Why Russians may soon travel visa-free to the USA

12 Feb

What determines whether you can travel visa-free to rich countries? It seems it is mainly economics.

New Rules For Identification Documents At US Borders Goes Into Effect

Picture: foxnews.com

Rich-country citizens can usually travel freely between each others’ countries. To demonstrate this, the following chart summarizes the visa policies of the US. US visa policy looks fairly straightforward: once you reach an income level of around 18 thousand dollars per capita in PPP terms, or about 35% of the US level, you will soon get a visa waiver (you still need to apply electronically, but the visa is granted automatically in most of the cases). Except if you are rich because of oil or gas. Qatar is the richest country in the world in terms of per capita income, but its citizens still need to apply for US visas, and the same goes for Saudi Arabia or Kuwait for example.

The actual visa policy of the US depends on the number of people who were refused to be given visa/overstay, but the outcome can be modeled very well with income levels. The oil country exceptions may have to do with large income inequality and/or fear of Islamist infiltration. There are very few other exceptions to the income rule-of-thumb.

US visa policy in a chart: Rich non-oil countries get the visa waiver with few exceptions

Picture1 Source: IMF data, Wikipedia, Worldbank. Sample omits countries with an oil rent of more than 10% of GDP

The Schengen visa policy is somewhat more complicated. It grants visa-free status to other rich countries, and oil producers are again the exception. However Schengen countries also give visa-free access to some lower income ex-colonies, mostly in Latin America, as well as European countries like Albania that have some kind of association agreement with the EU. Visa-free travel is often used as a carrot in negotiations of EU accession agreements, as was recently demonstrated with Ukraine. All this makes the cut-off line in Schengen GDP per capita more blurry, but it seems that it is around 40-45% of the German GDP if you don’t have any special favors.

Next in line for visa-free travel: Russia?

If relative income ratios drive visa policies, Croatians should get their visa waiver from the US – and indeed they are official “road map candidates” for this. Argentina and Uruguay could follow soon (all of these countries already have visa-free status to the Schengen Area).

More significantly (at least based on population size) Russia is also at the income threshold of EU visa-free status. Its per capita GDP is at 46% of the German level, so you could even argue that it is a bit overdue. And indeed, negotiations about this were scheduled to start in early 2014 – but this is a political question as well, bound together with Ukraine, gay rights etc. Russia may also achieve visa-free status with the US by 2020 – the IMF forecasts a relative income of 37% by 2018, though this may be too optimistic if oil prices fall.

In my opinion, giving visa-free status to Russia would be a good idea. Nothing reduces mutual suspicions more than middle-class Russians travelling to the EU and the US and vice versa. Super-rich Russians are already travelling easily (and spending heavily…). But the EU and possibly the US may want to receive some political concession(s) in exchange for this, which may prolong the process.

Another interesting development would be visa-free travel for Mexicans to the US, which sounds politically difficult, but may still be realized by the 2020s if Mexican growth rates do not falter and drug-related violence can be brought under control. Indeed the immigration pressure from Mexico has already eased considerably already since the recent economic crisis. Turkey should also get visa-free access to the EU relatively soon – very likely sooner than Mexico to the US as there are already ongoing negotiations.

Turkey’s per capita GDP is at 39% of the German level, relatively close to the level where countries start to get their Schengen access. The recent political and economic troubles may delay the process, but probably do not stop it, provided that the economic growth story remains on track.

Free travel for the Chinese in the 2020s?

The big question is of course huge countries like China and India. If China can maintain an average growth rate of about 6%, it may be able to get rich enough to achieve visa-free status in the EU by the mid-2020s and with the US soon after. This breakneck pace of growth is probably too optimistic, and the 2030s looks a more likely proposition. If India could sustain 7% growth rates, it could get visa-free status in rich countries by around 2030 – again, this is probably going to happen somewhat later in real life. Given the huge sizes of these aspirant countries, rich countries will want to make extra sure that there is not going to be mass immigration before they free up travel completely.

Not that poor any more: relative incomes getting over the magic 40% line

 Picture3

Source: IMF data and projections, per capita PPP GDP

But visa-free status is just the last step of relaxing travel restrictions. Visas are becoming simpler to get a long time before that. We are already seeing the easing of  entry restrictions for Chinese citizens, and even some competition for Chinese shoppers.

The World becomes high-income

Also, it may not be just the relative level of income which determines free travel, but the point at which they achieve a relatively high absolute income level. The following chart shows you the ratio of world population living in countries where the per capita income is more than 13 thousand dollars (roughly the current World Bank threshold for high-income countries). Even on our relatively pessimistic growth projections, China should surpass that level by around 2020, and India sometime in the 2030s. It will be a very different world when most of the population lives in high-income countries, and of course freer travel is just one aspect of that.

Not that poor any more II: The World is becoming high-income

 Picture2

Source:IMF, own forecasts. High income defined as countries with 13K and above per capita PPP GDP

…taketh away

All this sound very upbeat, but it rests of course on the assumption that poorer countries will be able to get richer over time. This assumption is probably correct for emerging economies as a class – but there is no guarantee for individual cases. Bad economic policies will result in declining relative incomes in the long run, and even visa-free access is not granted forever. Argentina already had a US visa waiver before its 2002 default, which then was taken away. It remains to be seen how long they can keep that privilege if they manage to get it again this time – the country is again in an economic crisis. Even within Europe, the free movement of people is causing some tension at the moment –without income convergence, the current status quo may not last. Free movement is usually only free for those who do not want to move in large numbers…

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