Effective Market Access in Modes 4 and 1 by

1. Effective Market Access in Modes 4 and 1by Rupa Chanda IIM, Bangalore June 6, 2006

2. Hong Kong Ministerial Declaration and modes 1 and 4 • Annex C urges members to negotiate towards achieving progressively higher level of liberalization • Aims to intensify negotiations by expanding sectoral and modal coverage of commitments and improving their quality • Particular attention to be given to sectors and modes of export interest to developing countries and appropriate flexibility for developing members • Objectives relevant to improving market access in modes 1 and 4: • Bind in commitments at existing levels across sectors in modes 1 and 2 • New or improved commitments on contractual service suppliers, independent professionals, others, delinked from commercial presence in mode 4 • New or improved commitments for intracorporate transferees and business visitors in mode 4 • Greater clarity in commitments • Rules negotiations

3. Plurilateral Requests in Modes 1 and 4 • Request in cross border supply • Involves several key developing countries • Goes some way in obtaining full commitments in wider range of services and emerging areas in future through improved classification under computer and related services and other business services • Calls specifically for removal of commercial presence, nationality/residency requirements, and national treatment limitations • Similar commitments requested in modes 1 and 2, with differences where required • Comment: • Detailed and quite comprehensive coverage of service activities, with corresponding classification varying with activity line • Tries to address gaps between commitments and emergence of commercially meaningful opportunities • Inadequacies of GATS classification system and uncertainties in classifying electronic delivery addressed • Forward looking in trying to account for rapid technological developments • But still a positive list approach as opposed to earlier mode 1 proposal for full horizontal commitments with small negative list (reasons recognized) • Continues to put burden on classification scheme to suitably capture wide range of traded services under mode 1 • Regulatory issues not raised separately

4. Request in mode 4 • Expand coverage of commitments to include CSS and IPs • Clarifies definitions of CSS and IP categories • De-links mode 4 access from mode 3 presence • Qualification commensurate to job requirement-based on diploma or university degree or demonstrated experience • Duration of stay for 1 year or longer depending on contract, with provision for renewal • Removal of certain conditions like wage parity • Removal of ENTs or at least greater transparency in their use • Positive list approach to specify sectors to which IP and CSS categories applicable • Engineering, technical analysis, medical and dental, computer and related, tourist guide and some others for CSS • Engineering, technical testing and analysis, accounting and bookkeeping, management consulting and some others for IPs • Transparency and non discrimination in administrativeprocedures

5. Comment: • Echoes earlier mode 4 proposal • Transparency and clarity issues addressed • Gives some scope to cover formal and non formal qualifications • But limited to horizontal commitments and limitations and not deepening sectoral commitments • Shifted more to removal of limitations and transparency issues than market access and administrative mechanisms that distinguish temporary from permanent movement (SPV type scheme not explicit) • Discretionary scope can continue

6. What progress can one expect in modes 1 and 4? • Gains in mode 4 likely to be in the form of: • Some improvement in transparency of commitments, classification and clarification of categories • Relaxation/removal of some limitations like ENTs/LMTs, clarification of criteria • Easier renewal/granting of visas for highly skilled • Unlikely to realize substantive increase in market access or inclusion of wider range of service categories and qualifications • Unclear how regulatory issues will affect mode 4 access • Gains in mode 1 likely to be in the form of: • More binding commitments across a larger number of sectors • Removal of some NT limitations • Unclear how regulatory issues could affect mode 1 access

7. How can market access in mode 4 be improved? Classification issues • Need greater clarity and uniformity in definitions • Agreement on common list of occupations and definitions • Commitments at finer, more disaggregated level wherever possible • Closer cooperation among professional bodies across countries required for disaggregating categories, determining qualifying work and educational criteria, and equivalence • Closer cooperation between regulatory authorities in host and source countries • Separate categories by occupations rather than skill levels

8. Coverage issues • Need to liberalize market access for wider range of service suppliers, to meet interests of developing countries • ICT: • Expand beyond executives, managers, specialists by lowering and diversifying functional/hierarchic criteria, relaxing conditions • include employees who provide assistance/advice/service to foreign client/receive business training regardless of status, without requirement of period of prior employment • CSS: • Relax minimum eligibility conditions to include non-professional, non-formally qualified persons, experience/competence based qualifications

9. Can consider creating new CSS subcategory to cover non-formally qualified, non-professional service providers • CSS-1: formal qualifications, minimum skill threshold with more liberal market access • CSS-2: non formal qualifications, based on demonstrated experience via apprenticeships, vocational training, on-the job experience • Could separate out those occupational categories and functions which fit this subcategory • To make some progress in these categories and allay sensitivities in host countries, could consider slightly more restrictive market access conditions • Quantitative ceilings • Minimum wages • Shorter duration of stay (3-6 months) • Negative list of sectors where CSS-2 not applicable • Flexibility in market access depending on labour market conditions? • Draw upon relevant elements of bilateral/other labour agreements • But where possible deeper sectoral commitments on CSS-2 • Issues of occupational certification, assessment of competence will need to be worked out for non formal qualifications and there could be additional enforcement burden in host countries

10. Alternative might be to use mode 4 negotiations at this time to liberalize only movement of professionals and mainly between developed and faster developing countries • Gradually build on this experience to accommodate a wider range of service providers • Bilateral and regional agreements could for the time being cover movement of other categories as they have greater flexibility to address cultural and other sensitivities • Pragmatic approach but goes against the GATS’ neutrality to skills and qualifications

11. Nature of commitments and supporting norms/mechanisms • More transparent commitments need to improve procedural transparency and facilitate entry • Opaque commitments can cause implementation burdens at ports of entry and delay processing • Could provide more supplementary information (on ENTs or LMTs, work permits or on additional conditions or requirements that apply to certain application processes) • Should still explicitly attempt for a visa which distinguishes temporary from permanent movement, with appropriate safeguards against abuse • More transparency required in recognition of formal qualifications, work experience, and demonstrated ability • Can multilateral norms for recognition and entry into MRAs be worked out? • Where market access sensitivities in host countries, could shift focus of commitments towards removal of national treatment limitations • Relevant in areas like legal, accountancy, architectural, other professional services where discriminatory conditions relating to nationality, licensing, registration not required given other recognition and market access conditions already present • Use assurance of non-discrimination as a step towards market access while retaining flexibility to inscribe quotas and other non-discriminatory provisions under market access commitments

12. Coordination issues • Greater coordination is required between regulatory authorities in host and source countries with sharing of responsibilities by source country • Need to reassure immigration authorities in host countries that source countries will screen service providers, accept and facilitate their return, prevent abuse of market access, address security concerns • Occupational certification and competence assessment issues may also require greater coordination • Need to consider mechanisms for regulatory assistance to developing countries • But what conditions might source countries be required to fulfil to be granted better market access? Can these conditions be included under GATS? • More coordination and sensitization required across trade, immigration, and labour policy officials

13. How can market access in mode 1 be improved? • Important challenge will be to cover a rapidly growing set of activities, especially intermediate activities, and new trade possibilities and to mimic as closely as possible the horizontal approach with small negative list proposal • Need to keep removing discriminatory conditions on mode 1 access • Business imperatives, demographic trends, and technological change likely to keep market access open in this mode • Main market access impediments are likely to be domestic regulations on cross border supply • Data privacy/protection, jurisdiction (taxes, indemnity), standards, recognition, government procurement related regulations could undermine liberal commitments in mode 1 • Challenge will be to ensure these regulations not applied in a discriminatory manner and are transparently enforced • Need to eliminate/reduce use of unnecessary regulations • General equivalence and harmonization of cross border regulatory requirements across modes 1 and 2 may be needed • International coordination and regulatory cooperation issues

14. Tradeoffs by developing countries • Within services: • Reciprocal commitments in mode 4 between developed and developing countries • Cross modal tradeoffs, especially in mode 3 • In exchange for improved market access in modes 1 and 4 developing countries could: • Eliminate barriers to foreign investment in sectors where already liberalized, where benefits evident, some regulatory capacity developed, and where reversal unlikely • Pre-commit where pre-conditions for liberalization can be met in reasonable time • Cross-sectoral: • Developing countries with a more pro-active agenda in services may need to show willingness to liberalize in other sectors in exchange for market access gains in modes 1 and 4 • Tradeoffs elsewhere can help in coalition building with other major developing countries on services