MOVEMENT OF NATURAL PERSONS (MODE4) UNDER GATS

1.0 INTRODUCTION

The General Agreement on Trade in Services (GATS) seeks to address trade liberalization in services that are supplied through the following four modes:

1. Cross-border supply which is analogous to the trade in goods

2. Consumption overseas

3. Commercial presence or movement of capital

4. Temporary movement of labour to supply services in a foreign market

Developing countries are particularly concerned with Mode 4, the movement of natural persons, since they have a comparative advantage for the provision of labour-intensive services. This is against the background that the initial phase of trade liberalization, with the reduction of tariffs and other entry barriers for goods, has resulted in manufacturing and agricultural industries in many developing countries becoming globally uncompetitive. This has caused the movement of the production of goods out of these countries and, consequently, job losses and rising unemployment. In many instances the labour component of production in these developing countries was price/productivity competitive when compared to their developed counterparts. However, when the production moved out of these countries, no mechanism existed for the competitive labour factors to follow production migration. This creates a distortion in the global economy where the free flow of goods, capital and services across borders exists at the same time as restriction on labour mobility. Many countries have questioned the long-term sustainability of such a development strategy.

The developing countries have a clear interest in ensuring that significant liberalization takes place in the movement of natural persons in the provision of services. This interest is not only in respect to the movement of professionals, but also, and arguably more importantly, in respect of semi-skilled and unskilled persons. This is due to the fact that the greater comparative advantage of the developing over the developed countries is in the abundance of semi-skilled and unskilled persons, as opposed to skilled professionals. In the absence of significant liberalization under Mode 4, the value of GATS to developing countries is significantly limited.

This paper will look at programmes and activities that exist in the Jamaican context for providing services overseas through the movement of natural persons. The paper closes with a review of Protocol II of the CARICOM Single Market and Economy (CSME) that establishes a framework for the movement of labour within that region. These programmes are not presented as an ideal or preferred example for the implementation of Mode 4, but rather they have various characteristics that can inform policy makers of potential issues to be considered as they move forward with the implementation of GATS, particularly as it affects small, developing countries.

2.0 Review of Existing Formal Programmes for Trade in Services through the Movement of Natural Persons (MNP)

The genesis of the modern Jamaican society was based on the movement of natural persons most notably from Africa as part of the slave trade, but also from Europe, China, India and the Middle East. This early labour migration was to satisfy the economic opportunities presented by the sugar plantations and the need to replace the indigenous labour force that had been destroyed in the wake of the Europeans arrival. The cultural and ethnic melting pot that represents Jamaica today is captured in the national motto “out of many, one people”. This reflects the integration of persons from various countries that have moved to Jamaica over the course of several centuries to participate in the economic activity of that country and in this respect Jamaica is similar to most modern societies that are multi-ethnic in structure.

With the decline of the sugar industry in the first half of the 1900’s, Jamaica became, for the first time, a net exporter of labour as Jamaicans migrated to Britain in record numbers in search of economic opportunities in the face of declining prospects in their homeland. These persons made significant contribution to the post World War II redevelopment of that host country particularly in the areas of transportation, construction and healthcare. This increased migration continued throughout the second half of the twentieth century with the destinations of choice being the USA and Canada in addition to the UK. These destinations were the obvious preference due to the similarities in culture based on an Anglo centric focus.

In addition to the permanent migration of workers to developed countries, Jamaica has entered into several bilateral agreements to provide persons to meet the temporary and seasonal demand for labour that could not be met by the host country counterpart in the exchange. The most established of these is the farm worker programme with the USA and Canada. However, in more recent times the Hospitality Worker Programme with the USA and the Schoolteacher Work Programme with the USA and Britain have generated much activity, interest and public debate.

2.1 Farm Work Programme

These agreements, focused on meeting the seasonal provision of low skilled labourers in the agricultural sector of developed countries, are Jamaica’s oldest manifestation of the formal temporary movement of natural persons in the supply of services dating back to the early 1900’s. The programme, in its various forms has provided great economic value to both the home and host country. Jamaica, the home country, possesses a significantly greater abundance of low skilled labour than can be absorbed in the local economy, whereas the host countries have a deficiency of human resources to meet the demand of this sector particularly during the seasonal peak demand. This programme provides an ideal opportunity for the expansion of the movement of natural perons since both countries, and indeed the global economy, benefit from an arrangement that allows for the Jamaican surplus labour to be deployed in economic activity in a country where that particular labour profile is in short supply.

2.2 Hospitality Worker Programme

More recently, bilateral agreements have been reached for Jamaica to provide seasonal workers for the hospitality and tourism segments of developed countries. The attraction of Jamaica is based on the well developed local tourism industry coupled with the proximity of Jamaica to the North American market and its English speaking population. As is the case with farm work, these relatively low paying jobs are not attractive to the host country labour force that has other more rewarding options. This causes severe problems for enterprises engaged in this sector in meeting the seasonal increase in demand for workers.

However, unlike the Farm Worker Programme, Jamaica does not have an over abundance of trained hospitality workers. The recent growth in this form of service provision using Jamaican workers has generated concern on the part of local hospitality interests that have seen their permanent employees resign in preference to accessing the opportunity to work temporarily in a developed country. This short-term negative impact can be addressed through Jamaica’s well developed infrastructure for training hospitality workers that could easily convert large numbers of unskilled persons into semi-skilled persons to meet the demand of both local and overseas industries. However, this would require a generally predictable growth in overseas demand and a policy framework that would make that demand accessible to increasing numbers of Jamaicans. Failing this, the increased training of hospitality workers would simply result in an oversupply to the local market further depressing the wages of this group of workers.

2.3 Schoolteachers Work Programme

This is the most recent example of the temporary movement of persons to supply services overseas. This programme was generated out of the inability of the USA and the UK school districts to recruit sufficient numbers of primary and secondary level schoolteachers for inner city schools in the New York and London areas. Jamaican teachers were seen as an attractive substitute in the absence of a sufficient local labour source. This attraction is not only based on the English speaking population, but also on the similarity between the education systems in the home and host countries, and the affordability of the teachers when their Jamaican salaries are compared to the cost of relocation and remuneration in the USA and UK. This programme started out as a direct recruitment drive without the active involvement of the Jamaican government. The result was over 500 teachers leaving Jamaican classrooms in 2001 to take up temporary assignment in host countries. The loss of approximately 3% of the Jamaican teacher workforce in such a short time period resulted in a shock to the local education system that is compounded by the fact that the overseas recruiters target the more experienced and qualified teachers. Jamaica does not have a competitive infrastructure for the training of teachers, a process that takes upwards of four years. If this level of recruitment is allowed to continue unabated, the result will be the desolation of the Jamaican education infrastructure. Quite simply, Jamaica is not currently in a position to satisfy the overseas market demand for this service. It was against this background that the Jamaican government intervened in this arrangement and is now seeking to control the outflow of teachers against the internal demand for this resource.

2.4 GATS Considerations

The above examples of the movement of natural persons highlight a number of significant considerations for the implementation of GATS Mode 4, namely:

· The movement of unskilled and semi-skilled workers must be given parity of consideration along with the movement of persons with professional qualifications. Indeed, for many developing countries, this provides the greatest opportunity for economic participation in the global provision of services due to the comparative advantage that they possess in these areas.

· The movement of natural persons in the supply of services should not be tied to a commercial presence in the host country. Such a requirement would place developing countries at a significant disadvantage since they lack the capital required to establish such a host country presence. At the same time this precondition, while it would relate to multi-national corporations, would not be relevant in a truly liberalized employment market.

· Home and host government control over the movement of persons in specific areas of services through the selection of persons and the service types being targeted should be reduced. This needs to involve the removal of barriers to movement in the form of quotas and other bureaucratic prerequisites for service contracts such as work permit requirements and levels of qualifications that are not indicative of the skills necessary to perform the work functions. These requirements serve only to suppress the cross border mobility of workers and, consequently, growth in this form of trade. Anything other than a significant reduction in government intervention in the cross border trade in services, will result in the continued inefficient utilization of labour on the global level and would not allow for the creation of increased numbers of service providers to proceed with the certainty that opportunities would be available to absorb them locally and overseas.

· Economic Needs Tests (ENT) in their current form, which is highly discretionary and arbitrary, should be removed as they are a severe impediment to trade in services insofar as there is no predictability in their application and they nullify efforts to promote true global market efficiency

· Some temporary provisions should be made to allow nations to prevent the short-term shock that can occur to the labour force of both home and host countries as a result of the rapid uncontrolled outward or inward movement of service workers. One should be mindful of the complexities involved in developing and applying such safeguards as they could easily become discriminatory against the very citizens they seek to protect. These provisions must be temporary as the ultimate determinant of the efficient deployment of human resources should be market driven.

3.0 Overview of Informal Initiatives Resulting in the Trade in Services through the Movement of Natural Persons

In the last 50 years increasing numbers of Jamaicans have migrated to the major cities of North America and the UK in search of economic opportunity. The majority of these persons have been driven entirely by economic considerations, and as soon as their economic aspirations have been realized or they have completed their economically productive years overseas, they return to Jamaica to enjoy the fruits of their labour and their retirement years. If these persons had the ability to temporarily participate in the labour force of their host country without having to take up permanent residence, it could be argued that this would be their preferred option. Today, of the 6.3 million persons that regard themselves as Jamaican, only 2.6 million reside in Jamaica. This is indicative of the economic migratory profile of the population. Jamaicans have historically been favourably viewed in host countries for employment in transportation, construction and healthcare services.

The importance of trade in services to the Jamaican economy is reflected in the labour related transfers from overseas. Jamaica is a large net recipient of remittances which is the nation’s third largest source of foreign currency.

3.1 Movement of Jamaican Professionals

In more recent times, permanent migration has been increasing among young professionals primarily as a result of host country immigration laws that show preference to this category of persons, who include computer programmers and accountants. The permanent migration of these persons constitutes a “brain drain” on the local economy that further exacerbates initiatives to develop the competitiveness of the local economy. Additionally, it results in the necessity to import professional persons and services at costs that in many instances are above that which obtains in the developed world. This, along with the remaining local professionals demanding wages that are reflective of their scarcity, has caused a significantly higher differential in salary scales between professionals and semi-skilled/unskilled workers than exist in the developed countries. This has contributed to the polarization of the Jamaican society and the concurrent social tensions that exist and are manifest in various forms of anti-social behavior including crime and violence. Certainly, developing countries would prefer the temporary movement of its professionals as opposed to the permanent migration. This would also be in the interest of the host country’s workforce since there would be a reduction in the associated displacement of domestic workers.

3.2 Movement of Jamaican Non-Professionals

Many other Jamaicans that do not have the professional qualification to access any of the formal migration opportunities that are available, resort to informal mechanisms to participate temporarily in the overseas labour market. These include using non-immigrant, visitor status to engage in temporary employment. These persons, mainly employed in homecare and healthcare services engage in employment contracts with host country nationals to provide these services for a period typically up to six months depending on the host country’s stay eligibility on the visitor visa. These contracts are not reported through any formal procedure due to the illegal nature of the employment. In reality, a market condition exists within the host country that has a demand for these types of services that is best met by lower cost overseas temporary workers. These workers have no desire to permanently migrate provided the opportunity for ongoing temporary employment exists. In many respects this represents the very market condition that GATS Mode 4 seeks to address, i.e. bringing an efficient service provider in the form of a natural person in contact with a demand for services in another member’s territory. It is therefore instructive to note that this category of persons face the greatest barriers to offering their services outside of their home country.

3.3 GATS Considerations

The above examples serve to highlight the following considerations for the implementation of GATS:

GATS should be implemented in a manner that allows for a clear differentiation between persons that are seeking permanent migration for reasons beyond economics and those persons that are seeking to access temporary work opportunities. This can only be achieved by a very liberal approach to Mode 4 with the removal of the strict eligibility conditions required for the temporary movement of workers under existing immigration regulations.
The current immigration policy of developed countries that favours the permanent migration of professionals from developing countries, should be replaced by provisions facilitating Mode 4 type temporary movement.
Consideration needs to be given to the legitimate public policy concerns of host nations in respect to controlling the free movement of service persons across its borders, including consumer protection, public interest and security.
Once a liberalized approach is in place, then market conditions will determine the efficient allocation of human resources. For the protection of the vulnerable small, developing country, the potential for the mass movement of scarce professional resources in the short-term needs to be regulated until such time as market equilibrium of supply and demand is achieved.

4.0 CARICOM Initiative to Regulate the Movement of Natural Persons in the Provision of Services within the Region

Protocol II - Right of Establishment, Services and Capital, is considered the most important instrument in the creation of the CARICOM Single Market and Economy (CSME). The objectives of this Protocol are as follows:

· To complete the creation of the CSME by adding to the free movement of goods, the free movement of services, capital and select categories of skilled workers; and the right of CARICOM nationals to set up business in any CARICOM country.

· To ensure national treatment and non-discrimination of CARICOM nationals who wish to carry out business in member states.

· To facilitate access of CARICOM nationals to resources within the single market

· To create more business and employment opportunities; and to open opportunities for trade in services.

Relevant to GATS Mode 4, the Protocol allows for the free movement within member territories for graduates from approved universities. On the basis of reciprocity, member states have extended the prescribed list of occupations. In 1998, Jamaica extended the list to include sports persons, artists, media professionals and musicians that are certified by their national professional body.

This list of approved occupations is itself discriminatory against the vast majority of CARICOM nationals that are not university graduates, highly skilled professionals or engaged in the other approved occupations.

The fundamental reason why Protocol II includes only professional occupations was the perceived absence of a mechanism to recognize through a formal methodology the knowledge, skills and attributes of all CARICOM nationals. However, CARICOM does recognize the need to ensure that its nationals at all skill and certification levels are efficiently deployed in economic activity.

This concern has resulted in the dialogue moving towards a regional strategy for technical and vocational education and training (TVET). The TVET system encompasses a much broader arena of occupations ranging from workforce entry-level skills to mastery level skills equivalent to university degrees. This system, therefore, provides the opportunity for significantly more CARICOM nationals to participate and directly benefit from the liberalization in the provision of services than the approximately 4% that are the recipients of university degrees.

The Regional TVET Strategy is based on the establishment of a National Training Agency (Authority) in each CARICOM territory. These Agencies, such as my organization the HEART Trust/National Training Agency (NTA), have the mandate to establish the standards for TVET delivery and certification within the context of an agreed regional framework. The framework is competency-based and is driven by industry needs. Emphasis is on accreditation, articulation and certification.

The National Training Agencies have as their primary responsibility the development and approval of training standards for occupational areas that are critical to regional economic activity. Thereafter, both public and private providers of training, whether it is in the formal school system, community colleges or vocational schools, are accredited to deliver these training programmes based on their ability to adhere to the standards.

Both nationally and regionally a framework is being developed to enable the cross-institution and cross-territory articulation of training programmes through an evaluation of equivalencies. This is facilitated by the modular manner in which the competency standards are developed.

Finally, the national certification of an individual’s competence is a valid and reliable indication that he/she can perform to the level stipulated in the TVET standards. Having received the national certification, any CARICOM National can thereafter apply for a CARICOM Vocational Qualification (CVQ) that is issued by their local training authority and is recognized throughout CARICOM.

This certification can be equated to an International Driver’s License, which in this case, makes the CARICOM National eligible for employment in any job that requires that particular qualification in any CARICOM territory, without the need for a work permit or any other bureaucratic prerequisite for employment. Full implementation of the free movement of labour under Protocol II is scheduled for 2005.

4.1 Observations of the CARICOM Model Relevant to GATS

The following observations of the CARICOM Model have some merit when considering the implementation of GATS:

Notwithstanding the relatively small size of CARICOM, the model emphasizes the need for nations to document and publish the standards that are required for employment in all occupational areas. Although, it is not necessary for all nations to adopt the same standards, and obviously they will not since local needs and technologies vary, these standards will form the basis for the evaluation and articulation of qualifications between nations.
If national occupational qualifications that are recognized by other territories are to be the vehicle for the free movement of labour, then a mechanism is required to achieve some level of harmonization in professional and occupational service standards between nations. The Mutual Recognition Agreement model is ideal for achieving this and should be promoted as the basis for member countries recognizing the certification of foreign nationals to engage in services activities within its territory.
Occupational certification is a preferred approach over professional qualifications since it opens up the possibility of including semi-skilled and skilled workers in non-professional areas. Additionally, this approach recognizes both on-the-job experience and the academic qualification. This facility provides a vehicle for the Jamaican agricultural, hospitality, homecare and healthcare workers to be nationally certified and eligible to offer their services in any market for which there is a demand and recognition of the Jamaican/CARICOM standard. This condition could be applied on a global basis if a similar approach is taken at that level.

5.0 CONCLUDING COMMENTS

Although this paper has specifically focused on Mode 4 movement under GATS, it must be noted that greater liberalization in this area is a necessary, but insufficient condition for the sustainable development of small, developing nations. These countries need to be cognizant of the need to strengthen all the factors of production in their local economy if long-term development is to be achieved. Increased emphasis should be placed on the competitive creation of human capital that is aligned with local and global labour needs. To support this, multi-lateral agencies should be increasingly engaged with developing countries to improve and expand their education and training infrastructure.

In respect of GATS, greater liberalization is in the interest of all nations and not moving rapidly in this direction runs counter to global economic rationale. Additionally, the notion that only highly skilled persons should be afforded freedom of movement in providing services is equally irrational. Global market conditions should be allowed to determine the service, price and location that are in demand along with the skill level of the persons providing the service.

The issue of the recognition of competence to provide a service across territories can be addressed through an approach that focuses on worker certification against documented performance standards. Such an approach, like the CARICOM Regional TVET Strategy, will facilitate not only worker certification at various skill levels, but also form a basis for the evaluation and recognition of worker certification by other nations.

In closing, GATS Mode 4 provides great opportunity for both developed and developing nations that is not mutually exclusive. One only hopes that the discussions proceed in an enlightened manner, recognizing that we prosper with each other, not at the other’s expense.

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