downsize or close to allow others to expand (Matusz and Tarr 2000; Francois 2003). Those costs are ignored in the global CGE models discussed above, where the aggregate employment rate is held constant in each economy.<sup>26</sup> There are also social costs to consider. They include social safety net provisions in so far as such schemes are developed/drawn on by losers from reform (e.g., unemployment payments plus training grants to build up new skills so displaced workers can earn the same wage as before).

All three types are one-off costs to weigh against the non-stop flow of economic benefits from reform. The private and social costs of adjustment tend to be smaller, the longer the phase-in period or smaller the tariff or subsidy cut per year (Furusawa and Lai 1999). Also, CGE simulation studies suggest that the annual change in an industry’s terms of trade due to phased trade reform is typically very

> 25 In a recent econometric study of migration to OECD countries, Dolman (2008) finds that countries tend to trade and invest more with countries from which they have received more migrants, especially if there are large language and other characteristics that distance those countries – and those greater trade and especially investment flows are not at the expense of flows with other countries.

> 26 Incorporating adjustment activities, such as worker retraining, appear to be of small, second-order importance in CGE modelling if the government is able to make credible policy commitments (Karp and Paul 2005) – which it is in the case of multilateral reform agreements under the WTO.

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