The General Agreement on Trade in Services, known and derided by its acronym GATS, has and will continue to be a controversial agreement. It was one of the key results of the Uruguay Round of trade negotiations (1986-1994) that led to the formation of the World Trade Organisation (WTO). The focus of GATS is on the liberalisation and de-regulation of 12 identified services sectors. Countries like India and Brazil were initially vehemently opposed to the very idea of bringing their incipient services industries under multilateral rules. A complex compromise was worked out to get these countries on board and the bargain included the flexible nature of GATS and its purported attempt to increase the movement of labour across borders.
Differences in the South
Countries are expected to open the 12 sectors in four different ways or modes. The fourth ‘mode of supply’ or Mode 4 was introduced into the GATS since many developing countries saw this as one of the few ways they could gain benefits from liberalisation and globalisation. They also successfully argued that if Mode 3 (commercial presence or Foreign Direct Investment) constituted ‘trade in services’, then movement of labour should also be included. This was seen then as a partial victory for developing countries and analysts claimed that they could now obtain access for their professionals and workers in return for reciprocal concessions in other services and goods.
Much of the public critique on the GATS has been focused on the corporate push behind the negotiations and the presence of critical services like health, education, water, energy and financial services. Civil society groups have largely pushed this analysis but there have also been reports from international organisations such as the United Nations High Commissioner for Human Rights. One of the more sensitive issues in which groups are yet to take clear positions in the GATS debate has been the issue of temporary labour movement. The GATS does not define ‘temporary’, but WTO members have agreed to Mode 4 for periods ranging from a few weeks to three to five years. Several developing countries have rightly argued that Mode 4 has seen little action and that present commitments by the European Union and the United States have only bound access for highly skilled labour, which is linked to Commercial Presence or Foreign Domestic Investment (FDI). It is estimated that over 60 per cent of the existing Mode 4 commitments are linked to FDI.
But there are important differences in the positions of developing countries on the issue of Mode 4. India’s focus has mainly been on securing access for its pool of highly skilled professionals. India has argued that while the US accepts a large number of software and other professionals under the H-1B visa programme they have not increased their GATS H-1B commitments from their Uruguay round quota of 65,000. Not binding a higher figure under the GATS offers the US the flexibility to change the quota autonomously within a minimum of 65,000. In 1999, the quota was 115,000. This was raised to 195,000 for 2001, 2002, and 2003. The cap reverted to 65,000 in the fiscal year 2004, and has been filled early each year. India has argued that this change in quota is an unfair policy mechanism, which creates problems for its software companies and can be addressed by binding a higher figure within the GATS.
India’s Mode 4 demand mirrors those of Information Technology lobbies such as IBM and Microsoft in the United States, and NASSCOM (National Association of Software and Services Companies) in India, which are interested in facilitating greater movement of Indian IT professionals to be able to work in the United States.
Trade-off Flayed
In the run-up to the 6th Ministerial Meeting of the WTO in Hong Kong (13-18 December 2005) Indian negotiators have signalled that if the United States agrees to India’s Mode 4 demands, they are willing to provide concessions on its demands on increasing FDI in crucial services sectors, as well as reducing tariffs in other areas such as Agriculture and industrial tariffs (in the area of NAMA or Non Agricultural Market Access).
Many civil society groups have squarely taken on this position and have termed this trade-off as “shocking”. The Left parties in a recent note to the UPA government cautioned “there should not be any dilution of India’s defensive position in Agriculture or NAMA in order to get concessions on ‘offensive interests’ in Mode 4 liberalisation”. Commerce Ministry officials are expected to represent the larger national interest and not petition for an elite section of professionals on behalf of industry lobbies. India has also been criticised for narrowing Mode 4 negotiations to the movement of highly skilled professionals that does not take into account unskilled or lower skilled workers.
Bangladesh, a leader of the LDC (Least Developed Countries) grouping in the WTO has argued for more focus on movement of less skilled and semi skilled labour. The LDC demands are quite general and include the removal of Economic Needs Tests and adoption of skill categories that will enable to movement of less skilled labour through the GATS. Predictably this demand has seen virtually no progress and most trade analysts feel that it is unlikely that the GATS will ever result in any meaningful commitments for less skilled labour. Interestingly, several members of the LDC grouping have successfully used lack of progress on their Mode 4 demands to stymie aggressive demands from the European Union and the United States to open their services sectors to FDI.
Heading for More Inequalities
India’s rather tame Mode 4 demand is likely to be met sooner or later since there will be a steady demand from the American economy for high skilled cheap labour. Services corporations in the United States would gain the most from an increase in H-1B visas. This will create greater employment opportunities to a small elite section in India but is unlikely to provide any substantial development gains for India in this so-called ‘Doha Development Round’. By providing greater access for highly skilled and relatively wealthy service suppliers, GATS commitments will exacerbate inequalities, promote brain drain as the individuals covered by the commitments are usually those who have greater facility in acquiring permanent resident status or citizenship in the importing countries.
Even in the unlikely possibility of less skilled labour gaining more access through the GATS, from the perspective of labour rights there are several pitfalls. Temporary workers moving under Mode 4 could be exposed to poorer working conditions than local workers, and will be more prepared to accept these because of the relatively short period of employment abroad. Their negotiating power during labour disputes and wage negotiations is relatively weak and more in the favour of the employer, since their employment is of a temporary nature. Also, in the present commitments on Mode 4, 22 countries have reserved the right to suspend commitments in the event of labour-management disputes.
Mode 4 is a relatively under-researched area and given that there have been minimal commitments there are no empirical studies to make a conclusive case for or against. But suffice to say that the GATS is a corporate-driven deregulatory agreement and it is highly unlikely that unskilled labour will move under equitable conditions. Global movement of labour will happen as companies will seek to move cheaper labour across the world but any international mechanism that seeks to govern this should be pro-regulation and the GATS is anything but that.