Special Issue on Migration, Remittances, and Trade Agreements: An Introduction

Article excerpt

The Journal of Business Strategies published a special issue on migration and remittances in Spring 2009 with six articles selected from the papers presented at the Conference on Regional Trade Agreements, Migration, and Remittances with Special Focus on CAFTA and Latin America held at the College of Business Administration, Sam Houston State University, in April 2008. The current special issue is a continuation of that effort and includes five more articles selected from the pool of papers presented at the conference. In addition to topics related to migration and remittances, this issue also includes articles on regional trade agreements (RTAs).

While migration of people across natural and man-made borders has remained a powerful force that contributes to the progress of human civilization, remittances--the transfers of money by migrants to family and friends left behind in their respective home countries--have been recognized as "the most tangible and ... the least controversial link between migration and development, having the potential to contribute significantly to poverty reduction and achievement of other UN Millennium Development Goals" (Irving et al, 2010). Although new migration flows fell during 2008-09 due to the global economic crisis, existing migrants were not returning even though the employment prospects have been bleak in many destination countries. In 2008, officially recorded remittances to developing countries reached a higher-than-expected level of $338 billion and it represented a growth of about 17 percent from $289 billion in 2007. (1) While South and East Asia witnessed a stronger-than-expected growth in remittance flows during 2008-09, Latin America and the Caribbean, Middle East, and North Africa experienced larger-than-expected declines. (2)

In addition to migration and remittances, greater trade liberalization, particularly in developing countries, has become another hallmark of the current wave of globalization. However, the development of a multilateral trading system based on global free trade under the aegis of the General Agreements on Trade and Tariff (GATT)/World Trade Organization (WTO) has been extremely slow mainly due to the complexity of multilateral negotiations. This has given way to an unprecedented proliferation of Regional Trade Agreements (RTAs), which have become a prominent feature of the Multilateral Trading System (MTS). (3) Almost every country is a part of one or more RTAs. Some 462 such agreements have been notified to the GATT/WTO up to February 2010 and 271 of them were in force. This trend is likely to continue as many more RTAs are currently under negotiations. Of these RTAs, Free Trade Agreements (FTAs) and partial scope agreements account for 90 percent, while customs unions (CUs) account for 10 percent. (4)

The rise of RTAs raises the time-honored question of whether these agreements help or hinder global trade liberalization. The classic analysis of the "trade diversion effect" (diversion of trade from a more efficient exporter towards a less efficient one by the formation of an FTA) by Jacob Viner (Viner 1950) was later extended to a full range of theoretically plausible effects of RTAs. The expositions on the implications of RTAs for global free trade are collectively known as the "stumbling bloc" or "building bloc" debate. (5) In this debate, RTAs are "stumbling blocs" if they prevent or slow multilateral trade liberalization, while they are "building blocs" if they accelerate or at least do not hinder multilateralism. Numerous mechanisms have been presented in the literature to suggest that one or the other position is likely.

The classic "trade diversion effect" as described above and the "trade creation effect" (more trade with the members of the RTA) are two such mechanisms extensively discussed in the literature.

Migration and Remittances

The first two articles in this special issue deal with topics related to international migration and remittances. …