5:28 AM Jul 19, 1994


Geneva 18 July (Chakravarthi Raghavan) -- Negotiations on conditions of temporary access for natural persons to the territories of other countries is a legitimate subject for negotiation of concessions in GATS and both industrial and developing countries have a mutual interest in more efficient arrangements, the UN Conference on Trade and Development has said.

The Uruguay Round GATS agreement has recognized, in terms of definition of 'trade in services', four modes of delivery, one of which is through "presence of natural persons".

The Marrakesh accord and the Ministerial decisions on GATS has allowed for continuance of negotiations in four areas: financial services, basic telecommunications, maritime services and movement of natural persons.

In a report on this issue (drawn up before the conclusion of the Round at Marrakesh) to the Standing Committee on Developing Service Sectors, the UNCTAD secretariat has said that such more efficient arrangements relating to temporary movement of personnel under the fourth mode of delivery would provide developing countries, who have comparative advantage in providing labour-intensive services to increase share of world trade in services "without increasing pressures for immigration, while mitigating 'brain drain'."

The more general secretariat report assessing the outcome of GATS, had said that developing countries would have some potential future benefits, but none of immediate major economic value. The mode of supply through movement of natural persons was listed as a horizontal concession limited to intra-corporate transferees -- managers, specialists or executives -- and business visitors linked to commercial presence but without sectoral specificity.

In its comments at the Standing Committee, the EU suggested that the developing countries would benefit from GATS through 'investment and transfer of technology' and that over-emphasising trade based on export of cheap labour would be a risk for the long-term.

The GATS country-annexes show that the EU has made no commitments, in any of the services sectors and sub-sectors, in respect of the fourth mode of delivery (movement of personnel). In terms of horizontal commitments it has made no commitments on any of its member-country measures on movement of natural persons except for temporary presence as very restricted categories related to a foreign service enterprise providing service through commercial presence such as intra-corporate transferees in senior management personnel, or those possessing 'uncommon knowledge' within a services enterprise etc.

The United States has made a horizontal commitment, under the category of 'fashion models and specialty occupations' for up to an annual 65,000 persons on a worldwide basis, but has attached several conditions including those relating to professional and licensing requirements for qualified persons engaged in 'speciality occupations', higher wages than local personnel, foreign personnel not being sought to be brought in during a strike, lockout or layoff.

Two other conditions are that the employer has taken or would take 'timely and significant steps' to recruit and train US workers and notice is given to the employees in the establishment.

The assymetry in the limitations, observers note, is brought out in the fact that if a country provides market access for services through cross-border movement or commercial presence, and makes it conditional on the foreign provider selling at a higher price than a domestic enterprise, it would be viewed as illegal and protectionist and promoting inefficiency.

The secretariat report on movement of personnel notes that temporary movement of personnel across national borders was both significant and increasing in volume as a result of growing globalization of markets. But the number of persons resident outside their countries was still small in absolute and relative terms.

The impetus for growth in temporary movement of personnel has not been limited to persons associated with service exporting firms or exporting labour-services firms, but also from manufacturing exporters and investors needing to staff foreign operations with their own personnel and main goods exported.

Despite high unemployment levels, many industrialized countries face shortages of skilled labour in labour-intensive services.

As a result, although their immigration policies are tightening, these countries have an interest in attracting highly-skilled persons from developing countries while the latter group of countries cannot afford to lose such assets.

"This suggests that developed countries and developing countries could have a mutual interest in arriving at more efficient arrangements which would provide developing countries with the possibility of increasing their share of world trade in services, without increasing pressures for immigration while mitigating brain drain," UNCTAD says.-

In terms of national policies, the secretariat suggests complementary policy measures at national level, both in importing and exporting countries would be needed.

Many developing countries, it says, have considerable experience in exporting labour-intensive services, in such areas as construction, engineering consultancy, maintenance, security, shipping, cleaning, education, and computer-related services. Specialized expertise related to manufacturing of natural resource extraction might also be "externalized" and organized in labour-intensive enterprises.

This expertise could be examined more closely in terms of past experience of individual firms in export markets to assess strengths and weaknesses and specific problems -- in terms of market access, national treatment, restrictive business practices etc -- and effectiveness or lack of previous national policies for promoting growth of these firms.

For exporting countries, several considerations militate in favour of organized movement of their personnel abroad, within an enterprise structure, for providing a package of services. They can be structured not only in terms of unskilled labour but also managerial know-how and technical expertise going with the service to provide a system from which value added is higher than mere wages and salaries earned by guest workers. Opportunities for technology transfer could be facilitated since firms and individuals could accumulate experience and expertise by working in collaboration with developed country firms that possess superior technologies.

Importing countries too have an interest in more efficient arrangements for temporary labour movement.

Labour-deficient countries that have used such guest labour in the past have subsequently encountered difficulties in absorbing the sizeable share of temporary guest workers staying on as permanent immigrants.

More structured trade in labour-intensive services would make it easier to limit stay of temporary labour, linking it to clearly defined skills.

At the same time greater security of access would be afforded to the exporting countries as movement of persons would respond more readily to vagaries of market demands.

This would also require concessions on commercial presence and national treatment since foreign firms in some countries are precluded from importing foreign workers.

In formulating policies for promotion of labour-intensive service firms and development of export markets for them, the UNCTAD report adds, countries that are traditional exporters of labour might review conventional labour export schemes as promoted through bilateral agreements, as well as promotions that have taken place in an unorganized manner.

More developing countries should prepare inventories of occupations of their nationals working abroad to identify areas of 'comparative advantage'.

Advances in telecommunications and information technology have also opened up new possibilities for export of labour-intensive services without movement of persons.

There is much anecdotal information on exports of data entry, data processing, software and other 'back office' services by developing countries, but very little information as to the actual and potential size of this trade and the type of economic and infrastructural policies to provide elements for an export strategy in this area.

The Uruguay Round accords, the report suggests, should result in new opportunities for exports of labour-intensive services from developing countries provided they meet a number of conditions including:

* concessions negotiated within the framework of GATS provide access for natural persons in sectors of interest to developing countries, which in turn, would reflect among others their ability to formulate and effectively pursue requests to this effect, and

* developing countries acquire the necessary means for promoting such exports in order to take advantage of market access opportunities through all modes of delivery.

"The inclusion of specific sectoral and occupation categories (in additional to 'horizontal' categories) in the schedules of commitments of the GATS should be a matter of priority," UNCTAD says.

"This would ensure that any tightening of immigration laws and regulations, provoked largely by high rates of permanent immigration and pressures of illegal immigration, will not act as a barrier to trade in services through temporary movement of persons," the report adds.

As a future work programme in UNCTAD, the report suggests that it would be useful to conduct a systematic analysis of immigration laws to identify their sectoral specificity.

This could help developing countries to identify possible opportunities for expanding trade and facilitate preparation of requests in negotiations within the framework of the GATS.

The GATS ministerial decision envisages continuance of the negotiations on financial services and movement of natural persons, after Marrakesh and until six months from WTO's entry into force.