Economics & Finance / Macroeconomics / International Trade & Globalization

EU Enlargement: Why Free Trade Saved Western Europe from a Migrant Disaster

In 2004, the European Union expanded eastward, creating a historic experiment in both goods and labor market integration. But what if the trade barriers had stayed? Using a dynamic general equilibrium model, economists Lorenzo Caliendo, Luca David Opromolla, Fernando Parro, and Alessandro Sforza reveal a shocking truth: without tariff elimination, Western Europe would have suffered a welfare loss from immigration. Instead, free trade acted as a pressure valve, slowing migration and boosting everyone's prosperity. This video breaks down the data—how Eastern Europe gained 1.65% in welfare, why low-skilled workers benefited most, and how the UK's early open-door policy backfired due to public service strain. Discover the counterintuitive link between trade and migration, and why ignoring it can flip winners into losers. Based on the 2017 paper from Goods and Factor Market Integration.