TWN 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 access meaningless.

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 Body process.

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 negotiating body.

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.

They include:

* 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 Indian companies.

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 minimum salary.

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 services.

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 issue.

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 bodies.

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 4.

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 requests.

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.