PRESS BRIEF

MOVEMENT OF NATURAL PERSONS

    "Movement of Natural Persons" is a good indication of just how difficult it is to write rules for services trade and to negotiate its liberalisation. The subject _ foreigners entering a country, in this case to engage in services businessSee footnote 1 _ is one of four methods (or "modes") of supplying commercial services internationally, recognized in the General Agreement on Trade in Services (GATS). Individual countries' market-opening commitments on sectors such as finance or telecommunications also state how they are going to deal with the presence of foreign personnel, although most frequently the commitments simply contain a cross-reference to tables of commitments dealing specifically with the subject.

    Movement of natural persons is linked to other negotiations because many services need the applied knowledge, expertise and technical skills of individuals if they are to be supplied successfully. The ability to move key personnel into foreign markets in order to provide a service is an essential component of business strategy for all kinds of suppliers with international operations. The reality around the world, however, is that nearly every country has visa, residence and work permit restrictions which can impede or delay the movement of professionals to country locations where they are needed.

    The issue is one of four services topics whose negotiations remained uncompleted in the Uruguay Round. (The other three are market access negotiations in financial services, basic telecommunications and maritime transportation.) Countries did make initial commitments on the movement of natural persons at the end of the Uruguay Round.

    The purpose of the negotiations that resumed in May 1994, one month after the Uruguay Round agreements were signed in Marrakesh, was to improve upon those initial commitments. The negotiations ended in July 1995. The package of new commitments were attached to the Third Protocol of the GATS. The protocol took effect this year (1996), representing a modest improvement over the Uruguay Round package.

How the issue developed

    Interest in the movement of natural persons came mainly from developing countries, although many developed countries also wanted to see barriers lowered. Initially, one area of interest for a number

of developing countries was the possibility of pushing for entry commitments for less skilled employees, for example construction workers travelling abroad to work with a construction company from their home country. However, some developing countries also have large numbers of well-qualified professionals capable of providing services abroad.

    Services liberalisation talks have tended to concentrate on issues such as cross border supply and commercial presence. But India, and a number of other developing countries, including Thailand, Egypt and Argentina, argued that their service providers did not have the capital to establish branches or subsidiaries abroad (i.e. to have commercial presence). Nevertheless, individuals could still supply services competitively in foreign countries even without the formal commercial presence of their companies in those countries, the developing nations said.

    In the closing stages of the Uruguay Round, this group of developing countries requested that the developed countries _ in particular the Quad (US, EC, Japan and Canada) _ expand their offers in this area. The United States and Canada responded by expanding their offers. The US said its existing policy of allowing temporary entry of up to 65,000 professionals each year would be "bound" under the GATS (i.e. committed as a minimum that would be difficult to change). Canada said entry would be permitted for unlimited numbers of professionals, but it committed fewer categories of professions than the United States. Then came the post-Uruguay Round talks, during which some developing countries adopted the strategy of linking movement of natural persons with financial services _ they said they would only be willing to improve their financial services offers if progress was made in movement of natural persons.

The results

    The GATS agreement provides a framework for negotiating the temporary entry and stay of personnel into the territory of other countries for the purpose of providing services. But the GATS does not interfere with immigration authorities' powers to decide _ on security, health or economic grounds _ whether foreigners or foreign workers can enter and live in a country. In many cases countries have also declined to apply the non-discrimination clauses of the GATS because they have special preferential or reciprocal visa arrangements with selected trading partners. The commitments differ considerably in detail, but broadly speaking, three categories of personnel are the subject of legally biding guarantees in the list (i.e. "schedules") of the developed and many of the developing countries:

    * Business visitors may enter a country for a short time (typically 90 days) but without making sales to the general public or supplying services themselves in return for payment within that country (although the visit could lead to international transactions).

    * Intra-corporate transferees _ foreign employees of an organisation transferred into a country to work in the organisation's offices, branches or subsidiaries in that country _ are typically allowed longer stays of between two and five years and are allowed to receive pay for their work in that country. These employees include executives, senior management personnel, and specialists possessing an uncommon knowledge of the organisation and its business.

    * Foreign qualified professionals and practitioners can be allowed entry and temporary stay to work in a country to perform temporary assignments without being linked to the presence of a branch, office or subsidiary in that country.

    The negotiations that followed the Uruguay Round and ended in July 1995 resulted in new commitments from six members totalling 20 countries _ Australia, Canada, the European CommunitiesSee footnote 2, India, Norway and Switzerland. Under GATS non-discrimination rules, the commitments apply to all WTO members. The commitments are intended to guarantee access to these countries' markets for qualified professionals, computer specialists and other experts of various kinds, allowing them to work as foreigners in these countries in an individual capacity on temporary assignments. (This is not linked to the question of whether foreign companies have set up offices, branches or subsidiaries in these markets.)

Footnote: Professional Services

    Often confused with negotiations on "Movement of Natural Persons", Professional Services is in fact a separate subject with a separate objective. The Movement of Natural Persons talks were about commitments to open markets so that personnel could conduct business in foreign countries. The discussions in the WTO's Professional Services Working Party deal with rules, not specific commitments.

    One way of looking at the subject is to view it as the services equivalent of Technical Barriers to Trade in goods. Professionals _ accountants, doctors, architects, lawyers, engineers, etc _ need to know that once they have been allowed under GATS commitments to work in another country, there will be no additional, unjustified red tape blocking their way. The working party is looking at a number of questions along these lines, such as how to avoid using professional qualifications, technical standards and licensing requirements as unnecessary barriers to trade. No agreements have been reached so far, however.

    The subject is new for the GATT/WTO system. The working party is looking first at accountancy, and has set itself a deadline of the end of 1997. It will later turn to other professional services such as legal services, engineering and architecture. Participants have not decided yet whether any agreements reached will become annexes to the GATS or what other form they might take. Many participating governments, including some from developing countries, consider these professions to be priorities.

    The working party is also discussing the mutual recognition of countries' professional qualifications and similar issues. The first draft of a set of guidelines on the subject has been developed.

Selected Glossary

Some of the terms that frequently appear in documents on movement of natural persons:

binding Commitment under GATT or GATS to keep market open, specifying maximum level of trade barriers. Requires negotiation and possibly compensation if a trade barrier is to be raised beyond the bound ceiling.

commercial presence Having an office, branch or subsidiary (in this context, in a foreign country)

GATS General Agreement on Trade in Services

MFN Most Favoured Nation: basic non-discrimination between trading partners (each partner is given the same rights as any other "most favoured nation") Set out in Article 2 of the GATS.

modes of delivery How international trade in services is supplied and consumed. Mode 1: Cross border supply. Mode 2: Consumption abroad. Mode 3: Foreign commercial presence. Mode 4: Movement of natural persons.

natural persons People, as distinct from juridical persons such as companies and organisations.

offer A country's proposal for binding its market access levels.

protocols Extra agreements attached to the GATS. The Third Protocol deals with the movement of natural persons.

schedule ("Schedule of specific commitments") List of a country's market access bindings.


Footnote: 1    Some experts say the subject should more properly be called "presence" of natural persons, since the focus is on foreigners being allowed to do business in a country, not just to cross borders.
Footnote: 2    The European Union is officially called the European Communities in WTO business.
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