WORLD TRADE  
ORGANIZATION  TN/S/W/46 
S/CSC/W/47 21 June 2005 
 
(05-2616) 
Council for Trade in Services 
Special Session Committee on Specific Commitments Original:   English 
 
 
 
COMMUNICATION FROM CANADA 
 
Mode 4 Commitments and Economic Needs Tests
 
 
 The following communication, dated 20 June 2005, from the delegation of Canada is being 
circulated to the Members of the Council for Trade in Services and the Committee on Specific 
Commitments.  
_______________ 
 
  
I. SUMMARY 
1. According to WTO, UNCTAD and OECD analyses, GATS Article XVI:2(d) and the 
Scheduling Guidelines set out the rules, which Memb ers have already agreed to, on economic needs 
tests (ENTs) with respect to mode 4.  Members ar e not supposed to use ENTs to limit the number of 
natural persons; however, if Members wish to continue  to use such ENTs, they are supposed to cite 
and describe them in their schedules.  Some Members have indicated that ENTs or labour market tests 
are not applicable to certain categories of natural pe rsons covered.  However, because of the lack of 
transparency of their commitments or lack of av ailable information on their national and subnational 
regimes, it sometimes looks as if ENTs or labour market tests are indeed operating.  Other Members 
have not mentioned explicitly that ENTs or labour market tests do not apply to certain categories of 
natural persons covered a nd consequently, the nature and applica tion of their ENTs or labour market 
tests are not clear.  WTO, OECD, UNCTAD studies and submissions by some Members have pointed out that ENTs or labour market tests constitute a m ode 4 barrier that needs to be addressed in the 
current negotiations, so that improved outcomes will  result.  As various analyses have suggested, 
Members could improve mode 4 commitments by adhering to the existing rules and scheduling 
guidelines on ENTs or by providing more details on their ENTs and labour market tests.  Such 
collective action would significantly improve the qu ality and transparency of mode 4 commitments 
for the benefit of trade negotiators and service suppliers.  
II. INTRODUCTION 
2. The purpose of this paper is to promote furthe r substantive discussion of economic needs tests 
(ENTs) with respect to mode 4 and to propose that  Members exchange information on ENTs or labour 
market tests applicable to their mode 4 commitments.   
3. Several delegations have men tioned the importance of ENTs in various fora, and brief 
discussion to date has shown that progress on commitm ents may be hindered if there is no common 
understanding of mode 4 ENTs. Furthermore, while  some delegations may favour more disciplines on 
ENTs in a reference paper or model schedule, Ca nada thinks that Member s should adhere to the TN/S/W/46 
S/CSC/W/47 Page 2 
 
 
 existing agreed rules and scheduling guidelines on ENTs and labour market tests, and engage in more 
discussion about them.
1  Some Members may disagree about the nature and definition of ENTs and 
with the existing rules and guidelines on scheduling such measures.  However, it may well be that, 
consistent with the conclusions of several studies, mode 4 commitments could be improved 
significantly if Members understood ENTs better and adhered to the existing rules on them.  
III. DESCRIPTION OF ENTS AND LABOUR MARKET TESTS 
4. As Members are aware, economic needs tests ar e not defined in the GATS. Several studies 
(e.g., see Appendix A) have analyzed mode 4 EN Ts and linked them to labour market tests .2 They 
have pointed out, for example, that ENTs are co mposed of various quantita tive and qualitative factors 
and that these assessments may affect both domestic a nd foreign service suppliers or apply solely to 
foreigners.  Furthermore, it is clear from th ese studies and from discussions with trade and 
immigration policy experts that labour market test s are the most common type of mode 4 ENT.  
Several studies have also shown that within the cat egory of labour market tests, the most frequent 
factor is the availability of similar workers in th e host country, or whether a foreign worker would be 
competing with or displacing a domestic worker.  As  well, analysis of the labour market tests of 
various Members shows that although differences exist in specific terminology and factors, they are 
composed of several common elements, whether they  be general or specific.  Appendix B is an 
illustrative list of some common elements.3   
IV. EXISTING GATS RULES  
5. According to WTO, UNCTAD, and OECD st udies, Article XVI:2(d) and the Scheduling 
Guidelines set out the existing GATS rules on mode 4 ENTs.  ENTs or labour market tests should 
either a) not be applied to the categories of natural persons covered by a Member's mode 4 
commitments or b) if applied be included in the Member's schedule of specific commitments.4  
Furthermore, the Scheduling Guidelines indicate that if a Member retains and lists an ENT or a labour 
market test, the criteria are supposed to be d escribed in the schedule under Market Access.  
                                                      
1 “Members should reflect on the following aspects … The specification of unsp ecified labour market 
tests from future commitments so as to ensure effective application of mode 4 liberalization. The elaboration of 
a common code of practice for economic needs tests w ith the objective to render  them more specific and 
transparent, define their application criteria, make th em non-discriminatory and impose a due process procedure 
could be highly desirable.” (EU communication, S/CSS/W/45, 14 March 2001). 
2 A review of literature on mode 4 ENTs and labour market tests is beyond the scope of this paper.  
However, Members may wish to consult the selected studies or submissions listed in Appendix A.   
3 Members may wish to refine or add to that list. 
 4 Article XVI:2(d) says: In sectors where market -access commitments are undertaken, the measures 
which a Member shall not maintain or adopt either on th e basis of a regional subdivision or on the basis of its 
entire territory, unless otherwise specified in its Schedule,  are defined as: […] limitations on the total number of 
natural persons that may be employed in a particular service sector or that a service supplier may employ and who are necessary for, and di rectly related to, the supply of a specific se rvice in the form of numerical quotas or 
the requirement of an ec onomic needs test [...]".  TN/S/W/46 
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 6. The proper scheduling of ENTs was clarifie d as long ago as November 1993, in the WTO 
Secretariat's response to Members' questions (Adde ndum to "Scheduling of Initial Commitments in 
Trade in Services: Explanatory Note").5  Moreover, these studies, which were based on content 
analysis of existing commitments, have pointed ou t that few Members with ENTs listed in their 
schedules have actually described the criteria adequately.6 
7. In "The Scheduling of Commitments under the GATS, A Review of Basic Principles" (WTO 
Job(03)/186, 10 September 2003), Members are encour aged to describe the criteria and operation of 
ENTs, so that none are left unspecified.  
V. MODE 4 BARRIERS: ENTS AND LABOUR MARKET TESTS  
8. Several studies have mentioned that ENTs or la bour market tests are important barriers to the 
freer movement of service suppliers.  Besides sched uling inconsistencies or the absence of described 
criteria, there is also a lack of transparency on the implementation or operation of specific ENTs.  For 
example, some studies have pointed out that frequ ently no information is readily available on an 
ENT's scope, administration or changes to criteria.  Although ENTs or labour market tests listed often 
relate to the availability of domestic workers or other factors, there are usually no references to 
specific domestic legislation or administrative re quirements and procedures.  Consequently, not 
surprisingly, this lack of transparency has led to  concerns that certain unspecified ENTs or labour 
market tests are being carried out in an arbitrary or discretionary manner.  More transparency would 
remedy this problem. 
9. Furthermore, although several Members explicitly  say that ENTs or labour market tests do 
not apply to certain categories of na tural persons covered by commitment s, it is not always clear, from 
an analysis of available information on their gene ral immigration regimes, that those categories of 
natural persons are in fact not subject to the requirements of ENTs or labour market tests.  Details on 
ENTs or labour market tests are not readily availabl e. Information is often lacking on the relationship 
between a Member's mode 4 commitments and the relevant parts of its immigration laws and 
                                                      
 5 Number 3 says: “With regard to market access li mitations, such as numerical ceilings or economic 
needs tests, how detailed should the entries in schedules be?  
The entry should describe each measure concisely i ndicating the elements  which make it inconsistent 
with Article XVI.  Numerical ceilings should be expre ssed in defined quantities in either absolute numbers or 
percentages; regarding economic needs tests the entry should indicate the main criteria on which the test is 
based, e.g., if the authority to establish a facility is based on a population criteria, the criterion should be 
described concisely ." 
6 For example: 
a) WTO Secretariat paper, 1998, paragraph 40: "The predictability of actual entry conditions is further 
affected by Members' failure in most cases in which th ey have reserved the right to operate economic needs 
tests, to specify the relevant criteria. Fn: "Paragra ph 3 of the addendum to the scheduling guidelines 
(MTN.GNS/W/164/Add.1) provides that "the entry shou ld indicate the main criteria on which the [economic 
needs] test is based e.g. if the authority to establis h a facility is based on a population criterion, the criterion 
should be described concisely". 
b) WTO Secretariat paper (S/CSS/W/118), 30 November 2001, page 3-4: "Of the 253 entries, 96 
provide no guidance concerning the concerning the criteria on which the test is based. Of the 157 entries that provide criteria on which the tests are based, very few ha ve described these criteria as set out in the Scheduling 
Guidelines. The 39 horizontal entries in mode 4 estab lish as the sole criterion for the admission of a service 
supplier the non-availability of qualified personnel in the local market. Other entries provide minimal indications on the objectives and criteria applied in the te st. ENTs containing criteria are frequently phrased in a 
way that nevertheless leaves wide discretion as to their application. Typical formulat ions are "criteria include" 
or the relevant agency "shall have regard to, inter alia , the following criteria". Work from UNCTAD and the 
OECD has pointed out that the absence of a definition of ENTs in the GATS has led to scheduling 
inconsistencies and a lack of transpar ency as to the operation of ENTs." TN/S/W/46 
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 regulations.  GATS negotiators and policy analysts  are usually not experts on the immigration or 
labour regimes of various Memb ers.  Consequently, without pertinent information, it is 
understandable why they have difficu lty determining precisely if an EN T or labour market test applies 
or does not apply to a particular category.
7 More transparency would also remedy this problem. 
10. The results of these studies, therefore, lead to several ways to improve the transparency and 
predictability of ENTs or labour market tests in mode 4 commitments.  For example, Members could 
be more explicit about: a) the criteria and operati on on which ENTs or labour market tests are based; 
b) the relationship between their mode 4 commi tments and their general immigration laws, 
regulations and administrative procedures; and c) the requirements and procedures for work permits 
or visas for work.  Such transparency would be a practical way to counter charges of arbitrary and 
discretionary application of ENTs or labour market  tests.  It would also reduce business costs and, 
because of known rules and regulations, encourage more  service suppliers to seek temporary entry.   
VI. CANADA'S LABOUR MARKET TEST 
11. Besides the standard immigration screening (fo r national security, health, criminality and 
bona fides) to determine if a visa for admission can  be issued, a foreign business person seeking to 
work temporarily in Canada or the relevant Canadi an employer or client, essentially face two, main 
regulatory requirements: assessments  for a) a labour market opinion and b) a work permit.  What 
Canada's commitments on temporary entry in interna tional trade agreements basically do is exempt 
specific categories of business people from one or both of these requirements.  For example, the labour market opinion does not apply to any of  the categories of service suppliers covered by 
Canada's existing mode 4 commitments (business visitors, intra-company transferees, and several 
professionals).  Canada has made this commitment  more explicit in its initial offer on mode 4 by 
citing whether or not a labour market test or a wo rk permit applies. Canada’s initial requests have 
asked other Members to do the same thing.   
12. Furthermore, in the interest of promoting more understanding and for greater transparency, 
attached to this paper (Appendix C) is a descrip tion of Canada's current labour market opinion (also 
referred to as a "job offer confir mation opinion" or an "assessment fo r a labour market opinion").  
This labour market test does not apply to those cat egories of natural persons  covered by Canada's 
existing mode 4 commitments and its initial and re vised offers.  Appendix C provides the relevant 
regulations and details on the criteria used in an assessment.  This information is available publicly 
and the website addresses are provided.   
VII. CANADIAN PROPOSAL  
13. As a first step, the Canadian delegation suggest s that Members adhere to the existing agreed 
rules and scheduling guidelines rule on ENTs and la bour market tests.  Further, Members should 
engage in further substantive discu ssion on mode 4 ENTs or labour mark et tests and attempt to define 
mode 4 ENTs or to at least agree on common elements.  
                                                     
 
7 Canada's June 2005 paper on improved transparency of mode 4 commitments proposes that Members 
provide inter alia  supplementary information on their mode 4 commitments or offers, so that trade negotiators 
and policy analysts of other Members could better understand and determine the "liberalization value" of 
commitments or offers. Attached to th is transparency proposal is a comple ted template providing supplementary 
information on Canada’s mode 4 commitments.  Members may wish to review this document as it illustrates how Members might incorporate more details on their ENTs or labour market tests.  Canada also submitted this 
completed template at the time it submitted its revised offer (TN/S/W/42).  TN/S/W/46 
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 14. To further increase transparency  and understanding of mode 4 ENTs, the Canadian delegation 
encourages all Members to exchange information on th eir mode 4 ENTs or labour market tests in the 
coming months.  In undertaking such an exchange of  information, Members may wish to provide it in 
the format Canada has done in Appendix C or as supplementary information along the lines of the 
template attached to Canada's Communication TN/S /W/42 submitted at the time our revised offer was 
released. A few Members have already provided this information informally.  
15. The Canadian delegation looks forward to hear ing the views of other delegations on this 
subject and to them joining the information exchan ge.  Further discussion and more transparency will 
help lead to a better understanding of mode 4 EN Ts or labour market tests and improve the 
transparency, predictability and relevance of our  mode 4 commitments for trade negotiators and 
business people. TN/S/W/46 
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 Appendix A
 
 
Selected References  
 
1. Presence of Natural Persons (Mode 4),  Background Note by the Secretariat , Council for Trade in 
Services, WTO, S/C/W/75,  8 December 1998, (98-4927) 
 
2. Preparations for the 1999 Ministerial Conference, General Council discussion on mandated 
negotiations and the built-in agenda , 23-24 November 1998, Communication from Pakistan , 
WT/GC/W/131, 22 Decem ber 1998, (98-5148). 
 
3. Preparations for the 1999 Ministerial Conference, Movement of Natural Persons under GATS , 
Communication from Pakistan , WTO, Geneva, WT/GC/W/160, 1 April 1999, (99-1336). 
 
4. "Lists of Economic Needs Tests in the GATS  Schedules of Specific Commitments", UNCTAD, 
Geneva, UNCTAD/ITCD/TSB/8, 6 September 1999, GE.99-53I84 
 
5. "Assessing the Barriers to Trade in Services",  OECD, Paris, TD/TC/WP(2000)11/Final, 10 
November 2000. 
 
6. Assessing Barriers to Trade in Services, the Sc heduling of Economic Needs Tests in the GATS: 
Follow-up Work, OECD, Paris, TD/TC/WP(2001)5, 25-26 January 2001. 
 
7. Communication from the European Communities and their Member States, GATS 2000: 
Temporary Movement of Service Suppliers , WTO, Geneva, S/CSS/W/45, 14 March 2001. 
 
8. "Service Providers on the Move: A Closer Look at Labour Mobility and th e GATS", OECD, Paris, 
TD/TC/WP(2001)26, 20-22 June 2001. 
 
9. "Economic Needs Tests", Note by the Secretariat , Council for Trade in Services Special Session, 
S/CSS/W/118, 30 November 2001 (01-6155). 
 
10. Symposium on Movement of Natural Persons (Mode 4) under the GATS, 
Joint WTO-World Bank Symposium, Geneva, 11-12 April 2002, www.wto.org/ature/tratop_e/serv_e/symp_mov_natur_perso_april02_e.htm.  
 
11. "Some Comments on the Economic Needs Tests and the Provision of Services under Mode 4" by 
Georgina Luna de la T./Ecuador, UNCTAD Expert Meeting on Market Access Issues in Mode 4 
(Movement of Natural Persons to Supply Services ) and Effective Implementation of Article IV on 
Increasing the Participation of Developing  Countries, Geneva, 29-31 July 2003. 
 
12. "The Scheduling of Commitments under the GA TS, A Review of Basic Principles", WTO, 
Geneva, Job (3)186, September 2003. 
 
13. OECD, World Bank, IOM Seminar on Trade and Migration, Geneva, 12-14 November 2003, 
www.iom.int/documents/officialtxt/en/agenda.pdf
. 
 
14. Communication from Switzerland, WTO, Geneva, TN/S/W/21, 8 September 2004, “On the 
Importance of Improving the Scheduling of GATS Commitments”. 
 
15. Communication from Hong Kong, China, WTO, Geneva, JOB(04)/171, 22 November 2004, 
“Economic Needs Tests”. 
 
 
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 Appendix B  
 
Economic Needs and Labour Market Tests  
 
Illustrative List of Common Elements  
 
1. Skills. Does the foreign worker being sponsored to come into a country meet minimum skill thresholds 
there?   
2. Salary. Would the foreign worker's salary be at or above a certain level stipulated for the prospective job? 
3. Economic Impact. What effect would the forei gn worker have on the domestic economy?    
4. Job Classification. Is the prospective job recognized  in the national occupation classification system?   
5. Labour dispute. Would the foreign worker adversely affect an ongoing labour dispute?  
6. Advertisement & Recruitment.  Before offering the job to a foreign worker, has the sponsoring employer 
advertised the job adequately or cons idered domestic candidates sufficiently? 
7.    Other elements (Views of other Members?) TN/S/W/46 
S/CSC/W/47 Page 8 
 
 
 Appendix C
 
 
Canada's Labour Market Test  
 
Note: The labour market test described below does not ap ply to business visitors, in tra-company transferees and 
the categories of professionals covered by Canada's existing mode 4 commitments in the GATS.  Nor does it 
apply to the categories of business persons covered by other international trade agreements to which Canada is a 
signatory (e.g., NAFTA and the Canada-Chile FTA).  Furthermore, under Canada’s initial and conditional 
GATS mode 4 offer, this labour market test would not apply to the categories of service suppliers it covers if 
and when they become fi nal commitments.      
 
1. 2002 Immigration and Refugee Protection Regulations  (June 2002)  
(Source : Canada Gazette, Extra Vol. 136, No. 9, Part 9 http://canadagazette.gc.ca/part II/tempPdf/g2-136x9.pdf) 
 
203. (1) On application under Division 2 for a work permit made by a foreign national other than a foreign 
national referred to in subparagraphs 2 00(1)(c)(i) and (ii), an officer shall dete rmine, on the basis of an opinion 
provided by the Department of Human Resources Develop ment, if the job offer is genuine and if the employment 
of the foreign national is likely to have a neutral or positive economic effect on the labour market in Canada. 
 
(2) The Department of Human Resources Developme nt shall provide the opinion referred to in 
subsection (1) on the request of an officer or an employer or group of employers. A request may be made in 
respect of  
(a) an offer of employment to a foreign national; and 
(b) offers of employment made, or anticipated to be made, by an employer or group of 
employers. 
 (3) An opinion provided by the Department of Hu man Resources Development shall be based on the 
following factors: 
(a) whether the work is likely to result in direct job creation or job retention for the benefit of 
Canadian citizens or permanent residents; 
(b) whether the work is likely to result in the creation and transfer of skills and knowledge for the 
benefit of Canadian citizens or permanent residents; 
(c)  whether the work is likely to fill a labour shortage; 
(d)  whether the wages and working conditions offered are sufficient to attract Canadian citizens 
or permanent residents to, and retain them in that work; 
(e)  whether the employer has made, or has agreed to make, reasonable efforts  to hire or train 
Canadian citizens or permanent residents; and 
(f) whether the employment of the foreign national is likely to adversely affect the settlement of 
any labour dispute in progress or the employment of any person involved in the dispute. 
 
2. Assessment for a Labour Market Opinion
 
 
(Source : http://www.hrsdc.gc.ca/en/epb/lmd/fw/tempOffers.shtml ) 
In almost all cases, foreign workers must have a valid work permit to work in Canada. When hiring a foreign 
worker, you, the employer must generally: 
1. Submit an HRSDC Foreign Worker Application  for a labour market opinion (LMO) to the HRSDC 
Foreign Worker office  responsible for your area.  
Before confirming a job offer, HRSDC considers whether : 
o The job offer is genuine;  
o The wages and working conditions are comparable to those offered to Canadians working in 
the occupation;  
o Employers conducted reasonable efforts to hire or train Canadians for the job;   TN/S/W/46 
 S/CSC/W/47 
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 o The foreign worker is filling a labour shortage;  
o The employment of the foreign worker will directly create new job opportunities or help retain 
jobs for Canadians;  
o The foreign worker will transfer new skills and knowledge to Canadians; and  
o The hiring of the foreign worker will not affect a labour disputes or the employment of any 
Canadian worker involved in such a dispute.  
 
Inform the foreign worker to apply for a work permit  from Citizenship and Immigration Canada (CIC).  
Next, CIC decides whether the foreign worker will get a work permit according to the requirements to work and 
reside temporarily in Canada. 
HRSDC LABOUR MARKET CONFIRMATION  
To assist your company in the application process, below is a description of the factors that HRSDC takes into 
consideration when reviewing your job offer. Submitting a complete application and providing information on 
these factors can result in faster decisions by HRSDC and  CIC officers and reduce delays in the recruitment of 
your foreign worker. 
When assessing a job offer, HRSDC considers primarily : 
• the occupation  that the foreign worker will be employed in;  
• the wages and working conditions  offered;  
• the employer's advertisement and recruitment  efforts;  
• the labour market benefits related to the entry  of the foreign worker;  
• consultations , if any, with the appropriate union;  
• whether the entry of the foreign worker is likely to affect the settlement of a labour dispute .  
For your information, please note that CIC may also require additional criteria when issuing work permits to 
foreign workers in regulated occupations . 
Occupation  
HRSDC and CIC use the National Occupational Classification (NOC) system to categorize the job you are 
filling based on the majority of duties you expect the foreign worker to perform. HRSDC also uses the NOC 
occupation to identify wages and labour market trends when assessing your job offer. 
The NOC system can help you as an employer more accurately describe the duties and identify the occupation 
that the foreign worker will be expected to perform, noting that HRSDC officers will work with you if the NOC does not precisely reflect your employment needs. 
• Find a detailed NOC job description
 .  
• Learn more about the NOC  in general.  
Wages and Working Conditions 
HRSDC reviews the wages that you are offering the foreign national, and compares them to wages paid to 
Canadians in the same occupation based on labour market information from Statistics Canada, HRSDC, TN/S/W/46 
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 provincial ministries, and other reliable sources. If you are offering wages below rates paid to Canadians in the 
occupation, HRSDC will not confirm your job offer. 
HRSDC also expects you to provide working conditions that are consistent with federal and/or provincial 
standards for the occupation and workplace. 
• Learn more information about federal and provincial labour standards in Canada  .  
Advertisement and Recruitment 
HRSDC generally expects that you show recruitment effort s to find qualified Canadians before applying to hire 
foreign workers. 
Demonstrating comprehensive advertisement to attract C anadians in local and national newspapers, recognized 
INTERNET job banks, job-specific and professional public ations, etc. before making offers to foreign workers 
will help your application. Clearly presenting wages offered and job duties required for the position in your advertisement will also help HRSDC in making a decision. 
In addition to advertisement, showing active recruitment of Canadians through such means as job fairs, CO-
Ops, apprenticeship programs, etc. will also support your application. 
• Learn more about HRSDC supports for employers on human resources planning and recruitment
 .  
Labour Market Benefits to Canadians 
HRSDC will consider direct labour market benefits from the hiring of the foreign worker(s). Showing how the 
entry of the foreign worker(s) will transfer skills and knowledge to Canadians, fill a labour shortage, or directly create or retain job opportunities for other Canadians will support your application. 
Union Consultation 
If the position being filled by the foreign worker is part of a bargaining unit, the following information will 
support a positive HRSDC decision and will reduce delays in the recruitment of the foreign national: 
• An explanation of the union's position on hiring a foreign national for your job. If you have not 
contacted the union, explain why you have not done so.  
• An indication of whether you actively work with union officials to identify unemployed Canadians.  
• Confirmation that the conditions of the collective agreement (e.g. wages, working conditions) will 
apply to the foreign worker.  
Please note that HRSDC may contact the applicable union for additional information when reviewing your 
application 
Labour Disputes 
Please be aware that HRSDC and CIC will not confirm the hiring, or issue a work permit to the foreign national 
if you are making an offer to a foreign national for a position that may affect a labour dispute at your workplace, or affects the employment of any Canadian worker involved in such a dispute. 
Also, please be aware that CIC will not issue a work permit if the foreign worker does not meet certification and 
licensing requirements for regulated occupations in Canada (e.g. doctors, engineers, tradespersons). Making the necessary arrangements with the regulatory body fo r certification and licensing is the employer's and the 
foreign worker's responsibility. 
To learn more about regulated occupations in Canada, please visit Work Destinations
 .   TN/S/W/46 
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 To learn more about the requirements to work in specific regulated occupations, visit the Regulated 
Occupations Data Base  . 
 
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