Labour mobility under international trade agreements

With the Migration Advisory Committee’s recent report, and its recommendation that the government should no longer allow preferential access to the UK for EEA nationals, attention inevitably focuses on what any future provisions on migration might look like.

In a nutshell, if existing free trade agreements models are followed, it won’t look anything like free movement as we now know it. For those who voted to Leave due to concerns about ‘unrestricted’ migration, this is a good thing. For businesses reliant on free movement, it is not.

The primary purpose of free trade agreements is to facilitate trade in goods and services and promote investment among trading partners. Free trade in services and facilitation of foreign direct investment is much more effective when there exists some form of movement of people so that service providers and recipients as well as investors are able to travel freely to do business.

While free movement of all people (not just those involved in business) is a cornerstone principle under EU law, other types of free trade frameworks establish much more limited labour mobility regimes.

Limits to mobility

International trade agreements typically establish rules for temporary entry and presence of natural persons for business purposes. Such persons must be citizens (in some cases permanent residents) of one of the contracting states (i.e. a trading partner state, such as Canada and the EU under the EU-Canada Comprehensive Economic and Trade Agreement, CETA).

Unlike free movement provisions under EU law, mobility rights under international trade agreements do not cover rights to residence, social rights or employment on permanent basis. One may argue that non-discrimination principle would nevertheless apply in relation to social rights for those persons who are permanently employed (even if employment is not covered by CETA rights). It is the Canadian model that the MAC is commending.

Mobility is typically limited in terms of personal and temporal scope as well as on the basis of activity to be conducted in the contracting state. We will address these limits in turn.

Personal scope

Most international trade agreements establish mobility only for highly skilled professionals and business persons. Strict limits to movement of people are drawn by listing categories of persons who can temporarily move to a contracting state. Such categories differ slightly from one agreement to another, but a broad picture can be drawn by looking into categories set out in CETA.

CETA lists three categories of persons who enjoy mobility privileges:

  1. Key personnel
  2. Short-term business visitors
  3. Contractual services and independent professionals

Key personnel is further subdivided into:

(i)        intra-corporate transferees (ICT): personnel transferred between affiliated offices in the contracting states (e.g. in case of CETA, offices in Canada and the EU);

(ii)       investors: individuals who supervise the development of investment projects and to which they have committed a substantial amount of capital;

(iii)      business visitors for investment purposes: individuals who are responsible for setting up an enterprise, but do not engage in direct transactions with the general public.

There is some degree of variation in terms terminology and categorization. For example, CETA’s ‘short-term business visitors’ are equivalent to ‘business service sellers’ (i.e. persons who travel for the purpose of negotiating the sale of services or entering into agreements to sell services) under other agreements, such as the EU-Korea free trade agreement (FTA) and the EU-Ukraine Association Agreement (AA).

Another example relates to differences in categorization of ICTs. Under CETA, ICT mobility covers senior personnel and specialists and graduate trainees, whereas the EU-Korea FTA lists managers and specialists, while graduate trainees are a separate sub-category of key personnel. Graduate trainees are not covered in the North American Free Trade Agreement (NAFTA).

Only individuals falling under one of the listed categories can enjoy temporary entry and stay rights. This is different from the free movement of people provisions under EU law where free movement is not reserved to the economically active, but covers all EU citizens (subject to certain conditions).

Temporal scope

Another restriction to mobility rights is that these are temporary. Time limits for stay in a host state differ depending on the categories of persons described above. For example, under CETA ICT senior personnel and specialists are allowed to stay in the contracting state up to three years, whereas graduate trainees cannot stay longer than one year.

A work permit for investors is valid for one year (though it can be extended). Business visitors for investment purposes as well as short-term business visitors are permitted to stay 90 days in any six month period.

Similar time limits are established in other agreements. For example, the EU-Ukraine AA sets identical limits to those established under CETA with an exception for contractual services and independent professionals category (CETA allows up to 12 months stay, whereas EU-Ukraine AA sets a 6 months limit).

Type of activity

Mobility is limited not only in terms of who can stay and how long, but also depending on the type of activity a person intends to carry out.

Firstly, mobility is limited to those activities which are covered by an agreement. Thus, sectors such as health care, public education, culture and other social services are excluded from CETA mobility rights because they are not covered by CETA. Financial services are covered by CETA.

In addition to the general limits on the scope of an agreement, mobility is permitted only in those activities which fall under a positive or negative list for a certain category. For example, Annex 10-E of CETA lists service sectors applicable to contractual service suppliers and independent professionals.

Short-term business visitors must fall under one of the permissible activities listed in Annex 10-D of CETA. The lists of activities differ from treaty to treaty. For example, while CETA allows business visitors to enter and stay for meetings and consultations as well as training seminars, those type of engagements are not available under NAFTA

Right to regulate

Rights of temporary entry and stay of natural persons supplying services belong to the state (in effect a state supplies services through a natural person). CETA thus does not create rights to natural persons which could be enforced against the contracting state (i.e. an EU citizen cannot bring a complaint against Canada for violation of his mobility rights).

As a general rule, a host state’s regulations on employment and social security measures are not affected by mobility rights (non-discrimination may apply in relation to those persons who are employed). Crucially, labour mobility regimes under the FTAs, unlike in the EU, allow the application of host state immigration law. So, if a state has a visa regime vis-à-vis its trading partner, it is not obliged to establish a visa-free entry to its trading partner’s nationals.

However, work permits (e.g. a working visa) cannot be required (save for reservations made by some EU Member States, see eg Annex 10-B of CETA) for certain groups of service providers, such as short-term business visitors and business visitors for investment purposes.

Crucially, there is a public policy exception: the contracting parties are not prevented from adopting measures that are necessary to protect the integrity of, and to ensure the orderly movement of natural persons across its borders (Article 10.2(3) of CETA). CETA does not define what measures would be captured by this exception. There are certain other limitations on the application of host state law.

A state is permitted to set regulatory requirements (e.g. licences, certificates, language requirements) as long as they are not applied in a discriminatory manner.

Second, a contracting state is committed to abide by the most-favourite nation treatment (MFN) principle. MFN calls for treatment no less favourable than that accorded to service suppliers of a third country (i.e. country not party to an international trade agreement in question).

There are limits to the NT and MFN obligations. Article 9.2(2) of CETA lists service areas which are not covered by NT and MFN principles, such as public procurement for government purposes and financial services. In addition, CETA Article 9.7 allows limited reservations with respect to NT and MFN (for the list of reservations under CETA, see Schedule to Annex I and II).

In addition, the contracting parties are obliged to establish market access. The host state is prevented from imposing limitations on mobility, such as through restrictions on the number of service suppliers entering from a contracting state, the total value of service transactions or the total number of service operations.

Finally, it is typical of international trade agreements to commit to negotiating an agreement for mutual recognition (MRA) of professional qualifications. This applies to professions which are regulated, such as accountants, engineers and architects.

MRAs lay down the conditions under which one trading partner will accept conformity assessment results (e.g. testing or certification) performed by the other trading partner. No such agreement has so far been concluded in relation to CETA.

Given that lack of an MRA between the UK and the EU may cause issues post-Brexit, the European Commission has published guidance to stakeholders on the impact of Brexit in relation to regulated professions.

In sum, international trade agreements establish much more limited mobility provisions than free movement of people rules under EU law.

Restricted entry provisions under free trade agreements mean that large groups of people, such as health service providers and students and those seeking permanent employment, would meet obstacles unless the EU and the UK will adopt mobility rules of much broader scope than those typically negotiated in international trade agreements.

By Professor Catherine Barnard and Emilije Leinarte, University of Cambridge.

Disclaimer:
The views expressed in this explainer are those of the authors and not necessarily those of the UK in a Changing Europe initiative.

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