Standard international trade theory suggests indifference between free trade and free migration, as both can lead to factor price equalization. Rich countries, however, appear to prefer free trade to free migration. This paper explains this preference in terms of the concept of social capital. The movement of people differs from the movement of goods and services, because people create attachments with those with whom they share social capital, including norms, language, customs, values and culture. Migration affects social capital in both the countries of emigration and immigration. In the paper four types of externalities associated with migration are identified and a model is set out that examines trade and migration policy (and changes in migration costs) under alternative assumptions about the internalization of these externalities. Irrespective of the degree of internalization of externalities, the countries that people emigrate from gain from trade liberalization and from preferential trade with richer countries to which immigration takes place, while the latter countries gain from immigration controls. The likelihood that the emigration countries gain from free migration increases with the degree of internalization of the externalities.