SERVICES: SECTOR BY SECTORMovement

SERVICES: SECTOR BY SECTOR
Movement of natural persons

The movement of natural persons is one of the four ways through which services can be supplied internationally. Otherwise known as “Mode 4”, it covers natural persons who are either service suppliers (such as independent professionals) or who work for a service supplier and who are present in another WTO member to supply a service.

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> Symposium on Mode 4 of the GATS — Taking Stock and Moving Forward, 22-23 September 2008





Introduction back to top

Under the General Agreement on Trade in Services (GATS), services can be traded internationally in four different ways — known as the four modes. Mode 4 refers to the presence of persons of one WTO member in the territory of another for the purpose of providing a service. It does not concern persons seeking access to the employment market in the host member, nor does it affect measures regarding citizenship, residence or employment on a permanent basis. (See Annex on the Movement of Natural Persons.)



Economic importance back to top

The measurement of Mode 4 flows poses formidable challenges. No clear statistical framework is currently in place to assess the size of Mode 4 trade, even if conceptual work on the issue is under way in the inter-agency Task Force on Statistics of International Trade in Services (see: Technical Subgroup on the Movement of Persons — Mode 4)

The Balance of Payments items “compensation of employees” and “workers’ remittances” are often used as statistical indicators to measure Mode 4 flows. However, they provide income flows originating from the movement of people across borders and, as such, they are not measures of Mode 4 trade. (For a fuller discussion, see: WTO Statistics Brief no. 8, September 2007.)

Relative to the other three modes of supply, available estimates suggest that trade through Mode 4 remains a very small component of overall trade in services, accounting for between 1 and 2 per cent of the total (WTO International Trade Statistics 2005).



Uruguay Round and Post-Uruguay Round Mode 4 negotiations back to top

In the Uruguay Round, commitments scheduled under Mode 4 were largely limited to two categories: intra-company transferees regarded as “essential personnel”, such as managers and technical staff linked with a commercial presence in the host country; and business visitors, i.e. short-term visitors not in general gainfully employed in the host country.

At the end of the Round, it was agreed that negotiations to improve commitments on the movement of natural persons would continue in the six months after the WTO came into force (Decision on the Negotiations on Movement of Natural Persons). To this effect, a Negotiating Group on Movement of Natural Persons was established.

The Negotiating Group supervised the bilateral negotiations on Mode 4, which concluded on 28 July 1995. As a result, six members — Australia [GATS/SC/6/Suppl.2], Canada [GATS/SC/16/Suppl.2/Rev.1], the European Community and its member states [GATS/SC/31/Suppl.2], India [GATS/SC/42/Suppl.2], Norway GATS/SC/66/Suppl.2/Rev.1] and Switzerland [GATS/SC/83/Suppl.2/Rev.1] — improved their commitments on the movement of natural persons. The improvements mostly concern access opportunities for additional categories of service suppliers, usually independent foreign professionals in a number of business sectors, or the extension of their permitted duration of stay.

The upgraded commitments are attached to the Third Protocol to the GATS, which entered into force on 30 January 1996. The Third Protocol provides for the annexation of the new commitments to the Uruguay Round services schedules of the six members concerned.



Current commitments and MFN exemptions back to top

Most members' Mode 4 commitments have been undertaken on a horizontal basis, i.e. applicable without distinctions to all sectors inscribed in a member's schedule. Overall, the degree of Mode 4 access that has been bound is quite shallow. In most instances, members have scheduled an initial “unbound” (i.e. no binding of access conditions) and then qualified it by granting admission to selected categories of persons, with a marked bias towards persons linked to a commercial presence (e.g. intra-corporate transferees) and highly skilled persons (managers, executives and specialists).

In addition to limiting access to certain categories of persons, other restrictions frequently inscribed in schedules include: defined duration of stay; quotas, including on the number or proportion of foreigners employed; “economic needs tests” (a test that conditions market access upon the fulfilment of certain economic criteria) or “labour market tests”, generally inscribed without any indication of the criteria of application; pre-employment conditions; residency and training requirements.

As for Mode 4 exemptions to most-favoured nation (MFN) treatment (i.