The United States (U.S.) and Jordan launched negotiations for a free trade agreement in 2000. Several reasons explain the U.S. desire to negotiate a free trade agreement with Jordan. The failed WTO Ministerial Conference in 1999 led U.S. trade officials to analyze the possibilities for a free trade agreement that would include certain provisions that are resisted at the multilateral trading level. Moreover, the U.S. and Jordan had already signed a trade and investment framework in 1999, which is usually a precursor for a FTA.
The US-JO FTA includes a preamble, nineteen articles, three annexes, joint statements, memorandums of understanding, and side letters. In addition to the interesting articles on labor and environment, the US-JO FTA provides the opportunity for Jordanian nationals to come to the U.S. to make investments and participate in trade. Under certain conditions, Jordanian nationals can enter the U.S. to render professional services.
The US-JO FTA permits entry of nationals of one party in the territory of the other. From the outset, it is necessary to distinguish between migration and the ability of Jordanians to enter into the U.S. to make investments and participate in trade. Jordanian nationals are not allowed permanent resident status, but are only given the opportunity to acquire a visa on a temporary basis or “non-immigrant” status. This status requires that the visa beneficiary return to Jordan after his temporary stay expires.
The US-JO FTA allows nationals of Jordan to enter into the U.S. to carry solely “substantial trade”, including trade in services and technology. The yardstick in the FTA is “substantial trade”. Article 8 does not specify what constitutes “substantial trade”. For example, should a Jordanian trader be major exporter to the U.S to be eligible for entry? Or the U.S is obliged, subject to its laws on entry, to allow Jordan’s traders entry into its territory for attending a trade fair or partnering with U.S firms.
In effect, the language of article 8 of the US-JO FTA is drawn from the Immigration and Naturalization Service (INS), now known as Bureau of Citizenship and Immigration Service within the Department of Homeland Security, and the U.S Department of State regulations. The Department of State regulations define a treaty trader as an alien, classifiable as a nonimmigrant treaty trader (E-1), who will be in the U.S solely to carry on trade of a “substantial nature” either on the alien’s behalf or as an employee of a foreign person or organization engaged in trade, “principally” between the U.S and the foreign state of which the alien is a national. This language is identical to the language of article 8.1 of the US-JO FTA. The regulations of the Department of State reads that consideration being given to any conditions in the country of which the alien is a national which may affect the alien’s ability to carry on such substantial trade. Moreover, the alien must prove that he intends to depart the U.S after the termination of E-1 status.
Although US-JO FTA does not define the term “substantial trade”, the Department of State regulations define it as the quantum of trade “sufficient” to ensure a continuous flow of trade items between the U.S and the treaty country. Continuous flow contemplates numerous exchanges over time rather than a single transaction, regardless of the monetary value. The U.S regulation considers monetary value as an important factor. However, greater weight is given to more numerous exchanges of larger value. Therefore, Department of State regulations do not specify an exact monetary value of substantial trade, for example $100,000, as a benchmark that would qualify a Jordanian trader as eligible for E-1 visa.
Rather, Department of State regulations leave it to the U.S Consular Office in Jordan the flexibility of determining “substantial trade” that would qualify Jordanian nationals of for E-1 visa. This conclusion is supported by the fact that the regulations of the Department of State itself read that consideration being given to any conditions in the country of which the alien is a national which may affect the alien’s ability to carry on such substantial trade. In other words, the U.S Consular Office will have to take into account the conditions prevalent in Jordan when evaluating a petition for E-1 visa. Thus, the term “substantial trade will be evaluated on a case-by-case basis.
Additionally, the term “trade” is not defined in the US-JO FTA. The negotiators of the US-JO FTA perhaps wanted to give a non-exhaustive list of trade activities that could be conducted in the territory of the other party such as trade in services and technology. Other items of trade may include trade in monies, international banking, insurance, transportation, tourism, communications, and some news gathering activities.
The US-JO FTA also allows nationals of one party to enter into the territory of the other party to establish, develop, administer, or advise on the operation of an “investment”. However, investment is qualified by the requirement that the nationals or the company that employs them “have committed” or “in the process of committing” a substantial amount of capital or other resources. In other words, the language of “have committed” or “in the process of committing” seems to require a significant amount of upfront investment such as transferring money before a national of Jordan can obtain the visa. The purpose such language could be interpreted so as to prevent maneuvering and fraud. Again, in the investment provision of the FTA, the yardstick is commitment to a “substantial amount of capital or other resources”. The Department of State regulations define a treaty investor as an alien, classifiable as a nonimmigrant treaty investor (E-2), that has invested or is actively in the process of investing a substantial amount of capital, as distinct from a relatively small amount of capital solely for the purpose of earning a living, and he seeks entry solely to develop and direct the enterprise. Moreover, the treaty investor must intend to depart from the U.S upon the termination of E-2 status. Thus, subparagraph 8.2 of the US-JO FTA is drawn directly from the U.S regulations.
The US-JO FTA is silent as to the definition of “investment” and “substantial amount of capital”. However, the Department of State regulation defines investment as the treaty investor’s placing of capital, including funds and other assets, at risk in the commercial sense with the objective of generating a profit. The treaty investor must be “in possession” of and “have control” over the capital invested or being invested. Furthermore, the U.S regulations require that capital in the process of being invested must be “irrevocably” committed to the enterprise. In other words, the treaty investor must commit capital in an unalterable way or commit beyond recall.
The treaty investor must have the burden of establishing such irrevocable commitment given to the particular circumstances of each case. Moreover, according to the U.S regulations, the treaty investor may use any legal mechanism available that would not only irrevocably commit funds to the enterprise but also extend some personal liability protection to the treaty investor. Even if all other conditions are met, the investment must not be passive or virtual but rather a “real” and “active” commercial or entrepreneurial undertaking, producing some service or commodity for profit and must meet applicable legal requirements for doing business in the particular jurisdiction in the U.S. This language intends to prevent visa fraud.
As to the definition of “substantial amount of capital”, article 8 of the US-JO FTA is silent on this matter. However, the U.S Department of State regulations define “substantial capital” as the amount that is 1) substantial in the proportional sense for example in relationship to the total cost of either purchasing an established enterprise or creating the type of enterprise under consideration; 2) sufficient to ensure the treaty investor’s financial commitment to the successful operation of the enterprise; and 3) of a magnitude to support the likelihood that the treaty investor will successfully develop and direct the enterprise. The U.S regulations define whether an amount of capital is substantial in the proportionality sense in terms of an inverted sliding scale. For example, the lower the total cost of the enterprise, the higher, proportionately, the investment must be to meet the criteria. Moreover, the Department of State regulations require that projected future capacity of the enterprise should generally be realizable within five years from the date the alien commences normal business activity of the enterprise. In summation, U.S regulations do not specify an exact amount of capital that would serve as a yardstick to evaluate whether an investment could qualify its holder for E-2 visa. Rather, the regulations leave “substantial amount of capital” test to be evaluated on a case-by-case basis.
Article 8.2 of the US-JO FTA allows nationals of either party to enter the territory of the other party to “establish”, “develop”, “administer”, or “advise” of an investment. These four terms are not defined in article 8 of the US-JO FTA. Again, U.S Department of State regulations define some of these terms. For example, the regulations define “develop and direct” as what the business or individual treaty investor does or will develop and direct the enterprise by controlling the enterprise through ownership of at least 50% of the business, by possessing operational control through a managerial position or other corporate device, or by other means. Therefore, an investor under the US-JO FTA must play a key role in the investment whether through establishment, development, administration, or advice in order to be eligible for E-2 visa.
For the purpose of article 8, the U.S rendered nationals of Jordan as eligible for treaty trader (E-1) and treaty investor (E-2) visas. This article seems to imply as if the U.S gave Jordanian nationals special or privileged visa treatment. However, Jordanian national individuals will not be exempt from acquiring a visa for entry into the U.S. Rather, Jordanian national must appear at the U.S. embassy or consulate in Jordan and be inspected by a consular officer and acquire a visa stamp before entering the U.S. for inspection by an immigration officer.
Two-way trade between the U.S. and Jordan is up substantially since the free trade agreement between the two countries took effect, but a provision enabling temporary entry of Jordanian nationals into the U.S. has seen little use. For the period 2002-2010, there were no trader or investor visas issued to Jordanian nationals under the visa provisions of the FTA. This state of affair could be attributed to lack of awareness or understanding on the part of Jordan’s nationals as to E category of visas, the difficulty traders or investors face in meeting the thresholds of “substantial trade” or “substantial amount of capital” for investment, or difficulty of proving intent to return back to Jordan. Not any trader or investor can meet these thresholds. The onerous of article 8 of the FTA might explain the nonexistent of visas under the FTA so far even though U.S regulations allow for consideration being given to any conditions in the country of which the alien is a national which may affect the alien’s ability to carry on such substantial trade.
On the other hand, one year after NAFTA came into force, 220 accountants from the U.S, but none from Mexico, entered Canada independently, and 62 U.S accountants entered as intra-company employees, 965 engineers from the U.S and 7 from Mexico, and 224 American intra-company engineers and 3 Mexicans were issued entry documents, 34 lawyers independently and 9 as intra-company employees came from the U.S.
Although national security, outsourcing, and immigration concerns are issues that need to be addressed, the U.S. must rationally weigh the costs and benefits of limiting movement of individuals. Increasing temporary worker mobility, and for that matter trade in general, has greater potential to benefit trade development, mutual understanding, peace, and tolerance. Failure to consider movement for individuals as a vital component of economic infrastructure and foreign policy will seriously affect economic growth and stability.
US-Jordan FTA Cross-Border Provision of Services
Historically, most trade agreements focused on reducing tariffs and non-tariff barriers on goods as they cross international borders. However, the services sector now accounts for about seventy five percent of employment activity in industrialized countries like the U.S. Therefore, current trade agreements deal with trade in services.
While WTO achieved major progress in liberalizing the trade in goods, it later has begun to liberalize trade in services. The WTO’s General Agreement on Trade in Services (GATS) recognizes several modes of supplying services with “Mode 4” addressing the temporary cross-border movement of business and professional workers. The US-JO FTA goes beyond the primary focus on goods and it deals with a new frontier, liberalization of trade in services. Such liberalization is important for freer flow of labor over national borders.
The US-JO FTA sets out several service obligations. The FTA requires each party to accord to service providers of another party treatment no less favorable than that it accords, in like circumstances, to its own service providers. The idea of this provision is nondiscrimination whereby Jordan must treat service provider from the U.S. the same way that Jordan treats service provider from Jordan. The other key US-JO FTA obligation is the most-favored nation obligation whereby each party is to accord to service providers of another party treatment no less favorable than that it accords, in like circumstances, to service providers of any other Party or of a non-Party. For example, if Jordan treats a service provider from Iraq more favorably than it treats a service provider from the U.S., the treatment provided to the Iraqi must be accorded to an American service provider.
The US-JO FTA created obligations specifically targeting professional services. Professional services, unlike most service providers who wish to provide their services in the U.S., they need permission to enter the jurisdiction from the U.S. immigration authorities. Movement of natural persons, professionals, is of particular importance to Jordan. However, temporary entry into the U.S. is limited to executives, managers, or specialists of a Jordanian company that has a physical presence in the U.S. in the form of branch, subsidiary, or affiliate. Such entry is limited to three years with a one-time two years extension.
The U.S. commitment, while covering the intra-corporate movement of senior personnel, does not extend to other categories of workers. Low-skilled workers seeking entry into the U.S. will not be admitted under the US-JO FTA. Both the U.S. and Jordan would benefit more from relaxed restrictions on unskilled labor rather than on skilled labor. Jordan has primarily unskilled labor to supply while the U.S. has primarily unskilled jobs to offer.
Under the US-JO FTA, a corporate employee cannot move to the U.S. unless his company already maintains commercial presence in the U.S. In other words, the FTA requires a Jordanian service providers to establish or maintain a representative office or any form of enterprise in the U.S. as a condition for the cross-border provision of a service. The “commercial presence” requirement prohibited if not stopped stop temporary movement of workers between the U.S. and Jordan. The US-JO FTA should have prohibited the parties from imposing local presence requirements on cross-border service providers.
The U.S. opted for skilled workers and commercial presence in the FTA perhaps out of concerns over education, certification, professional accreditation, and licensing in Jordan. For example, an engineer who wants to build a bridge in the U.S. is going to need two pieces of paper; in addition to a temporary visa permit, they also need to be licensed by the U.S. professional regulatory body. In order to increase worker mobility, the U.S. and Jordan could have concluded mutual recognition agreements and harmonized professional standards in certain sectors. Additionally, the U.S. and Jordan could have placed more emphasis on education and experience rather on passing exams or interviews. For example, a Jordanian engineer can obtain a temporary license to practice in the U.S. if he has a minimum of twelve years of acceptable engineering experience.
Labor Mobility in the North American Free Trade Agreement
Compared with the modest language of article 8 of the US-JO FTA, NAFTA dedicates a whole chapter-chapter 16- dedicated to temporary entry for business persons. The purpose of chapter 16 of NAFTA is to facilitate temporary entry of business persons. NAFTA parties endeavor to develop and adopt common criteria and definitions for the implementation of chapter 16. Moreover, each NAFTA party is committed to furnish the other parties with materials that enable them to be acquainted with chapter 16. To facilitate the movement of persons across the borders, each NAFTA party is committed to provide explanatory material regarding the requirements for temporary entry under chapter 16 in such a manner as will enable business persons of the other parties to become acquainted with them. On the other hand, the US-JO FTA is absent of such a commitment. Hence, Jordanian nationals might not be able to determine the meanings of critical terms such as “substantial trade” or “investment”.
According to NAFTA, any dispute regarding refusal to grant temporary entry of business persons is subject to the dispute settlement mechanism. Chapter 16 of NAFTA created four categories of business persons who are citizens of a member country to be granted temporary entry. These four basic categories are: business visitors, traders and investors, intra-company transferees, and professionals. Business visitors who are engaged in international business activities may enter a NAFTA member country in B-1 status for the purposes of conducting research and design (technical, scientific, and statistical researchers), growth, manufacture and production (harvester owner supervising a harvesting crew, purchasing and production management personnel), marketing (marketing researchers and analysts, trade fair and promotional personnel).
NAFTA also provides E-1 and E-2 visas for traders and investors. The conditions for granting visa under this category are the same as visas granted under article 8 of the US-JO FTA. However, NAFTA mandates that no NAFTA party may impose or maintain any numerical restriction relating to temporary entry for traders or investors. In contrast, the U.S may impose numerical limits on the number of visa traders or investors under the US-JO FTA.
Another distinction between NAFTA and the US-JO FTA under the treaty trader and investor provisions is that a Canadian or Mexican business person may be denied E visa if there is a labor dispute in the Canadian or Mexican’s occupational classification in progress where the Canadian or Mexican will be employed and their entry may adversely affect the settlement of the labor dispute or the employment of any person involved in the dispute. In other words, the requirements for E-1 and E-2 visas under NAFTA are the same as they in the US-JO FTA, with the exception that entry may be denied when it would adversely affect the settlement of a labor dispute in the US. This provision is only triggered when the Department of Labor certifies the existence of a strike or work stoppage, and does not apply to E visa holders already in the US. This language is absent from the US-JO FTA which means in effect that even if there is a labor dispute in the Jordanian’s occupational classification, still a Jordanian national can enter the U.S as trader or investor.
The third category of NAFTA visas is L-1 visa for a business person employed by an enterprise who seeks to render services to that enterprise or a subsidiary or affiliate thereof, in a capacity that is managerial, executive or involves specialized knowledge. In this category, no NAFTA party may impose numerical restrictions on temporary entry.
The last category of visas under NAFTA is professional visa, TN category. This kind of visa is unique for NAFTA nationals and is not available for other nationals. The US-JO FTA does not contain such kind of visa system for professionals. Under NAFTA, certain categories of professionals who meet minimum educational requirements, or posses designated credentials or licenses and experience, and who seek to engage in professional occupations in a NAFTA member country, may be admitted for example into the U.S for up to one year. Appendix 1603.D.1 of NAFTA lists 63 professions whom its holder may be eligible for TN visa after meeting the minimum requirements. For example, an economist has to posses baccalaureate or Licenciatura degree, a lawyer has to posses LL.B (for example Canadian common law degree), J.D., LL.L., B.C.L. (for example Canadian civil law degree) or Licenciatura degree (Mexican law degree consists of studying for five years) or membership in a state/provincial bar, and a university teacher has to posses baccalaureate or Licenciatura degree.
The U.S could have incorporated a provision similar to the TN category of NAFTA in the US-JO FTA regarding professional visas. Professional visa system could have given the opportunity for Jordanian professionals to acquire contacts and experience that would be translated into increase of trade between the U.S and Jordan. However, issues of immigration and recognition of credentials could have prevented the incorporation of such a provision in the US-JO FTA. Probably, the U.S was concerned that Jordan may dump its citizens in the U.S. and they would not return to their native Jordan. Although, placing a cap on the number of TN visas issued annually could have minimized this concern on the part of the U.S.
Freer trade applies not only for trade in goods but also extends to include other factors of production such as labor and capital. Production is not just a function of capital and natural resources, but also of labor. Little attention has been paid to liberalizing the movement of persons who trade in these goods and services. In the formulation of trade agreement, the flow of goods between the member countries should be discussed in connection with the flow of people.
The US-JO FTA is designed to permit temporary entry, without intent to establish permanent residence, of traders and key business personnel. Despite that, the FTA does not provide “truly temporary entry”. As of this date, Jordanian nationals are not able to benefit from the visa commitments of the US-JO FTA. The US-JO FTA permits entry for narrowly defined investment-related and trade-related purposes. The U.S made the entry of traders and investors from Jordan difficult. Jordanian businesspeople face difficulties in meeting the threshold of “substantial trade”, “investment”, and “substantial amount of capital”. Moreover, the U.S. couples the movement of key business personnel with local presence requirements. Only Jordanian nationals with money and extensive professional skills can gain entry to the U.S. The US-JO FTA prioritized workers with advanced educational training and capital to invest. The US-JO FTA prioritizes the cross-border movement of corporate executives, researchers, and professionals with advanced degrees.
The US-JO FTA, among other US-Arab free trade agreement, is a trade agreement concerned with the movement of goods and services but not with the movement of persons. The U.S. has chosen to actively pursue a free trade agenda in the Middle East while simultaneously restricting inbound temporary labor mobility. Jordanian nationals are human beings and they have a baccalaureate degree. They are part of the free trade agreement. There can be no free trade without people to facilitate it. The current temporary visa provisions significantly increase the cost of doing business and prevent the effective use of a company’s human resources. The issue of trade and temporary visas should be of immediate relevance to negotiators when crafting the broader US-Middle East FTA. Unless the inter-relationship between trade and temporary visas is properly understood, trade liberalization may be easily undone.