On paper, the four categories outlined in Table 2 can appear
all-encompassing and broad enough to cover most situations under which
firms might need their employees to cross the border for business,
trade, or investment purposes. In practice, however, firms still face
several challenges when trying to carry out their cross-border
activities, as shown in the results of a survey of large businesses with
extensive ties across the two countries.11Council for Global
Immigration and Canadian Employee Relocation Council, Cross
Border Mobility Survey: Service Level Survey . Firms’ challenges can
be summarized as two key issues: the difficulties of border officials to
interpret and apply existing rules, and the current limitations in the
list of professional occupations covered by the agreement.22Shotwell,
Yewdell, and Cryne, Barriers to Cross-Border Labor Mobility for
Professionals ; Council for Global Immigration and Canadian Employee
Relocation Council, Cross Border Mobility Survey: Service Level
Survey .
Barriers to the cross-border mobility of business persons can have
significant economic costs for two key reasons. First, North American
multinationals operating on both sides of the border have a significant
economic footprint. As such, affiliates of Canadian-owned firms in the
United States employ over half a million U.S. workers and generate
annual revenues of more than $300 billion. 33Based on 2014 data
from Statistics Canada, Table 376-0065—Activities of Canadian
Majority-Owned Affiliates Abroad, by Countries . Conversely,
affiliates of U.S.-owned companies in Canada employ over 1.2 million
Canadians and generate over $600 billion in revenues.44Based on
2014 data from Statistics Canada, Table 376-0151—Activities of
Foreign Majority-Owned Affiliates in Canada, by Country . These North
American multinationals have hundreds of employees who regularly need to
cross the border for business purposes. Barriers preventing them from
carrying on with their day-to-day activities on both sides of the border
leads to significant costs and missed opportunities for these firms.
Second, barriers to the cross-border mobility of business persons have
important costs in terms of forgone trade in services, whether these
services are traded as standalone products or as intermediate inputs.
Services such as research and design, professional services, financial
services, and transportation and logistics are essential inputs into
North America’s supply chains. They are the “connective tissue” of
global value chains, powering all steps of the process, from the initial
product development all the way to their sales and exports.55The
Conference Board of Canada’s Global Commerce Centre dedicated a
three-part series to Canada’s services trade. For more information,
see Palladini, Spotlight on Services in Canada’s Global
Commerce; Palladini, Good Service Is Good Business ; Goldfarb
and Palladini, Becoming a Services Superpower .
Traditional measures of trade do not reveal the full contribution of
services to the well-functioning of North American supply chains.
However, value-added trade data measures developed in recent years have
filled this gap. The “value added” concept refers to the amount by
which the value of a good or service increases at each step of the
production process. In contrast with conventional trade measures, which
consider the total value of a good or a service when it crosses the
border, value-added trade measures allow for the split between each
activity taking place across supply chains.66The Conference
Board of Canada published a series of briefings on value added trade
measures. For more information, see Armstrong, Adding Value to
Trade Measures: An Introduction to Value-Added Trade ; Armstrong and
Burt, Adding Value to Trade Measures: Understanding Canada’s
Role in Global Value Chains .
When using value-added trade data, we can see how crucial services are
to Canadian trade, accounting for as much as 40 per cent of total
Canadian exports (compared with 16 per cent when using traditional trade
measures).77Palladini, Good Service Is Good Business: How
Services Add Value to Canadian Goods Exports , 14. In fact, based on
value-added trade data, Canadian services exports in the form of
intermediate inputs are 40 per cent larger than our exports of
standalone services.88Based on 2011 data from OECD, Trade
in Value Added (TiVA) Database . And, close to 60 per cent of
Canada’s services exports as intermediate inputs go to the U.S.
market.99Ibid.
To be delivered, services often require people to interact with each
other. And this is also true for services trade, whether they are
exported as standalone products or as intermediate inputs in traded
goods. For example, a Canadian architectural firm selling its services
to a client in the U.S. (a service traded as a standalone product) may
need to send employees south of the border to meet with the client and
discuss its needs. Similarly, a Canadian manufacturing company could
hire the services of a Canadian consultant to assess its transportation
and logistics needs before starting to export its manufactured goods to
the United States. To provide that service, the Canadian consultant may
need to travel to the U.S. to meet with the U.S. firms that will be
importing the goods from Canada. These two examples illustrate how
essential the cross-border mobility of business people is for services
trade to take place.
To reduce barriers to the cross-border mobility of business people, we
propose the following:
-
Clarify the differences between business visitors and other categories
requiring a work permit.
-
Broaden the professional occupation coverage and improve clarity of
the professionals category.
Business Visitors: The Need for Clearer Rules
How entry is granted under each of the four categories of business entry
depends largely on the interpretation of border officials. A survey of
businesses found that border officials can make unpredictable and
inconsistent decisions. That can be explained in part by a lack of
training.1010Shotwell, Yewdell, and Cryne, Barriers to
Cross-Border Labor Mobility for Professionals . However, the lack of
clarity for some of these categories leaves too much room for
interpretation, making it difficult for border officials to apply the
rules consistently and fairly.
For example, the broad “business visitor” category (the only one that
allows temporary entry to individuals without them being considered
“workers”—includes a wide range of activities that can easily be
interpreted as “work” by border officials, including research and
design, marketing, and after-sales service.1111NAFTA Secretariat,
Chapter Sixteen: Temporary Entry for Business Persons . See
“Annex 1603.” Therefore, distinguishing between what does and does
not constitute work is subject to much interpretation by border
officials and leads to inconsistent decisions.
As such, in a survey of 24 large companies operating in the U.S. and
Canada,1212Respondents to the survey were firms with over 1,000
employees in North America. Among these firm, 57 per cent employ more
than 10,000. some firms reported that their employees were required
to first get a work permit (either as professionals or intra-corporate
transferees) before crossing the border to attend business meetings or
provide after-sales services.1313Council for Global Immigration
and Canadian Employee Relocation Council, Cross Border Mobility
Survey: Service Level Survey . Technically, business meetings and
after-sales services should count as “business visitor” trips under
the sales and marketing and after-sales activities.
Moreover, the same survey also found that, among the various categories
of business persons covered under NAFTA, the business visitor category
was the one for which border officials’ decisions were the least
consistent. For temporary entry to both Canada and the United States,
close to 60 per cent of respondents said that decisions for the business
visitor category were not consistent, compared with only one-third of
respondents for the professional category.1414Ibid. Here are some
quotes from businesses who took part in this survey1515Ibid.:
-
“We have some of our executive that travel to the U.S. strictly for
business meetings, yet they are told to obtain an L-1A
[intra-company transferees] because they cross the border so
much.”
-
“We received border denials for individuals attempting to enter the
U.S. to perform non-productive work (just attend meetings) where
officer instructed individual to return to the border with a work
permit.”
-
“Many border officials have a different interpretation regarding what
constitutes ‘productive work.’ The definition of ‘productive work’
needs to be better defined in order to ensure consistency.”
The interpretation of border officials on both sides of the border
varies widely depending on the nature of the relationships with the firm
in the other party, the accompanying documentation presented at the
border, and how frequently a person crosses the border.1616Shotwell,
Yewdell, and Cryne, Barriers to Cross-Border Labor Mobility for
Professionals ; Council for Global Immigration and Canadian Employee
Relocation Council, Cross Border Mobility Survey: Service Level
Survey . Therefore, the business visitor category should be clarified
in NAFTA 2.0 so that border officials and firms can clearly
differentiate those circumstances that require employees to get a work
permit from those that do not.
Professionals: Broadening the List of Covered Occupations
The list of occupations covered for temporary business entry under the
“professionals” category has not been updated in over two decades.
According to businesses on both sides of the border, the fact that the
list of occupations is outdated is one of the key barriers to the flow
of business persons between the two countries.1717Shotwell,
Yewdell, and Cryne, Barriers to Cross-Border Labor Mobility for
Professionals . The list excludes a wide range of occupations that
have emerged since NAFTA was first negotiated. This is true across all
sectors of the economy, but particularly in information technology.
These include such occupations as software developers, data scientists,
analysts, project managers, supply chain and logistics professionals,
and investment managers, to name a few.1818Council for Global
Immigration and Canadian Employee Relocation Council, Cross
Border Mobility Survey: Trusted Employer Program Survey .
To update this list, NAFTA 2.0 could leverage the work done under
CETA.1919For a discussion of labour mobility under CETA, see
Brender, Across the Sea With CETA . Instead of relying on a
list of occupations that must be clearly stated, CETA lists the actual
services for which professionals are allowed temporary entry, based on
the Central Product Classification (CPC).2020United Nations,
Central Product Classification (CPC) Ver. 2.1 . Services
covered by CETA in Chapter 10 of that accord include legal advisory
services, accounting and bookkeeping, computer and related services,
financial services and consulting services, travel services, research
and development services, and other.2121Government of Canada,
Text of the Comprehensive Economic and Trade Agreement—Annex
10 . This list is not as closely tied to specific occupations (aside
from those that are regulated professions) and could provide more
flexibility as new occupations emerge.
However, the sectoral approach proposed in CETA is highly technical and
could also be difficult for border officials to interpret. Therefore,
other options may need to be considered during the renegotiation of
NAFTA to ensure a broader coverage of occupations, facilitate
interpretation by border officials, and reduce uncertainty for
professionals crossing the border.
Another option could be to opt for a “negative listing” approach in
specific sectors, particularly where job titles continuously change—as
they do, for example, in information technology. Under such an approach,
all occupations in a sector would be covered unless otherwise specified.
NAFTA 2.0 could also include a provision allowing for new types of
occupations or services to be added to the list on an ongoing basis so
as to ensure that the agreement can be updated in the future as
technological changes continue to transform business and trade
realities.
In turn, a more extensive coverage of occupations under the
professionals category would make cross-border travel a lot easier for
many North American businesses.
Lastly, two other aspects where the work of CETA could be incorporated
into a NAFTA 2.0 to improve labour mobility and support trade and
investment outcomes include:
-
streamlining the process for regulators and professional bodies to
pursue mutual recognition agreements, as included in CETA’s Chapter 11
(which goes beyond what is currently included in NAFTA)2222CETA
was the first free trade agreement signed by Canada that included
specific provisions on the mutual recognition of professional
qualifications, with an entire chapter (Chapter 11) dedicated to
this issue. See Government of Canada, Text of the
Comprehensive Economic and Trade Agreement—Chapter Eleven: Mutual
Recognition of Professional Qualifications .;
-
granting work permits that are exempt from a Labour Market Impact
Assessment to the spouses of intra-corporate transferees and other
temporary migrant workers, as included in other recent FTAs.2323Mertins-Kirkwood,
Labour Mobility in Canada .