Info Service on WTO and Trade Issues (Jun16/16)
24 June 2016
Third World Network
South-North showdown on Mode 4 in Services trade
Published in SUNS #8266 dated 21 June 2016
Geneva, 20 Jun (D. Ravi Kanth) - India, China, Turkey, Bolivia, the
African Group, and the least-developed countries on Friday (17 June)
clashed with the United States, the European Union, and Canada at
the World Trade Organization over their continued regulatory barriers
imposed on the movement of natural persons under Mode 4 of the General
Agreement on Trade in Services, several trade diplomats told the SUNS.
During the Uruguay Round negotiations on Trade in Services in a separate
track under the Punta del Este mandate, initial deadlocks on what
was to be negotiated, was only resolved, after difficult negotiations,
when "trade in services" was agreed to be dealt with by
limiting the scope of the proposed agreement to "trade in services",
without defining "services" as such.
In this regard, the "trade in services", it was further
agreed, was to be defined as the supply of a service: (a) from the
territory of one Member into the territory of any other Member; (b)
in the territory of one Member to the service consumer of any other
Member; (c) by a service supplier of one Member through commercial
presence in the territory of any other Member; and (d) by a service
supplier of one Member, through presence of a natural person of a
Member in the territory of any other Member (Art. 2 of GATS).
At the CTS meeting on 17 June,the developing and the least-developed
countries offered a graphic account of regulatory barriers imposed
by the three trade majors in Mode 4 that effectively rendered market
The developing countries demanded an updated paper on the developments
in Mode 4 by the WTO Secretariat so as to throw light on how countries
have implemented their Mode 4 commitments since the last major background
note of 2009.
However, the three trade majors - the US, the EU, and Canada - opposed
the demand from the developing countries for a revised background
paper by the Secretariat on grounds that it would not be conducive
at a time when a trade dispute is currently under the Dispute Settlement
The three developed countries chose to stonewall questions on Mode
4 on the pretext that the issues raised by the developing countries
involved market access which can only be discussed at the special
There was a sharp debate at the WTO's Council for Trade in Services
(CTS) on 17 June between the developing and least-developed countries
led by India, China, Morocco on behalf of the African Group, and the
LDCs on the one side, and the three major developed countries over
the issues raised in the seven-page Indian proposal on "Mode
4: Assessment of Barriers to Entry."
The Indian paper offered a detailed account by citing the Mode 4 barriers
that were mentioned by the WTO Secretariat.
* Movement tends to be associated with a commercial establishment
in the host country and contingent upon prior period of employment
with the home country company;
* There are also numerical quotas and Economic Needs Tests (ENTs)
that are frequently imposed. ENTs are conducted in the absence of
clearly defined criteria and procedures are comparable in effect to
the absence of any policy binding;
* Eligibility criteria for visa and work-permit related requirements
and procedures tend to have a bias towards persons who are highly
skilled and educated, at elevated functional levels;
* Procedures relating to visas and work permits can act as an additional
impediment since they often tend to be cumbersome, costly and administratively
complex and time consuming. Rejection rates are also high, and the
procedures are sometimes opaque and arbitrary;
* The paper cites a study which estimates that the worldwide costs
of processing visa/work permit applications represents around 0.3%
of the world GDP;
* Nationality and residency requirements, and non-portability of social
security benefits, also act as Mode 4 barriers:
* Even non-discriminatory regulatory requirements may seriously affect
Mode 4 trade, and this includes assessment of an applicant's credentials
by taking into account only formal qualifications, rather than considering
skills and experience. Approval procedures may be complex and discretionary,
particularly where no specified criteria exist for judging equivalence.
India provided an illustrative list of barriers in the US, United
Kingdom, and Canada, including some latest measures such as the recent
report on the Migration Advisory Committee of the UK.
India explained about the restrictive regime in Canada since 2012
which undermined the predictability and impacted negatively on the
Some of the restrictive measures imposed by Canada, according to India,
include hike in visa fees, more restrictive guidelines on ICT visa,
mandatory customer certification, and frequent upward revisions in
Commenting on the US measures, India said that it is raising only
those issues that are outside the ongoing trade dispute with the US.
India said the increasingly complex nature of barriers to Mode 4 entry
in the US, Canada, and the EU include:
* subjective definitions of Mode 4 categories such as managers, executives
and specialists under the ICT category;
* non-portability of social security contributions;
* discriminatory salary thresholds;
* lack of clarity in visa categories, massive increases in visa fee
for certain categories of foreign professional etc.
India maintained that these challenges/issues remain "generic"
to Mode 4 access that the developing and the poorest countries invariably
face in major markets.
A large majority of developing and poorest countries want the Mode
4 issues to be addressed on a priority basis. Further, the Mode 4
regulatory barriers entailed huge costs for companies providing short-term
India said it remains disappointed as members could not reach consensus
on issues related to Mode 4 since 2009.
The Secretariat must update commitments undertaken by recently acceded
members, including Doha offers, and more recent literature.
The US adopted a hardline stance that it will not discuss the Mode
4 issue now as it is part of the ongoing dispute with India.
The US said it is unproductive to mention them in the paper. The US
also expressed its disapproval to any update by the Secretariat on
The EU cast aspersions on India's real intention by arguing that while
it spoke of the Mode 4 measures being generic, India also drew attention
to specific measures of specific members.
The EU said that it is disappointed because the Indian paper raised
questions about the commitment of the EU to multilateralism. The EU
also said that the Indian proposal on Mode 4 involved market access
which can only be discussed at the special negotiating body.
Canada disagreed with India's illustrations on the Canadian measures
maintaining that it does not impose any barriers.
In sharp response, India told the US that the issues raised in its
paper are outside the current dispute.
India reminded the EU that all issues of Mode 4 can be discussed at
the regular CTS as per paragraph 11 of the Nairobi Ministerial Declaration
which called on members to continue work on all issues in the regular
Turkey said that Mode 4 remains the most neglected area of negotiations.
Turkey expressed concern that the commitments made in Mode 4 are few
and far between without any benefit to developing countries.
China said it agreed with India's proposal for a comprehensive examination
of barriers concerning Mode 4.
China said it also faced similar problems in the Mode 4 in major markets.
China urged the Secretariat to update its background paper by including
all the latest data.
Morocco, on behalf of the African Group, said that barriers under
Mode 4 are constantly increasing. Morocco said "lack of recognition
of qualifications" and lengthy procedures pose hurdles for Mode
The African Group has a "systemic" interest in Mode 4 issues,
suggesting that it is going to table its concerns.
The least-developed countries said they fully support the Indian proposal
because it contained the problems they have raised in their collective
In short, the Mode 4 showdown between India, China, and other developing
and least-developed countries on one side, and the US, the EU, and
Canada on the other, revealed the classical North-South divide on
issues concerning the movement of natural persons over the past 150
years, according to trade diplomats from the developing world.