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Free trade requires openness to people too

By Philippe Legrain

Britain’s international trade minister, Liam Fox, was in Washington DC this week crowing about prospects for a post-Brexit trade deal with the US. Cue much clucking about whether this would entail the UK having to accept “chlorinated chicken”. Fox insisted that there wasn’t even a nugget of truth to fears that American poultry was unsafe to eat. But feathers flew when another leading Brexiteer, environment minister Michael Gove, countered that there would be no lowering of British food standards (though some may wonder whether foreign produce could get any worse than brain-rotting British BSE beef). Who will chicken out? Someone will surely end up with egg on their face.

Puns aside, UK ministers are only now starting to realise that the “free-trade deals” that they are so gung-ho about are much more complex – and controversial – than they thought, not least because they are mostly about squaring differing domestic regulations, such as food standards, rather than about lowering import tariffs.

Indeed, there is an even bigger tension at the heart of UK trade policy: while Brexiteers seem keen on goods and services moving freely across borders, they’re not so keen on the people who make those goods and services doing so. Indeed, the desire to curb migration is the main reason why Britain is planning to leave not just the EU, but the single market too. But leaving the EU won’t resolve this tension, because Britain’s other trading partners care about its immigration rules too.

While visa liberalisation may not be a priority for the likes of Donald Trump, the Australian government this week warned the UK that a future trade deal could hinge on London making it easier for Aussies to move. Prime Minister Theresa May got a similar message when she visited New Delhi last year. India wants more business visas, notably for its IT workers, an issue that has stalled its trade negotiations with the EU. And it also wants less stringent visa requirements for Indian students. On the plus side, at least Britain doesn’t have a problem with coronation chicken.

It’s not just the specifics of immigration rules that impinge on trade, it’s also the rhetoric. Theresa May’s chillingly nativist declaration that “if you believe you’re a citizen of the world, you’re a citizen of nowhere” was scarcely an invitation to trade. Proclaiming that you are open for global business sits uneasily with being hostile to foreigners.

For sure, Britain is not alone in thinking of international trade and migration as separate things. In government bureaucracies, trade ministers tend to be part of an economic ministry (or one for foreign affairs), while immigration ministers are often part of an interior or justice ministry charged with domestic security. Yet in our globalised world, international flows of goods, services, capital and people are increasingly intertwined.

Imagine you need surgery. If you go abroad for it, the operation is classified as international trade: an import of medical services. But if the same foreign surgeon comes to your country to do the job, this is considered migration. Yet the operations are analogous.

Or consider a British company that outsources its back-office work to an Indian one. If the Indian programmers do the job in Bangalore, it is called trade. If they come to Birmingham to do the tasks, it is called migration. Again, it is basically the same work.

In some cases, trade is only possible if people move. Consider services that have to be delivered locally: old people cannot be cared for from afar; offices and hotel rooms have to be cleaned on the spot; food and drink have to be served face to face; buildings have to be erected in situ. If Britain wants to import construction services from Poland, it needs to allow in Polish builders.

Sometimes it is the consumer of the services, not the producer, who has to move. To study at London School of Economics, foreigners need to move to the British capital. And while their trips are typically short enough to be thought of as visits rather than migration – here too definitions are blurry – people need to move to attend an international conference or go on a foreign holiday.

In many cases, trade and people flows are complements. McKinsey may need to send its consultants on foreign trips to pitch for business that is delivered electronically. A US bank that establishes a presence in the City of London may need to bring over American bankers.

In other cases, trade and migration may be substitutes. If Britain stops allowing in East European workers to pick strawberries, Britain may instead import the fruit from Spain.

While politicians tend to compartmentalise trade and migration, the multilateral trading system does recognise that short-term mobility is a form of trade. The World Trade Organisation’s services agreement distinguishes four ways in which services can be supplied, two of which involve mobility: Mode 2 for consumption and Mode 4 involving the movement of “natural persons”. (Which begs the question: what is an “unnatural” person?) And the other two ways of supplying services, cross-border trade (Mode 1) and establishing a foreign commercial presence (Mode 3), may also entail mobility, as the examples above highlight.

None of this is to deny that the movement of people, especially for permanent settlement, has wider ramifications than shipping a widget across borders. Migrants aren’t just workers or businesspeople; they are human beings. They fall in love, make friends and have families. They cook food, write books, sing songs and play sports. Their different thinking helps spark wonderful new ideas. All of which are further reasons to be open to migration. Are your Polish neighbours really scarier than American chicken?

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