Introduction

1. Development implications of Mode4 UNCTAD short courses on Key Issues on the International Economic AgendaPalais des Nations, Geneva26 March 2010 Deepali FernandesTrade Negotiations & Commercial Diplomacy, BranchUNCTAD

2. Introduction Need for more & better data, research & analysis UNCTAD Accra Accord (April 2008) • remittances… significant private financial resources for households in countries of origin of migration • international community to pay special attention to … export interest of DCs; importance…of effective liberalization of temporary movement of natural persons (Mode 4 of GATS); • UNCTAD to conduct research & analysis on potential benefits & opportunities of trade, investment & developmental links between countries of origin of migrants & communities abroad

3. OUTLINE • What is mode 4? • Gains and Concerns • Commitments and Limitations in GATS • Current Negotiations • HKMD, plurilalteral and LDC request, signalling conference • RTAs and Mode 4 • Scope, kinds, elements, MRAs • Migration and the crisis • Unemployment, impacts, policies • Moving Forward: some issues and questions

4. Temporary Migration and the GATS • Number of initiatives unilaterally, bilateral and through the GATS, multilateral • GATS movement of persons linked to trade in services • services linked to information, capital, goods or the service provider moves • One of four modes of supply

5. What is 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”

6. GATS: How is Mode 4 covered in the GATS? • GATS addresses “temporary movement” • e.g., not access to employment market; nor measures regarding permanent employment • does not a-priori exclude: • any occupation or skill level • Governments free to regulate entry & (temp.) stay • provided does not “nullify or impair” commitments

7. Mode 4 Gains and Concerns

8. Potential Gains: related to Mode 4 • USD 200 billion annually • if multilateral temporary work visa scheme (quota for skilled & unskilled DC workers at 3 % of IC labour force for 3-5 years) (Rodrik, 2002) • USD 156 billion annually (world welfare gains) (0.6 % of world income) • if IC increase quota for workers' entry from DC by 3 per cent (Winters 2001, 2003, 2005 etc.) • 15 – 67 % of world GDP worldwide efficiency gains • when eliminating global restrictions on labor mobility (UN-WIDER, 2003) • global output gain USD 356 billion by 2025 • if DC migration equal to 3 per cent of IC labour force (Worldbank, 2006)

9. Gains: Migration of key interest to developing countries Gains from Mode 4 liberalization expected to be substantial given: • size of services sector  services contribution to GDP • wide scope of coverage where (temporary) migration is / could occur • e.g. professional, computer-related, health, construction, tourism, agriculture-related & transport services, or other seasonal activities • DCs comp. advantage in semi-skilled and unskilled labour • However,hard to estimate true mode 4 effects in absence of liberalisation policies and good data • in regional agreements Mode 4 gaining importance especially on S-S basis too early to say exact gains

10. Host country non return potential displacement of native workers, cost to public system permanent, multilateral, legally binding commitment links to national regulation and immigration policies, intended to be flexible security concerns Home country reduction of labour supply reduction in tax base, economies of scale, entrepreneurship lack of opportunity for less skilled workers Similar gains and concerns in both cases to general migration Concerns: of home and host countries

11. Commitments and Limitations on Mode 4 in the GATS Where do we stand?

12. Commitments: Starting point • positive listing: “Unbound except ...” • specific commitments in Mode 4 primarily horizontal • Mode 4, least liberal • due to positive listing, proliferation of limitations • “full bindings” almost insignificant vis a vis Modes 2 & 3 • ca. 75% movement linked to commercial presence • frequently specified durations of stay • bias towards movement of the highly skilled • supported & facilitated by national legislative framework

13. 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 Limitations: How restricted is mode 4 trade?

14. Categories: “Typical” definitions in commitments – ICT and BVs • “Intra-corporate transferees” (ICT) – work for an enterprise established in the territory of a Member and are transferred to the enterprise’s commercial presence in the territory of another Member in the context of the supply of a service • Business visitors” (BV) not engaged in supplying the service or making direct sales to the public, do not receive remuneration from a source in host Member • “Sales” BV , “Set-up” BV

15. Categories: “Typical” definitions in commitments – CSS and IP • “Contractual service suppliers” (CSS) – employees of a juridical person (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 • receives remuneration from the employer while abroad • may not engage in other employment • commitment relates to activity which is subject of the contract • “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

16. 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)

17. Current Negotiations in Mode 4

18. Negotiations:Mode 4 Offers so far… • 30 of around 70 offers propose improvement to horizontal commitments • Broadly improvements include: • new categories, broader coverage • expanded list of sectors to which the commitments apply • extended periods of stay; possibility of renewal • clarification of application/reduction of the scope of ENTs • reduction of discriminatory measures • some improvements in transparency • However, number and quality of offers, remains unsatisfactory, 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)]

19. Negotiations: Initiatives on Mode 4 • texts in HK Ministerial Declaration (Dec 2005) • plurilateral request (2006) 2 LDC Grouprequests plus initiative on “Special Priority” (2005/2006 & 2007/2008) • language in Chair’s text (2007/2008) • signaling conference (July 2008) • plus work in WPDR (Domestic Regulation Disciplines)

20. Negotiations: 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

21. Negotiations: Plurilateral Requests - Mode 4 • from 15 developing to 9 developed countries • seeks new/improved commitments in - CSS and IP delinked from commercial presence • Improvements in sub-sectors • removal/clarification of economic needs tests • greater transparency in mode 4 commitments Least-developed countries request on mode 4 has similar focus

22. Negotiations: Services Signaling Conference, July 2008 • acknowledgment of importance of Mode 4 in context of “development round” • possible improvements in categories • ICTs, BVs, CSS, IPs, some de-linked from M3 • possible improvements in sub-sectors • willingness to: • extend periods of stay • clarify, reduce, or eliminate ENTs • remove definitional uncertainties • adjust current entries to scheduling conventions • increase quotas • extend geographic coverage

23. Negotiations: Services Signaling Conference, July 2008 • contributions expected from others • architecture, engineering, medical, computer and related, distribution, certain environmental services, installer & maintainers, tourism/related, logistics, maritime transport, space transport • improve conditions for business mobility, without ENTs, call for complete removal of numerical ceilings, flag licensing & qualification requirements, importance of WPDR work Attention: • limited participation of Members • subject to trade off in overall Doha Work Program

24. What is happening in Regional and Bilateral Trade Agreement in terms of Mode 4?

25. RTAs: Coverage of Mode 4 • broader agreements covering economic cooperation, trade and investment flows, with provisions for managing mobility of service providers and workers • promising avenue for temporary movement of persons and workers • important, given limited Mode 4 commitments in WTO • most agreements limited, not far beyond GATS commitments • mostly focus on ICTs, Business Visitors, professionals, skilled suppliers • majority provide special access/facilitate access under existing immigration schemes

26. full mobility, limited exceptions (e.g. for public services, security, public health works market access for certain groups including grouping all movement of natural persons/temporary business entry in a separate chapter GATS model with additional elements no market access, facilitated entry Labour market integration approach ultimate objective: full integration Eg: EU, EEA, EFTA Services-based liberalization, NAFTA, Canada–Chile, US–Sing. mixed approach dual track of labour market integration & services liberalizatione.g. CARICOM, Andean Community 3. ASEAN, Euro-Med Association agreements 4. APEC, SAARC RTAs: approaches to labour mobility

27. Mutual Recognition Agreements fundamental to skilled movement • facilitates movement of skilled service suppliers  harmonization/ equivalence • negotiated by different bodies at different levels with different legal natures and competencies (devolved authority) • GATS Article VII: (1) allows conclusion of MRAs (and addresses broader membership); (2) establishes bases for recognition • challenges for developing countries: • transparency in the negotiations; third party rights • setting up domestic regulatory institutions • enhancing participation in international standard-setting • requires participation of all stakeholders private sector, professional associations, concerned government ministries

28. A few words on Migration and the Crisis

29. Crisis: Impacts

30. The crisis: employment-migration nexus • unemployment’s more international fall-out has been on migration • worsening economic conditions  unemployment and less job creation  • labour migration flows fall globally • less remittances • more restrictive policies for labour movement

31. The crisis: What is the impact? • falling employment results in fall in migration • UN DESA estimates lower average annual growth rate of global non-refugee migrant lower in 2005-2010 than in 2000-2005 • UK 45% reduction in migrant workers from Eastern Europe • fall in FDI a key source of demand for foreign workers in both high and low income countries, likely to result in reduction of employment opportunities • impact on migrant worker in terms of length of stay • possible bankruptcy of migrants with implications for poverty and local economies

32. The crisis- What is the impact? • lower remittance flows • remittance flows to developing countries USD 338 billion (2008) • represents over half the value of FDI inflows ($550 b), thrice as large as ODA ($119 b) • estimated to have declined by 6.9% in 2009 • as FDI inflows fall, magnifying importance of remittances as a resilient source of private finance and “crisis smoothener” • need for monitoring of migrant employment and remittances so that emerging problems can be effectively addressed

33. The crisis: policy reactions of some governments • Introduction of financial incentives to encourage migrant workers to return home • close-off entry of new migrants through more restrictive policies, including skill-based labour matching procedures However, labour mismatch reality still remains

34. Crisis: Policy responses • resist pressure for trade protection • renewed commitment to the Doha round • multilateral monitoring of trade related measures and policies being undertaken • reform of national and international regulation of financial markets • diffrentiated sectoral policy responses • some may require reduction in number of workers, others may require addressing condition of employment

35. Moving Forward: Some Issues and Questions

36. Moving Forward • How to ensure that Mode 4 commitments generate maximum possible development benefits? • definitions: categories & skill-levels; scope of commitments: sub-sectors, facilitating conditions of entry & stay • What is the link between MFN & approaches in bilateral & other schemes? • How to create a pro-development system for trade & migration flows? • need to complement GATS / trade rules with policies on e.g., skills & HR development, incentives for pro-development use of remittances, financial transfers

37. Moving Forward • Which elements of bilateral & other labour movement schemes would be useful in multilateral context? • definitions, policies for temporariness, recruitment agencies • How to enhance political willin receiving countries? • ensuring temporariness • safeguards or roll-back in sensitive areas • create credible but flexible commitments (e.g., allow for adjustment to demographic changes etc.) • cooperation in management of migration flows, with source countries & private sector entities • co-development, cooperation & solidarity frameworks

38. Thank you for your attention! deepali.fernandes@unctad.org