Professional Protectionists: The Gains From Free Trade in Highly Paid Professional Services
The term “free trade” has been grossly misused in trade debates. Free trade has generally meant removing barriers on trade in goods, the effect of which is to put downward pressure on the wages of the three quarters of the work force without a college degree. A consistent proponent of “free trade” would also be arguing strongly for the removal of barriers to trade in professional services. Putting highly paid professionals in direct competition with professionals in developing countries would lead to large gains to consumers and the economy. In addition, it would be a more equitable approach to trade. For the last fifty years U.S. trade policy has focused primarily on removing barriers to trade in goods. Trade policy has not only reduced or eliminated direct barriers, such as tariffs and quotas, it has also worked to reduce indirect barriers, such as rules governing foreign investment, product safety and environmental standards. However, U.S. trade negotiators have made no comparable effort to reduce barriers to trade in highly paid professional services, such as doctors’, dentists’, lawyers’ and accountants’ services. To the contrary, in some cases barriers to foreign professionals working in the United States have increased in recent years. This paper documents some of the barriers that prevent foreign professionals from working in the United States. It also produces calculations of the potential gains to consumers and the economy if free trade applied to highly-paid professional services. The paper also discusses some of the mechanisms that could be put in place to ensure that developing countries share in the gains from an increased flow of professionals to the United States.