Wednesday, 19 October 2011


International Organization for Migration / About Migration / Developing Migration Policy / Migration & Trade / GATS Mode 4

GATS Mode 4

The General Agreement on Trade in Services (GATS) is the first binding multilateral trade agreement to explicitly address the movement of persons. While the scope for GATS mode 4 commitments to facilitate the orderly movement of persons remains uncertain, it is vital for migration policy makers to understand the nature of the agreement and its possible implications for migration policy making.

GATS is a binding multilateral framework agreement for trade in services, which applies to all 148 members of the World Trade Organization (WTO). Developed during the Uruguay Round of negotiations within the WTO and now a focal point of the Doha Round, it has three main objectives:

  • to progressively liberalize trade in services through successive rounds of negotiations that will promote the interests of all members of the WTO and achieve an overall balance of rights and obligations
  • to encourage economic growth and development through liberalization of trade in services, as the General Agreement on Tariffs and Trade (GATT) does through the liberalization of trade in goods
  • to increase the participation of developing countries in world trade in services and expand their services exports by developing their export capacity and by securing export opportunities in sectors of export interest to them.

The agreement has a wide scope and applies to all services supplied on a commercial basis. It excludes non-commercial services, such as services supplied in the exercise of governmental authority.

The GATS is divided into two parts. The first part consists of general obligations, as well as some obligations that apply only where commitments for particular sectors are made. An example of a general obligation is the “Most Favored Nation” or MFN requirement, which requires WTO Members to treat all other WTO Members as well as they treat their most favored nation. There are 38 MFN exemptions relevant to mode 4, of which 32 are preferential agreements and the rest are reciprocal (or, in two cases, preferential and reciprocal). Where measures have been specified in detail, they relate, for example, to granting of work permits, waiving of ENTs, or improving access for certain activities. Beneficiary countries covered are not always identified, but factors listed include traditional sources of supply, geographical zones, regional organizations, and language.

The second part of the GATS sets out the framework and conditions for countries to identify the service sectors in their markets that they want foreign suppliers to enter. The commitments made under this framework are referred to as “specific commitments”.

Important Points

  1. The GATS sets out four possible modes, or ways, in which services can be supplied between WTO Members.1 Mode 4 - the mode with the most direct implications for migration policy makers - is defined in Article I.2 (d) of GATS as being “the supply of a service... by a service supplier of one Member, through presence of natural persons of a Member in the territory of another Member”. This definition applies to nationals as well as, in certain circumstances, permanent residents of WTO Members seeking to supply services abroad.
  2. Generally, GATS mode 4 is seen as covering:
    • persons providing services where a foreign service supplier obtains a contract to supply services to the host country company and sends its employees to provide the services
    • independent service providers abroad: an individual selling services to a host country company or to an individual
    • persons employed abroad by foreign companies established in the host country (but excluding nationals of the host country).
  3. Duration and purpose of stay can be used to distinguish mode 4 movement from other forms of temporary labour migration. Mode 4 service suppliers:
    • gain entry for a specific purpose (to fulfill a service contract as self-employed or an employee of a foreign service supplier)
    • are normally confined to one sector (as opposed to workers who enter under general migration or asylum programmes who can move between sectors)
    • are temporary (i.e., they are neither migrating on a permanent basis nor seeking entry to the labour market).
  4. There is no standard definition on what classifies as “temporary” movement. Only about one-third of commitments include any specified duration of stay and these are mostly for intra-corporate transferees (generally two to five years) and business visitors (generally three months).
  5. Commitments on mode 4 generally apply the same conditions to all service sectors, with no greater access given in sectors of particular relevance to mode 4 (e.g., professional services). Most of these horizontal4 commitments generally take the form of “unbound except for…” and then state special access conditions for particular types of labour (level of skill, type of occupation) and purpose of their movement (e.g., establishing a commercial presence).
  6. Economic needs or labour market tests are mostly scheduled as part of horizontal commitments (sector-specific ENTs appear in medical, dental and hospital, entertaining and financial services) and generally apply to specialist personnel, or highly qualified professionals, managers and executives. Few countries comply with the requirement for information as to ENT criteria. These tests are found in 50 cases. Twenty-three countries have made commitments that, for certain categories of natural persons, ENTs will not apply (generally those related to mode 3 establishment and to persons holding management positions or experts with specialized knowledge of the company).

What You Need To Know About...
Mode 4 Outcomes

Little progress has been made in the liberalization of the movement of service suppliers under mode 4. Even by the modest standards of services trade liberalization in the Uruguay Round, where GATS commitments are guaranteed to a minimum level of treatment, the result was that countries tended to be conservative, with most committing to temporary labour migration frameworks that were even more restrictive than those they were already employing.

Commitments have been generally limited to the higher skilled categories (managers, executives, specialists) with approximately one-half relating explicitly to intra-corporate transferees. While mode 4 technically covers all skill levels, only 17 per cent of all horizontal entries cover low skilled personnel (e.g., “business sellers”) and only ten countries have allowed some form of restricted entry to “other level” personnel. Further, general terms used in commitments such as “managers” or “business visitors” are not defined, leaving considerable scope for interpretation and discretionary action by officials.

A number of developing countries see their main opportunity to participate in the global provision of services through the movement of unskilled and semi-skilled workers, however, GATS mode 4 commitments remain largely restricted to high-skilled movement (inter-corporate transferees (40 per cent of commitments) and executives, managers, specialists, business visitors (50 per cent of commitments).

Fewer commitments have been made in mode 4 than for other modes of supply, by both developed and developing countries. There are very few cases of full commitments, and fewer cases of partial commitments than for other modes of supply. While overall, developed countries have scheduled commitments in 50 per cent of service sectors and developing countries in 11 per cent of service sectors, sectors where mode 4 is important (e.g., professional and health services) tend to have fewer commitments.

Restrictions include:

  • quotas on the number of foreign suppliers
  • the proportion of total employment met by foreigners or the proportion of senior staff (80 cases)
  • pre-employment requirements (i.e., person must already be employed, over 100 cases)
  • technology transfer requirements (i.e., training of local staff, mainly included by developing countries, 32 cases)
  • restrictions on geographic and sectoral mobility or mobility between firms (10 cases).

Fifty countries have scheduled conditions relating to domestic wage legislation, working hours, and social security (this does not include general references to domestic legislation, and there may be more Members with such requirements in practice). In 22 cases, countries have reserved the right to suspend commitments in the event of a labour dispute (this seems to apply mainly to intra-corporate transferees at senior levels).

1 The four modes of service delivery are: 1. Cross-border delivery; 2. Consumption abroad; 3. Supply via commercial presence; 4. Supply via presence of natural persons.

Posted by Britannia Radio at 16:56