Salient features of ASEAN FTA: focus on services

Rajan Sudesh Ratna
Economic Affairs Officer
Trade Policy Section (TID)
[email protected]
[email protected]
in WTO
 Services negotiations in ASEAN
 Opportunities and Challenges
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•There was no international discipline on trade in services
until adoption of the GATS.
• Like TRIPS, GATS was not part of the GATT system until the
Uruguay Round negotiations. And like TRIPs, many
developing countries resisted negotiations on trade in
•GATS negotiations were conducted “outside” the Uruguay
Round negotiations until the end of the process when the
countries reached consensus on a framework agreement.
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Trade in Services differs from Trade in Goods:
Unlike in Goods, Positive listing of sectors
and modes while undertaking commitments.
In Goods - control is through Tariffs –
Services - control through Regulations – No
Tariffs Services are supplied through four
modes - Modes 1, 2, 3 and 4.
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•Business Services
• Communication Services
• Construction Services
• Distribution Services
• Education Services
• Environmental
•Health Related Services
• Financial Services
• Tourism Services
• Recreation, Culture, Sports
• Transport Services
• Other Services
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Mode 1: Cross-border supply – Service flows from
the territory of one country into the territory of
another country.
Mode 2: Consumption abroad - consumer of a
service moves into the territory of another Member
country to obtain the service.
Mode 3: Commercial presence - service suppliers of
a Member country establishes a territorial presence
(a legal presence) in another Member country.
Mode 4: Presence or movement of natural persons – the service supplier temporarily enters the territory
of another Member country for supply of services.
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Primarily Request-Offer on bilateral basis - decided
in 2001.
Doha Development Agenda reiterates the objective
of trade negotiations i.e. to promote economic
growth of all trading partners and development of
developing and least developed countries.
Doha Ministerial endorsed the NGP and fixed
deadlines for submission of R/O - June 2002 and
March 2003.
July 2004 package recognized Services one of the
three pillars of market access
and mandated
improved offers in sectors and modes of interest to
Developing countries.
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The mandated negotiations under GATS
Article XIX of GATS commenced on 1.1.2000.
Several proposals were tabled, the approach
to be followed was decided as the Request
Offer approach.
Countries submitted Requests and Offers
under this negotiations.
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Positive List approach followed.
Request and Offer method.
Multilateralisation of commitments.
Predominant method of negotiations post Hong
Kong Ministerial.
A group of member countries of WTO place a
collective request directly on a country. The recipient
country to consider these request while submitting
new Revised Offers.
The offer shall be on MFN basis to all WTO members.
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Developed countries - primary interests are in Mode 3
Removal/increase of FDI caps
Removal of restrictions on legal entity
Removal of quantitative limits in banking, telecom etc.
Removal of FIPB approval for prior collaboration
Commitments at the autonomous level of liberalization
Developed Countries have sectoral interests in:
Financial Services
Telecommunication Services
Distribution Services
Maritime Transportation Services
Legal Services
Postal/Courier and Express Delivery Services
Environmental Services
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• Negotiations came to a standstill in July 2006.
• The negotiations resumed in February, 2007
and have intensified:
 Three rounds of plurilateral discussions
held (May, Sept and Nov 2007).
 A draft document on domestic regulations
for negotiations circulated (Jan 2008).
 Report on elements of breakthrough in
services released (July 2008).
 “Signaling Conference” in July 2008.
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The Association of Southeast Asian Nations, or
ASEAN, was established on 8 August 1967 in
Bangkok, Thailand, with the signing of the ASEAN
Declaration (Bangkok Declaration) by the
Founding Fathers of ASEAN, namely Indonesia,
Malaysia, Philippines, Singapore and Thailand.
Brunei Darussalam then joined on 7 January
1984, Viet Nam on 28 July 1995, Lao PDR and
Myanmar on 23 July 1997, and Cambodia on 30
April 1999, making up what is today the ten
Member States of ASEAN.
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Signed by the ASEAN Leaders at the 13th ASEAN
Summit on November 20, 2007, the ASEAN Economic
Community (AEC) Blueprint lays the foundation for
realising the goal of ASEAN as an integrated
economic region by 2015. The AEC is characterised
by four pillars:
(a) a single market and production base,
(b) a highly competitive economic region,
(c) a region of equitable economic development, and
(d) a region fully integrated into the global economy.
In each of the four pillars are the various measures
and initiatives that are being implemented to achieve
the goals of the AEC.
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The services sector is a sizeable and continuously expanding
component of GDP in ASEAN countries. On average, the services
sector contributes 40-50% of GDP in ASEAN countries.
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Recognising the growing importance of trade in services, ASEAN
countries officially launched their joint effort to work towards
free flow of trade in services within the region through the
signing of ASEAN Framework Agreement on Services (AFAS) on
15 December 1995 by the ASEAN Economic Ministers (AEM)
during the 5th ASEAN Summit in Bangkok, Thailand.
AFAS is aimed at substantially eliminating restrictions to trade in
services among ASEAN countries in order to improve the
efficiency and competitiveness of ASEAN services suppliers.
AFAS provides the broad guidelines for ASEAN Member States to
progressively improve Market Access and ensure equal National
Treatment for services suppliers among ASEAN countries. All
AFAS rules are consistent with international rules for trade in
services as provided by the General Agreement on Trade in
Services (GATS) of the World Trade Organisation (WTO). In fact,
liberalisation of services trade under AFAS shall be directed
towards achieving commitments beyond Member Countries’
commitments under GATS, or known as the GATS-Plus principle.
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With a desire to expedite liberalisation of trade in
services within ASEAN, the AEM signed the
Protocol to Amend the ASEAN Framework
Agreement on Services on 2 September 2003 in
Phnom Penh. The Protocol enables for the
application of “ASEAN Minus X” formula in the
implementation of Member States’ services
commitments. Under this formula, countries that
are ready to liberalise a certain service sector
may proceed do so without having to extend the
concessions to non-participating countries.
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Following the signing of AFAS, officials of ASEAN Member
States embarked on negotiations to achieve the objective of
AFAS of creating a freer trade in services within the region.
This was implemented through several rounds of
negotiations, each round resulting in packages of
commitments from each ASEAN Member State in each agreed
economic sector/sub-sector and mode of supply.
The services negotiations are undertaken under the purview
of ASEAN Economic Ministers (AEM). Following the decision of
AEM at their Informal Meeting held on 28 June 1999 in
Auckland, New Zealand, ASEAN Finance Ministers and ASEAN
Transport Ministers subsequently took the lead in the
liberalisation of financial services and air transport services,
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At present, ASEAN has concluded 8 packages of commitments
under the AFAS signed by the AEM through different rounds
of negotiations since 1 January 1996. These packages provide
for details of commitments from each ASEAN Member State in
the various services sectors and subsectors.
In addition, there has also been three additional packages of
commitments in financial services signed by the ASEAN
Finance Ministers (the second, third, and fourth Packages of
Commitments of Financial Services under the AFAS) and two
additional packages of commitments in air transport signed
by the ASEAN Transport Ministers (the fourth and fifth
Packages of Commitments on Air Transport Services under
the AFAS).
ASEAN Member States continue to work on further expanding
the negotiations to cover all sectors and all modes of supply.
The ASEAN Economic Community Blueprint adopted by the
ASEAN Leaders at the 13th ASEAN Summit on 20 November
2007 in Singapore sets out concrete steps to be taken to
achieve a free flow of services by 2015 with flexibility.
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Mutual Recognition Arrangements (MRAs) is one of the
more recent developments in ASEAN cooperation on trade
in services. MRAs enable the qualifications of professional
services suppliers to be mutually recognised by signatory
Member States; hence, facilitating easier movement of
professional services providers in the ASEAN region.
At present, ASEAN has concluded seven MRAs:
MRA on Engineering Services signed on 9 December 2005
in Kuala Lumpur, Malaysia;
MRA on Nursing Services signed on 8 December 2006 in
Cebu, the Philippines;
Arrangement for the Mutual Recognition of Surveying
Qualifications both signed on 19 November 2007 in
MRA on Medical Practitioners, MRA on Dental Practitioners,
and MRA Framework on Accountancy Services all signed on
26 February 2009 in Cha-am Hua Hin, Thailand.
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Under the 7th Package of the ASEAN Framework
Agreement in Services (AFAS), ASEAN has committed
to at least 65 services sub-sectors for liberalisation.
Services commitments for the 8th AFAS package with more services subsectors and higher thresholds
for liberalisation being targeted - are now in the final
process of conclusion.
To support greater mobility of qualified professionals
in the region, the MRAs for engineers and architects
have been implemented, while work is underway to
effectively operationalise the other professional MRAs
To facilitate the movement of persons engaged in
trade and investment, the ASEAN Agreement on
Movement of Natural Persons (MNP) has been drafted
and is expected to be finalised in 2012.
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So far much of the emphasis in the services area has
been on meeting the targets of liberalisation as
outlined in the AEC Blueprint. However, in order to
move the services sector to the next level and to
enhance its economic and sectoral integration and for
this sector to remain competitive, a more strategic
perspective on the approach to the services sector in
ASEAN may need to be taken.
Based on these, ASEAN is currently reviewing the
ASEAN Framework Agreement on Services (AFAS)
which was signed in 1995 with the objective of
enhancing its provisions and transforming this into a
comprehensive services agreement to achieve free
flow of services by 2015.
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Under the ASEAN Framework Agreement on
Services, ASEAN continues to progressively
liberalize trade in services and achieve free
flow of services by 2015.
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Brings opportunities
Within ASEAN:
◦ Domestic regulations?
Beyond ASEAN:
◦ WTO negotiations
◦ FTAs under negotiation
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