SERVICES: SECTOR BY SECTOR
Movement of natural persons
The movement of natural persons is one of the four ways through which services can be supplied internationally. Otherwise known as “Mode 4”, it covers natural persons who are either service suppliers (such as independent professionals) or who work for a service supplier and who are present in another WTO member to supply a service.
Under the General Agreement on Trade in Services (GATS), services can be traded internationally in four different ways — known as the four modes. Mode 4 refers to the presence of persons of one WTO member in the territory of another for the purpose of providing a service. It does not concern persons seeking access to the employment market in the host member, nor does it affect measures regarding citizenship, residence or employment on a permanent basis. (See Annex on the Movement of Natural Persons.)
Economic importance back to top
The measurement of Mode 4 flows poses formidable challenges. No clear statistical framework is currently in place to assess the size of Mode 4 trade, even if conceptual work on the issue is under way in the inter-agency Task Force on Statistics of International Trade in Services (see: Technical Subgroup on the Movement of Persons — Mode 4)
The Balance of Payments items “compensation of employees” and “workers’ remittances” are often used as statistical indicators to measure Mode 4 flows. However, they provide income flows originating from the movement of people across borders and, as such, they are not measures of Mode 4 trade. (For a fuller discussion, see: WTO Statistics Brief no. 8, September 2007.)
Relative to the other three modes of supply, available estimates suggest that trade through Mode 4 remains a very small component of overall trade in services, accounting for between 1 and 2 per cent of the total (WTO International Trade Statistics 2005).
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Uruguay Round and Post-Uruguay Round Mode 4 negotiations
In the Uruguay Round, commitments scheduled under Mode 4 were largely limited to two categories: intra-company transferees regarded as “essential personnel”, such as managers and technical staff linked with a commercial presence in the host country; and business visitors, i.e. short-term visitors not in general gainfully employed in the host country.
At the end of the Round, it was agreed that negotiations to improve commitments on the movement of natural persons would continue in the six months after the WTO came into force (Decision on the Negotiations on Movement of Natural Persons). To this effect, a Negotiating Group on Movement of Natural Persons was established.
The Negotiating Group supervised the bilateral negotiations on Mode 4, which concluded on 28 July 1995. As a result, six members — Australia [GATS/SC/6/Suppl.2], Canada [GATS/SC/16/Suppl.2/Rev.1], the European Community and its member states [GATS/SC/31/Suppl.2], India [GATS/SC/42/Suppl.2], Norway GATS/SC/66/Suppl.2/Rev.1] and Switzerland [GATS/SC/83/Suppl.2/Rev.1] — improved their commitments on the movement of natural persons. The improvements mostly concern access opportunities for additional categories of service suppliers, usually independent foreign professionals in a number of business sectors, or the extension of their permitted duration of stay.
The upgraded commitments are attached to the Third Protocol to the GATS, which entered into force on 30 January 1996. The Third Protocol provides for the annexation of the new commitments to the Uruguay Round services schedules of the six members concerned.
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Current commitments and MFN exemptions
Most members' Mode 4 commitments have been undertaken on a horizontal basis, i.e. applicable without distinctions to all sectors inscribed in a member's schedule. Overall, the degree of Mode 4 access that has been bound is quite shallow. In most instances, members have scheduled an initial “unbound” (i.e. no binding of access conditions) and then qualified it by granting admission to selected categories of persons, with a marked bias towards persons linked to a commercial presence (e.g. intra-corporate transferees) and highly skilled persons (managers, executives and specialists).
In addition to limiting access to certain categories of persons, other restrictions frequently inscribed in schedules include: defined duration of stay; quotas, including on the number or proportion of foreigners employed; “economic needs tests” (a test that conditions market access upon the fulfilment of certain economic criteria) or “labour market tests”, generally inscribed without any indication of the criteria of application; pre-employment conditions; residency and training requirements.
As for Mode 4 exemptions to most-favoured nation (MFN) treatment (i.e. non-discrimination), it is difficult to provide a reasonably comprehensive overview, as MFN exemptions are not generally expressed in modal terms and because several relate to regional agreements whose coverage is difficult to evaluate. An approximate count would nevertheless indicate that around 40 MFN exemptions concern the movement of natural persons.
For consolidated information on countries’ commitments and exemptions on movement of natural persons go to the services database.
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The current services negotiations began in January 2000.
- Proposals relating to the movement of natural persons
Various members, and developing countries in particular, have put significant emphasis on securing better commitments on the temporary movement of natural persons, especially for those categories “de-linked” from commercial presence. (See pages 12-13 of document TN/S/20 and 22-23 of document TN/S/23 for summary accounts of the mode 4 issues under discussion).
A number of the offers submitted in the current negotiations propose upgrading access for natural persons. However, the quality of the Mode 4 improvements proposed so far has been rather disappointing, not unlike other services areas (see paragraph 4 of document TN/S/20 for an assessment of the prevailing sentiment about progress in the services negotiations after two rounds of offers).
In spite of the somewhat unsatisfactory start, services talks were given fresh impetus by the Hong Kong Ministerial Conference of December 2005. In Hong Kong, members agreed to intensify the negotiations in accordance with a set of modal objectives. On Mode 4, the Ministerial Declaration called for, among other things, new and improved commitments on categories of persons linked with, as well as de-linked from, commercial presence, the reduction/elimination of economic needs tests and the extension of the permitted duration of stay. (See WT/MIN(05)/DEC, Annex C, page C-1).
The Declaration also established modalities for plurilateral negotiations. In keeping with this mandate, a plurilateral Mode 4 process was launched in March 2006 through the submission of a collective request. The request focused on better commitments for categories of natural persons whose movement is not linked to a commercial establishment abroad. (For a summary description of the content of the request, see paragraph 43 of document (TN/S/M/19).
With the plurilateral format presently exhausted (see paragraph 100 of document TN/S/M/27), it is only once subsequent rounds of offers have been presented that it will be possible to assess the impact it has had on the Mode 4 negotiations.
- WTO Secretariat, World Trade Report 2004, “The Liberalization of Services Trade Through the Temporary Movement of Natural Persons” (2004)
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Some useful links and other resources
- IOM, OECD and World Bank (2003), “Trade and Migration: Building
Bridges for Global Labour and Mobility”, Report of the Seminar on Trade
and Migration held in Geneva on 12-14 November, 2003. All
background documents from this seminar.
- IOM, World Bank and WTO (2004), “Managing the Movement of People:
what can be learned for mode 4 of the GATS?”, Report of the seminar on
Trade and Migration held in Geneva on 4-5 October 2004. All
background documents from this seminar.
- OECD (2002), “Service Providers on the Move: a Closer Look at Labour Mobility and the GATS”, Working Party of the Trade Committee, TD/TC/WP(2001)26/FINAL, Paris, 20 February 2002.
- OECD (2002), “Service Providers on the Move: the Economic Impact of Mode 4”, Working Party of the Trade Committee, TD/TC/WP(2002)12/FINAL, Paris, 19 March 2003.
- OECD (2002), “Service Providers on the Move: Mutual Recognition Agreements”, Working Party of the Trade Committee, TD/TC/WP (2002)48, Paris, 6 February 2003.
- UNCTAD (2003) “Increasing the Participation of Developing Countries through Liberalization of Market Access in GATS Mode 4 for Movement of Natural Persons Supplying Services”, Note by the UNCTAD Secretariat, TD/B/COM.1/EM.22/2, 18 June 2003.
- UNCTAD (2003) “Report of the Expert Meeting on Market Access Issues in Mode (Movement of Natural Persons Supplying Services) and Effective Implementation of Article IV on Increasing the Participation of Developing Countries”, TD/B/COM.1/64 and TD/B/COM.1/EM.22/3, 27 November 2003.
- World Bank (2003) “Moving People to Deliver Services”, Oxford University Press and World Bank, Washington, D.C., 2003 (Mattoo, Aaditya and Antonia Carzaniga, eds.).
- World Bank (2003) “Moving People to Deliver Services: How Can the WTO Help?”, World Bank Policy Research Working Paper No. 3238, (Chaudhuri Sumanta, Aaditya Mattoo and Richard Self).