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(Provisional Translation)

Trade in Services Negotiations on WTO
Proposal Concerning the Movement of Natural Persons

18 June 2002

Japan Business Federation
( Nippon Keidanren )

1. Introduction

In today's globalized economy, it is not only the movement of goods, services, capital and information that is becoming increasingly active - the temporary movement of natural persons over national borders is also intensifying. Above all, mobility is progressing among highly-skilled professionals, such as the IT sector, in tandem with the technological revolution. The changes in the environment surrounding the movement of such persons demonstrates the transition toward a new era of global competition in human resources.

In a report published in June 2001, entitled, "Toward the Implementation of Strategic Trade Policies - A Grand Design of Japan's Policy as a Nation Built on Trade," the Japan Business Federation (Nippon Keidanren) called for the dismantling of barriers at national borders, to "remove barriers to free cross-border movement of business resources such as people, goods, services, capital and information, while undertaking efforts to maintain transparency, and achieve the harmonization of domestic systems and regulations with international standards." It was in such a climate that the new round of World Trade Organization (WTO) negotiations was launched in November 2001 and that negotiations on the trade in services, which had already begun as a part of the "Built-in Agenda," were integrated into the new round. The Japan Business Federation (Nippon Keidanren) welcomes this development.

Concerning negotiations on trade in services, it has been decided that each country will submit an initial request by the end of June and subsequently there will be a transition to substantive negotiations on improvement of specific commitments. Above all, there is great interest on the part of both developed and developing countries in the area of "temporary movement of natural persons," which, it is recognized, will be one of the most important agenda in the negotiations on trade in services.

Japanese corporations are developing global businesses with networks that span the globe, and the movement of natural persons across national borders is becoming more vigorous in a variety of forms, including short-term business trips for marketing, business negotiations and aftercare services, the formation of international teams in order to promote large-scale projects and internal corporate training. In addition, in order to enhance international competitiveness, it is of increasing necessity to strategically utilize persons of a variety of nationalities, for example in appointments and training of people from neighboring countries in overseas operations, or the acceptance of trainees to the home country headquarters from overseas offices. Furthermore, in addition to promoting a rapid response to new technologies, it is important to secure human resources in IT-related sectors. In this way, in order to survive in the global competition in human resources, a challenge of increasing importance for Japan's corporations will be to ensure higher mobility of people.

The "movement of natural persons" is defined in this proposal as being the so-called "temporary movement of natural persons" under the General Agreement on Trade in Services (GATS), whereby persons who provide services enter another country to engage in the service industry for a temporary period. Not included in this definition are the movement of persons seeking access to the employment market of countries and the movement of persons who are seeking permanent residence or employment in that country on a permanent basis, as is provided specifically in the GATS.

2. Challenges Facing Japanese Corporations

Concerning the temporary movement of persons, Japanese corporations are currently facing issues in their business operations such as the following. These issues were elucidated as a result of the "Questionnaire Concerning Movement of Natural Persons" (March 2002), which was targeted at the member corporations of the Japan Business Federation (Nippon Keidanren), and from the "List of Country barriers on Services" (February 2002), which was compiled for the purpose of sectoral negotiations.

In these researches, it became clear that many obstacles exist, not only in developing countries, but also in developed countries that Japanese business people have strong relationships with, as well as in Japan itself. We recognize that other countries have pointed out that there are a variety of problems experienced by foreign business people in acquiring a visa to enter Japan. This proposal calls for the liberalization and facilitation of the temporary movement of natural persons not only in other countries, but also in Japan itself.

(1) Low Level of Liberalization

  1. Intra-corporate movements: In the schedules of specific commitments made by WTO Member countries, stringent conditions (e.g. quantitative restrictions or quotas on the number of foreign suppliers, residency requirements, the proportion of total employment met by foreigners) are applied by not only developing countries but also by developed countries in some specific sectors, such as finance services. As a result, it becomes impossible to utilize executives and employees abroad effectively and strategically through intra-corporate movements, making it difficult to expand businesses in the foreign market.

  2. Intra-corporate movements for training and skills development purposes: Concerning intra-corporate movements for training and skills development purposes, Japanese corporations have significant needs in the following areas: the dispatch of young Japanese employees for training in overseas bases; the dispatch of staff who work in neighboring countries to other centers for business in major overseas hubs for training; and the dispatch of staff from countries neighboring Japan such as the Association of South-East Asian Nations (ASEAN) or the People's Republic of China to Japan for training purposes. However, intra-corporate movements with the aim of training and skills development are not clearly defined in each member country's schedule. In this regard, the administrative procedure of each country to instances such as intra-corporate movements for training and skills development purposes remains untranceparent.

  3. Movement of highly-skilled professionals on a contract basis: Few commitments are made by WTO Members concerning the movement of highly-skilled professionals on a contract basis, in such areas as legal services, construction services, engineering-related services, computer and related services and experts in research and development. We consider that the low level of liberalization hinders the development of global business.

(2) Issues Concerning Administrative Procedures for Immigration, such as the Issuance of Visas and Work Permits

  1. Quotas for visas and work permits: Due to quotas on visas and work permits, superlative researchers and experts in specific sectors cannot be hired in a timely manner. Furthermore, regulation standards are ambiguous.

  2. Delays in the issuance of visas and work permits: A significant amount of time is required from the time of application for a visa and a work permit until its issuance. In addition, due to the fact that the time frame for acceptance is unclear, a company cannot effectively utilize its human resources.

  3. Opaque, arbitrary and discriminatory practices in procedures to issue visas and work permits: There are cases where it is unclear what documents are required for the application process and what are standard documents, due to differences from person to person in the visa-issuing authority. There are also cases of arbitrary or discriminatory treatment in visa-issuing procedures.

  4. Rigidity in visa and work permit issuance: Procedures for the issuance of work permits are not being implemented flexibly in accordance with the new style of business activities. For example, it is difficult to acquire a working visa in cases where it is necessary to enter a country to participate in an international short-term project.

The importance of intra-corporate movements for training and skills development purposes has been increasing in recent years. In addition to the significant time required for immigration control procedures for such movements, there are also issues of the opacity in standards for judging whether a visa or work permit is issued or denied.

3. Expectations on WTO Services Negotiations

Japanese corporations are particularly hoping for the promotion of liberalization and facilitation of intra-corporate movements, within the category of "temporary movement of natural persons." In particular, we request WTO Members to diminish or abolish completely such measures as nationality requirements, residency requirements, limits to numbers of managers and persons, and the obligation to employ nationals of the country in question. In addition, measures limiting activities once a person has entered a country, such as conditions on the internal transfer of technology, limits on domestic travel, and limits on movement among different sectors, are an unnecessary hindrance to business activities. We therefore hope that such measures should also be abolished.

Given that there is a high need for intra-corporate movement for training and skills development purposes, it is necessary to create a framework that enables the smooth transfer of persons towards such objectives.

In addition, as is being seen in IT-related sectors, Cross-border movement of highly-skilled professionals is becoming more vigorous on a global scale. In particular, Japanese corporations expect that movement of professionals on a contract basis will be promoted in construction services, engineering-related services, IT-related services, legal services, consulting-related services and sectors involving experts in R&D.

GATS takes the positive list approach, whereby member countries make commitments in the areas they are able to liberalize. It means that if few liberalization commitments are made, there is very little substantive meaning in them being made in the first place. In addition, in circumstances in which even though commitments are made for liberalization, opaque domestic regulations (in the case of the temporary movement of natural persons this could be administrative procedures on immigration) could hinder the compliance of these commitments. For this reason it is imperative that the support for liberalization is accompanied by the securing of transparency in domestic regulations.

For the above reasons, Japanese corporations request that in negotiations for the liberalization on trade in services, the following be comprehensively promoted with regard to the "temporary movement of natural persons": (1) each country to further liberalize through improvements of its schedules of specific commitments; (2) securing transparency in commitments and immigration control regulations and procedures; and (3) comprehensively promoting the simplification and acceleration of immigration control regulations and procedures.

(1) Promoting Further Liberalization (See Annex 1)

The Nippon Keidanren strongly hopes that on a request-offer basis, an improvement in cross-sector commitments regarding the intra-corporate movements of executives, professionals and other white-collar workers, in addition to improvements in sector-by-sector horizontal commitments, can be achieved. As yet a clear definition does not exist for intra-corporate movements and each country has a different interpretation. We propose that the definition of intra-corporate movements can be fixed as, "the temporary movement of natural persons among headquarters, overseas offices and branches, subsidiaries and affiliated companies."

In addition, one of the problems that has become more noticeable in recent years and should be emphasized, is the heightening of the need for intra-corporate movements for training and skills development. In cases where Japanese corporations are dispatching young employees to overseas bases for training and skills development, or in cases where personnel from the overseas base are brought to Japan for training and skills development purposes, Japanese corporations are facing the problem of a lack of clarity and understanding concerning the time required for visas and work permits to be issued and what the requirements are for the issuance of such documents. From such cases it can be inferred that problems are emerging due to the fact that in the systems for immigration management procedures of each country the handling of "intra-corporate movements for training and skills development purposes" is unclear. This not only causes trouble for the vigorous activities of the private sector, but it also hinders the transfer of technology to developing countries. We therefore propose that a new category should be introduced for "intra-corporate movements for training and skills development purposes" in the schedule.

In order to bring about certain results through negotiations, such as the securing of some degree of liberalization and the improvement of transparency of immigration administrative procedures, the "Model Schedule" which can be utilized as guidelines for each country to make horizontal and sectoral commitments can be considered as a realistic approach. One possible proposal would be for the component on the "temporary movement of natural persons" in the Model Schedule to refer to the "intra-corporate movements for training and skills development purposes" as one of its applicable components.

(2) Securing Transparency in Immigration Regulations and Procedures and Clarifying Member Country's Schedule of Specific Commitments (See Annex 2)

Japanese corporations are facing a variety of problems with regard to transparency of immigration procedures, including: (a) lack of clarity on categories for visas and work permits; (b) lack of information on procedures for such matters as the required documentation and required time, and conditions for extension of visas and permits for immigration control procedures; and (c) lack of clarity on standards for judging visa and work permit applications.

Given the globalization of corporate activities, short-term stays for urgently required business consultations or large-scale international projects are rapidly increasing. In addition, activities including human exchange among overseas bases and the securing of superlative human resources from neighboring countries at the overseas bases are becoming more and more vigorous. Accordingly, the improvement of information and clarity of standards pertaining to immigration control regulations is an item of the utmost importance for companies seeking to expand their global activities. Improvement of transparency is also vital from the perspective of heightening the effectiveness of existing commitments.

In addition, given the fact that the definitions used in commitments of each country, such as "intra-corporate movements," "executives" and "professionals," are vague in their meanings, this detracts from the effectiveness of existing commitments.

It is therefore hoped that in negotiations, focus will be placed on the following: (1) simplification of access to information on immigration legislation and procedures and the provision of clear and detailed information; (2) clarification and harmonization of definitions of categories used in existing schedules for specific commitments; and (3) improvement of transparency in conditions for economic needs tests.

(3) Facilitation and Expedition of Immigration Procedures (See Annex 3)

Excessive time taken from the application for visas and work permits to the time they are issued, and the similarly excessive time required to apply for and be issued with a visa and work permit extension are hindering smooth business activities. In particular, with the development of the information society, in international business of today, where speed is essential, it is of the utmost importance to support sound business practices by placing the right people in the right positions promptly and precisely. For this reason, Japanese corporations strongly hope that through the negotiations facilitation and expedition of immigration control procedures will be promoted.

Concerning this issue, with such efforts being made as to announce the standard time required for administrative procedures relating to visas and work permits and notification when this period is exceeded in each county, it will be possible to adhere to and respect Article III of GATS concerning improvement of transparency in administrative procedures, and also for debate to be taken up concerning Domestic Regulation, Article VI of GATS.

On the other hand, the "temporary movement of natural persons" as is committed to in the GATS, while stating that, "the Agreement shall not apply to measures affecting natural persons seeking access to the employment market of a Member, nor shall it apply to measures regarding citizenship, residence or employment on a permanent basis." Given the fact that immigration procedures are dealt with in the same manner as immigration control procedures for immigrants seeking permanent residency even if a country makes some commitments in its schedule, it should be noted that corporations cannot actually enjoy the benefits of the merits of liberalization commitments. From such a standpoint, the Nippon Keidanren considers that it would be beneficial for each country to open a review into the proposal for a "GATS Visa" and start internal discussions. However, for the introduction of such a "GATS Visa," it would be necessary to bear in mind that this could result in: (a) there being no real significance in the "GATS Visa" until initial commitments are improved, for the Visa is only effective for commitments already made; and (b) that if no clear framework is created, in the issuance of the "GATS Visa," each country could apply its own discretion, which could invite arbitrary application of the visa system. In the case that the introduction of the "GATS Visa" were to prove difficult, we hope that in order to facilitate and expedite the "temporary movement of natural persons" in immigration procedures, the introduction of special systems or procedures would be considered.

(4) Other Matters

The following represents the basic standpoint of the Nippon Keidanren on issues not covered in the above, but which pertain to discussions on the movement of natural persons at this round of services negotiations.

  1. Expansion in the coverage of "Professional Services"
    In addition to definitions of "executives," "managers," and "professionals," some countries have proposed to create a new category for "individual professionals" who have no relevance to the Mode 3 and to clarify the definition of "other persons" and "specialists" to include middle and lower-level professionals. Due to the fact that about 70% of all cross-sectoral commitments for the "temporary movement of natural persons" apply to directors, management and professionals, there are few countries that have made clear commitments concerning middle and lower-level professionals. We understand that the proposal is to improve this current situation through negotiations and to aim to achieve liberalization at a broader level. However, given the current situation where the overall level of Mode 4 commitments is low, it cannot be thought to be immediately realistic to expand the application of discussions to middle and lower-level professionals. The Japanese economic community considers it necessary to undertake serious future examination, based on each country's social and historical background.

  2. Strengthening of norms and disciplines in recognition of qualifications
    There are countries which request the stringent implementation of the "recognition of qualifications" as stipulated in Article VII of GATS, the prompt notification of Mutual Recognition Agreements with the WTO, and the further strengthening of norms and disciplines. The Japanese economic community, while basing mutual recognition on a bilateral and regional level, considers it important that each country abide strictly by the disciplines and procedures as stipulated in Article VII of GATS.

  3. Social security agreement
    Concerning social security, some countries have made proposals to the effect that social security agreements should be promoted on the multilateral level, including the sharing by developed countries of bilateral pension agreements with developing countries. The issue for social security agreements is that they do not fall under the scope of negotiations on the liberalization of trade in services at the WTO. However, for Japanese corporations in promoting the free movement of persons, duplicated payments for social security (pensions) is a serious issue to be tackled. With regard to this issue, countries with similar concerns in this issue will promote social security agreements on a bilateral basis as has been done, and we hope that agreement can be reached at the multilateral level to in principle promote this policy and promptly erase duplicated social security payments.

4. Conclusion

The activation of the temporary movement of natural persons would contribute to economic vitalization in both developed and developing countries and this would be linked to global economic development over the long-term.

With regard to the movement of persons in its broadest sense, including immigration policies, it is important to continue with discussions that take adequate account of the possible influence on their economies and societies based on each country's historical background. However, the scope of GATS covers the temporary movement of natural persons and it should be noted that the movement of persons seeking access to the employment markets of other countries, and movements of persons seeking citizenship, residence or employment on a permanent basis are not covered as is stipulated in the agreement. Accordingly, through the course of negotiations on the liberalization of trade in services, it is hoped that constructive discussion will take place from the perspective of promoting the liberalization and facilitation of the movement of persons who fall under the scope of GATS, be they in developed or developing countries.

It is also important to point out that Japan faces a challenge to make efforts for improving the infrastructure and environment to accept highly-skilled professionals from abroad through improvements in immigration legislation and procedures, such as enhancing transparency for visa issuance procedures and the relaxation of requirements for a specified period of work experience. We hope that the Government of Japan will demonstrate initiative in the discussion on the movement of natural persons in the negotiations on services trade.

Furthermore, we strongly expect the Government of Japan to utilize various opportunities and promptly and actively promote mutual recognition of qualifications and social security agreements.

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