New Trends in International Trade and Labor Market Interactions: South–South Trade, Trade in Services and Labor Market Implications

In light of the current economic developments after the 2008–2009 global financial crises and the political turmoil following the uprisings in the Middle East and North Africa (MENA), South–South dynamics and trade in services have become center of the attention for businessmen, policy makers, academicians and practitioners. Increasingly, every indicator, from the least formal, such as the ever increasing number of Google search hits, to the most established, such as the titles of several panels dedicated to the topic in the International Development Conference 2011 at the Kennedy School of Government, points to the attention the South–South momentum is attracting. Both South–South trade dynamics and the increasing trend in services trade have significant labor market implications, especially for developing countries. As the composition of trade diverges from traditional sectors and the familiar North–South axis, the demand for labor is affected considerably. The relatively higher value-added and skill requirements of services trade is counter-balanced by still relatively less value-added trade in the South–South domain. The purpose of the chapter is to start a promising, but highly challenging research exploration in a phenomenon increasingly shaping the new map of trade, globalization and labor mobility. In addition to presenting new trends in international trade, the chapter also investigates the recent literature on labor market implications of these trade moves and makes very basic and intuitive predictions utilizing standard trade theory.