Trade in Services, Trade in Technology, and Labor Mobility

It is hard to believe that the month of September is almost over. In blogging, as in academia in general, there are so many things we want to research and write about, and only a certain amount of time. It’s like the old joke about law practice: there are only 24 hours in a day, and you can only bill 36 of them.

In the area of international trade regulation, I am interested, among other subjects, in the connections and gaps between trade control regimes concerning (a) trade in technology, (b) trade in services, and (c) labor mobility. In some respects these three types of regimes overlap in complementary fashion; in other respects they are in tension with one another; and in other respects there are gaps between the regimes. What are the implications of these overlaps and gaps? What do they suggest about the nature and direction of transnational economic activity and the movement of persons? And perhaps most interesting of all, what does it suggest about how trade might be more effectively regulated or deregulated, or liberalized or restricted?

These are large questions, and they suggest (accurately) that my views and thoughts on the subject are still developing. That makes the subject a perfect one for a post, since it gives me the opportunity to set forth my thoughts for others to comment upon (or not) as they see fit. I will endeavor to keep this post to a reasonable length, which means that the discussion will be at a high level of generality.

The Regimes

Let me begin by reviewing the overlaps in outbound trade controls, trade in services regimes, and labor mobility regimes. First, as I discussed in a previous post, a substantial portion of what at least the U.S. and other industrialized countries regulate as exports actually covers non-physical activity – namely, the provision of technology or assistance to parties abroad. That is, technology for the development, production or use of a particular good or software is itself subject to the export laws of the United States. (Many of the U.S.'s industrialized trading partners also employ a similar regulatory scheme, such that there is rule harmonization in this regard). Moreover, the technology in question is subject to these export control regimes regardless of whether the technology accompanies the goods or software to which it pertains, and regardless of whether a business transaction is involved. The upshot is that a lot of non-physical or non-goods activity is considered export activity.  (For readers interested in how the U.S. export controls in question technically operate, see 15 C.F.R. Part 732, which contains a fairly user-friendly, step-by-step explanation of U.S. export controls.)

It is also important to bear in mind that under U.S. export controls and other national export control regimes like it, the provision of assistance (that is, of a service, such as through a service call) can be considered the provision of technology. That means that any liberalization of trade in services of necessity overlaps with, and interacts with, export control regimes. Some efforts to liberalize trade in services are contained in regional trade agreements or other bilateral agreements between countries, but the larger effort to liberalize trade in services is of course the WTO’s General Agreement on Trade in Services. GATS lists four modes of supply, namely:

   1. Cross border supply

   2. Consumption abroad

   3. Maintenance of a commercial presence abroad

   4. Movement of natural persons

Cross border services, commercial presence abroad and the movement of natural persons all provide opportunities for persons engaged in those service activities to provide an export of “technology” that is separately controlled by a national export control regime such as that of the U.S.

Finally, labor mobility implicates both export controls and trade in services because (a) persons who travel to another country might engage in actions there that constitute the provision of services, or an export of technology, or both. And even more interesting, and perhaps surprising, is that at least under U.S. export controls, the provision of technology to a non-permanent foreign national in the U.S. is deemed to be an export to the foreign national’s "home country" (the so-called “deemed export” rule). Thus, the provision of technology to a Chinese national in the U.S. (such as in the form of training or assistance) is considered by the U.S. to be an export to China, unless the Chinese national is a permanent U.S. resident.  It is a rule observed in the breach, perhaps, but it is a rule, and there are companies (especially in industries with a significant amount of sensitive technology) that spend a great deal of time and money complying with the rule.  There are also individuals whose employment and residency prospects are affected by the rule.  Other countries, however, generally do not have the same sort of “deemed export” rule.

The Implications

This is all very interesting from a technical or operational perspective, but what is far more interesting is what questions the overlaps raise regarding international trade policy at the national, regional and multilateral levels. For example, how is trade encouraged, discouraged or diverted by the interplay of these regimes? For example, does the deemed export rule discourage lawful immigration, and if so, is that a desirable result? Do immigration restrictions avoid or reduce the perceived need for such a rule?

Also, to what extent are trade in technology, trade in services, and labor mobility actually substitutes? To what extent are they complements? International trade and foreign direct investment generally are more complementary than substitutionary, even on an intra-industry basis (which was a subject of my masters dissertation in international economics); does the same hold true for trade in technology, trade in services, and labor mobility? If the rules of the three types of regimes differ – for example, labor mobility rules are more restrictive than trade in technology rules, and trade in services liberalizations are inconsistent across the four GATS modes of supply, among countries and across economic sectors – what does that do to the overall level of global (or regional) trade?

Moreover, how might the overlaps be used to promote what one might call desirable or “fair” trade – which I define here (in quasi-Pareto-efficient fashion) as trade that creates jobs and wealth in one country without causing significant, or at least immediate and rapid, dislocating or structural adjustments in another country? Given the Obama administration's stated interest in "free but fair" trade, that is a question that is perhaps more relevant now than previously.

Finally, such pluralism of regulatory regimes is common, and in some cases even desirable. Paul Schiff Berman, for example, has written about this in his article “Global Legal Pluralism.” Is that the case in this area, however? If plurality of regimes for outbound trade control, trade in services, and labor mobility leads to reduced international trade, could that be desirable (for example, by preventing rapid changes in terms of trade) or undesirable (as traditionally has been generally supposed)? If the result of pluralism in this context is undesirable, does that suggest that greater harmonization (and perhaps even unification) of these three different types of regimes is the only means to achieve the benefits of greater and more liberalized trade?

Again, I currently have more questions than answers, but I pose them nonetheless in the spirit of intellectual discourse. My own current views are, firstly, that greater harmonization of these regimes is desirable, and that pluralism is not. (It perhaps might be that this area of trade regulation, with its concerns regarding efficiency, transparency and security, is the exception that proves the rule with respect to the benefits of legal pluralism in trade, but I have not made my mind up on that score.) Secondly, it is my view that national export control regimes should be more multilateral in their approach (as discussed in my previous post) , and thirdly, I believe that greater efforts should be made to link trade in services regimes to international or regional labor mobility regimes. Too often (in the U.S. at least), the immigration debate centers on security issues that have little to do with trade and economic prosperity. Linking labor movement/immigration laws to economic activity and economic growth might help to shift the debate to more constructive ground, especially if embedded in the discussions is the possibility of greater work opportunities abroad for U.S. nationals.