The Battle Over Mode 4 Migration at the Doha Round

♠ Posted by Emmanuel in , at 5/12/2008 01:30:00 AM
If you thought services outsourcing wasn't a contentious enough issue, imagine throngs of highly skilled Indian service workers coming to the USA on an expanded if temporary basis. It probably would result in pandemonium if such a thing were to happen: skilled LDC workers being allowed to cross over and render services. Nobody who reads this blog regularly needs to be told that migration is a most contentious global issue, surpassing even trade and the involvement of MNCs. Thus, it would only seem appropriate that the lame WTO Doha Development Agenda would get bogged down on, you guessed it, migration matters. We are concerned in this post with the General Agreement on Trade in Services (GATS) provisions on the movement of natural persons, otherwise known as Mode 4 services trade. For non-trade junkies, services provided fall under four main categories. They are:

From the territory of one Member into the territory of any other Member
(Mode 1 — Cross border trade AKA "outsourcing");
In the territory of one Member to the service consumer of any other Member
(Mode 2 — Consumption abroad);
By a service supplier of one Member, through commercial presence, in the territory of any other Member
(Mode 3 — Commercial presence); and
By a service supplier of one Member, through the presence of natural persons of a Member in the territory of any other Member
(Mode 4 — Movement of natural persons).

The WTO offers examples of each mode of service provision:

Mode 1: Cross-border
A user in country A receives services from abroad through its telecommunications or postal infrastructure. Such supplies may include consultancy or market research reports, tele-medical advice, distance training, or architectural drawings.
Mode 2: Consumption abroad
Nationals of A have moved abroad as tourists, students, or patients to consume the respective services.
Mode 3: Commercial presence
The service is provided within A by a locally-established affiliate, subsidiary, or representative office of a foreign-owned and — controlled company (bank, hotel group, construction company, etc.).
Mode 4: Movement of natural persons
A foreign national provides a service within A as an independent supplier (e.g., consultant, health worker) or employee of a service supplier (e.g. consultancy firm, hospital, construction company).
For understandable reasons, India--one of the two main LDC negotiators in the Doha round together with Brazil--has been a proponent of expanding Mode 4 migration. It is a truism that international organizations are often instruments of those who create then in the sense of following the "golden rule": he who hath the gold maketh the rules. At least when the rules of the WTO were being drafted, the US and the EU had the most clout in international affairs. Hence, the strong influence of Western financial services providers saw to it that the so-called Mode 4 trade in services received mention. Mode 4 was originally conceived to enhance the mobility of skilled MNC employees to provide services where MNCs had a commercial presence.

In the time since the WTO was established in 1995, India has emerged to become a major services provider in its own right. Medical, technical, engineering, software--you name it--India has many trained experts just waiting to be tapped for on-site service tasks in the developed world. Being, in many respects, on the leading edge of services provision, Indian industry is keen on interpreting the Mode 4 text in a way that expands the market access of LDCs abroad for services provision. Concerning Mode 4, here is India's request list to the US for the Doha round. To say that some are demanding is an understatement:

1. Broadening the category of services salespersons to any Business Visitor visiting for purpose of business negotiations;
2. Undertake to put in place a Visa System to ensure the fulfillment of the horizontal and sectoral commitments undertaken;
3. Take full commitments in respect of the category of independent professionals delinking from commercial presence (Mode 3); Remove the limitation on account of narrow definition of specialty occupation which insists on “higher specialised knowledge” or “higher degree” of qualification both of which are not clearly specified;
4. Remove the limitation relating to Quantitative Restrictions and numerical quotas so as to enable Professionals to enter and deliver services as per demand;
5. Remove the Labour condition application requirements for professionals;
6. Remove requirement of licensing in each state to enable practice of profession throughout USA;
7. Undertake to put in place a Visa System ensuring grant of multiple entry visas for professionals;
8. Allow inter-firm mobility to professionals;
9. Undertake full national treatment instead of “Unbound”.

As you would expect, the US has balked at these demands. If most of these demands are passed, they would amount to substantial changes in the US immigration system and give open access to Indian and other LDC service providers to operate in the US market. The US Trade Representative has maintained that migration matters are outside the remit of trade talks. It is ironic how Mode 4 has backfired on the US and to some extent the EU. Mode 4 was once seen as a way to extend the dominance of Western firms in service arenas. Now that LDCs are progressing smartly in services provision themselves, Mode 4 has become a "non-trade" issue according to the West. If Mode 4 speaks so little about trade, then why was it included in the GATS in the first place?

Importantly, being able to provide Mode 4 services without an established commercial presence abroad (e.g., unlike Citigroup having branch networks spanning the globe; Mode 3) is a sticking point as the current rules favour Western MNCs. It will be interesting to see how things turn out. I don't see the US moving on Mode 4. Given the deadlock over so many other matters, this only worsens the prospects for the Doha round. Here is a foretaste of the debate which may pop up in the US if Mode 4 is even contemplated: "The American Resistance" sees job destruction and a loss of sovereignty. Meanwhile, Public Citizen further notes:
The bottom line is that the USTR cannot commit to real increased Mode 4 access – or honestly promise any given country (say, India) guaranteed visa quotas — because it simply is not within the Executive Branch’s authority to deliver on any such commitments. Only Congress can enact such policies, and the mood in Congress is diametrically opposed to any such policy.
Doha, we hardly knew ye? There was a symposium held in 2002 on Mode 4 that featured many worthwhile papers on the topic if you are further interested. Rediff has more on Mode 4 negotiations at the WTO:

India wants to know what it would get for its short-term movement of skilled service providers under Mode 4 on a non-immigration basis from the US and the European Union, said Khullar. He added this was the most important market access area for all developing countries like India...

Besides, the US is not willing to offer any access on Mode 4 on the ground that it is an immigration issue…

During a meeting between the WTO chief and chairs of different Doha negotiating bodies on Tuesday, the chair for Doha services negotiations, [Mexican] Ambassador Fernando de Mateo, said there would not be any favourable response on the issue of Mode 4 from the US.