Mode 4 of GATT and WTO - Essay Example

dе 4 of GАТТ and WТО Name Lecturer Date Introduction The movement of natural persons is among the four modes of services delivery across the borders. After the Second World War the growth of services delivery among the OECD countries increased rapidly due to the advancements in technology. Before the development of the GATS technology services were considered highly non-tradable. This is because services are non-storable since they are supposed to be consumed as soon as they are produced. However with the help of the current technology it was found possible to store services in a computerized manner. This computerised storage of data made it possible to trade services across the borders. The services sector especially within the developed countries experienced a dramatic expansion and in turn there was the need to streamline the services trade among the partnering countries. Moreover there was a need to introduce rules and regulations that would govern the services trade both within the host country as well as the trading partner. Most importantly these regulations had to be established at the marketplace as a condition of trade in the host country. In the service sector the appropriateness of the GATT technology as well as its applicability raised a number of questions that needed to be addressed so as to guarantee the participants about the positivity of its implications.1 The GATS is referred to as the mode 4 because it consists of four modes of service delivery across the borders. These modes include; Cross border supply Consumption overseas Commercial presence Presence of natural persons Mode 4: Cross-Border Movement of Natural Persons In this report we will discuss the forth mode of delivery which is the cross-border movement of natural person as outlined in the World Trade Organization. This mode of service delivery has over the recent past raised issues that have mounted to conflicts of economic interests in the North-South. The mode 4 of the World Trade Organisation entails natural persons who can either be service suppliers for example private or independent professionals or those who are employed to work for a service supplier and are presently in one of the members of the World Trade organisation supplying a service. Within the General Agreement of Trade in Services (GATS), the tradability of services is enhanced through the four ways which were mentioned earlier. Each mode of service delivery has its own means of enhancing the transferability of these services from one member country to the other. The modes are employed in way that helps in giving these services the qualities that they lack in order to make them tradable. For instance one of the main factors that make services non-tradable is the fact that services are not storable. This means that a service can only be traded directly, that is services need to be consumed as soon as they are produced. This non-storability of services is encountered by the use of the current technology that helps in making it possible to store the services. The mode 4 generally refers to the presence of persons in one of the World Trade Organisation member within another member country so as to provide the services in that particular territory. However it should be noted that this mode does not consider those who are in the host country looking for employment opportunities. Moreover the mode also disregards the residence, citizenship as well as employment on permanent terms. Among the main objectives of the inception of mode 4 within the GATS was to ensure that there are credible and dependable system of international trade rules and regulations. It also aimed at offering fair and equitable treatment of all member countries that participates in the international trade of goods and services.2 Most importantly is to ensure economic activities stimulation in certain and policy binding manner as well as uplifting or catalysing trade and development in the region through a continuous liberalization. According to the recent studies it has been found out that about one hundred and forty economies are members of the GATS. All these economies are similarly members of the World Trade Organization and are said to have varying levels of commitments in their respective service sectors. Services accounts for about 60% of the total production in the world but only about 20% of the total trade in the globe is based on the provision of services.3 However with the help of the GATS in combination with its various modes of services delivery as mentioned above, the services that used to be considered as domestic activities only they have continuously been made international. This has been enhanced through the introduction of new transmission techniques that are supported by the technology for example the tele-health services, e-banking services as well as tele-education and e-commerce among others. Since the inception of these modes of service delivery several issues have been raised regarding their applicability as well as its appropriateness. For instance the presence of natural persons in other countries, where they offer services such as accounting, doctors, teachers and other professional services are yet to be clarified on how they benefit the host countries. This is because there are no clear statistics upon which the applicability of the mode 4 can be assessed in terms of the size of trade that it controls. This issue makes it difficult for the countries to tell how much it obtained from the service trade that is conducted through the mode 4 of the GATS. However there has been a process underway to deal with this issue under the intra-agency Task Force on Statistics of International Trade services.4 Compensation and the remittances of the services providers Balance of payment is another issue worthy discussion as far as the mode 4 is concerned. This is because when services are transferred sometimes it is not possible to measure the monetary value of the service that is provided in the foreign country by the persons from other countries. According to the GATS rules regarding the mode 4 a person take his or her services into another country where the country benefits from his or her knowledge or expertise on a particular field. The money that the individual is paid for the services that he or she provides sometimes it is not directly proportion since it just depends on the employer. Over the recent past there has not been a measure for the amount that is supposed to be compensated to the service provider who provides a certain service in the foreign country. One of the reasons as to why this has not been possible is due to the differences in the types of services that are provided. It should be noted that the magnitude of services is not always equal. This means that each service that an individual provides is normally compensated depending on its magnitude. Moreover services are measured on the basis of professional qualifications as well as the level of expertise that an individual has on that particular field. Considering these differences in the labour market it makes it difficult to have a standardized measure upon which the countries that are involved in the temporary natural movement of persons can rely on. Nevertheless in order to ensure the balance of payment it is vital to have a clear definition of the returns that are expected when certain services are offered to the trading country partner. For this reason the compensations and the workers remittances for the services offered ought to have a standardized measure upon which each country should adhere to. Even if it is not a very precise measure, but at least it ought to be there so as to ease the computation of the balance of payment among the countries involved.5 Lowly and medium skilled service providers Another major issue is the transferability of the medium and lowly skilled service providers between the developing and the developed countries. Studies show that medium and low skilled service providers are the majority within the developing countries, however the temporary movement of natural persons only considers those who are highly skilled leaving out the majority less skilled individuals in the developing countries. It should be noted that any trade may it be of goods or services, is developed through the exploitation of differences between the trading partners. This also applies when it comes to the labour mobility from one country to the other. Unfortunately this comes to the disadvantage of the developing countries because, these countries highly consists of the lowly and skilled labour. Hence since the number of highly skilled labour in the developing countries is low then the countries only ends up suffering from brain drain. This is because the majority lowly and medium skilled service providers are not considered in the service trade. If the lowly skilled or the medium skilled service providers in the developing countries were to be incorporated in the temporary natural movement of persons then the service trade would fetch quite much for these countries. However this has not been the case in the execution of the mode 4 agendas. Consequently this has made the developing countries to be disadvantaged as far as the trade is concerned. For this reason it would be considerable if the service trade under mode 4 involved the transfer of services that are provided by the lowly and the medium skilled persons who are the majority in the developing countries.6 There is a large economic gain potential that lies within the developing countries under the labour mobility. It is estimated that labour mobility can generate up to $US156 billion world welfare if well conducted between the developed and the developing countries.7 However studies show that as people age in the developed countries and the average levels of training and education rise in these countries, the scarcity for less skilled and medium skilled labour will also continue to increase. This means that soon the temporary natural movement of person will give room for these low and medium skilled service providers from the developing countries to the developed countries.8 Liberalization of the service sector The liberalization of the service sector is another issue of concern as far as the natural movement of persons mode of service delivery in the GATS is concerned. It has been found out that one would expect more gains from the increased trade liberalization in the service sector as compared to the goods market. This because the service sector is wide and with the help of the current technology it is possible to conduct it in bulk since allot of data can be transferred through the computers making it possible for the sector to fetch more gains for the countries involved. Therefore it is argued that the simpler the transferability of the services the higher the possibility of earning from the trade. This means that liberalizing the service trade it would gather the best returns as compared to the goods market.9 However, barriers to the liberalization of trade in the service sector are said to be more or greater than in goods. One of the main reason as to why this is perceived to be true is due to the fact that some of the services are able to pervade the economy and efficiently enhance competition in many other sectors in the economy. For instance according to the recent studies it has been found out that the service sector as a whole accounts for quite a big portion of income as well as frequent employment than the combination of both the industry and the agriculture sector.10 According to Hertel 40% liberalization in the service sector would result to more than $300 billion increase in the global welfare per year while similar percentage liberalization in both manufacturing and the agriculture sector would only result to $70 billion rise in the global welfare per year.11 In the temporary natural movement of persons the service trade accounts for only 1.4% the gains that are obtained from the exchange of goods and services. This low gain is due to the many barriers of liberalization in the sector. However there are high levels of promises in the sector if the liberalization is surrendered. The issue of liberalization is curbed together with the level of rules and regulations that exists in the trading countries as far as the service sector is concerned. According to the GATS in the meeting that was held in Bali in 2013 it was agreed that countries should reduce the levels of regulations so as to enhance the service trade between the member countries. This agenda had also been tried to be developed further at the Uruguay Round Multilateral Trade Negotiations which were aiming at bringing the services into a multilateral trading system through the General Agreement on Trade in Services. Initially the service trade was only conducted through a bilateral system which was found to be ineffective in several ways and therefore required revision so as to enhance efficiency. Several negotiations have been conducted in order to lessen the gap that exists between these countries that hinder the liberalization process. It was finally found that most of the commitments were horizontal especially within the mode 4 under the GATS. This called for the removal of the confines that existed in the intra-corporate transferees only at the senior levels, high-skill professionals and specialists to allow other levels of skills in the service trade. Moreover there has been the need to eliminate the conditions and qualifications such as wages-parity in service provision as well as various kinds of needs tests which just acted to lower the effective services market access among the member countries.12 Grant of visas and permits As the mode four of the general agreement of trade in services continues to advance there has been a need to change the procedural requirements for the grant of the visas and work permits to the individuals in the trading countries. However this has not been possible due to several discretionary powers among the issuing authorities leading to further complication in the access of the service market. In addition to the problems related to the permits issuing authorities there have been the issue of recognition and the verification of professional qualifications among the countries involved in service trade. Recognition of qualifications and the verification of professional competence has been an issue in that some countries are viewed to have more advanced levels of academic and education standards than others. This has made the implementation of the service trade applicability more difficult calling for a mutual recognition agreement and harmonized rules to be employed in order to eliminate the problem. However, this issue was later curbed by the fact that there most of the professional services are licensed locally where the service provider is required to meet certain legal requirements. This is then authenticated by a signature or an audit report from a recognized body within the locality of that country. In addition, the issue has not fully been settled but it is yet to be agreed upon whether it can act as a constraint to the temporary natural movement of persons; mode four.13 References Adlung, R., & Morrison, P. (2010). Less than the GATS:‘Negative preferences’ in regional services agreements. Journal of International Economic Law, jgq021. Adlung, R. (2009). Services liberalization from a WTO/GATS perspective: in search of volunteers. Beckmann, A., Cooper, C., & Hill, D. (2009). Neoliberalization and managerialization of ‘education’in England and Wales–a case for reconstructing education. Journal for Critical Education Policy Studies, 7(2), 311-345. Chanda, R. (2009). Mobility of less-skilled workers under bilateral agreements: lessons for the GATS. Journal of World Trade, 43(3), 479-506. Dee, P., & Findlay, C. (2009). 6. Services in PTAs–donuts or holes?. 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