SERVICES: SECTOR BY SECTOR

Movement of natural persons (mode 4)

Under the General Agreement on Trade in Services (GATS), services can be supplied internationally in four different ways — known as "modes of supply". Mode 4 refers to services traded by individuals of one WTO member through their presence in the territory of another. It covers employees of services firms and self-employed service suppliers.

As stipulated in a GATS annex, however, measures regarding citizenship, residence or employment on a permanent basis and measures affecting persons seeking access to another member's employment market are excluded from the scope of mode 4.

Estimates suggest that trade through mode 4 remains a very small component of overall trade in services, but this does not capture its role in facilitating the international delivery of services that takes place through the other three modes of supply.

Current commitments and most-favoured-nation (MFN) exemptions

Most mode 4 commitments have been undertaken on a horizontal basis, i.e. applicable without distinctions to all services sectors included in a member's schedule. Overall, the degree of mode 4 access that has been bound is quite limited. Commitments provide a right of entry and stay only to selected categories of individuals, in particular to those connected with the establishment of a commercial presence (e.g. intra-corporate transferees) and highly skilled individuals (e.g. managers, executives or specialists).

In addition, other restrictions frequently encountered include quotas, “economic needs tests” or “labour market tests” (i.e. tests that condition access upon the fulfilment of certain economic criteria), pre-employment conditions, residency and training requirements.

Many exemptions to the most-favoured nation (MFN) obligation have been listed that concern mode 4, although a precise assessment is complicated by the fact that MFN exemptions are not generally expressed in modal terms.

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Treatment of the sector in negotiations 

At the end of the Uruguay Round, members agreed to extend the negotiations on mode 4 in the six months after the WTO came into force in January 1995. This was agreed through the Decision on the Negotiations on Movement of Natural Persons.  As a result of those negotiations, six members — Australia, Canada, the then European Community, India, Norway and Switzerland — improved their mode 4 commitments.  

The improvements mostly provide access opportunities for independent foreign professionals, in a number of business sectors and extend the permitted duration of stay.  The upgraded commitments are attached to the Third Protocol to the GATS, which entered into force on 30 January 1996.

Mode 4 was once again on the negotiating table when a new round of services negotiations began in 2000.  Numerous members, and developing countries in particular, submitted proposals in the first years of negotiations. 

Following the exchange of bilateral requests for enhanced market access, offers of improved commitments were exchanged among members. However, the quality of the mode 4 improvements proposed was, overall, rather disappointing.

The services talks were given fresh impetus by the Hong Kong Ministerial Conference of December 2005. Following the Conference, mode 4, like several other services areas, was the focus of a plurilateral request, whereby a group of 15 members, all developing economies, communicated to another group of 33 members, all developed countries, the types of improvements in commitments they were seeking in the negotiations. In addition, least developed countries also submitted a collective request of their own, seeking enhanced mode 4 commitments from all other members.

Commitments were sought on categories or persons de-linked from the establishment of a commercial presence, in several sub-sectors. The requests asked for the removal or reduction and clarification of economic needs tests, longer permitted duration of stay and the elimination of wage-parity requirements, among other things.

Information on sectoral and modal negotiating objectives expressed by members is contained in reports from the Chair of the Special Session of the Council for Trade in Services issued in 2005. For an assessment of the plurilateral negotiations in different sectors and areas, consult the Report by the Chair in 2011.

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