1 JOINT WTO-WORLD BANK SYMPOSIUM ON MOVEMENT OF NATURAL PERSONS (MODE 4) UNDER THE GATS WTO, Geneva, April 2002 Temporary Entry of Natural Persons as Service Providers: Issues and Challenges in Further Liberalization under the Current GATS Negotiations Richard Self B.K. Zutshi

2 Outline of the Presentation Introduction Section 1 Mode 4: Scope and Coverage Section 2 Mode 4: Specific Commitments to-date Section 3 Issues and Challenges in Current Negotiations Section 4 Conclusions and Recommendations

3 INTRODUCTION 1.Background to inclusion of services in the UR negotiations 2.Bringing GATS into the WTO 3.Outcome in terms of liberalization in general and under Mode 4, in particular 4.Issues in Mode 4 liberalization

4 Section 1 Mode 4: Scope and Coverage Definition of Trade in ServicesDefinition of Trade in Services a)Negotiating History b)Emergence of the Modal Approach to the definition c)Parity/Symmetry in Factor Movement (i)Specificity of purpose (i)Specificity of purpose (ii)Discreteness of transactions (iii)Limited duration (iv)Essentiality caveat d)Modal Approach embedded/implied in the principle of parity in factor movement

5 Section 1 Mode 4: Scope and Coverage (Contd) Annex on Movement of Natural Persons as Service SuppliersAnnex on Movement of Natural Persons as Service Suppliers a)Coverage of self employed and of employees of service supplier associated with Mode 3 b)Temporary movement, Period not defined c)Exclusion of access to labour market, citizenship, etc. d)All categories of Natural Persons at all skill levels covered subject to commitment negotiations e)Flexibility in the application of visa restrictions f)Illustrative list of categories of Natural Persons as service suppliers Ambiguity in definition through distinction between service supply and employment on the basis of the nature of engagement?Ambiguity in definition through distinction between service supply and employment on the basis of the nature of engagement? Foreigners employed by host entities.Foreigners employed by host entities.

6 Section 2 Mode Four Specific Commitments to Date Uruguay Round Commitments in Mode 4 Uruguay Round Commitments in Mode 4 -Senior Managers and Executives in overseas affiliates -Services Sales persons (who cannot provide services) -Other commitments on a limited scale and exclusively confined to workers at the highest skill level.

7 Section 2 Mode Four Specific Commitments to Date (Contd) A comparison of specific commitments in mode four compared to those of other modes A comparison of specific commitments in mode four compared to those of other modes -Most countries made mode four commitments -They inscribed them horizontally -Only 50% of services sectors covered by developed countries; -11% of services sectors covered by developing countries -Quality of mode four commitments generally less than that of mode three.

8 Section 2 Mode Four Specific Commitments to Date (Contd) An assessment of commitments (Contd) An assessment of commitments (Contd) -94% of entries covered senior managers et al, and business visitors -Most commitments reflected Standstill Minus -No roll-back -Can balance of interests be assessed by examination of four modes -- problems of data and perceived interests among countries.

9 Section 2 Mode Four Specific Commitments to Date (Contd) Political and Regulatory concerns profoundly affected levels of commitments under Mode Four Political and Regulatory concerns profoundly affected levels of commitments under Mode Four -Enforcement concerns and the problem of temporary entry leading to permanent entry -Protection of labour markets associated with lower pay foreign services suppliers.

10 Section 3 Issues and Challenges in Current Negotiations a) Article XIX: Rules of Engagement b)Negotiating Guidelines c)Scheduling Guidelines

11 Section 3 Issues and Challenges in Current Negotiations (Contd) Substantive Market Access Issues Present Situation Present Situation Ways to promote further liberalization Ways to promote further liberalization 1)Widen and Deepen Commitments under Mode 4 2)Classification of Natural Persons for negotiations and scheduling commitments: Issues and Prospects Greater clarity in developing rules and commitments Greater clarity in developing rules and commitments 1)Separating temporary movement and stay of natural persons as service providers within regulations on visas and work permits: Issues and prospects 2)Clarity and precision in scheduling commitments: Ways of achieving this objective

12 Section 3 Issues and Challenges in Current Negotiations (Contd) DISCIPLINES ON DOMESTIC REGULATIONS: ARTICLE VI:4 Regulation a sine quo non in services Regulation a sine quo non in services Objective of disciplines under Article VI:4: To address disguised restrictions Objective of disciplines under Article VI:4: To address disguised restrictions Disciplines in the Accountancy SectionDisciplines in the Accountancy Section Present status of work in WGDRPresent status of work in WGDR Checklist of issues: Necessity, Transparency, Equivalence and International StandardsChecklist of issues: Necessity, Transparency, Equivalence and International Standards Horizontal v/s sector-specific disciplines?Horizontal v/s sector-specific disciplines?

13 Section 3 Issues and Challenges in Current Negotiations (Contd) Other Relevant Issues 1)Recognition 2)Wage Parity 3)Social Security

14 Section 3 Issues and Challenges in Current Negotiations (Contd) Negotiating techniques to improve mode four commitments Negotiating techniques to improve mode four commitments -Continuation of horizontal (Uruguay Round) approach or a mix of horizontal/sector specific -Advantages to horizontal approach in light of its consistency with national regulatory regimes -Formula and Model Schedule Approaches Formula requires uniform level of commitments by allFormula requires uniform level of commitments by all

15 Section 3 Issues and Challenges in Current Negotiations (Contd) Negotiating Techniques (Contd) Negotiating Techniques (Contd) -Model Schedule Approach: Proposes a template around which countries negotiate different levels of obligations Model Schedule currently in circulation by private sector groups centering around GATS Visa and best practices provisionsModel Schedule currently in circulation by private sector groups centering around GATS Visa and best practices provisions Advantages of flexibility to a model schedule and its discipline over request and offerAdvantages of flexibility to a model schedule and its discipline over request and offer

16 Section 4 Conclusions and Recommendations Objective of the Paper Effort designed to introduce the issue of mode 4 liberalization for a comprehensive discussion among the participants and promote a better understanding of problems and prospects of this area Conclusions The analysis in the paper points to following important conclusions: 1)Modal approach to definition is a reflection of some basic concerned of the participants: For developing countries parity in the treatment of factor movement of capital and labour and for developed countries the assurance that investment in services is a part of a trade framework

17 Section 4 Conclusions and Recommendations (Contd) Conclusions Conclusions (Contd) 2)The notion of parity between factor movement has to find a reflection in liberalization of market access opportunities under modes 3 and 4 3)The current level of scheduled commitments, except in the telecom and financial services sectors, reflect modest liberalization. In case of mode 4, even more so i.e. hardly any liberalization 4)In order to secure a big liberalizing package overall in this Round, the outcome will have to produce significant improvements in mode 4 liberalization by way of providing effective market access.

18 Section 4 Conclusions and Recommendations (Contd) Conclusions Conclusions (Contd) 5)Otherwise, GATS might end up as a grim harvester of autonomous liberalization in services rather than a catalyst for future liberalization 6)The present seems a propitious time to attempt a significant improvement in effective market access liberalization under mode 4

19 Section 4 Conclusions and Recommendations (Contd) Recommendations In the backdrop of these main conclusions we would recommend the following steps, at the minimum to realize greater liberalization and effective market access under more 4 1)To negotiate market access and national treatment commitments from a common template that is sufficiently flexible for parties with differing interests and varying levels of ambition. 2)To mount a priority effort to gain a single text of agreed commitments that would improve the transparency of granting temporary entry to service providers.

20 Section 4 Conclusions and Recommendations (Contd) Recommendations (Contd) 3)To aim to arrive at a generally agreed formulation as to the skill levels of workers affected by the temporary entry negotiations, as a part of the negotiating process itself. 4)To impart greater clarity to rules and commitments by negotiating guidelines for the application of rules, and conditions to market-access commitments.