Mode 4 – Definition, commitments, state of play in the negotiations Hamid Mamdouh Director, Trade in Services Division, WTO September 2008 WTO Symposium Mode 4 of the GATS - Taking stock and moving forward

What is mode 4?

Trade in services under the GATS Four modes of supply (Article I): (1) Cross border supply (2) Consumption abroad (3) Commercial presence (4) Presence of natural persons

GATS Definition of mode 4 The supply of a service by: a service supplier of one Member, through presence of natural persons of a Member in the territory of any other Member

GATS Annex - (1) What types of natural persons? Natural persons who are service suppliers of a Member and are present in the territory of any other Member –Self-employed Natural persons of a Member who are employed by a service supplier of a Member (= or Member) and are present in the territory of any other Member –Intra-corporate transferees –Business visitors –Contractual service suppliers –Employees of foreign service suppliers

Categories of natural persons under mode 4 The GATS covers services supplied by whom? Service supplier of another Member What form can such a foreign service supplier take? Natural personJuridical person How are services supplied in the host country? Directly to consumer in host country as independent service supplier Through an employee of a foreign company with commercial presence in host country Through an employee of a foreign company without commercial presence in host country What categories of natural persons are generally found in Members' Schedules? Independent professional Contractual service supplier Intra-corporate transferee OR temporary employee Contractual service supplier

GATS Annex - (2) Mode 4 does not cover: Measures affecting natural persons seeking access to the employment market Measures regarding citizenship, residence or employment on a permanent basis (Annex)

Plus... Governments are free to regulate entry and temporary stay, provided these measures do not nullify or impair the commitments Including by applying differential visa requirements

GATS Definitions (Article XXVIII) Service supplier of another Member In the case of a juridical person In the case of a natural person

Mode 4 commitments – where do we stand?

A snapshot of commitments Governed by horizontal commitments Absence of full liberalization (i.e. None) Positive listing: Unbound except... Often linked to commercial presence High-level of training/expertise, often as ICT Most frequently specified durations of stay: 3 months for BV, 5 years for ICT

Main limitations scheduled Limited categories included Pre-employment requirements Economic Needs Tests/Labour Market Tests Quotas Residency and nationality requirements Training/Education/ Qualification Authorisation, approval, registration requirements Training of locals

Typical definitions of categories in commitments - ICT Intra-corporate transferees (ICT) – work for an enterprise established in the territory of a Member and are transferred to the enterprises commercial presence in the territory of another Member in the context of the supply of a service. Often as executives, managers, specialists. Executives – direct the management, have wide latitude in decision-making, are supervised only by board of directors or stockholders, do not provide service directly Managers – direct organization or department, hire/fire, have day-to-day discretion, supervise other staff Specialists – have essential knowledge at advanced level of expertise, proprietary knowledge of organisation

Typical definitions of categories in commitments - BV Business visitors (BV) are not engaged in supplying the service or making direct sales to the public, and do not receive remuneration from a source in host Member Sales BV – negotiate for the sale of a service, establish business contacts, attend business meetings and similar Set-up BV – set-up a commercial presence in another Member, where their employer has none

Typical definitions of categories in commitments - CSS Contractual service suppliers (CSS) – employees of a juridical person (which has no commercial presence in host Member) who supply a service on the basis of a contract their employer has concluded with a consumer in host Member The employee receives remuneration from the employer while abroad, has appropriate educational and professional qualifications, may not engage in other employment Commitment relates only to the activity which is the subject of the contract

Typical definitions of categories in commitments - IP Independent professional (IP) – self- employed person based in the territory of another Member who supplies a service on the basis of a services contract with a consumer in the host Member IP has appropriate educational and professional qualifications Commitment relates only to the activity which is the subject of the contract

Structure of Horizontal Commitments (% of total categories scheduled, 2008 ) BV = Business Visitors ICT = Intra-Corporate Transferees E,M,S = Executives, Managers, Specialists Source: WTO Secretariat (2008)

State of play in the mode 4 negotiations

Starting point In comparison to the other three modes of supply, mode 4 commitments are the least liberal, due to positive listing and proliferation of limitations

Main mode 4 barriers identified by Members Structure and coverage of existing commitments Economic Needs Tests (ENTs) Definitional problems Administrative practices: no access to information and lack of transparency Lack of recognition of qualifications

Some of the solutions proposed... More and better commitments more categories, improved definitions, finer classification, sector-specific commitments Removal of barriers multilateral criteria for ENTs - more specific, transparent and non-discriminatory Greater transparency and predictability GATS visa More regulatory cooperation amongst sending and receiving Members

Mode 4 - Offers so far… 30 of around 70 offers propose some improvement to horizontal commitments (half developed, half developing countries) The value or importance of horizontal commitments in mode 4 depends on the number of sectors included in the schedule

Main mode 4 improvements contained in offers New categories, broader coverage Expanded list of sectors to which the commitments apply Extended periods of stay; possibility of renewal Clarification of the application/reduction of the scope of ENTs Reduction of discriminatory measures Some improvements in transparency

Overall state of play in the services negotiations Number and quality of offers has thus far been unsatisfactory, including on mode 4 Few, if any, new commercial opportunities would ensue for service suppliers. Most Members feel that the negotiations are not progressing as they should. [Chair of CTSS, July 2005 (TN/S/20)] BUT Hong Kong Ministerial (December 2005) provided objectives and plurilateral process

Hong Kong Ministerial Declaration – Mode 4 objectives Members to be guided, to the maximum extent possible, by the following mode 4 objectives: New or improved commitments on: –CSS, IP and Others de-linked from commercial presence –ICT, Business Visitors to reflect inter alia –removal or substantial reduction of ENTs –indication of duration of stay and renewal

Plurilateral Requests - Mode 4 Collective request on mode 4 From 15 developing to 9 developed countries Seeks commitments on CSS and IP Commitments are called for in a number of sectors, falling under business, construction, environmental, tourism and recreational services Asks for the removal/clarification of Economic Needs Tests Least-developed countries have also submitted a mode 4 request, with a largely similar focus

July 2008 Mini-Ministerial – Signalling Conference Indications were exchanged on own new and improved commitments as well as on the contributions expected from others Overall, positive indications were given about market access commitments across all major services sectors and modes of supply Most participants indicated their readiness to improve access conditions for mode 4. In several statements, these signals were expressly linked to the development character of this Round. [Report by the Chairman of the TNC, 30 July 2008 (JOB(08)/93)]

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