© WTO/OMC1 GATS AND MODE 4 Economic Research and Statistics Division, WTO

© WTO/OMC2 Relevant framework for mode 4 GATS’ main text: mode 4 presence of natural persons GATS’ Annex movement of natural persons GATS and Mode 4 Mode 4: Who is in and who is out ? Snapshot of current mode 4 commitments What is GATS ? The four modes of supply

© WTO/OMC3 nMEASURES AFFECTING TRADE IN SERVICES AT ALL GOVERNMENT LEVELS nALL SERVICES (except air traffic rights and services supplied in the exercise of governmental authority) n FOUR MODES OF SUPPLY -Cross-border supply -Consumption abroad -Commercial presence -Presence of natural persons GATS: Scope, Coverage, Definition GATS

© WTO/OMC4 The GATS Pillars and Commitments GATS Pillars Set of general obligations and disciplines Countries schedules of specific commitments Annexes on specific issues Commitments under GATS By services sectors By mode of supply GATS

© WTO/OMC5 The Services Sectoral Classification List GNS/W/120 GATS 1. Business services 2. Communication services 3. Construction and related engineering services 4. Distribution services 5. Educational services 6. Environmental services 7. Financial services 8. Health-related and social services 9. Tourism and travel-related services 10. Recreational, cultural and sporting activities 11. Transport services 12. Other services not included elsewhere

© WTO/OMC6 The 4 Modes of Supply Under GATS (1/2) COUNTRY ACOUNTRY B Mode 1: service transactions Mode 2: service transactions Mode 3: service transactions Consumer from A Consumer from A Company Foreign affiliate Consumer from A Supplier Direct investment in country A Service supply Consumer from A Supplier The service crosses the border The consumer goes abroad Service supply GATS

© WTO/OMC7 The 4 Modes of Supply Under GATS (2/2) Mode 4: service transactions Mode 4: employment Foreign service firm Natural person Employment Consumer from A Natural person Natural person Service supply Self-employed goes to country A or employee sent by firm from B COUNTRY ACOUNTRY B GATS

© WTO/OMC8 Relative Importance of Mode 4 Estimates at World level: –Mode 1 - ~ 35% –Mode 2 - ~ % –Mode 3 - ~ 50% –Mode 4 - ~ 1 - 2% Situation differs across services sectors and countries GATS

© WTO/OMC9 The 4 th Mode of Supply Supply of a service by a service supplier of a Member through presence of natural persons of a Member in the territory of any other Member Service consumer Service supplier What does the supply of a service refer to? MODE 4 Member AMember B

© WTO/OMC10 Which natural persons? Self-employed of Member A Employed by a service supplier of Member A: –the employee is sent to Member B in respect of the supply of a service –Member A has commercial presence in Member B and sends its employee to its affiliate in Member B (intra- corporate transferees) Does not exclude any level of skill MODE 4 Employed by a service supplier of Member B (host country) ?

© WTO/OMC11 The Annex on Movement of Natural Persons GATS does NOT apply to measures –affecting natural persons seeking access to the employment market –regarding citizenship, residence or employment on a permanent basis GATS does not define “temporary” MODE 4

12 All foreign workers abroad Non-permanent ServicesGoods Employees Independent service suppliers Employees of domestic firms ? Mode 4 MODE 4

© WTO/OMC13 The Annex on Movement of Natural Persons Commitments can be scheduled by categories of natural persons Governments are free to regulate entry and temporary stay, provided these measures do not nullify or impair the commitment footnote 1: differential visa requirements, not to be regarded as nullifying or impairing benefits under a specific commitment MODE 4

© WTO/OMC14 Who is in and Who is out? Falling under Mode 4Not falling under Mode 4 Supply of services (Definition of particular services?) All skill levels Intra-corporate transferees Contractual service suppliers –Independent service suppliers –Employees of foreign service supplier Also: business visitors Temporary movement Employees in the “goods” sector Employees of host country firms Permanent migration MODE 4

© WTO/OMC15 A Snapshot of Mode 4 Commitments Very few fully liberal commitments Listing of measures: “Unbound except...” Governed by horizontal commitments Mostly categories with high-level of training and expertise, often intra-corporate transferees Specified duration of stay: 3 months to 5 years MODE 4 Commitments

© WTO/OMC16 Structure of Horizontal Commitments (108 Members, as of 2003) MODE 4 Commitments

© WTO/OMC17 Mode 4 and Current Commitments Mode 4Commitments Supply of services All skill levels Intra-corporate transferees Contractual serv. suppliers Business visitors Temporary movement Mainly horizontal commitments Mostly high-level Intra-corporate transferees (~70%) Contractual serv. suppliers (~10%) Business visitors (~20%) 3-5 years: Intra-corporate transferees < 1 year: Contractual serv. suppliers < 3 months: Business visitors MODE 4 Commitments