Mode 4 of the GATS Taking Stock & Moving Forward WTO Symposium 22-23 September 2008

1. Mode 4 of the GATS Taking Stock & Moving Forward WTO Symposium 22-23 September 2008 Mina Mashayekhi, Head, UNCTAD TNCDB, Geneva

2. Outline • Development Benefits of Migration • Some figures • Triple benefits of migration • Zooming in on “Mode 4” • Services sector • Temporary movement • Categories of movement covered in schedules • Way Forward • Ensuring pro-development movement • Overcoming reluctance in receiving countries • Co-operation, co-development & solidarity frameworks

3. The Case for Liberalizing Migration

4. Today’s Reality of Migration • 200 million people • live outside their country of birth • in today’s economic reality • movement is increasingly taking place for delivering services • there is a global competition for skills • more pro-active migration management policies

5. The Case for Liberalizing Migration • Calculations cover more than GATS-type movements • which is limited to temporary movement for the provision of services • Estimated gains vary, but they are • significant, expected to exceed gains from liberalization of merchandise trade, have pro-development distributional implications • Examples include • double world income • if full liberalization of movement (Whalley, 1984)

6. The Case for Liberalizing Migration • 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) (that is 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)

7. How to Improve Data on Mode 4 ? Interagency Task Force on Statistics of International Trade in Services (OECD, EC Commission, IMF, UNCTAD, UNSD, UNWTO/OMT & WTO/OMC)

8. The Case for Liberalizing Migration Greater benefits promised by lower-skilled movement: Some figures: • while movement of labour can generate gains (15 – 67 % of world GDP) movement of only skilled labour would generate much smaller gains (3 – 11 % of world GDP) (UN-WIDER, 2003) • ICs & DCs to benefit more from liberalization of restrictions on low-skilled labour than on skilled labour • low-skilled temp migrant from DCs would gain USD 38 billion & their remittances would more than offset their original low contribution to home output, so welfare of those remaining behind also rises (Winters 2002)

9. The Case for Liberalizing Migration Greater benefits promised by lower-skilled movement: Additional sources of benefits: • irregular migration is concentrated among lesser skilled, hence more benefits from regularizing such movement • less potential for brain drain, more brain gain • lower skill levels comparatively more restricted, hence greater gains from liberalization • potential to build on bilateral labour movement schemes which frequently cover activities at lower skill levels • migration of low-skilled workers is usually beneficial; low skilled migration has contributed to poverty alleviation; findings on impact of high-skilled emigration are mixed (Worldbank 2006)

10. Push & Pull Factors Costs & Benefits • Pull factors • demographic changes, labour market needs, higher wages • Push factors • poverty, unemployment, lack of economic & political stability • Balance in potential costs & benefits • varies across countries, level of skills & economic, social specificities • varies for: sending & receiving country & migrant • Need to ensure movement • that generates pro-development outcomes • crucial: multi-stakeholder approach, involving sending & receiving countries, migrants, employers & unions

11. Country of Origin: Benefits Additional benefits derive from • remittances (among largest sources of external finance for DCs, USD 240 billion, 2007) • relieve from unemployment • experience & skills acquired • poverty alleviation & gender empowerment (MDG) • investment of remittances & Diaspora investments into building productive capacities • increasing trade flows • entrepreneurship & business climate • “social remittances“ • e.g., impact of migrants on ideas, behaviors & social capital in sending country

12. Country of Origin: Challenges but benefits are not automatic & potential challenges include • loss of human capital & public investment in education • emigration rate of tertiary-educated: as high as 81 % • health workers e.g., Ethiopia, Uganda, Zambia, Liberia • loss of fiscal revenue • large remittance flows may lead to currency appreciation & adverse effects on exports • dependency on remittances • social disintegration

13. Country of Destination: Benefits Benefits for destination countries include • steady supply of needed workers, bridging shortages of personnel • e.g., health, key infrastructure services, business services, including IT • enhanced productivity (including lower prices) & essential services delivery • migrants serve as links to business opportunities in sending countries • responds to need of business sector/employers (agriculture, IT etc.)

14. Country of Destination: Challenges but there are common “fears” associated with migration • loss of jobs • wages being pulled down • drain on social resources • security • political “unattractiveness”

15. Migrants: Benefits Migrants bear principal risks & potentially reap largest rewards • but are often ignored in policy discussion Migrating individuals hope to gain through: • access to employment • wage differential (to sustain family at home) • enhanced skills • social exposure • safer, legal migration from DCs

16. Migrants: Challenges but there are also challenges • social disintegration & long periods of separation from families • brain waste • potential for abuse, particularly for lower skilled & female workers • inability to accumulate real savings • no integration in host country - not welcome by society

17. Zooming in on Mode 4

18. Zooming in on Mode 4 Gains from Mode 4 liberalization expected to be substantial: • size of the services sector • e.g., services contribution to GDP: 72 % in IC & 52 % in DCs • services sector covers wide range of activities where (temporary) migration is - or could occur • e.g. professional, computer-related, health, construction, tourism, agriculture-related & transport services, or other seasonal activities

19. Zooming in on Mode 4 Temporary/circular migration expected to generate particular development benefits • Country of origin • pro-development benefits, but less potential of brain drain; brain gain upon return • Country of destination • filling labor market needs without bringing full challenges of immigrant integration • UN – High Level Dialogue on Migration & Development • Global Forum on Migration & Development • 2008, Manila: ”Protecting & Empowering Migrants for Development” Roundtable 2 “Empowering Migrants and Diaspora to Contribute to Development” • 2007, Brussels, focusing on circular migration, e.g. Roundtable 1.4, “ How can circular migration & sustainable return serve as development tools”

20. Mode 4 Liberalization in WTO Taking Stock

21. “Mode 4”: the GATS Approach • Annex (to GATS): defines “natural persons” as: • service suppliers of a Member (self-employed); • employees of a service supplier (i) as ICT or (ii) employee of a company outside the territory of another Member; • GATS addresses “temporary movement” • e.g., not access to employment market; not covering measures regarding employment on a permanent basis; • GATS does not a-priori exclude: • any occupation or any skill level • Governments free to regulate entry & (temp.) stay • provided this does not “nullify or impair” the commitments

22. “Mode 4”: Current Commitments Assessment given in plurilateral request • categories of natural persons for whom commitments are being sought is amongst most critical aspects • specific commitments in Mode 4 primarily horizontal • coverage ofcategories narrow & restricted mainly to personnel related to commercial presence • coverage of categories de-linked from commercial presence is extremely low • substantial improvements in coverage of categories & substantial removal of market access limitations for each of them is key objective

23. “Mode 4”: Impact of Pattern in Current Commitments Mode 4, least liberal • commitments mainly horizontal • “full bindings” almost insignificant vis a vis Modes 2 & 3 • categories • ca. 75% movement linked to Mode 3 • for CSS: bias towards qualified (skilled) labour Impact • facilitating particularly movement of the highly skilled • much of such highly skilled movement is already happening • on North-North, North-South & South-South basis • supported & facilitated by national legislative framework

24. Negotiating Initiatives on Mode 4 • 2 LDC Grouprequests plus initiative on “Special Priority” (2005/2006 & 2007/2008) • Texts in HK Ministerial Declaration (Dec 2005) • Plurilateral request (2006) • Language in potential Chair’s text (2007/2008) • Signaling conference (July 2008) • Plus work in WPDR (Domestic Regulation Disciplines) Plus academic, research & other work • e.g. Model schedule on Mode 4

25. Hong Kong Ministerial Declaration (Dec.2005) Para27. …determined to intensify negotiations…with a view to expanding sectoral & modal coverage of commitments & improving their quality….particular attention …to sectors & modes of supply of export interest to DCs. Annex C: On Mode 4 • new or improved commitments on CSS, IP & others, de-linked from CP, to reflect inter alia • removal or substantial reduction of ENTs • indication of prescribed duration of stay & possibility of renewal • new or improved commitments on ICTs & BVs, to reflect inter alia • removal or substantial reduction of ENTs • indication of prescribed duration of stay & possibility of renewal

26. Discussions on a possible Chair’s Text JOB (08) 79 • …responses shall, where possible, substantially reflect current levels of market access & national treatment & provide new market access & national treatment in areas where significant impediments exist, in particular in sectors & modes of supply of export interest to developing countries, such as modes 1 & 4, in accordance with Article IV of the GATS.

27. Services Signaling Conference 26 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 • numerous business services (e.g. architectural, engineering, medical profession, opinion polling, R&D, computer services) • In addition: 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

28. Services Signaling Conference26 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.

29. Mode 4 Liberalization in WTO Moving Forward

30. Moving Forward 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

31. 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 type of solutions are possible? • substantive & process-oriented solutions: market access commitments complemented with commitment to negotiate (bilateral) labor exchange programs (Art XVIII, Reference Paper additional commitments) • What is the link between MFN & approaches in such bilateral & other schemes? • how to address schemes not covered by Art V & V bis?

32. Moving Forward • Which elements of bilateral & other labour movement schemes would be useful in multilateral context? • definitional aspects, policies to ensure temporariness, cooperation sending & receiving countries, working through recruitment agencies • How to incorporate such elements into GATS framework? • market openness commitments, additional commitments, e.g. Art XVIII, Reference Paper etc.

33. Moving Forward • How to address definitional uncertainties in the GATS? • clear understanding needed to move forward in useful manner • How to enhance political will in receiving countries? • ensuring temporariness (sticks & carrots) • safeguards or roll-back for commitments in sensitive areas • creating credible but flexible commitments (e.g., allowing for adjustment to demographic changes etc.) • cooperation in management of migration flows, with source countries & private sector entities, “managed migration” • co-development, cooperation & solidarity frameworks

34. Moving Forward • What are lessons learnt from debate on circular migration & development? • traditional policies need to be complemented by policies that help migrants reach their goals in countries of origin -> co-development, cooperation & solidarity frameworks • 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 • co-development, cooperation & solidarity frameworks • need for synergy between trade & other rules & initiatives

35. In Sum • Temporary migration, particularly at lower skill levels • can generate considerable development benefits • in both, countries of origin & destination • GATS offers a useful framework • but to realize its potential there is need for: creativity & political will &better understanding on determinants & effects of migration

36. Thank you for your attention! Mina.Mashayekhi@unctad.org