Towards Greater Mobility: Movement of Service Suppliers in East Asia

Abstract

Mode 4 is by far the smallest mode of service delivery in terms of both trade flows and the volume of scheduled concessions inscribed under the GATS. Most entries concern executives, managers and specialists, and almost all these focus explicitly on intra-corporate transferees. The issue here is the ability of developed countries to send their specialists to developing countries, while developing countries are unable to send their less skilled labor to developed countries. East Asia provides an interesting case study on the issues of mode 4. The different levels of per capita income and labor force deployment suggest that East Asian countries are in a position to take advantage of their comparative advantages and maximize any resulting benefits through mode 4 trade. Therefore, it is important to explore the technical issues of the GATS, with a particular attention on East Asian WTO Members. With regard to whether or not the GATS covers the employment of non-nationals by domestic firms to supply services domestically, this paper concludes that the GATS rules should not come into play in the absence of an international transaction. With regard to whether the GATS architecture on which mode 4 is based sets limits on the level of skill, this paper concludes that the Annex constitutes a de facto discrimination against blue collar workers, by substantially confining market access to natural persons with no professional skills, although nothing in the GATS explicitly limits the scope of natural persons to a particular skill level. With regard to the "de-linking" issue, this paper suggests that sector-specific commitments should be pursued to complement the horizontal commitments, so that mode 4 liberalization can be separated from the problems related to the liberalization issue of mode 3. Based on these conclusions, this paper further argues that although mode 4 liberalization can be justified economically, the measures affecting mode 4, which are at the center of trade, migration, and labor, prove to be sensitive. The question that goes to the root of the controversy is whether it is politically desirable for countries in the region to further deregulate these already sensitive measures. Some suggestions on both substantive and procedural aspects are presented at the end of this paper.

Keywords: GATS, Mode 4, movement of natural persons, service suppliers, East Asia