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Until recently, the World Trade Organization (WTO) has been an effective framework for cooperation because it has continually adapted to changing economic realities. The current Doha Agenda is an aberration because it does not reflect one of the biggest shifts in the international economic and trading system: the rise of China.Even though China will have a stake in maintaining trade openness, an initiative that builds on but redefines the Doha Agenda would anchor China more fully in the multilateral trading system. Such an initiative would have two pillars. First, a new negotiating agenda that would include the major issues of interest to China and its trading partners, and thus unleash the powerful reciprocal liberalization mechanism that has driven the WTO process to previous successes. Second, new restraints on bilateralism and regionalism that would help preserve incentives for maintaining the current broad non-discriminatory trading order.

How global emissions reduction targets can be achieved equitably is a key issue in climate change discussions. This paper presents an analytical framework to encompass contributions to the literature on equity in climate change, and highlights the consequences -- in terms of future emissions allocations -- of different approaches to equity. Progressive cuts relative to historic levels -- for example, 80 percent by industrial countries and 20 percent by developing countries -- in effect accord primacy to adjustment costs and favor large current emitters such as the United States, Canada, Australia, oil exporters, and China. In contrast, principles of equal per capita emissions, historic responsibility, and ability to pay favor some large and poor developing countries such as India, Indonesia, and the Philippines, but hurt industrial countries as well as many other developing countries. The principle of preserving future development opportunities has the appeal that it does not constrain developing countries in the future by a problem that they did not largely cause in the past, but it shifts the burden of meeting climate change goals entirely to industrial countries. Given the strong conflicts of interest in defining equity in emission allocations, it may be desirable to shift the emphasis of international cooperation toward generating a low-carbon technology revolution. Equity considerations would then play a role not in allocating a shrinking emissions pie but in informing the relative contributions of countries to generating such a pie-enlarging revolution.

There is growing clamor in industrial countries for additional border taxes on imports from countries with lower carbon prices. The authors confirm the findings of other research that unilateral emissions cuts by industrial countries will have minimal carbon leakage effects. However, output and exports of energy-intensive manufactures are projected to decline potentially creating pressure for trade action. A key factor affecting the impact of any border taxes is whether they are based on the carbon content of imports or the carbon content in domestic production. Their quantitative estimates suggest that the former action when applied to all merchandise imports would address competitiveness and environmental concerns in high income countries but with serious consequences for trading partners. For example, China’s manufacturing exports would decline by one-fifth and those of all low and middle income countries by 8 per cent; the corresponding declines in real income would be 3.7 per cent and 2.4 per cent. Border tax adjustment based on the carbon content in domestic production, especially if applied to both imports and exports, would broadly address the competitiveness concerns of producers in high income countries and less seriously damage developing country trade.

The Doha Round must be concluded not because it will produce dramatic liberalization but because it will create greater security of market access. Its conclusion would strengthen, symbolically and substantively, the WTO’s valuable role in restraining protectionism in the current downturn. What is on the table would constrain the scope for tariff protection in all goods, ban agricultural export subsidies in the industrial countries and sharply reduce the scope for distorting domestic support - by 70 per cent in the EU and 60 per cent in the US. Average farm tariffs that exporters face would fall to 12 per cent (from 14.5 per cent) and the tariffs on exports of manufactures to less than 2.5 per cent (from about 3 per cent). There are also environmental benefits to be captured, in particular disciplining the use of subsidies that encourage over-fishing and lowering tariffs on technologies that can help mitigate global warming. An agreement to facilitate trade by cutting red tape will further expand trade opportunities. Greater market access for the least-developed countries will result from the"duty free and quota free"proposal and their ability to take advantage of new opportunities will be enhanced by the Doha-related"aid for trade"initiative. Finally, concluding Doha would create space for multilateral cooperation on critical policy matters that lie outside the Doha Agenda, most urgently the trade policy implications of climate change mitigation.

This paper documents an unusual and possibly significant phenomenon: the export of skills, embodied in goods, services or capital from poorer to richer countries. The authors first present a set of stylized facts. Then, using a measure that combines the sophistication of a country’s exports with the average income level of destination countries, they show that the performance of a number of developing countries - notably China, Mexico and South Africa - matches that of much more advanced countries - such as Japan, Spain and the United States. The authors create a new combined dataset on foreign direct investment (covering greenfield investment as well as mergers and acquisitions). The analysis shows that flows of foreign direct investment to developed countries from developing countries - like Brazil, India, Malaysia and South Africa - as a share of their GDP, are as large as flows from developed countries - like Japan, Korea and the United States. The authors suggest that it is not just the composition of exports but their destination that matters. In both cross-sectional and panel regressions, with a range of controls, a measure of uphill flows of sophisticated goods is significantly associated with better growth performance. These results suggest the need for a deeper analysis of whether the benefits of development might derive not from deifying comparative advantage but from defying it.

Singapore is an interesting example of how the pattern of foreign investment changes with economic development. The authors analyze inbound and outbound investment between Singapore and a sample of industrialized and developing countries over the period 1984-2003. They find that Singapore’s two-way investment with industrialized nations has shifted into skill-seeking activities over the period, while Singapore’s investments in developing countries have increased sharply and become concentrated in labor-seeking activities. Singapore’s increasing skill abundance relative to all countries in the sample accounted for 41 percent of average inbound stocks during the period, that is, US$18 billion annually; the corresponding figure for outbound stocks was 40 percent, that is, US$5.51 billion annually.

Services trade reform matters, but what is Doha doing about it? It has been hard to judge, because of the opaqueness of services policies and the opaqueness of the request-offer negotiating process. This paper attempts to assess what is on the table. It presents the results of the first survey of applied trade policies in the major services sectors of 56 industrial and developing countries. These policies are then compared with these countries' Uruguay Round commitments in services and the best offers that they have made in the current Doha negotiations. The paper finds that at this stage, Doha promises greater security of access to markets but not any additional liberalization. Uruguay Round commitments are on average 2.3 times more restrictive than current policies. The best offers submitted so far as part of the Doha negotiations improve on Uruguay Round commitments by about 13 percent but remain on average 1.9 times more restrictive than actual policies. The World Trade Organization's Hong Kong Ministerial had set out ambitious goals for services but the analysis here shows that much remains to be done to achieve them.

Professional skills are scarce in Mozambique, even by the standards of low-income countries. The solution, however, is not necessarily to create more Mozambican training institutions but to address market-specific problems. Where skills are already the binding constraint (for example, in auditing and engineering), policy action is indeed needed to remedy supply-side problems: capital market imperfections that inhibit investment in training institutions by entrepreneurs and in education by individuals; weakness in upstream school education, which handicaps Mozambican students in their pursuit of higher education; inadequacies in professional education and training, including curricula not attuned to industry needs; and a fragmentation of the regional education market by regulatory and language differences that prevent the emergence of regional institutions that can exploit economies of scale.Where skills may be limited but are not yet the binding constraint, the priority is to stimulate demand for appropriate skills. In this respect, the emergence of professional guilds offers opportunities, but also creates risks. The guilds can design, with government support, a regulatory framework, for example, in accounting and basic engineering, which is more attuned to the needs of Mozambican firms. They can also help make firms more aware of the benefits of professional help, for example, in accounting and information technology. The risk is that guilds will create unnecessary regulatory barriers to entry, particularly for foreign or foreign-trained professionals. Greater coherence between policies affecting professional services and international migration policy can help deal with both supply-side and demand-side problems.

Using the knowledge-capital model, we compare factors affecting the inbound and outbound manufacturing and services investment between Singapore and a sample of industrialized and developing countries. The nature of Singapore's two-way investment with the industrialized nations is essentially skill seeking, while with the developing countries it is low wage seeking with the exception of inbound services investment, which is skill seeking. During 1994-2003 time period, Singapore's skill abundance relative to all parent countries, increased annual average inbound investment in manufacturing and services by US$ 8.15 billion and US$ 15.19 billion respectively.

In this paper we analyze changes in the inbound and outbound investment between Singapore and a sample of industrialized and developing countries. The nature of Singapore's two-way investment with the industrialized nations has shifted into skill-seeking activities over the period, while Singapore's investments in developing countries have increased sharply and become concentrated in labor-seeking activities. Over the 1984-2003 period, as host Singapore became skill abundant relative to parent industrialized countries, average inbound investment stocks from these countries increased by US$ 24.8 billion annually, while the corresponding figure for outbound stocks to host developing countries was US$ 9.5 billion.

Two aspects of global imbalances - undervalued exchange rates and sovereign wealth funds - require a multilateral response. For reasons of inadequate leverage and eroding legitimacy, the International Monetary Fund has not been effective in dealing with undervalued exchange rates. This paper proposes new rules in the World Trade Organization to discipline cases of significant undervaluation that are clearly attributable to government action. The rationale for WTO involvement is that there are large trade consequences of undervalued exchange rates, which act as both import tariffs and export subsidies, and that the WTO's enforcement mechanism is credible and effective. The World Trade Organization would not be involved in exchange rate management, and would not displace the International Monetary Fund. Rather, the authors suggest ways to harness the comparative advantage of the two institutions, with the International Monetary Fund providing the essential technical expertise in the World Trade Organization's enforcement process. There is a bargain to be struck between countries with sovereign wealth funds, which want secure and liberal access for their capital, and capital-importing countries, which have concerns about the objectives and operations of sovereign wealth funds. The World Trade Organization is the natural place to strike this bargain. Its General Agreement on Trade in Services, already covers investments by sovereign wealth funds, and other agreements offer a precedent for designing disciplines for these funds. Placing exchange rates and sovereign wealth funds on the trade negotiating agenda may help revive the Doha Round by rekindling the interest of a wide variety of groups.

Most economic analyses of climate change have focused on the aggregate impact on countries of mitigation actions. The authors depart first in disaggregating the impact by sector, focusing particularly on manufacturing output and exports because of the potential growth consequences. Second, they decompose the impact of an agreement on emissions reductions into three components: the change in the price of carbon due to each country’s emission cuts per se; the further change in this price due to emissions tradability; and the changes due to any international transfers (private and public). Manufacturing output and exports in low carbon intensity countries such as Brazil are not adversely affected. In contrast, in high carbon intensity countries, such as China and India, even a modest agreement depresses manufacturing output by 6-7 percent and manufacturing exports by 9-11 percent. The increase in the carbon price induced by emissions tradability hurts manufacturing output most while the Dutch disease effects of transfers hurt exports most. If the growth costs of these structural changes are judged to be substantial, the current policy consensus, which favors emissions tradability (on efficiency grounds) supplemented with financial transfers (on equity grounds), needs re-consideration.

Changes in demographics and patterns of investment in human capital are creating increased scope for international trade in professional services. The scope for mutually beneficial trade is, however, inhibited not only by quotas and discriminatory taxation, but also by domestic regulation - including a range of qualification and licensing requirements and procedures. To illustrate the nature and implications of these regulatory impediments, this paper presents a detailed description of the regulatory requirements faced in the United States market by four types of Indian professionals: doctors, engineers, architects, and accountants. India is one of the largest exporters of skilled services, and the United States is one of the largest importers of skilled services, so these two countries reflect broader global trends. The paper argues that regulatory discrimination, for example through preferential recognition agreements, has implications both for the pattern of trade and for welfare. It presents some illustrative estimates that suggest the economic cost of regulations may be substantial. The paper concludes by examining how the trade-inhibiting impact of regulatory requirements could be addressed through bilateral and multilateral negotiations.

There is a fundamental shift taking place in the world economy to which the multilateral trading system has failed to adapt. The Doha process focused on issues of limited significance while the burning issues of the day were not even on the negotiating agenda. This paper advances five propositions: (i) the traditional negotiating dynamic, driven by private sector interests largely in the rich countries, is running out of steam; (ii) the world economy is moving broadly from conditions of relative abundance to relative scarcity, and so economic security has become a paramount concern for consumers, workers, and ordinary citizens; (iii) international economic integration can contribute to enhanced security; (iv) addressing these new concerns - relating to food, energy, and economic security - requires a wider agenda of multilateral cooperation, involving not just the WTO but other multilateral institutions; and (v) despite shifts in economic power across countries, the commonality of interests and scope for give-and-take on these new issues make multilateral cooperation worth attempting.

Trade ministries will soon meet in Geneva in an effort to move the Doha Development Agenda (DDA) negotiation towards conclusion. The negotiations have been under way for almost seven years. In the areas where negotiations are most advanced, they have generated complex and detailed proposals. This note takes stock of the major components of what is currently on the table in goods and services, as well as the key elements relating to economic development: duty-free, quota-free access for the poorest countries, trade facilitation, and aid for trade. The headline conclusion is that Doha round, perhaps not as ambitious as ministries had hoped at its launch in 2001, compares favorably with the Uruguay round in terms of market access, and surpasses it in terms of breadth of coverage and tangible benefits for developing countries. Ministries, if they turn their back on deal, will be leaving on the table a significant multilateral achievement.

Using panel data for the fourteen major states of India over the 1980-2000 period, the authors estimate the effect of human capital endowment on the performance of the state economies. They find that greater availability of skilled workers had a positive and significant impact on output in the service sectors. They do not find any such effect for the manufacturing sectors. The paper shows that the differential effect on services and manufacturing arises because service sectors are more skill intensive.

The competitiveness of firms in open economies is increasingly determined by access to low-cost and high-quality producer services - telecommunications, transport and distribution services, financial intermediation, etc. This paper discusses the role of services in economic growth, focusing in particular on channels through which openness to trade in services may increase productivity at the level of the economy as a whole, industries and the firm. The authors explore what recent empirical work suggests could be done to enhance comparative advantage in the production and export of services and how to design policy reforms to open services markets to greater foreign participation in a way that ensures not just greater efficiency but also greater equity in terms of access to services.

The authors investigate the occupational placement of immigrants in the U.S. labor market using census data. They find striking differences among highly educated immigrants from different countries, even after they control for individuals' age, experience, and level of education. With some exceptions, educated immigrants from Latin American and Eastern European countries are more likely to end up in unskilled jobs than immigrants from Asia and industrial countries. A large part of the variation can be explained by attributes of the country of origin that influence the quality of human capital, such as expenditure on tertiary education and the use of English as a medium of instruction. Performance is adversely affected by military conflict at home which may weaken institutions that create human capital and lower the threshold quality of immigrants. The selection effects of U.S. immigration policy also play an important role in explaining cross-country variation. The observed under-placement of educated migrants might be alleviated if home and host countries cooperate by sharing information on labor market conditions and work toward the recognition of qualifications.

This chapter starts with a brief overview on how services are traded and the different modes of service supply that include: cross-border trade, consumption abroad, foreign direct investment, and labor movement. It then reviews the reasons for trade in services together with the sources of potential welfare as well as the effects of services liberalization on income distribution. It notes that these issues are very similar to the standard analysis of trade in goods and factors. Next the interactions among the different modes of supply are discussed. These interactions are important because restrictions on some modes (such as labor mobility) may either render some services non-tradable, or may force service providers to use another (possibly less efficient) mode. An analysis is then provided of the effects of some of the most common barriers to trade in services, noting in particular how the effects of trade liberalization cannot be analyzed independently of the domestic regulatory system. The relative merits of trade agreements versus unilateral liberalization of services trade are discussed.

This book aims to improve understanding of the economic implications of services trade, liberalization, regulatory reforms, and international negotiations. It discusses the basic economics of services trade, cross-sectoral domestic policy issues, and the international negotiating framework, as well as data sources and measures of services trade barriers. It addresses how services reform — including in banking and the broader financial sector, in health, and in key infrastructure sectors such as telecommunications and transport — can promote efficiency, economic growth, and poverty reduction. The book points out that the benefits of services liberalization may be diminished by flaws in reform programs, such as inadequate efforts to introduce competition; failure to strengthen regulation or institute policies that ensure that the poor have access to services in liberalized markets; inappropriate sequencing of reforms; and inadequate foreign assistance to help implement reforms. The ongoing GATS negotiations in the Doha Development Round could help achieve reciprocal liberalization, lend credibility to reform, and help mobilize external assistance to support reform. There may also be greater scope for achieving deeper integration of particular services sectors, and for greater cooperation on temporary migration (mode 4) under regional or bilateral agreements.

This chapter explains the basic structure of the General Agreement on Trade in Services (GATS), and how it applies to measures that affect trade in services. Although a number of terms and concepts in the GATS have been borrowed from the General Agreement on Tariffs and Trade (GATT) — the older agreement covering merchandise trade — there are important differences. That is, the GATS is more comprehensive in coverage, its definition of trade in services extends beyond the traditional notion of cross-border exchange to cover consumer movements and factor flows (investment and labor), and the reach of relevant disciplines is not confined to the treatment of products (i.e., services), but extends to measures affecting service suppliers (producers, traders, and distributors). The breadth in scope and coverage of the GATS contrasts with the flexibility of its rules. Unlike under the GATT, the use of quantitative restrictions is legitimate under the GATS unless explicitly foregone by the Member concerned, and national treatment is not a general obligation, but a negotiable commitment. Country specific schedules of commitments define the extent to which these rules apply to individual service sectors. There are no common templates. The chapter then discusses the achievements to date (or lack thereof) in the current Doha Round of services negotiations, with a focus on the issues especially from a developing-country perspective.

This chapter discusses the four modes of supply of services that are covered by the GATS, the sources of services data, and the services growth experiences of selected countries and regions. It then notes how services reform can promote efficiency and growth at the sectoral level and economy-wide, pointing out that the benefits of services liberalization may be diminished by flaws in reform programs, the failure to provide for greater services access for the poor, and the need to take adjustment costs into account. The chapter argues that domestic policy reforms should recognize the importance of increasing competition among service providers; the need for appropriate sequencing of reforms; and reduction of the importance of national monopolies. Further, it stresses that international engagement is crucial to buttress domestic reform in order to achieve reciprocal liberalization, greater credibility of reform, provision of external assistance to facilitate domestic adjustment, reinforcement of the reform process, and promotion of greater harmonization and integration of policies. The ongoing GATS negotiations are an important and essential framework to support the international liberalization of services, and should include the design of arrangements for aid to developing countries to help promote services trade and promote greater cooperation on temporary migration. There may also be greater scope for achieving deeper integration of particular services sectors by means of regional services agreements.

This chapter reviews the recent wave of regional trade agreements (RTAs), to assess the benefits and costs of alternative approaches and identify the policy choices developing countries will face in negotiating regional agreements. The chapter focuses on three core issues: (1) whether services trade differs sufficiently from goods trade as to require different policy instruments and approaches in the context of preferential liberalization, whether and how RTAs may allow deeper forms of regulatory cooperation to occur, and the effects on non-members; (2) lessons learned from the practice of preferential liberalization in services in terms of market access and rule design; and (3) the legal dimension of the policy interface, focusing on a number of aspects of rule-design, including the strengths and weaknesses of existing multilateral disciplines on regional approaches to services trade and investment liberalization. A summary is provided of Article V (Economic Integration) of the GATS, including a discussion of the extent to which its disciplines are likely to allow third countries to object to provisions in proposed agreements that are detrimental to their interests. The chapter concludes with a discussion of issue areas that parties to prospective RTAs in services will need to confront and seek novel solutions to in advancing the process of services liberalization and rule-making at the regional level. The addendum to the chapter includes a discussion of liberalizing services trade in ASEAN region and in Latin America.

This paper discusses what could be done to expand services trade and investment through a multilateral agreement in the WTO. A distinction is made between market access liberalization and the regulatory preconditions for benefiting from market opening. We argue that moving forward on multilateral services liberalization requires a shift from bilateral request-offer negotiations to a model schedule approach that sets ambitious objectives - ideally full national treatment for the major backbone services. Attainment of such objectives, especially by smaller and poorer members, requires procompetitive regulation and strengthened regulatory institutions in developing countries. This suggests linking implementation of liberalization commitments to the provision of development assistance (‘aid for trade’) to bolster regulatory capacity and enforcement could enhance the relevance of the WTO for developing countries. Bolstering WTO mechanisms to monitor the actions of both developing and high-income country governments could make the institution much more relevant in promoting not just services liberalization but, more importantly, domestic reform of services policies.

The paper analyzes migration from Zambia in order to understand how migration policy can support development in the least developed countries. Overall emigration from Zambia is not high by regional standards, but the pattern of migration is skewed toward the skilled and away from the unskilled. A development-friendly approach to migration for Zambia would strive to ensure the temporariness of both types of movement. First, industrial countries may be willing to accept a higher level of unskilled immigration if they could be certain that it is temporary. Second, any adverse effects of brain drain would be greatly alleviated if skilled emigration is temporary. The problem is that host countries cannot unilaterally ensure temporariness of unskilled migration because repatriation cannot be accomplished without the help of source countries like Zambia, and source countries today have little incentive to facilitate the return of the unskilled. At the same time, source countries like Zambia cannot unilaterally ensure temporariness of the skilled because repatriation cannot be accomplished without the help of the host countries, and host countries currently have little incentive to send back the skilled. So, there is a strong case and considerable scope for cooperation between source countries like Zambia and destination countries in the design and implementation of migration policy so that unskilled migration becomes feasible and skilled migration takes a more desirable form.

This major work consists of carefully commissioned original and incisive contributions from leading scholars in the field of international economic law. Covering a full range of topics, the Handbook provides an accessible treatment of the law in each area, as well as a thoughtful synthesis and discussion of related public policy issues from a broadly social science perspective.

Recent empirical research has focused on the role of institutions in overall economic performance. This paper examines the impact of institutions on the relative performance of the service sector. Through cross-country level and growth regressions it establishes the following stylized fact: countries with better institutions have relatively larger and more dynamic service sectors. It suggests that regulatory and contract enforcing institutions play a key role in the development of service sectors because these sectors enter into a more complex web of transactions with the rest of the economy and are more prone to market failure due to asymmetric information.

While there is considerable empirical evidence on the impact of liberalizing trade in goods, the effects of services liberalization have not been empirically established. Using firm-level data from the Czech Republic for the period 1998-2003, this study examines the link between services sector reforms and the productivity of domestic firms in downstream manufacturing. Several aspects of services reform are considered and measured, namely, the increased presence of foreign providers, privatization, and enhanced competition. The manufacturing-services linkage is measured using information on the degree to which manufacturing firms in a particular industry rely on intermediate inputs from specific services sectors. The econometric results lead to two conclusions. First, the study finds that services policy matters for the productivity of manufacturing firms relying on services inputs. This finding is robust to several econometric specifications, including controlling for unobservable firm heterogeneity and for other aspects of openness. Second, it finds evidence that opening services sectors to foreign providers is a key channel through which services liberalization contributes to improved performance of downstream manufacturing sectors. This finding is robust to instrumenting for the extent of foreign presence in services industries. As most barriers to foreign investment today are not in goods but in services sectors, the findings may strengthen the argument for reform in this area.

The authors analyze recent efforts at international cooperation to limit illegal migration, particularly through the use of legal migration avenues like guest worker schemes. They show that while guest worker schemes may be desirable as an avenue of international migration, they are an inefficient instrument to induce cooperation on illegal migration. On the one hand, guest worker schemes suffer from a negative selection problem relative to illegal migration, which tends to erode their attractiveness to source countries. On the other hand, guest worker schemes increase total (legal and illegal) migration which make them a costly compensating device for the host country. Moreover, guest worker schemes create additional pressure on host countries to implement tough laws against illegal immigration even when the host finds such laws undesirable. Thus, less favorable treatment of illegal immigrants, as in California Proposition 187, may be an inevitable rather than incidental outcome of reliance on guest worker schemes. In contrast, countries that are willing to use transfers and other forms of economic assistance to induce source countries to cooperate can afford relatively liberal treatment of illegal immigrants.

The benefits of services trade reform are huge but services negotiations in the World Trade Organization (WTO) are making little progress. A proximate cause is the current negotiating process, based on an inertial request-and-offer approach rather than a set of goals that would give direction and momentum to the negotiations. The paper suggests that WTO members should consider: (1) locking in the current openness of cross-border trade for a wide range of services; (2) eliminating barriers to foreign investment either immediately or in a phased manner where regulatory inadequacies need to be remedied; and (3) allowing greater freedom of international movement at least for intra-corporate transferees and for service providers to fulfill specific services contracts. A deeper problem is that WTO members have sought to negotiate market access in services without adequately addressing concerns that the General Agreement on Trade in Services (GATS) commitments limit regulatory freedom unduly and unpredictably, that regulatory institutions in many countries are too weak to cope with liberalized markets, and that there is no provision for the regulatory cooperation that is necessary for successful liberalization, particularly of temporary labor mobility. Three types of actions are needed: (1) at the current stage of its development, the GATS must focus primarily on disciplines for measures that discriminate against foreign services and providers, rather than on politically sensitive and legally complex rules for nondiscriminatory measures; (2) a credible assistance mechanism must be established to help developing countries make the regulatory improvements needed for successful liberalization; and (3) where necessary, WTO members should make access commitments on labor mobility conditional on the fulfillment of specific conditions by source countries-to screen services providers, accept and facilitate their return, and combat illegal migration.

There is limited trade in health services despite big differences in the price of health care across countries. Whether patients travel abroad for health care depends on the coverage of treatments by their health insurance plan. Under existing health insurance contracts, the gains from trade are not fully internalized by the consumer. The result is a strong "local-market bias" in the consumption of health care. A simple modification of existing insurance products can create sufficient incentives for consumers to travel. For just 15 highly tradable, low-risk treatments, the annual savings to the US would be $1.4 billion even if only one in ten patients who need these treatments went abroad. Half of these annual savings would accrue to the Medicare program alone. We examine how measures by destination countries to improve and credibly signal the quality of health care can enhance the scope for trade.

The impact of international students and skilled immigration in the United States on innovative activity is estimated using a model of idea generation. In the main specification a system of three equations is estimated, where dependent variables are total patent applications, patents awarded to U.S. universities, and patents awarded to other U.S. entities, each scaled by the domestic labor force. Results indicate that both international graduate students and skilled immigrants have a significant and positive impact on future patent applications, as well as on future patents awarded to university and nonuniversity institutions. The central estimates suggest that a 10 percent increase in the number of foreign graduate students would raise patent applications by 4.7 percent, university patent grants by 5.3 percent, and nonuniversity patent grants by 6.7 percent. Thus, reductions in foreign graduate students from visa restrictions could significantly reduce U.S. innovative activity. Increases in skilled immigration also have a positive, but smaller, impact on patenting.

The choice between temporary and permanent migration is today central to the design of migration policies. The authors draw a distinction between the two types of migration on the basis of the associated social cost and the dynamics of learning by migrants. They find that unilateral migration policies are globally inefficient because they lead to too much permanent migration and too little temporary and overall migration. Existing international agreements on labor mobility, such as the World Trade Organization's General Agreement on Trade in Services, have failed to do better because they seek primarily to induce host countries to make commitments to allow entry. Instead, Pareto gains and more liberal migration could be achieved through multilateral agreements that enable host countries to commit to repatriation.

The choice between temporary and permanent migration is today central to the design of migration policies. The authors draw a distinction between the two types of migration on the basis of the associated social cost and the dynamics of learning by migrants. They find that unilateral migration policies are globally inefficient because they lead to too much permanent migration and too little temporary and overall migration. Existing international agreements on labor mobility, such as the World Trade Organization's General Agreement on Trade in Services, have failed to do better because they seek primarily to induce host countries to make commitments to allow entry. Instead, Pareto gains and more liberal migration could be achieved through multilateral agreements that enable host countries to commit to repatriation.

The previous General Agreement on Trade in Services (GATS) negotiations produced little liberalization of the movement of individual service providers (mode 4), and the potentially large global gains from such movement remain unrealized. In the current negotiations, as part of the Doha Development Agenda, developing countries are seeking greater openness in their area of comparative advantage: the movement of providers unrelated to commercial presence abroad. At the same time, many multinational firms would like easier intra-corporate movement of their personnel. We describe how this coincidence of interest could be harnessed to deliver greater openness at least for skilled service providers.

India's trade policy establishment is perceived to be somewhat wary of multilateral engagement, even though India is implementing substantial economic, and trade policy reforms. Some essays in this well-researched volume may throw light on this paradox. More important, the essays take a hard look at India's interests, and concerns with respect to international trade. They suggest ways that India could deploy its domestic reform agenda in the Doha Round negotiations, to secure concessions from its trading partners, while using multilateral engagement to reinforce the domestic reform process, and enhance the process' credibility. The book should prove of considerable value to policymakers, market participants, and other stakeholders.

This paper elaborates on a number of key principles that need to underpin a coherent and development-friendly architecture for the WTO. The key principles include enlarging the scope of WTO bargaining to include labor flows as well as capital flows; creating a structure that would provide a balance between furthering liberalization and providing some discretion or policy space to accommodate the inevitable political constraints; and minimizing the extent of regulatory harmonization. These principles, while applicable to all countries, may have less immediate relevance in addressing the problems of the least developed countries.

The World Trade Organization (WTO) is today dealing with an issue that lies at the interface of two major challenges the world faces, trade liberalization and international migration. Greater freedom for the "temporary movement of individual service suppliers" is being negotiated under the General Agreement on Trade in Services (GATS). Conditions in many developed economies - ranging from aging populations, to shortages of skilled labor - suggest that this may be a propitious time to put labor mobility, squarely on the negotiating agenda. Yet, there is limited awareness of how the GATS mechanism can be used to foster liberalization in this area of services trade. At the same time there is great concern, about the possible social disruption in host countries, and brain drain from poor countries. As a first step in improving our understanding of the implications of such liberalization, this volume brings together contributions from service providers, regulators, researchers and trade negotiators. They provide different perspectives on one central question: how is such liberalization best accomplished, in a way that benefits both home, and host countries? The result, combining insights from economics, law and politics, is bound to be a vital input into the WTO services negotiations, as well as the broader debate on the subject.