Labour mobility and international trade

Motivation: The academic debate on whether the relationship between factor mobility and international trade is one of complementarity or substitution is inconclusive. In general, the relationship between the two can vary depending on the specific research methodology and the object of study. Moreover, there are fewer empirical analyses with China and the European Union as subjects, so studying the relationship between labour mobility and trade in the case of China and Europe is worthwhile. Aim: The purpose of this paper is to determine, through empirical analysis, the relationship between labour mobility in the form of dispatched labour and bilateral trade between China and the European Union in the period of 2005-2021. Materials and methods: This paper utilises quantitative analysis to investigate the relationship between labour movements and trade (imports and exports) based on data from 2005 to 2021, primarily through co-integration analysis and Granger causality testing. Results: The study found that there is a substitution relationship between the number of dispatched labour from China and the trade in goods between China and the European Union in the research period. Additionally, Granger causality tests show that China's dispatched labour to the EU is the Granger cause of China-EU export trade, and vice versa. However, China's dispatched labour to the EU is not a Granger cause of China-EU import trade.