40175 TRADE ISSUES IN EAST ASIA June 2007 EAST ASIAN FTAS IN SERVICES POLICY RESEARCH PAPER EAST ASIA AND PACIFIC REGION POVERTY REDUCTION AND ECONOMIC MANAGEMENT THE WORLD BANK East Asian Free Trade Agreements in Services: Roaring Tigers or Timid Pandas? Carsten Fink and Martín Molinuevo* June 2007 *Carsten Fink is a Senior Economist at the World Bank Institute. Martín Molinuevo is a Research Fellow at the World Trade Institute and a Consultant to the World Bank. This paper was prepared for the World Bank's Poverty Reduction and Economic Management Department for East Asia. The authors are grateful to Rolf Adlung, Nasser Al Zubi, Julian Clarke, Daniel Crosby, Arti Gobind Daswani, Panos Delimatsis, Roberto Fiorentino, Felipe Hees, Tan Tai Hiong, Christoph König, Krista Lucenti, Juan Marchetti, Sébastian Miroudot, Christian Pauletto, Glenda Reyes, Sebastián Sáez, Constantinos Stephanou, Luis Verdeja, Carlos Gimeno Verdejo, and Mahani Zainal-Abidin for helpful comments and suggestions. The views expressed in this paper are the authors' own and do not necessarily represent those of their respective institutions. Table of Contents Executive Summary ...................................................................................................................i 1. Introduction..........................................................................................................................1 2. Economic and bargaining considerations.........................................................................4 Economic considerations ...............................................................................................5 Bargaining considerations..............................................................................................6 3. Architecture..........................................................................................................................8 A Scheduling approach ....................................................................................................9 Agreements with a positive list of sectors ...................................................................10 Negative list agreements..............................................................................................14 Positive versus negative list scheduling: an assessment..............................................17 B. Main disciplines ..........................................................................................................20 National treatment........................................................................................................20 Market access...............................................................................................................22 Most favored nation treatment.....................................................................................22 C. Investment in services.................................................................................................24 Definition of investment and key obligations..............................................................25 Relationship between services and investment disciplines..........................................27 D. Movement of natural persons.....................................................................................30 Architectural considerations ........................................................................................30 Recognition of professional qualifications ..................................................................35 E. Rules of origin.............................................................................................................36 Rules of origin for services..........................................................................................37 Rules of origin for juridical persons ............................................................................38 Rules of origin for natural persons...............................................................................43 F. Trade rules...................................................................................................................44 Domestic regulation.....................................................................................................45 Government procurement, subsidies and safeguards...................................................48 G. Dispute Settlement.......................................................................................................49 State-to-state dispute settlement ..................................................................................50 Investor-to-state dispute settlement .............................................................................54 4. Where and how far have East Asian FTAs gone beyond the GATS?..........................56 Aggregate assessment..................................................................................................58 Country level assessment.............................................................................................65 5. Are East Asian FTAs compatible with WTO rules on economic integration? ...........67 Notification ..................................................................................................................68 Substantial sectoral coverage.......................................................................................70 Elimination of substantially all discrimination............................................................71 Overall level of trade barriers ......................................................................................72 Rule of origin...............................................................................................................73 Special and differential treatment for developing countries........................................74 6. Building blocks or stumbling stones?..............................................................................75 7. Conclusion .........................................................................................................................76 References...............................................................................................................................79 Appendix 1: Overview of key disciplines found in East Asian FTAs................................84 Appendix 2: Methodology for quantifying services commitments....................................86 Appendix 3: Summary of country-specific liberalization undertakings...........................89 Annex A: Individual Commitments ................................................................................... A-i Annex B: Maximum Commitments by Country............................................................... B-i List of Figures Figure 1: East Asian FTAs with a services component.............................................................2 Figure 2: Classification of East Asian FTAs by scheduling approach ....................................11 Figure 3: GATS/FTA commitments and GDP per capita........................................................59 Figure 4: Aggregate liberalization content by sector...............................................................60 Figure 5: Aggregate liberalization content by modes of supply..............................................61 Figure 6: Aggregate liberalization content by scheduling approach .......................................62 List of Tables Table 1: FTAs under negotiation...............................................................................................3 Table 2: Sectoral carve-outs.......................................................................................................9 Table 3: Scheduling approaches ..............................................................................................10 Table 4: Classes of measures in negative list agreements .......................................................16 Table 5: National treatment provision .....................................................................................21 Table 6: MFN provisions.........................................................................................................24 Table 7: The treatment of investment in services....................................................................26 Table 8: Movement of natural persons: key architectural choices ..........................................32 Table 9: Rules of origin for juridical persons..........................................................................39 Table 10: Rules of origin for natural persons ..........................................................................43 Table 11: New Sectoral disciplines found in FTAs.................................................................48 Table 12: State-to-state dispute settlement mechanisms .........................................................51 Table 13: Results of econometric investigation.......................................................................64 Table 14: Maximum liberalization content by country............................................................65 Table 15: East Asian FTAs notified to the WTO ....................................................................69 Executive Summary Bilateral and regional free trade agreements (FTAs) are proliferating across the globe, fundamentally altering the governance of world trade. Many of the recently concluded FTAs are comprehensive in their coverage, seeking to not only dismantle barriers to trade in goods but also the liberalization of trade in services. What have FTAs in services actually accomplished? This paper offers an assessment of the new generation of services agreements that have been concluded in the East Asia region. Until recently, governments in this region had been hesitant to enter into bilateral or regional arrangements. Yet since the year 2000--when only one regional services agreement was in force--twenty-four agreements have been signed that include at least one party in East Asia. Additionally, around 40 FTAs are currently being negotiated in the region, which suggests an even more prominent role for FTAs in the future. Multilateral liberalization promotes entry of the most competitive service suppliers What are the benefits and drawbacks of pursuing services trade liberalization in FTAs rather than through multilateral trade negotiations at the World Trade Organization (WTO)? From an economic perspective, there are good reasons to believe that multilateral liberalization offers greater benefits, because opening one's market to the rest of the world promotes entry of the most competitive service suppliers. In addition, multilateral trade talks offer smaller countries the opportunity to leverage their bargaining position by forming negotiating alliances. ... but FTAs allow for more effective bargaining and offer the possibility of deeper regulatory cooperation At the same time, bargaining may be more productive in FTAs. Multilateral negotiations are complex and time-consuming. Despite more than five years of negotiations, there has been no conclusion to the WTO's Doha Development Agenda. A bilateral or regional forum may deliver quicker results. In addition, the smaller number of parties in FTA negotiations reduces the scope for free-riding on the bargaining efforts of other players, which promotes more focused exchanges of market opening concessions. Finally, bilateral and regional agreements offer the possibility of deeper regulatory cooperation. Harmonizing regulatory standards and recognizing professional qualifications may not be feasible among the 150 members of the WTO, but it may well be achievable among smaller groups of countries that share similar legal and educational systems. There are important architectural differences in the twenty-five FTAs analyzed in this paper. These differences have implications for incentives for liberal negotiating outcomes while also impacting upon the transparency and credibility of FTA liberalization undertakings. The approach towards scheduling commitments matters less than commonly thought One key architectural choice concerns the approach towards scheduling trade commitments. Fifteen agreements have adopted a so-called positive list, whereby market opening disciplines only apply to sectors listed in the commitment. By contrast, ten agreements have opted for a negative list, whereby market opening disciplines apply across-the-board except for i scheduled limitations. In analyzing the choice of scheduling approach, the paper draws the following conclusions: ˇ In principle, the same level of openness can be inscribed in a positive or a negative list schedule. As such, there are no inherent transparency or credibility advantages associated with either approach. ˇ Certain market opening disciplines--notably a requirement to commit at the level of existing policies and a mechanism to harvest unilateral liberalization--are found in all negative list agreements. However, they have also been incorporated into two positive list agreements, underlining that these disciplines are, in principle, independent of the scheduling approach. ˇ Empirically, the East Asian negative list agreements are associated with wider and deeper liberalization undertakings relative to countries' multilateral commitments. However, this empirical relationship does not imply that negative listing causes a more ambitious liberalization outcome. Causality also runs the other way, as countries that are prepared to bind liberal trade policies are more likely to adopt a negative list scheduling approach. An econometric investigation that attempts to control for reverse causality finds that negative list agreements offer incentives for wider but not deeper commitments. ˇ Notwithstanding these empirical findings, the benefit of any trade commitment-- whether scheduled on a positive or negative list basis--depends critically on the precise content of market opening schedules. Ambiguous and overly broad entries in commitment schedules can reduce the liberalization value of FTAs, as well as undermine the transparency and credibility of committed trade policies. Dual coverage of investment in services can streamline FTA disciplines but also undermine their transparency and credibility Many FTAs provide for dual coverage of investment in services through separate disciplines on trade in services and investment. Dual coverage offers the benefit of investment rules that apply across goods and services, while allowing service-specific trade disciplines apply to commercially established service suppliers. Dual coverage, however, requires the establishment of rules on the interrelationship between services and investment disciplines. There is considerable variation in these rules among East Asian FTAs. Some of them appear to undermine the transparency and credibility of investment disciplines in services and may even give rise to legal inconsistencies. Rules of origin are mostly liberal, with some notable deviations Rules of origin of origin in East Asian FTAs are mostly liberal, softening the discriminatory nature of trade preferences in services. Most FTAs extend benefits to third party service suppliers that fulfill the two criteria of being established in one of the FTA parties and showing substantive business operations. However, selected agreements have limited FTA benefits only to domestically owned or controlled service suppliers. In addition, there are important nuances in the scope and definition of the substantive business operations requirement. ii FTAs show limited progress in areas of rule-making that remain unresolved multilaterally East Asian FTAs have not made significant progress in areas of rule-making that remain unresolved at the WTO. Virtually no progress has been made on subsidies, government procurement in services, and emergency safeguards. Limited progress has been made in the area of domestic regulation. One agreement has established an across-the-board necessity test for domestic regulation. A number of agreements have created new sectoral regulatory disciplines, covering telecommunications, electronic commerce, and maritime transport. Dispute settlement under FTAs is sometimes weaker than at the WTO Most East Asian FTAs feature state-to-state dispute settlement mechanisms broadly along the lines of the WTO's Dispute Settlement Understanding. However, some FTAs fall short of the WTO mechanism by allowing single parties to block the establishment of arbitral panels, which ultimately reduces the credibility of trade commitments. At the same time, the majority of agreements also provide for investor-to-state dispute settlement mechanisms, granting additional guarantees to foreign investors in services. East Asian FTAs present a mixed liberalization outcome Turning to the degree of liberalization achieved by East Asian FTAs, this paper has developed a database measuring the value of FTA liberalization undertakings relative to multilateral services commitments. Even though this database cannot precisely capture the depth of FTA commitments and their impact on domestic laws and regulations, several empirical patterns emerge: ˇ The ambition of FTA liberalization undertakings varies considerably. Some FTAs offer only limited value added to multilateral commitments, whereas others reach substantially beyond countries' WTO undertakings. Notwithstanding significant variation, there is a positive relationship between the ambition of a country's FTA undertaking and its level of economic development. ˇ Even though FTAs generally offer new and improved commitments across all services sectors, several sectors have received relatively more attention--primarily, distribution and tourism services followed by construction, business services, and communications services. Sectors with well-know sensitivity towards market opening--such as health, transport, and financial services--have seen the smallest number of value-added FTA commitments. ˇ FTAs do not establish free trade in services across-the-board. The complete elimination of trade barriers is almost exclusively confined to the first two modes of service delivery--cross-border supply and consumption abroad. Services supplied through commercial presence (mode 3) remain subject to a variety of limitations, often mirroring those inscribed at the multilateral level. ˇ While there are a large number of new and improved commitments relating to the movement of natural persons (mode 4), their value added to multilateral commitments is minimal, consisting mostly of minor expansions in the types of individual service suppliers and measures covered. Notwithstanding this pessimistic finding, several FTAs feature provisions recognizing the qualifications of certain professionals. While the number of such provisions and the range of professions covered are still iii small, this finding points to the potential of FTAs to facilitate the movement of natural persons in a way not feasible at the multilateral level. The compatibility of FTAs with WTO rules on regional integration is not always clear ... For FTAs to constitute a lawful exemption to the non-discrimination requirement under the WTO, they must fulfill certain conditions--such as substantial sectoral coverage, the elimination of remaining trade barriers, and liberal rules or origin. It is not clear whether all East Asian FTAs meet these conditions. For example, many agreements arguably do not provide for substantial sector coverage or eliminate remaining trade barriers, and it is not clear whether they will meet these two requirements within a reasonable timeframe. In addition, it seems that some agreements do not provide for the kind of rule of origin demanded by the WTO. ... and it remains uncertain how the proliferation of services FTAs will affect the prospects for further multilateral integration From a broader perspective, will the East Asian FTAs act as building blocks or stumbling stones towards further multilateral liberalization? This question has been heavily debated by economists in the context of goods trade, with a variety of arguments supporting either view. Many of these arguments directly apply to services trade. At the same time, there are two key considerations that are specific to services--one countering and one supporting the stumbling stone view. First, the liberal rules of origin adopted by services FTAs reduce the discriminatory nature of trade preferences in services. The liberal treatment of third parties arguably generates less resistance to further multilateral liberalization from vested interests worried about preference erosion. Second, services are an important bargaining chip in the current multilateral trading round. Many East Asian countries stand to gain from agricultural trade reforms at the WTO and, at the same time, are the targets of liberalization requests in services. If the `demandeurs' in services are able to advance their offensive interests through FTAs, a grand multilateral bargain may be undermined. iv 1. Introduction Bilateral and regional free trade agreements (FTAs) are proliferating across the globe, fundamentally altering the governance of world trade. From 1950 to 1995, less than three of these agreements were on average notified annually under the General Agreement on Tariffs and Trade (GATT). Since 1995, this number has jumped to eleven agreements per year. Between January 2004 and February 2005 alone, the World Trade Organization (WTO) received forty-three notifications, setting a historical record.1 There are various reasons why governments seek bilateral or regional trade agreements. Foreign policy considerations often play an important role. Improving trade relations may be a vehicle to strengthen strategic ties between nations or to overcome historic animosities. Notwithstanding politics, economic considerations are more often the driving force behind the conclusion of FTAs. Trade agreements can enhance commercial opportunities abroad for domestic businesses, while offering a vehicle for anchoring home-grown policy reforms. Multilateral trade negotiations have in recent years not been successful in fostering an exchange of market opening commitments. Despite more than five years of negotiations, there has been no conclusion to the WTO's Doha Development Agenda (DDA). In fact, DDA negotiations were suspended in July 2006 with uncertain prospects for their revival. For countries ready to commit to market opening, a bilateral or regional forum may deliver quicker results. Many of the recently concluded FTAs are comprehensive in their coverage, seeking not only the dismantling of barriers to traditional trade in goods but also the liberalization of trade in services--the focus of this paper. The widening of the scope of FTAs reflects underlying economic forces. Technological progress and the trend towards private and competitive provision of infrastructure services have enabled international commerce in a wide range of service activities that were previously considered non-tradable. In many countries, services account for the fastest growing segment of international commerce (World Bank, 2002). What have FTAs in services accomplished? Have they established stronger disciplines on measures affecting trade in services? Have they led to liberalization undertakings that go beyond those to which countries are committed under the WTO's General Agreement on Trade in Services (GATS)? Several studies have been conducted to answer these questions. OECD (2002) and Sauvé (2005) review some of the key architectural innovations of services FTAs.2 Stephenson (2005) and Roy et al. (2006) evaluate the liberalization content of selected bilateral and regional agreements. Stephenson (2000a), Sáez (2005), Marconini (2006), and Pereira Goncalves and Stephanou (2007) review the negotiating experiences of countries in Latin America and the Caribbean. This paper offers an assessment of the new generation of services agreements that have been concluded in the East Asia region. Until recently, this region had been hesitant in entering into bilateral or regional arrangements. As of 2003, there were only two FTAs per country in East Asia, compared to a world average of five (World Bank, 2005). However, the region is catching up fast. Figure 1 lists the existing East Asian FTAs that have a services component.3 1See Crawford and Fiorentino (2005). These figures underestimate the number of concluded FTAs, as numerous agreements have not (or not yet) been notified to the WTO. 2Dee, Ochiai, and Okamoto (2006) attempt to quantify these innovations and measure their economic effects. 3There are additional East Asian FTAs that do not (or not yet) cover services. These include, for example, Thailand's bilateral agreements with Bahrain, India, New Zealand, and Peru; the Bangladesh-India- Myanmar- 1 Until 2000, the only trade agreement in services in the region was the ASEAN Framework Agreement on Trade in Services (AFAS). Since 2000, twenty-four agreements have been signed with at least one party in East Asia. Table 1 shows all FTAs that are currently being negotiated. This list is changing frequently and not all envisaged FTAs may include a services component. Yet if all negotiations were concluded successfully, there would be another thirty-eight agreements shaping trade policy in the East Asia region. Figure 1: East Asian FTAs with a services component 1995 [...] 2000 2001 2002 2003 2004 2005 2006 2007 AFAS New Zealand-Singapore FTA US-Vietnam BTA Japan-Singapore EPA EFTA-Singapore FTA Australia-Singapore FTA Chile-Korea FTA Mainland-Hong Kong CEPA Mainland-Macao CEPA Singapore-US FTA Panama-Taiwan (China) FTA Laos PDR-US BTA Japan-Mexico EPA Jordan-Singapore FTA Australia-Thailand FTA FTA signed India-Singapore ECA FTA in force Korea-Singapore FTA Japan-Malaysia EPA Brunei-Chile-New Zealand-Singapore (Trans-Pacific) EPA EFTA-Korea FTA Guatemala-Taiwan (China) FTA Panama-Singapore FTA Nicaragua-Taiwan (China) FTA Japan-Philippines EPA ASEAN-China Trade in Services (TIS) Agreement* Notes: As of January 2007. * The ASEAN-China TIS Agreement is scheduled to enter into force on July 1, 2007. Sri Lanka-Thailand Economic Cooperation (BIMSTEC) Free Trade Area; China's FTAs with Chile and Pakistan; and the ASEAN-Korea FTA. 2 Our analysis consists of two main parts. The first part--presented in Section 3--will provide a comparative review of the key architectural elements of the twenty-five East Asian FTAs shown in Figure 1. In particular, we will consider the scheduling approach adopted by these agreements, the main disciplines that determine their liberalization content, the treatment of investment in services, the treatment of labor mobility, the rules of origin adopted, trade rules, and provisions for the settlement of disputes. In reviewing the various architectural choices encountered, we will specifically assess to what extent those choices create incentives for liberal negotiating outcomes, promote the transparency of services policies, and foster the credibility of these policies. Table 1: FTAs under negotiation Country FTA partner(s) ASEAN Australia & New Zealand, India, Japan Brunei Japan China Australia, Gulf Cooperation Council, New Zealand, Southern African Customs Union Indonesia Japan Japan ASEAN, Brunei, Chile, Indonesia, Korea, Thailand, Vietnam Korea Canada, India, Japan, Malaysia, United States Malaysia Australia, India, Korea, New Zealand, Pakistan, United States Singapore Bahrain, Canada, Egypt, Kuwait, Mexico, Pakistan, Peru, Qatar, Sri Lanka, United Arab Emirates Taiwan Dominican Republic, El Salvador, Honduras Thailand EFTA, Japan, United States Vietnam Japan Note: As of January 2007. The second part--presented in Section 4--will evaluate the liberalization content of the twenty-five FTAs, drawing on a database in which we recorded the valued added of FTA liberalization undertakings relative to pre-existing multilateral services commitments. This database enables us to assess the depth and breadth of liberalization undertakings by the main service sectors, the four modes of supplying services, and the scheduling approach of agreements. It also allows us to evaluate how far individual East Asian countries have liberalized across all their FTAs and whether market opening commitments to different FTA partners have been alike or dissimilar. To motivate our analysis, Section 2 will first discuss the main economic and bargaining considerations surrounding FTAs in services. By their nature, FTAs create trade preferences from which only member countries benefit, thereby discriminating against service suppliers from non-members. This type of discrimination raises several important economic and bargaining issues, which need to be taken into account in assessing the accomplishments of FTAs. Finally, the proliferation of FTAs has important implications for the multilateral trading system. The GATS has established certain requirements for FTAs in services that WTO members need to meet. Our analysis can shed light on the considerations that might be 3 relevant in assessing compliance with these requirements. We will discuss these considerations in Section 5. More broadly, economists have long debated whether FTAs are building blocks or stumbling stones towards further multilateral integration. In Section 6, we will briefly ponder on what our findings can say in support or opposition of either camp. The final section offers a few concluding remarks. 2. Economic and bargaining considerations FTAs seek the liberalization of trade in services among a small number of countries--most often only two trading partners.4 FTAs are thus preferential in nature. Only parties to an agreement benefit from the trade commitments negotiated under an FTA. Service suppliers from non-parties are discriminated against.5 By contrast, services liberalization under the GATS takes place on non-discriminatory terms. The WTO's most-favored-nations (MFN) principle requires members of the multilateral trade body to extend any trade benefit immediately to all other members. Most East Asian countries are members of the WTO. The only exception is Laos, which is currently in the process of acceding to the WTO. In other words, service suppliers from most countries--inside or outside the region--have access to East Asian service markets at least at the level of existing GATS commitments. Thus, in order for a bilateral or regional agreement to be meaningful, its parties need to commit to additional market opening beyond their liberalization undertakings under the GATS. Liberalizing trade in services promises significant economic gains, but also imposes unique challenges--for instance, in ensuring the sound regulation of private service markets. These gains and associated policy challenges have been well documented elsewhere (see, for example, World Bank, 2002). However, there are certain economic and bargaining considerations from liberalizing trade in services on a preferential rather than MFN basis. In this section, we briefly outline these considerations, setting the scene for the assessment of East Asian FTAs in the subsequent sections of this paper. Before proceeding, one clarifying remark is in order. In principle, parties to an FTA may choose to implement their preferential trade commitments on an MFN basis. In addition, FTAs commitments may go deeper than the GATS, but may not provide for actual policy liberalization and, as such, no actual trade preferences. In these cases, FTAs do not discriminate against non-parties in the actual application of services policies and many of the arguments developed in this section do not apply. The economic effects of non- discriminatory liberalization under FTAs approximate those from unilateral liberalization and, again, are well-documented elsewhere. 4Throughout the paper and unless other terms are employed, we use the term `FTA' loosely to also include other types of trade agreements that seek the liberalization of trade in services--such as bilateral trade agreements (BTAs) or economic partnership agreements (EPAs). Similarly, we refer to `countries' in a broad sense, so as to encompass any geographical entity with international personality and capable of conducting an independent foreign economic policy. The designations employed do not imply the expression of any opinion concerning the legal status of any country or territory. 5As will be discussed in Section 3.B, non-party most-favored-nations (MFN) clauses in FTAs can reduce the preferential character of FTAs. For the purpose of this section, however, it is helpful to abstract from this possibility. 4 Economic considerations Mattoo and Fink (2004) have analyzed the economic effects of preferential versus MFN- based liberalization of trade in services. They draw the following main conclusions, from the viewpoint of a country that engages in liberalization: ˇ First, relative to the status quo, preferential liberalization in services brings about static welfare gains. This finding differs from the more ambiguous conclusion drawn in the goods case. The key difference is that protection in services does not generate fiscal revenue, as do tariffs on imported goods. Thus, trade diversion effects associated with preferential liberalization in services do not lead to any loss in government revenue that can lead to negative welfare effects in the case of goods. ˇ Second, MFN liberalization generally yields greater welfare gains than preferential liberalization. Non-discriminatory market opening does not bias competition from abroad and therefore promotes entry of the most efficient service providers. Additional gains from trade, associated with greater economies of scale and knowledge spillovers, are also likely to be greater if liberalization proceeds on an MFN basis. There is one exception to this conclusion. If `learning by doing' effects are important, preferential liberalization may enable domestic service suppliers from member countries to become more efficient, as they face some competition from within the FTA territory, but are not yet exposed to global competition. In theory, preferential liberalization can thus prepare infant domestic suppliers for competition at the global level. This `learning-by-doing' rationale would apply mainly to agreements among developing countries, where firms operate below best-practice productivity levels. 6 ˇ Third, there is a special long-term trade diversion effect to worry about. Preferential liberalization offers a first-mover advantage to potentially second-best service providers from within the FTA territory. Since many service industries are characterized by high location-specific sunk costs, first-best providers from outside the FTA territory may not enter the market when trade is eventually liberalized on an MFN basis. Thus, even if preferences are temporary, they may have long-term implications for a country's ability to attract the world's most efficient service providers. The degree of trade preferences--and thus the potential for trade diversion effects--depends critically on the rules of origin adopted by an FTA. In a nutshell, rules of origin in the services context determine the extent to which service suppliers from non-parties established in the territory of a party benefit from the market opening negotiated under an FTA. If rules of origin are restrictive, the set of service suppliers eligible for trade preferences is small and trade diversion effects will be more pronounced. If rules of origin are liberal, preferential liberalization approaches MFN liberalization. However, it will always fall short of the latter, 6However, this variation of the infant industry argument relies on the strong assumptions that competition from FTA service suppliers is sufficiently mild to favor learning-by-doing and that governments are in a position to correctly predict the extent of learning-by-doing in different service industries. In addition, even if these assumptions were to hold, non-discriminatory liberalization combined with subsidies to the infant firms may be a better policy instrument to address the underlying market failure. 5 because non-party service suppliers will need to have at least some presence in one FTA party.7 Additional considerations apply from the viewpoint of a country that would see an expansion in services exports as a result of market opening in an FTA partner country. What may be considered as trade diversion from a global perspective amounts to an export opportunity from the perspective of the country benefiting from preferential market access abroad. Such export opportunities may underpin possible `learning-by-doing' effects mentioned above. In addition, preferential access to foreign markets may attract export-oriented investment from abroad. Indeed, a country with liberal entry conditions for suppliers from outside the FTA area can become a hub for companies wishing to access markets within this area. The benefits from export-oriented foreign investment depend on the nature of the services supplied, but can include short-term employment gains, increased tax revenues, and the transfer of knowledge and managerial skills. Again, the rules of origin adopted in an FTA are critical in shaping the eventual economic outcome. If they are restrictive, the benefits of preferential access would mostly be captured by domestic firms and the learning-by-doing rationale would be strengthened. If they are liberal such that it is easy for service suppliers from outside the FTA area to become eligible for trade preferences, incentives for export-oriented foreign investment would be strengthened. In sum, the welfare implications of preferential versus MFN-based liberalization differ for the preference-granting and preference-receiving countries and depend on a number of complementary factors--such as the rules of origin adopted and the significance of learning- by-doing effects. Unfortunately, the economic literature provides only little guidance on what type of economy would gain or lose under which circumstances.8 Bargaining considerations Why do countries sign trade agreements, be they preferential or non-discriminatory? As Krugman (1997) famously pointed out, the economist's case for open markets is essentially a unilateral case. If trade liberalization brings about economic benefits and governments are convinced of these benefits, market opening should be pursued regardless of what other countries may do. In addition, experience has shown that the success of liberalization in many service sectors hinges on the development of sound regulatory institutions, which is primarily a challenge of domestic policy. Notwithstanding these considerations, can trade agreements somehow support governments in their pursuit of greater openness? In principle, they can make three types of contributions: ˇ First, trade negotiations are mercantilist in nature, involving the reciprocal exchange of market opening concessions. While trade economists would object to the notion of liberalization as a concession, mercantilism can serve a useful political economy purpose. Suppose that a government is convinced that certain liberalization measures 7For a more detailed discussion of the economic effects of different rules of origin in services, see Fink and Nikomborirak (2006). Section 3.E offers a comprehensive review of the rules of origin found in the East Asian FTAs. 8Mattoo and Fink (2005) review available evidence from the EU's Single Market Program. However, they note that this evidence remains difficult to interpret in welfare terms. 6 will generate overall economic benefits, but those measures are opposed by vested interests that stand to lose from foreign competition. Negotiated as part of a package of trade commitments, a government may be in a better position to proceed with market opening, because it can muster support from those constituents that stand to gain from improved market access in foreign countries. ˇ Second, trade agreements offer a forum for regulatory cooperation between trading partners. In certain regulation-intensive service sectors, the removal of explicit trade barriers may be insufficient for foreign service suppliers to compete. Differences in regulatory standards or professional qualification requirements may pose de facto barriers to foreign participation. Regulatory cooperation--in the form of harmonization of standards and recognition of professional qualifications--can overcome these barriers without compromising legitimate regulatory objectives. ˇ Third, trade agreements can enhance the transparency and credibility of the domestic trade regime. Lack of information about how to do business in a foreign country can in itself represent a trade barrier. In addition, commitments in trade agreements are bound under international law and are not easily reversible. They can thus assure foreign traders and investors that policy will not become more restrictive. This aspect is particularly important for infrastructural services, for which foreign participation typically requires commercial establishment in the importing country and non- recoverable investments in location-specific assets. Where are these benefits of trade agreements best pursued--at the multilateral level or at bilateral and regional levels? As pointed out in the introduction, the choice of negotiating forum may be dictated by political considerations. From a more narrow bargaining perspective, multilateral agreements offer both advantages and disadvantages. One key advantage is that countries can form negotiating alliances at the WTO, allowing members with small economies to leverage their bargaining power. In addition, certain trade policy measures--particularly agricultural subsidies--by nature cannot be reduced on a preferential basis. Countries seeking to offer deeper liberalization in services in exchange for the reduction of agricultural subsidies abroad can only do so at the WTO. At the same time, bargaining itself may be more productive at the bilateral or regional level, where negotiations involve only few players. The WTO now has 150 members at all levels of development and the multilateral trade agenda has much expanded since the GATT days. Trade negotiations at the multilateral level therefore tend to be complex and time-consuming. As already pointed out, the WTO's Doha Development Agenda was suspended in July 2006, after more than five years of negotiations. In the absence of satisfactory progress at the multilateral level, a bilateral or regional forum may deliver quicker results. Another handicap of multilateral negotiations is that countries can free-ride on the bargaining efforts of others. Multilateral services negotiations have proceeded on a bilateral request and offer basis, but eventual commitments are made on an MFN basis. Thus, even though one WTO member may be interested in improved market access in another member, it may be reluctant to engage in reciprocal bargaining if there are third members interested in the same market access. The end result may be a less ambitious negotiating outcome. In principle, FTAs offer a way out, as the smaller number of players reduces the scope for free-riding on the bargaining efforts of others.9 In addition, to the extent that the mercantilist value of 9This point is elaborated more fully in Schwartz and Sykes (1996). 7 preferential trade commitments is higher than MFN commitments, FTAs may be associated with deeper exchanges of market opening commitments. Yet again, the greater bargaining effectiveness of preferential agreements depends critically on the rules of origin of these agreements. Under liberal rules of origin, non-parties would to some extent benefit from the trade concessions of FTA parties, reintroducing the free-rider problem. For free-rider problems to be less severe in a bilateral or regional context, FTAs need to adopt restrictive rules of origin. This argument has an important corollary, which is of relevance to the bargaining situation of many East Asian countries. Suppose a country negotiates sequentially two or more bilateral FTAs. If it commits to open service markets in the first FTA and this FTA adopts a liberal rule of origin, the trading partner for the second FTA may be unwilling to `pay' for obtaining the same commitment in the second FTA. In other words, with a liberal rule of origin, it may not be possible to `sell' the same market opening commitment twice. As to the pursuit of regulatory cooperation, bilateral and regional trade agreements may also be a more productive negotiating forum. Harmonizing regulatory standards and recognizing professional qualifications may not be feasible among the 150 members of the WTO. However, it may well be achievable among smaller groups of countries that share similar legal and educational systems. In Sections 3E and 3F, we will review to what extent East Asian FTAs have been able to deliver on this potential. Finally, the transparency and credibility benefit of binding trade policies under international law can, in principle, be harnessed at the WTO and in FTAs. Where FTA commitments go beyond the GATS--regardless of whether they offer actual liberalization--they discriminate against non-party service suppliers in the legal certainty of service policies. The precise transparency and credibility value of policy bindings will depend on the nature and clarity of trade commitments and the mechanism available to enforce them. Throughout Section 3, we will evaluate how key architectural elements of the East Asian FTAs have affected the transparency and credibility of services trade policies. 3. Architecture In this section, we review key architectural elements of the twenty-five East Asian FTAs that have a substantial services component. Ultimately, trade agreements seek to promote international commerce. They can do so in three ways: by reducing barriers to foreign participation, by making trade policies more transparent, and by enhancing the credibility of the trade regime. Architectural choices can make an important difference in this respect. In comparing the different approaches found in East Asia, we specifically seek to evaluate to what extent agreements promote trade along these three dimensions. Our review starts with the scheduling approach adopted by FTAs--one of the key distinguishing characteristics of trade agreements in services. We then consider the main disciplines that determine the liberalization content of FTAs, the treatment of investment in services, the treatment of labor mobility, the rules of origin adopted, trade rules, and provisions for the settlement of disputes. 8 A. Scheduling approach No trade agreement in services has established immediate free trade in all service sectors. The East Asian FTAs make no exception in this regard. For a variety of reasons, governments wish to exempt certain activities from the coverage of trade disciplines or maintain certain trade-restrictive measures. A critical question in the design of an FTA is how these exemptions and limitations are inscribed into an agreement. As a first step, most FTAs allow for sectoral carve-outs that exempt one or more activities from the scope of the agreement. Activities falling under such an exemption are not subject to any of the disciplines established in the agreement. Table 2 summarizes the sectoral carve- outs found in the twenty-five East Asian FTAs analyzed here. The most frequently encountered carve-out pertains to air transport. Twenty FTAs exempt core air transport services related to the exercise of air traffic rights.10 This exemption is also found in the GATS and is explained by the fact that the provision of these services has historically been negotiated through separate bilateral treaties. Four FTAs also carve out cabotage in maritime transport--a sector in which foreign participation is often deemed sensitive. More significantly, four FTAs fully exempt financial services from the scope of the agreement--an issue to which we will return later.11 Table 2: Sectoral carve-outs Agreement(s) Carve-out(s) AFAS, Australia-Singapore FTA, Australia-Thailand Core air transport services FTA, ASEAN-China TIS Agreement, India-Singapore ECA, EFTA-Korea FTA, EFTA-Singapore FTA, Jordan- Singapore FTA, Korea-Singapore FTA, Nicaragua-Taiwan (China) FTA, Panama-Singapore FTA, Panama-Taiwan (China) FTA, Singapore-US FTA Japan-Malaysia EPA, Japan-Philippines EPA, Japan- Core air transport services and cabotage in Singapore EPA maritime transport Chile-Korea FTA, Guatemala-Taiwan (China) FTA, Core air transport services and financial services Trans-Pacific EPA Japan-Mexico EPA Core air transport services, cabotage in maritime transport, and financial services Lao PDR-US BTA, Mainland-Hong Kong CEPA, None Mainland-Macao CEPA, New Zealand-Singapore FTA, Vietnam-US BTA Note: The Chile-Korea FTA and the Trans-Pacific EPA foresee the possibility of future negotiations on trade in financial services. 10However, this exception usually does not apply to aircraft repair and maintenance services, the selling and marketing of air transport services, and computer reservation system services. 11In addition to the sectoral carve-outs found in the services chapters of FTAs, investment chapters may also exclude certain activities from the scope of investment disciplines. For example, under the Japan-Mexico EPA, Mexico scheduled a list of activities reserved to the state--including telegraph services, postal services, and electricity distribution--for which foreign entry may be refused. 9 Five FTAs do not provide for any carve-out of service activities, making all service sectors subject to the agreements' underlying provisions. However, it does not automatically follow that all sectors are subject to liberalization undertakings. The liberalization content of FTAs is detailed in country-specific market-opening schedules. A variety of approaches exist in drawing up these schedules. Fundamentally, these approaches differ along two dimensions: (i) the listing of service activities subject to liberalization commitments and (ii) the listing of levels of openness. Lists can either be done on a positive basis--identifying what is covered or allowed--or on a negative basis--identifying what is not covered or not allowed, though mixed approaches are also possible. Table 3 indicates the scheduling approaches adopted by the East Asian FTAs, which for ease of reference are also graphically illustrated in Figure 2. In what follows, we first describe key features of these scheduling approaches. We then compare and assess these approaches, focusing on the three dimensions outlined above: incentives for liberalization, transparency and credibility. Agreements with a positive list of sectors Fifteen East Asian FTAs have adopted a positive list of sectors in which trade commitments are undertaken. In other words, only the sectors that parties have expressly identified are subject to market opening undertakings. Countries are free to maintain or impose trade- restrictive measures in all non-scheduled sectors, although those measures may still be subject to an agreement's general disciplines (such as on transparency). Table 3: Scheduling approaches Agreement(s) Listing of sectors Listing of level of openness Lao PDR-US BTA Positive Not applicable, as no trade- restrictive measures are scheduled Mainland-Hong Kong CEPA, Mainland-Macao Positive Positive CEPA AFAS, ASEAN-China TIS Agreement, Positive Hybrid Australia-Thailand FTA, India-Singapore ECA, Japan-Malaysia EPA, Japan-Philippines EPA, Japan-Singapore EPA, EFTA-Korea FTA, EFTA-Singapore FTA, Jordan-Singapore FTA, New Zealand-Singapore FTA, Vietnam-US BTA Australia-Singapore FTA, Chile-Korea FTA, Negative Negative Guatemala-Taiwan (China) FTA, Japan-Mexico EPA, Panama-Taiwan (China) FTA, Trans- Pacific EPA Nicaragua-Taiwan (China) FTA, Singapore- Negative, except for Negative Panama FTA, Singapore-US FTA cross border trade in financial services for which a positive list is adopted Korea-Singapore FTA Negative, except for Negative, except for financial financial services for services for which a hybrid list which a positive list is is adopted adopted 10 Once a sector is scheduled, the next question is how to set the level of openness in that sector. Interestingly, this question is not relevant for one of the East Asian FTAs--the Lao PDR-US BTA. Under this agreement, Laos is committed to unrestricted market access and national treatment in listed sectors.12 However, the Lao PDR-US BTA should be considered a special case and, indeed, is unparalleled in its ambition. All other trade agreements in services allow parties to not immediately commit to free trade in sectors subject to liberalization undertakings. For the remaining fourteen East Asian FTAs with a positive list of sectors, we observe two approaches for specifying levels of openness: pure positive lists and GATS-style hybrid lists. Figure 2: Classification of East Asian FTAs by scheduling approach Negative list agreements Australia-Singapore Nicaragua-Taiwan (China) Chile-Korea Panama-Singapore Guatemala-Taiwan (China) Panama-Taiwan (China) Japan-Mexico Singapore-US Korea-Singapore Trans-Pacific Free Trade Agreements in Services in East Asia Positive list agreements Lao PDR-US BTA GATS-style hybrid (only list of sectors) list agreements AFAS Japan-Malaysia Pure positive list ASEAN-China Japan-Philippines agreements Australia-Thailand Japan-Singapore EFTA-Korea Jordan-Singapore Mainland-Hong Kong EFTA-Singapore New Zealand-Singapore Mainland-Macao India-Singapore Vietnam-US 12In principle, the agreement specifies that "each party" is not allowed to maintain any restriction on market access in the listed sectors and on national treatment. However, the agreement also provides that the obligations of the US are subject to the market access and national treatment limitations scheduled by the US under the GATS (see Articles 32 and 33 of the Lao PDR-US BTA). In addition, market access and national treatment do not apply to the United States with respect to the financial services sector (see Article 35 of the agreement). 11 Pure positive list agreements Under a pure positive list, parties to an agreement specify for each listed service sector the level (and type) of foreign participation that is allowed. Only two East Asian FTAs follow this approach: the Mainland-Hong Kong and the Mainland-Macao CEPAs. Interestingly, these two agreements do not establish binding disciplines, such as the ones created by the GATS market access and national treatment provisions (see Section 3.B). They also do not define any modes of supply, as is done for all other trade agreements in services (see below). In fact, the legal disciplines established by the agreements' services chapters are arguably the weakest among all the East Asian FTAs. Yet, China's market opening undertakings under the two CEPAs grant service providers from Hong Kong and Macao substantial trade preferences--as will be further discussed in Section 4. GATS-style hybrid list agreements Under a GATS-style hybrid list, parties may define the level of openness in listed sectors either on a positive or negative list basis. In particular, agreements following this approach typically adopt the market access and national treatment provisions of the GATS (see Section 3.B). Schedules of commitments then specify the market access "terms, limitations and conditions" and national treatment "conditions and qualifications".13 In other words, countries are free to describe either how trade is restricted or what type of services transactions are allowed in a listed sector. As a rule of thumb, an entry in a GATS schedule that takes the form "None, except ..." signifies a negative list of trade-restrictive measures, whereas an entry that takes the form "Unbound, except ..." signifies a positive list of market- opening concessions.14 One clarifying remark is in order. The GATS approach to the scheduling of commitments has frequently been referred to in the literature as a positive list approach. This terminology focuses only on the selection of sectors subject to trade commitments. For the purposes of this paper, we refer to GATS-style agreements as hybrid list agreements, because the fixing of the level of openness under this approach involves elements of both negative and positive listings.15 We use the term positive list agreements to describe all agreements that adopt a positive list of sectors subject to trade commitments, encompassing the special case of the Lao PDR-US BTA, the pure positive list agreements, and the hybrid list agreements (see Figure 1). Several features associated with the GATS-style hybrid list approach are worth pointing out. First, commitments in each listed sector are made with respect to four different modes of supply: cross-border trade (mode 1), consumption abroad (mode 2), commercial presence (mode 3), and movement of natural persons (mode 4).16 In actual GATS schedules, most entries for modes 1, 2, and 3 set the level of openness on a negative list basis, whereas the great majority of entries for mode 4 are made on a positive list basis. 13See GATS Articles XVI.1 and XVII.1. 14A negative list of trade-restrictive measures also prevails, when a scheduling member does not explicitly indicate "None, except ...", but inscribes one or more limitations applying to a listed sector. For further details on the scheduling of GATS commitments, see WTO document S/CSC/W/19. 15Hoekman and Sauvé (1994), OECD (2002), and UNCTAD (1999) also characterize GATS-style agreements as hybrid list agreements. 16For a more comprehensive discussion of modes of supply, see Adlung and Mattoo (2006). 12 Eleven of the twelve East Asian hybrid list FTAs follow the structure of the GATS by distinguishing between four modes of supply and between market access and national treatment measures. The only exception is the Australia-Thailand FTA. Commitments under this agreement neither distinguish between modes of supply nor between market access and national treatment measures. To which mode and to which class of measures a particular commitment applies is determined by the nature of the scheduled entry. Compared to the GATS, this scheduling approach appears to reduce difficulties in scheduling measures that that may be inconsistent with both market access and national treatment obligations.17 Second, several GATS-style hybrid list agreements adopt an MFN obligation which is subject to the scheduling of reservations. However, MFN reservations are always inscribed on a negative list basis in relation to both service activities and trade restrictive measures. The precise meaning of MFN in a bilateral or regional agreement will be further discussion in Section 3.B. Third, GATS-style schedules allow for horizontal commitments. Measures scheduled in these horizontal commitments apply to all listed service sectors, unless the wording of a sectoral commitment unambiguously indicates otherwise. In assessing the level of openness of specific service sectors, it is therefore critical to take these horizontal commitments into account. Sometimes they can be far-reaching--for example, a joint venture requirement with foreign equity participation limited to 49 percent, or an entry that limits the movement of individual service providers to specific types of intra-corporate transferees. In such cases, they effectively fix a low level of openness across all sectors. As will be further discussed in Section IV, some East Asian countries have reduced horizontal limitations in their FTA schedules relative to the GATS, whereas others have reproduced entirely what they committed horizontally at the multilateral level. Fourth, GATS-style hybrid list agreements typically do not require signatories to make bindings at the level of actual openness. In fact, existing GATS commitments are often characterized as being less liberal than status quo policies--not least because substantial unilateral liberalization has taken place in many countries since the conclusion of the Uruguay Round of Trade Negotiations in 1994. A gap between bound and actual policies--a so-called binding overhang--may introduce uncertainty, because governments at any point can restrict foreign participation in their domestic service markets, as long as they stay within their trade commitments. Most East Asian hybrid list FTAs similarly do not impose any requirement to bind at the actual level of actual openness. However, Japan's EPAs with Malaysia and the Philippines have introduced an innovation that serves to reduce the uncertainty associated with a binding overhang. These agreements offer the possibility to identify in schedules those service sectors in which a party agrees to bind status quo policies. In addition, the identified service sectors are subject to upward ratcheting: once a party unilaterally eliminates a trade-restrictive measure, policy will automatically be bound at the more liberal level.18 Even though upward ratcheting enhances the credibility of unilateral trade reforms, it implies a loss of transparency in committed 17The relationship between the GATS market access and national treatment disciplines has been subject to conflicting legal interpretations. See Mattoo (1997). 18For example, Article 99.3 of the Japan-Malaysia EPA provides that "[w]ith respect to sectors or sub-sectors where the specific commitments are undertaken [...] and which are indicated with "SS", any terms, limitations, conditions and qualifications [...] other than those based on measures pursuant to immigration laws and regulations, shall be limited to those based on non-conforming measures, which are in effect on the date of entry into force of this Agreement." 13 policies because parties are not required to notify these reforms or periodically update their schedules. Negative list agreements Ten East Asian FTAs have adopted a negative list approach in scheduling their market opening commitments. Negative listing generally applies to both sectors and measures. In other words, trade is unrestricted across all service activities (except where a sectoral carve- out applies), unless scheduled limitations indicate otherwise. Historically, one of the first major agreements to adopt the negative list model was the North American Free Trade Agreement (NAFTA) between Canada, Mexico, and the United States, which came into force in 1994. It is interesting to observe how this model found its way to East Asia. Singapore was the first country to adopt a negative list agreement in its FTA with the United States in 2003. Singapore has since pursued the negative list model in four other agreements, including its FTA with Korea. Japan adopted a negative list in the Japan-Mexico EPA in 2003. Finally, Korea's first negative list agreement was concluded with Chile in 2004--after Chile had concluded a negative list FTA with the United States in 2003.19 It appears that countries that conclude one negative list agreement seek to promote this model in subsequent agreements, an issue to which we return later. Again, it is useful to review several key features of negative list agreements. First, these agreements typically establish separate disciplines for cross-border trade and investment in services. Cross-border trade in services in the negative list model covers the GATS equivalent of modes 1, 2, and 4, although commitments do not formally distinguish between these three modes of supply. The GATS equivalent of mode 3 is covered by a horizontal investment chapter that applies to both goods and services, though the typical investment disciplines go beyond those established by the GATS. Two agreements depart from this basic model. The Trans-Pacific EPA does not establish separate investment disciplines, but services supplied through commercial presence are covered under the agreement's services disciplines--reverting to the structure of the GATS. Similarly, the Australia-Singapore FTA covers commercial presence in the services chapter, but in this case separate investment disciplines still apply (see also the discussion in Section 3.C). Second, trade in financial services receives separate treatment in several of the negative list FTAs. Three agreements--the Nicaragua-Taiwan (China) FTA, the Panama-Singapore FTA and the Singapore-US FTA--adopt a positive list of sub-sectors for cross-border trade in financial services. Trade restrictive measures continue to be scheduled on a negative list basis. The Korea-Singapore FTA extends the positive list of sub-sectors to investment in financial services and allows parties to determine the level of openness in each sub-sector through a hybrid list approach. In other words, the Korea-Singapore FTA fully adopts the GATS approach for the scheduling of financial services commitments. As illustrated in Table 2, four negative list FTAs--the Guatemala-Taiwan (China) FTA, the Japan-Mexico EPA, the Korea-Chile FTA, and the Trans-Pacific EPA--carve out trade in financial services entirely from the scope of the agreement, leaving the Australia-Singapore FTA and the 19Taiwan (China) signed its first negative list agreement with Panama in 2003, after Panama had concluded its first negative list agreement with Central American countries in 2002. Since then, Taiwan (China) has signed two negative list FTAs with Guatemala and Nicaragua, both of which had signed two negative list FTAs before. 14 Panama-Taiwan (China) FTA as the only agreements for which the negative list applies, in principle, to financial services.20 Third, negative list agreements establish additional classes of measures for the scheduling of specific commitments. Table 4 lists the classes of measures identified by the ten negative list FTAs in the three areas subject to trade commitments: cross-border trade in services, investment, and trade in financial services. All ten FTAs provide for the scheduling of national treatment limitations. However, only 6 negative list FTAs establish market access obligations. Interestingly, the Chile-Korea FTA, the Guatemala-Taiwan (China) FTA, and the Panama-Taiwan (China) FTA follow the original NAFTA model in requiring that quantitative restrictions be only notified. Seven FTAs subject MFN treatment to the scheduling of limitations (see also Section 3.B).21 For cross-border trade in services, negative list agreements introduce a new class of measures: local presence requirements. This class reflects the fact that negative list agreements do not separately identify the GATS equivalent of mode 1. In hybrid list agreements, local presence requirements are implicitly dealt with by commitments under mode 1. For investment, there are two new classes of measures: performance requirements and limitations on the nationality or residency of senior managers and boards of directors. These two classes of measures have their origin in bilateral investment treaties, on which the horizontal investment chapters of FTAs are based (see Section 3.C). Finally, for financial services, Taiwan's (China) FTAs with Nicaragua and Panama as well as Singapore's FTAs with Panama and the United States allow for the scheduling of limitations on cross-border purchases of financial services--again, reflecting the absence of a distinction between modes of supply in the scheduling of commitments.22 Fourth, negative list agreements allow for the scheduling of two categories of limitations: existing non-conforming measures and future measures. Existing non-conforming measures include all current laws and regulations that a country seeks to maintain, but which would be inconsistent with one or more of the obligations listed in Table 4. By definition, limitations scheduled in this category reflect status quo policies. In addition, all ten negative list FTAs provide for upward ratcheting of policy bindings: once a trade-restrictive measure identified in this category is eliminated, policy will automatically be bound at the more liberal level. As described above, upward ratcheting enhances the credibility of unilateral reforms, but reduces the transparency of trade commitments. 20However, under the Australia-Singapore FTA, Singapore scheduled several broad future measures in financial services, substantially limiting the scope and depth of its liberalization undertaking. See the discussion below. 21As explained in Section 3.B, a negative list of MFN exemptions is also found in several hybrid list agreements. 22The financial services chapter of the Panama-Taiwan (China) FTA features a right of establishment discipline, according to which "[t]he Parties recognize the principle that investors of a Party shall be permitted to establish a financial institution in the territory of the other Party through any forms of establishment and operation that the law of that Party permits" (Article 12.04). The precise rationale for this discipline is not clear. Discriminatory establishment limitations are already captured by the agreement's national treatment obligation. From the discipline's language, it's not clear whether non-discriminatory measures, such as quantitative restrictions, would be covered. In any case, the wording "recognize the principle" suggests that the discipline is of a soft-law nature, not implying any binding obligations on the parties. 15 Table 4: Classes of measures in negative list agreements (Cross-border) trade Investment Trade in financial services in services Australia- National treatment, National treatment (Not treated separately) Singapore FTA market access Trans-Pacific EPA National treatment, (No separate investment -- MFN treatment, market disciplines, but access investment is covered by commercial presence mode of supply in services chapter) Chile-Korea FTA National treatment, National treatment, -- local presence performance requirements requirements, limitations Quantitative restrictions on senior managers and (notifications only) boards of directors Guatemala- National treatment, National treatment, MFN -- Taiwan (China) MFN treatment, local treatment, performance FTA presence requirements requirements, limitations Quantitative restrictions on senior managers and (notifications only) boards of directors Japan-Mexico National treatment, National treatment, MFN -- EPA MFN treatment, local treatment, performance presence requirements requirements, limitations on senior managers and boards of directors Panama-Taiwan National treatment, National treatment, MFN Cross-border trade: national (China) FTA MFN treatment, local treatment, performance treatment, MFN treatment, presence requirements, limitations limitations on cross-border Quantitative restrictions on senior managers and purchases of financial services (notifications only) boards of directors Investment: right of establishment, national treatment, MFN treatment, and limitations on senior managers and boards of directors Korea-Singapore National treatment, National treatment, National treatment and market FTA market access, local performance access presence requirements requirements, limitations on senior managers and boards of directors Nicaragua-Taiwan National treatment, National treatment, Cross-border trade: national (China) FTA, market access, MFN market access, MFN treatment, MFN treatment, Panama-Singapore treatment, local treatment, performance limitations on cross-border FTA, Singapore- presence requirements requirements, limitations purchases of financial services US FTA on senior managers and Investment: national treatment, boards of directors market access, MFN treatment, and limitations on senior managers and boards of directors Future measures are reservations that do not necessarily relate to existing laws and regulations. They allow a country to introduce new measures in the relevant sectors at any 16 point after an agreement enters into effect. The scope of future measures is defined through their sectoral coverage and the description outlining the reserved policy actions. Broad future measures can de facto exclude full sectors from an agreement's market opening obligations-- equivalent to not listing a sector or inscribing `unbound' for one or more modes of supply under a positive list scheduling approach. For example, under the Korea-Singapore FTA, Korea scheduled a future measure under which the government reserves "the right to adopt or maintain any measure with respect to (a) broadcasting services [...] (b) foreign investment in the broadcasting services sector". Positive versus negative list scheduling: an assessment Does an FTA's approach towards scheduling commitments matter? Some observers have argued that a negative list approach provides for greater transparency and lends greater credibility to services trade policies.23 Knowing what is not allowed--rather than allowed-- may help service providers better understand how they can do business in a foreign country.24 In addition, as described above, non-conforming measures scheduled under a negative list reflect status quo policies. Thus, businesses are better informed about the actual level of openness in an FTA partner and are directly pointed to the laws and regulations affecting their ability to contest the FTA partner's market. Status quo bindings also maximize the credibility value of trade commitments, as foreign service suppliers are assured that actual policies will not become more restrictive. The scheduling approach may affect an FTA's negotiating outcome, too. Under a negative list, governments need to reveal existing non-conforming measures in the course of FTA negotiations and, if they wish to maintain those restrictions, defend their rationale. This process may create greater incentives for eliminating unwarranted restrictions. Another pro- liberalization feature of negative list agreements is that they apply to future service activities, because those activities would not be subject to limitations at the time FTAs are concluded. New service activities may emerge from technological progress or new ways of organizing business and an automatic commitment to free trade may pre-empt protectionist pressures. Having said this, there are several considerations that question the superiority of negative list agreements along these lines. First, the transparency value of knowing what is not allowed would seem to depend on the level of openness. Where few trade restrictions prevail, a negative list may indeed be more transparent. However, where trade-restrictive measures take the size of a `telephone book', knowing what is allowed may equip foreign businesses with a better understanding of how they can do business. Second, it is in principle possible to replicate every negative list schedule with a positive list schedule. In addition, GATS-style hybrid list agreements allow for the scheduling of measures on a negative list basis, preserving possible transparency benefits associated with negative listing. Theoretically, a positive list of sectors can even apply to future service activities by covering residual service sectors, such as `other business services,' `other financial services,' or `other services not included elsewhere.'25 23For example, see Hoekman and Sauvé (1994) and Stephenson (2002). 24See OECD (2002). 25In practice, however, commitments with a positive list of sectors do not seem to provide for substantial coverage of these residual categories. Negative list agreements therefore appear to be more liberalizing with respect to future service activities. 17 Third, benefits associated with status quo bindings are not necessarily limited to negative list agreements. The Japan-Malaysia EPA and the Japan-Philippines EPA illustrate that a requirement to schedule at the level of existing policies can also be incorporated into a pure positive list or hybrid list agreement.26 Conversely, the possibility of scheduling future measures opens the door for excluding certain service activities from liberalization undertakings and binding policy above status quo levels in negative list agreements--diluting the difference between hybrid list and negative list agreements.27 Some observers have also argued that a positive list of sectors combined with the possibility of binding above status quo policies may provide important breathing room to governments.28 Such breathing room may be needed in cases where governments have limited administrative capacity to compile an inventory of all trade-restrictive measures, including at the sub-federal level, or in sectors where there are sensitivities towards foreign participation. In this context, it is interesting to note that four of the East Asian negative list FTAs have partially or fully reverted to a positive list in scheduling commitments for financial services--a sector where regulatory sensitivities towards foreign participation are common. As pointed out above, four of the remaining six negative list FTAs have carved out the financial service sector altogether, leaving the Australia-Singapore FTA and the Panama- Taiwan (China) FTA as the only agreements in which the negative list applies to financial services. However, in the case of the Australia-Singapore FTA, Singapore scheduled several broad future measures, preserving its freedom to maintain or impose restrictions on the supply of financial services by Australian institutions. For example, one such future measure reserves Singapore's right "[...]to adopt or maintain any measure affecting the supply of services by foreign full banks or in relation to Qualifying Full Bank licenses."29 The Panama-Taiwan (China) FTA in turn grandfathers all measures affecting cross-border trade in services that were adopted before the agreement's entry into force.30 In sum, the structure of negative list agreements may not always be conducive to promote market opening in particularly sensitive sectors. In contrast, positive list agreements seem to afford governments the ability to tailor commitments to better accommodate regulatory concerns. They may thus give governments the confidence to embark on some liberalization rather than fully excluding sensitive sectors. Finally, possible transparency and liberalization benefits of negative list agreements depend crucially on the nature of non-confirming and future measures scheduled. If non-conforming measures do not list all relevant laws and regulations, businesses may not be able to draw an accurate picture of the level of openness of an FTA partner. Reservations that exempt a broad range of measures can seriously reduce the liberalization content of trade commitments. Three examples of non-conforming measures and future measures in East Asian negative list FTAs that are seemingly incomplete and broad are worth pointing out: ˇ In the Singapore-US FTA, the United States scheduled a non-conforming measure that effectively exempts "[a]ll existing non-conforming measures of all states of the 26That said, this requirement falls somewhat short of the list of non-conforming measures found in negative list agreements, as parties are not obliged to list the specific laws or regulations underlying a scheduled limitation. 27This point is also emphasized in World Bank (2004). 28See UNCTAD (2004) for further elaboration. 29See Annex 4-II(B) of the Australia-Singapore FTA. 30See Article 12.05 of the Panama-Taiwan (China) FTA. 18 United States, the District of Columbia, and Puerto Rico."31 No state law or regulation is explicitly listed under this reservation, making it difficult for a Singaporean service provider to assess possible US trade barriers at the state level.32 ˇ In the same FTA, the United States scheduled a non-conforming measure under which it "[...] reserves the right to adopt or maintain any measure that is not inconsistent with the United States' obligations under Article XVI of the General Agreement on Trade in Services."33 This limitation appears to nullify all market access concessions that the US offered to Singapore and that go beyond the US GATS commitment.34 Moreover, fully understanding how open US service markets are for Singaporean service providers requires a careful reading of the US GATS commitment. Given that the latter follows a hybrid list approach, the presumed transparency value of the negative list seems seriously undermined.35 ˇ In the Japan-Mexico EPA, both parties scheduled a future measure under which they reserve "[...] the right to adopt or maintain any measure relating to new services other than those services recognized [...] at the time of entry into force of this Agreement [...]". The concept of `recognized services' includes "[a]ny services classified positively and explicitly" in existing industry or product classifications. In addition, the two parties reserve "[...] the right to adopt or maintain any measure relating to the supply of services in any mode of supply in which those services were not technically feasible at the time of entry of force of this Agreement." This future measure effectively denies the application of the agreement to `other' services and future service activities--one of the supposed benefits of negative listings.36 In Section 4, we will compare the liberalization content of FTAs with different scheduling approaches in quantitative terms. Yet from our analysis so far, we can already make two observations. First, benefits associated with greater transparency, enhanced credibility and stronger incentives for committing to liberal trade policies may emerge from rules that require countries to bind status quo policies and that allow for an upward ratcheting of policy bindings once trade-restrictive measures are unilaterally liberalized. These rules exist in all East Asian negative list FTAs. However, the Japan-Malaysia EPA and the Japan-Philippines EPA illustrate that they can also be incorporated into positive list FTAs. Second, positive list FTAs may provide breathing room to governments that do not have the capacity to compile 31See Annex 8A of the Singapore-US FTA. 32The Japan-Mexico EPA recognizes the burden of collecting information on all trade-restrictive measures applied at the sub-federal level. However, instead of scheduling a single reservation like the one described for the US, Mexico committed to list all non-conforming measures applied by Mexican states within one year after entry into force of the FTA. 33See Annex 8A of the Singapore-US FTA. 34The transparency and credibility of the US commitment in the Singapore-US FTA is reduced by another provision of this agreement. Schedules of non-conforming measures contain both a description of the relevant measures and a reference to the relevant laws and regulations. Article 2(g) of Annex 8 of the Singapore-US FTA provides that "description, for Singapore, sets out the non-conforming aspects of the measure for which the entry is made; and description, for the United States, provides a general, non-binding, description of the measures". 35This reservation also raises questions about the agreement's compatibility with GATS Article V. In light of GATS Article XX.2, measures scheduled under Article XVI may be discriminatory in nature. However, GATS Article V.1(b) calls for the elimination of "substantially all discrimination" for an FTA to constitute a lawful exception to the MFN principle. See also Section 5. 36See Annex 7 of the Japan-Mexico EPA. 19 an inventory of all non-conforming measures or where governments want to retain the flexibility to introduce trade-restrictive measures at a future point in time--as is illustrated by the treatment of financial services in East Asian negative list FTAs. These two observations suggest that causality not only runs from the scheduling approach to the transparency, credibility and liberalization outcome, but also the other way around. Trading partners which have limited administrative capacity to take stock of all their existing measures and which are cautious in committing to market opening in services may be more likely to adopt a positive list approach and shun rules requiring status quo bindings and upward ratcheting. By contrast, countries that have a good understanding of all measures affecting trade in services and that are prepared to open up are more likely to adopt negative list agreements and accept status quo binding and ratcheting rules. In addition, it is not surprising that countries such as Japan, Korea, Singapore, and Taiwan (China) that have negotiated at least one negative list FTA, will seek the adoption of negative lists in subsequent FTAs, as they already went through the exercise of identifying all their non- conforming measures. As a final consideration, the transparency, credibility and liberalization value of any FTA commitment depends crucially on the nature of trade-restrictive measures scheduled--as illustrated by the examples of non-conforming and future measures described above. Indeed, it can be argued that the scope and nature of scheduled limitations is in the end more significant than the scheduling approach as such. B. Main disciplines Trade agreements establish rules that constrain governments from maintaining policies that adversely affect foreign participation in the domestic economy. In the area of trade in services, these rules take the form of disciplines on national treatment, market access, MFN treatment, domestic regulation, dispute settlement, and other matters. In what follows, we briefly review the main disciplines that determine the liberalization content of FTAs-- national treatment, market access, and MFN treatment. Other disciplines will be discussed later in this section. For ease of reference, Appendix 1 offers a comprehensive overview of the most relevant disciplines found in the twenty-five East Asian FTAs analyzed in this paper. National treatment National treatment is one the main disciplines that ensures the contestability of services markets by foreign suppliers. It mandates that imported services do not face more restrictive policy measures than domestically supplied services. As discussed in Section 3.A, the Lao PDR-US BTA incorporates a national treatment obligation which applies fully to all service activities listed in the agreement. All other agreements allow parties to not immediately provide for non-discriminatory treatment of foreign supplied and domestically supplied services. Depending on the scheduling approach of FTAs, departures from national treatment are inscribed in schedules of specific commitments or in lists of non-conforming and future measures. Two agreements--the Mainland-Hong Kong and Mainland-Macao CEPAs--do not expressly establish a national treatment discipline, though China's market opening schedules under these agreements implicitly allow for departures from national treatment. 20 Table 5: National treatment provision Agreements Standard of likeness AFAS, ASEAN-China TIS Agreement, Australia- Like services and service suppliers Singapore FTA, Australia-Thailand FTA, EFTA- Singapore FTA, India-Singapore ECA, Japan- Malaysia EPA, Japan-Philippines EPA, Japan- Singapore EPA, EFTA-Korea FTA, Lao PDR-US BTA, Jordan-Singapore FTA, New Zealand- Singapore FTA, Vietnam-US BTA Chile-Korea FTA, Guatemala-Taiwan (China) FTA, In like circumstances, referring to services and Japan-Mexico EPA, Korea-Singapore FTA, service suppliers Nicaragua-Taiwan (China) FTA, Panama-Taiwan (China) FTA, Panama-Singapore FTA, Singapore- US FTA, Trans-Pacific EPA Mainland-Hong Kong CEPA, Mainland-Macao No explicit national treatment discipline CEPA Note: The standard of likeness indicated here refers to the national treatment provision of FTAs' services chapter. Different standards may prevail in the investment chapter of FTAs. Appendix 1 offers more details. The reach of the national treatment obligation depends crucially on whether foreign and domestic services are considered alike. If likeness were defined narrowly such that only few imported services would be considered like domestically supplied services, the reach of national treatment would be limited. In this context, it is interesting to observe that the standard of likeness in services agreements is not uniform. Table 5 offers an overview of the different standards found in East Asian FTAs. The hybrid list agreements, the Lao-PDR US BTA, and the Australia-Singapore FTA have adopted the language of GATS Article XVII, which mandates no less favorable treatment to "like services and service suppliers." By contrast, national treatment in all negative list agreements except the Australia-Singapore FTA applies in "like circumstances". These seemingly small semantic differences can have non-trivial implications for the level of openness established by trade agreements. Which standard of likeness is narrower or broader raises complex legal issues and will depend on the factual situation in question. For example, is likeness met if only services are like but service suppliers are unlike? Or do both services and service suppliers have to be alike? Consider a car manufacturer that provides consumer loans to promote the purchase of its automobiles. Would the car manufacturer's lending service be like a lending service supplied by a bank? Would the car manufacturer and the bank be like service suppliers or acting in like circumstances, if the former is not subject to the same prudential regulations? Finally, does likeness extend across different modes of supply? Are online gambling services supplied from foreign territories like online gambling services supplied domestically? So far, there has been no jurisprudence that could give guidance in answering these types of questions.37 37Johnson (2001) discusses the concepts of "like circumstances" and "like service and service suppliers" in the context of NAFTA disciplines on investment. See also Mattoo (1997) and Cossy (2006). 21 Market access Market access is the second main discipline that determines the liberalization content of FTAs. The measures covered by the market access discipline fall under an exhaustive catalogue of explicit trade barriers. Under the GATS, the market access provision encompasses four types of quantitative restrictions, limitations on the form of legal establishment, and restrictions on foreign equity participation.38 Measures covered may be discriminatory or non-discriminatory in nature.39 All but six East Asian FTAs contain disciplines on market access. As discussed in Section 3.A, market access is subject to the scheduling of specific commitments or non-conforming and future measures, depending on the agreement's scheduling approach. The catalogue of measures covered by these agreements mirrors the one adopted by the GATS, with the exception that five negative list agreements--the Korea-Singapore FTA, the Nicaragua- Taiwan (China) FTA, the Singapore-Panama FTA, the Singapore-US FTA, and the Trans- Pacific EPA--do not cover restrictions on foreign equity participation under market access. In the case of the Korea-Singapore FTA, market access does not apply to investment in services and the question of foreign equity participation thus does not arise. In the other three cases, foreign equity limitations would likely be covered under the agreements' national treatment obligation, because they are discriminatory in nature. In other words, the absence of foreign equity restrictions in the catalogue of market access measures does not fundamentally alter the scope of measures covered by liberalization undertakings. As discussed in Section 3.A, China's two CEPAs with Hong Kong and Macao do not establish an explicit market access obligation, though market access-type measures are implicitly covered in China's schedule of specific commitments. The Japan-Mexico EPA and the Chile-Korea FTA also do not establish a market access discipline. In these two FTAs, non-discriminatory market access-type measures are truly excluded from the agreements' liberalization undertakings. The Chile-Korea FTA, the Guatemala-Taiwan (China) FTA, and the Panama-Taiwan (China) FTA feature a provision that requires parties to set out all quantitative restrictions they maintain. However, this provision does not bind governments to the notified measures, as new quantitative restrictions can be listed at any time. The treatment of quantitative restrictions in these three agreements replicates the original NAFTA model, which also did not establish a binding market access discipline. Most favored nation treatment The MFN principle is one of the cornerstones of the multilateral trading system. It obliges WTO members to not discriminate between trading partners. Under the GATS, MFN is a general discipline, applying to all service sectors even if no specific commitments are undertaken.40 However, it is subject to three exceptions: the conclusion of recognition 38See GATS Article XVI.2. The four types of quantitative restrictions are limitations on the number of service suppliers, on the total value of service transactions or assets, on the total number of service operations or on the total quantity of service output, and on the total number of natural persons. 39See WTO document S/CSC/W/19. The overlap between market access and national treatment measures is addressed in GATS Article XX, which specifies that measures inconsistent with both market access and national treatment are to be scheduled under market access and would then be considered as a limitation on national treatment as well. 40However, the MFN obligation does not apply to service activities that are carved out from the scope of the GATS, notably core air transport services (see Section 3.A) and services supplied in the exercise of governmental authority. 22 agreements, the formation of regional trade agreements and certain reservations scheduled by WTO members on a negative list basis. The former two exceptions will be discussed in greater detail in Sections 3.F and 5, respectively. The third exception was negotiated as part of the original GATS agreement and was supposed to be temporary, though scheduled reservations have so far not been eliminated.41 What is the role of the MFN principle in bilateral and regional free trade agreements? One can distinguish between two such roles. First, regional trade agreements involving more than two countries may wish to establish an MFN obligation to establish non-discriminatory treatment between service providers from countries within the region.42 In East Asia, this is the case for the ASEAN Framework Agreement on Services, which calls for preferential treatment to be accorded on an MFN basis. Interestingly, a 2003 amendment to the AFAS allows for departure from MFN if two or more members agree to liberalize trade in services faster than the remaining ASEAN members. The rationale for this so-called ASEAN-X formula was to advance negotiations among member countries that are ready and willing to commit to more open service markets. The adoption of this formula is a textbook illustration of the bargaining handicap associated with MFN-based negotiations, as discussed in Section 2. The second type of MFN provision found in FTAs focuses on the treatment of parties versus non-parties. A number of East Asian services agreements require that trade preferences accorded to non-parties are extended to FTA parties. As in the GATS, this non-party MFN clause is subject to a negative list of reservations. Several other East Asian services agreements establish a soft non-party MFN provision, merely requiring countries to favorably consider requests from other parties to extend benefits granted to a non-party. The bargaining incentives created by an non-party MFN obligation are somewhat different from the well-known free-rider handicap outlined in the previous section. For any given FTA, each country has an incentive to ask its trading partner for MFN treatment, as it ensures that domestic service providers benefit from current and future trade preferences extended to non-parties. However, a country bound by many non-party MFN obligations faces a less favorable bargaining situation in future FTAs. A new FTA partner knows that any negotiated preference will be extended automatically to others. This situation does not necessarily create free-rider problems if FTAs are negotiated sequentially. However, automatic extension of trade preferences to non-parties may reduce the value of trade preferences and, consequently, the willingness of a new FTA partner to `pay' for additional market opening. On balance, incentives to negotiate at the multilateral level are strengthened. Table 6 offers an overview of the different type of MFN provisions found in the twenty-five East Asian FTAs analyzed here. No clear pattern can be discerned: there are almost as many FTAs without a binding MFN clause as there are with a binding MFN obligation. In addition, the approach to MFN treatment cannot be associated with the basic structure of the agreement: one finds negative list agreements with and without MFN disciplines, as one finds positive list agreements with and without MFN disciplines. Having said this, one 41GATS Annex II, Art. 6, provides that "[i]n principle, such exemptions should not exceed a period of 10 years". However, that period elapsed on January 1st, 2005 without achieving the elimination of GATS MFN reservations. For a detailed discussion of the MFN principle in the GATS, see Mattoo (1999). 42An intra-regional MFN obligation may not be necessary for regional agreements involving WTO members, as FTA parties would already be bound by the MFN obligation of the GATS. It would only be needed if FTA parties wanted to eliminate at the regional level the application of MFN exemptions scheduled under the GATS or desired to make MFN subject to a regional dispute settlement mechanism. 23 distinguishing feature of MFN clauses can be associated with the basic FTA structure. As in the case of national treatment, negative list agreements provide for MFN in `like circumstances' whereas the hybrid list agreements have adopted the `like services and service suppliers' language found in the GATS.43 The interpretive questions raised above on the different standards of likeness thus apply equally to the MFN discipline. Table 6: MFN provisions Agreement(s) Type of MFN provision AFAS Intra-regional MFN obligation subject to ASEAN-X formula EFTA-Korea FTA, EFTA-Singapore FTA, Non-party MFN obligation subject to a negative list Guatemala-Taiwan (China) FTA, Japan-Malaysia of reservations EPA, Japan-Mexico EPA, Japan-Philippines FTA, Nicaragua-Taiwan (China) FTA, Panama-Singapore FTA, Panama-Taiwan (China) FTA, Singapore-US FTA, Trans-Pacific EPA, Vietnam-US BTA Australia-Thailand FTA, India-Singapore ECA, Non-binding non-party MFN provision Japan-Singapore EPA Australia-Singapore FTA, ASEAN-China TIS No MFN disciplines Agreement, Chile-Korea FTA, Korea-Singapore FTA, Lao PDR-US BTA, Mainland-Hong Kong CEPA, Mainland-Macao CEPA, Jordan-Singapore FTA, New Zealand-Singapore FTA Notes: The type of MFN provision indicated here refers to FTAs' services chapter. Different types may prevail in the investment chapter of FTAs. Appendix 1 offers more details. The MFN obligations of the EFTA-Korea and EFTA- Singapore FTAs do not apply to agreements concluded by one of the parties and notified under GATS Article V. Even though the AEAN-China FTA does not have a formal intra-regional MFN obligation, the agreement makes clear that the commitments of China apply to all ASEAN member countries and the commitments of each ASEAN member country apply to China and the rest of the ASEAN member countries. C. Investment in services For historical reasons, many FTAs establish two different sets of disciplines for investment in services. On the one hand, investment is considered a mode of supply in the services chapters of numerous agreements. Given that many services require the physical proximity of suppliers and consumers, the concept of trade in services has typically been defined more broadly than trade in goods to also include services supplied through commercial presence abroad. Under the GATS, commercial presence is one of four modes of supply and FTAs that have adopted the GATS model have followed this approach. On the other hand, countries have for a long time concluded bilateral investment treaties (BITs) that establish horizontal disciplines for investment in goods and services. No such horizontal investment disciplines have so far been established under the WTO.44 However, most FTAs negotiated in recent years have included separate investment chapters that are largely based on the BIT model. Indeed, a number of agreements--notably those that follow 43In particular, those FTAs that provide for MFN treatment adopt the language on likeness found in the agreements' respective national treatment articles, as shown in Table 4. 44WTO members considered the establishment of a multilateral investment agreement in the initial stages of the Doha Development Agenda. However, no consensus on launching negotiations in this area could be formed and the topic was removed from the DDA's work programme as part of the July 2004 General Council Decision. 24 the NAFTA model--cover investment in services exclusively through horizontal investment disciplines. However, twelve East Asian FTAs feature both services disciplines covering commercial presence and horizontal investment disciplines. The dual coverage of investment in services raises several questions about the transparency, credibility and depth of liberalization undertakings. In what follows, we first compare the definition of investment and the key obligations established by the two different sets of disciplines. We then describe how FTAs have sought to address possible inconsistencies between services and investment chapters, evaluating the advantages and drawbacks of the different approaches encountered.45 Definition of investment and key obligations Table 7 provides an overview of the treatment of investment in the twenty-five East Asian FTAs analyzed in this paper. Twenty agreements have incorporated horizontal investment disciplines. The definition of investment in most of these agreements is broad, covering foreign direct investment, portfolio investments, and various forms of tangible and intangible property.46 Only two agreements depart from this broad definition. The Framework Agreement on the ASEAN Investment Area (AIA) and the Australia-Thailand FTA limit the scope of horizontal investment disciplines to foreign direct investment (FDI). The former does not further define FDI, whereas the latter refers to the International Monetary Fund's definition of FDI which uses a 10 percent ownership threshold to distinguish FDI from portfolio investment.47 The definition of commercial presence in FTAs' services chapters is substantially narrower. Most FTAs that incorporate commercial presence as a mode of supply subject to services disciplines follow the GATS definition of commercial presence. This definition covers only foreign direct investments in services where the investor of the other party holds more than 50 percent of the equity interest or exercises control over the invested enterprise. Foreign investments with a minority equity stake and no exercise of control are not covered by services disciplines, though they would typically be covered by horizontal investment disciplines (either as FDI or portfolio investment).48 The services chapters of the New Zealand-Singapore FTA and the Trans-Pacific EPA have adopted a more liberal definition of commercial presence. They do not attach any minimum ownership or control threshold to 45See Roy (2003) for a general discussion of the treatment of investment in services under services and investment disciplines. 46For example, under the Singapore-US FTA "investment means every asset owned or controlled, directly or indirectly, by an investor, that has the characteristics of an investment. Forms that an investment may take include: (a) an enterprise; (b) shares, stock, and other forms of equity participation in an enterprise; (c) bonds, debentures, other debt instruments, and loans; (d) futures, options, and other derivatives; (e) turnkey, construction, management, production, concession, revenue-sharing, and other similar contracts; (f) intellectual property rights; (g) licenses, authorizations, permits, and similar rights conferred pursuant to applicable domestic law; and (h) other tangible or intangible, movable or immovable property, and related property rights, such as leases, mortgages, liens, and pledges" (Article 15.1, para. 13, footnotes omitted). 47The IMF's Balance of Payments Manual defines a direct investment enterprise "as an incorporated or unincorporated enterprise in which a direct investor, who is resident in another economy, owns 10 percent or more of the ordinary shares or voting power (for an incorporated enterprise) or the equivalent (for an unincorporated enterprise)" (International Monetary Fund, 1993). 48The definition of commercial presence in most FTAs extends to "the creation or maintenance of a branch or a representative office"--mirroring GATS Article XXVIII. These forms of foreign presence appear to be covered also under the definition of investment adopted by horizontal investment chapters. 25 foreign investments, such that even investments without any lasting interest appear to be covered.49 Appendix 1 offers an overview of the most relevant disciplines found in the services and investment chapters of FTAs. The key obligations established by the two sets of disciplines are similar in one respect. Where services or horizontal investment disciplines exist, they always establish a national treatment obligation. At the same time, most services chapters provide for a market access discipline, which is not included in investment chapters. In addition, services chapters often establish service-specific rules on domestic regulation not found in horizontal investment disciplines. By contrast, several obligations are, in principle, unique to investment chapters: fair and equitable treatment, prohibitions of performance requirements, bans on residency requirements for senior managers and boards of directors, regulations against direct and indirect expropriation, and guarantees on the free transfer of funds. Having said this, to the extent that measures covered by these obligations are discriminatory, they may also be subject to the national treatment obligation of services chapters. Finally, all horizontal investment disciplines provide for investor-state dispute settlement, which is not available under any of the services chapters (see Section 3.G). Table 7: The treatment of investment in services Definition of Definition of investment in commercial horizontal Relationship between services presence in investment and horizontal investment Agreement(s) services chapter disciplines disciplines Mainland-Hong Kong -- -- No substantial disciplines on CEPA, Mainland-Macao either services or investment CEPA ASEAN-China TIS GATS definition of -- No investment disciplines, only Agreement, Lao PDR- commercial services disciplines apply US BTA presence (unclear in the case of Lao PDR-US BTA) Trans-Pacific EPA No minimum -- No investment disciplines, only ownership or services disciplines apply control threshold Chile-Korea FTA, -- FDI, portfolio No services disciplines, only Guatemala-Taiwan investment and investment disciplines apply. (China) FTA, Japan- various forms of Nicaragua-Taiwan (China) Mexico EPA, Korea- tangible and FTA, Panama-Singapore FTA, Singapore FTA, intangible property and Singapore-US FTA extend Nicaragua-Taiwan market access and domestic (China) FTA, Panama- regulation obligations of cross- Singapore FTA, border trade in services chapter Panama-Taiwan (China) to investment in services. FTA, Singapore-US 49The services chapter of the Lao PDR-US BTA neither offers a definition of commercial presence nor of a `juridical person of the other party'. The range of investments in services covered by this agreement remains therefore unclear. Since the structure of this agreement's services chapter follows in many ways the GATS, can one assume that the GATS criteria of majority ownership or control apply? Or does the absence of a definition imply that any level of foreign participation in a juridical person would be covered? 26 FTA ASEAN Framework Not explicitly Foreign direct AIA does not apply to Agreement on defined, but investment (not investment in services Services/ASEAN implicitly follows further defined) Investment Area (AIA) GATS Australia-Thailand FTA GATS definition of Foreign direct One single schedule of commercial investment, as commitments for services and presence defined by IMF investment Australia-Singapore GATS definition of FDI, portfolio One single schedule of FTA commercial investment and commitments for services and presence various forms of investment tangible and intangible property US-Vietnam BTA, GATS definition of FDI, portfolio Services chapter prevails in case India-Singapore ECA, commercial investment and of inconsistencies Japan-Malaysia EPA, presence various forms of Jordan-Singapore FTA tangible and intangible property EFTA-Korea FTA GATS definition of FDI, portfolio The investment chapter's (investment agreement commercial investment and national treatment and MFN excludes Norway) presence various forms of obligations do not apply to tangible and commercial presence as intangible property governed by services chapter New Zealand-Singapore No minimum FDI, portfolio The investment chapter's FTA ownership or investment and national treatment and MFN control threshold various forms of obligations do not apply to tangible and commercial presence as intangible property governed by services chapter EFTA-Singapore FTA GATS definition of FDI, portfolio Investment chapter's disciplines commercial investment and on national treatment and MFN presence various forms of do not apply to service sector tangible and intangible property Japan-Philippines FTA GATS definition of FDI, portfolio For the Philippines: investment commercial investment and chapter's disciplines on national presence various forms of treatment, MFN, and tangible and performance requirements do intangible property not apply to service sector Japan-Singapore FTA GATS definition of FDI, portfolio Relationship not expressly commercial investment and defined. Singapore has presence various forms of scheduled a reservation which tangible and effectively incorporates the intangible property limitations scheduled under the services chapter into the investment chapter. Relationship between services and investment disciplines In principle, the dual coverage of investment in services can be complementary or overlapping. Complementary coverage occurs whenever an investment transaction is covered by one set of disciplines, but not the other. It can emanate either from the different 27 definitions of investment or from the different obligations established by the two sets of disciplines, as described in the previous section. Governments may specifically seek this type of complementary coverage. A horizontal investment chapter promotes equal treatment of investors in manufacturing and services and may thus promote a more transparent investment regime for multinational enterprises that are engaged in both manufacturing and the provision of services. At the same time, a parallel services chapter allows parties to establish disciplines specific to the service sector, such as market access and domestic regulation. Thus, many of the negative list FTAs that do not include commercial presence as a mode of supply in the services chapter do not feature such service-specific obligations. However, three negative list FTAs--the Nicaragua-Taiwan (China) FTA, the Panama- Singapore FTA, and the Singapore-US FTA--have establish a link between services and investment disciplines, which effectively extends the reach of the services chapter's market access and domestic regulation obligations to investment in services. In other words, these three agreements reap the complementarity benefit associated with dual coverage without actually providing for dual coverage. Overlapping coverage occurs whenever measures affecting foreign investment in services are covered by both sets of disciplines. In principle, such overlaps would not pose a problem if the disciplines and levels of openness under the services and investment chapters were identical. However, suppose that a measure is allowed in one chapter, but prohibited in the other chapter. Which chapter would prevail? Inconsistencies of this type would undermine the transparency of the investment regime and may even give rise to legal conflicts. To remedy such inconsistencies, most East Asian FTAs that provide for dual coverage of investment in services have established rules that define the relationship between the services chapter and the horizontal investment chapter. These rules are described in the last column of Table 7. The Framework Agreement on the AIA has taken the most drastic approach by simply removing investment in services from the scope of investment disciplines.50 This approach avoids any type of inconsistency, but does not provide the benefit of truly horizontal investment disciplines. Four agreements--the India-Singapore ECA, the Japan-Malaysia EPA, the Jordan-Singapore FTA, and the US-Vietnam BTA--have established a rule that gives precedence to the services chapter in case of inconsistencies.51 Investment disciplines still apply insofar they affect matters not covered by the services chapter. This rule again avoids inconsistencies between the two chapters and, at the same time, preserves some of the benefits of horizontal investment disciplines. However, the transparency of the investment regime is reduced, as an understanding of what type of investments are (not) allowed requires joint reading of the two chapters and possible interpretation of what might be considered an inconsistency.52 50A 2001 amendment to the Framework Agreement on the AIA increases the scope of the AIA to include services incidental to manufacturing, agriculture, fishery, forestry, and mining and quarrying. The relationship between ASEAN Framework Agreement on Services and the AIA for these service activities is not further defined. 51In the case of the Japan-Malaysia EPA, the precedence of services discipline only applies to inconsistencies with the investment chapter's obligations on national treatment, MFN, and performance requirements. The investment chapter takes precedence in the case of inconsistencies with all other investment disciplines. In the case of the US-Vietnam BTA, precedence of services disciplines only applies to inconsistencies between "provisions set forth" in parties' schedule of specific services commitments and the BTA's investment disciplines (see Article VII.6). 52For example, suppose that a sector is not subject to specific service commitments but no investment reservations are listed in that sector. Would this situation be considered an inconsistency, as one could argue 28 Two agreements--the New Zealand-Singapore FTA and the EFTA-Korea FTA--have adopted a different approach. They provide that the national treatment and MFN obligations of the investment chapter do not apply to measures affecting commercial presence as governed by the services chapter. Since national treatment and MFN are the only two overlapping obligations in these FTAs, direct inconsistencies between the two chapters are avoided. This approach provides for somewhat greater transparency, as the liberalization content related to commercial presence is solely determined by the services chapter and no judgment is necessary about what might be considered an inconsistency. However, in the case of the EFTA-Korea FTA, a full understanding of the investment regime for services still requires joint reading of the services and investment chapters, as the investment chapter's national treatment and MFN obligations still apply to those forms of investments not covered by the services chapter--notably investments with a minority equity stake and no effective foreign control.53 The EFTA-Singapore FTA and the Japan-Philippines FTA feature a variation of this approach. These agreements entirely remove investment in services from the scope of the investment chapter's core liberalizing obligations.54 This rule offers a cleaner distinction of the roles of the services and investment chapters, but implies a loss of discipline for minority investments in services. Curiously, in the case of the Japan-Philippines EPA, this rule applies only to measures adopted or maintained by the Philippines. For Japan, the relationship between services and investment disciplines remains undefined. In addition, while services commitments are scheduled on a hybrid list basis, investment reservations are scheduled on a negative list basis and Japan's two commitment schedules do not provide for identical sectoral coverage. This approach seems to offer the least transparent treatment of investment in services and may even open the door to inconsistencies between services and investment disciplines. A similar situation is encountered in the Japan-Singapore FTA. The agreement does not establish any rule defining the relationship between services and investment disciplines. However, Singapore has scheduled a reservation which stipulates that (i) the investment chapter's obligations on national treatment and performance requirements do not apply to sectors for which no specific services commitments are undertaken; and (ii) where sectors are subject to specific services commitments, these commitments are effectively incorporated into the investment chapter.55 This reservation eliminates potential inconsistencies and improves on transparency along the lines discussed above. Yet again, no such reservation is found in the case of Japan. that the right to restrict investment is afforded by one set of disciplines and denied by the other? A side letter to the Jordan-Singapore BIT on this question makes clear that such a case would indeed be considered an inconsistency. The same conclusion may be drawn for the US-Vietnam BTA, which stipulates that the investment disciplines "shall not be construed or applied in a manner that would deprive a Party of rights" provided for in the schedule of specific services commitments (see Article VII.6). The other two agreements do not explicitly address this question. 53As pointed out above, the definition of commercial presence in the New Zealand-Singapore FTA includes minority investments. 54In the case of the EFTA-Singapore FTA, this exemption is subject to a review after ten years. 55See Annex V.B of the Japan-Singapore FTA. It appears that limitations scheduled under the services disciplines would then also apply to minority investments in services. At the same time, where specific services commitments have been undertaken, the investment chapter's obligations on national treatment and performance requirements would still apply, insofar as they are not inconsistent with Singapore's services commitments. 29 Finally, the Australia-Thailand FTA and the Australia-Singapore FTA offer what appears to be the most transparent solution to avoiding inconsistencies. Liberalization undertakings in these two agreements are inscribed in one single schedule of commitments, which also covers investment in goods. This approach offers the benefit of consulting only one schedule of commitments to determine the level of openness of the investment regime, while taking full advantage of the complementary coverage of investment in services by two different sets of disciplines.56 D. Movement of natural persons As in the case of investment, the inclusion of labor movements in trade agreements on services stems from the fact that the provision of many services requires the physical proximity of suppliers and consumers. At the same time, trade agreements typically seek the freeing of only certain labor flows--those directly linked to the provision of services, as distinct from permanent migration. The supply of services through the movement of natural persons is recognized as the fourth mode of delivery by the GATS. Many observers have pointed out that WTO members have so far made only limited commitments in this area.57 A natural question therefore is whether FTAs have been able go any further. In Section 4, we will seek to assess this question empirically. In what follows, we will focus on two issues that escape our empirical analysis. First, we will review the different architectural approaches adopted by the East Asian FTAs towards the movement of natural persons. Even though an evaluation of the depth of liberalization undertakings on mode 4 invariably requires careful reading of all relevant commitments, certain architectural choices influence the transparency and depth of commitments. Second, we will discuss the contribution of East Asian FTAs with respect to the recognition of professional qualifications. For many professional services, trade may only be commercially attractive if trading partners recognize the credentials of foreign professionals. As discussed in Section 2, FTAs may offer a fertile forum for this type of regulatory cooperation and we will evaluate to what extent East Asian FTAs have lived up to this promise. Architectural considerations In considering the different architectural approaches towards labor mobility encountered in East Asian FTAs, a natural starting point is the treatment of the movement of natural persons at the multilateral level. The GATS defines mode 4 as the supply of a service "by a service supplier of one Member, through presence of natural persons of a Member in the territory of any other Member." This definition extends to independent service providers, the self- employed and foreign individuals employed by foreign companies established in the territory of a WTO member. However, it excludes foreign individuals employed by domestic companies.58 56Theoretically, the EFTA-Singapore FTA, the New Zealand-Singapore FTA, the EFTA-Korea FTA, the Japan- Philippines EPA, the Australia-Thailand FTA and the Australia-Singapore FTA leave the door open to potential inconsistencies between obligations not subject to liberalization undertakings, such as provisions on the `transfer of funds'. 57See, for example, Mattoo and Carzaniga (2003). 58See, for example, Nielson (2003) and Chaudhuri, Mattoo, and Self (2004). 30 Two types of measures are expressly carved out from the scope of the GATS. First, the GATS does not apply to measures affecting access to the employment market of a Member nor to measures regarding citizenship, residence or employment on a permanent basis. Second, it does not prevent WTO members from regulating the entry of natural persons provided that regulations are not applied in such a manner as to nullify or impair the benefits accruing from specific commitments made by WTO members. In this context, the sole fact of requiring a visa for certain members and not for others is not regarded as nullifying or impairing benefits under a specific commitment.59 Table 8 summarizes the architectural approaches adopted by the twenty-five East Asian FTAs. As can be seen, most of the positive list agreements have adopted the GATS definition of mode 4. The only two exceptions are China's two CEPAs with Hong Kong and Macao, which do not offer any definition of modes of supply. The Lao PDR-US BTA replicates the GATS definition of mode 4, but then limits its scope to services sales persons and intra-corporate transferees. Most positive list FTAs also provide for similar carve-outs with respect to covered measures as the ones established in the GATS. Exceptions again are China's two CEPAs with Hong Kong and Macao and the Lao PDR-US BTA, for which no comparable carve-outs are found. In addition, the services chapter of the Japan-Singapore EPA does not expressly carve out regulations affecting the entry of natural persons. Four of the ten negative list FTAs--the Australia-Singapore FTA, the Nicaragua-Taiwan (China) FTA, the Panama-Singapore FTA, and the Panama-Taiwan (China) FTA--have also followed the GATS definition of the movement of natural persons. In addition, these four agreements feature the two familiar carve-outs--except the Nicaragua-Taiwan (China) FTA, which does not carve out immigration measures from the scope of services disciplines. The other six negative list FTAs have adopted a definition of the movement of natural persons that can be traced back to the NAFTA. Thus, disciplines on cross-border trade in services apply to services supplied "by a national of a Party in the territory of the other Party" (whereby `national' is essentially equivalent to a natural person). No further guidance is offered on what type of service suppliers are included under this definition. The concept of supply of a service by a national--rather than through presence of natural persons as in the GATS--may imply a different scope.60 The six `NAFTA-style' negative list FTAs also provide for a carve-out with respect to measures affecting access to the employment market of a party. In addition, one of the six agreements--the Trans-Pacific EPA--has expressly incorporated the second GATS-style carve-out relating to regulations affecting the entry of natural persons. The Chile-Korea FTA, the Guatemala-Taiwan (China) FTA, the Korea-Singapore FTA, and the Singapore-US FTA generally exempt immigration measures from the scope of services disciplines, thus offering a similar carve-out. Therefore, the only negative list agreement not providing for a similar exemption for regulations affecting the entry of natural persons is the Japan-Mexico EPA. 59In this regard, it could be argued that a consistent practice of denying visas to service providers of a certain WTO Member, or plainly denying the possibility to apply for visas, may entail a nullification of GATS commitments on mode 4. 60On the one hand, one may argue that the NAFTA definition does not extend to foreign employees of companies, because services are eventually supplied by a juridical person. On the other hand, the involvement of foreign employees in the production, distribution, and delivery of a service by juridical persons may in itself be considered a supply of a service, so that employees would be covered. 31 Table 8: Movement of natural persons: key architectural choices Agreement(s) Definition of mode 4 Separate chapter or agreement related to the movement of natural persons Positive list agreements ASEAN-China TIS Agreement, GATS -- Jordan-Singapore FTA, New Zealand- Singapore FTA, US-Vietnam BTA Lao PDR-US BTA GATS, but limited to -- services sales persons and intra-corporate transferees ASEAN (AFAS) GATS AESAN Framework Agreement on Visa Exemption Australia-Thailand FTA GATS Chapter on movement of natural persons, providing for additional rights and obligations to those set out in the services and investment chapters EFTA-Korea FTA, EFTA-Singapore GATS Provision on key personnel in investment FTA, Japan-Malaysia EPA chapter (or BIT) India-Singapore ECA GATS Chapter on movement of natural persons, commitments subject to reservations scheduled under services chapter Japan-Singapore EPA GATS (weaker exception) Chapter on movement of natural persons, commitments apply only to sectors included in a party's services schedule Japan-Philippines EPA GATS Chapter on movement of natural persons, relationship to services chapter not further defined Mainland-Hong Kong CEPA, No definition -- Mainland-Macao CEPA Negative list agreements Australia-Singapore FTA, Panama- GATS Chapter (or annex) on movement of Singapore FTA natural persons, commitments subject to reservations scheduled under services and investment chapters Panama-Taiwan (China) FTA GATS Chapter on movement of natural persons, prevailing over services chapter as far as `immigration measures' are concerned Nicaragua-Taiwan (China) FTA GATS (weaker exception) Chapter on movement of natural persons, relationship to services chapter not further defined Chile-Korea FTA, Guatemala-Taiwan NAFTA Chapter on movement of natural persons, (China) FTA, Korea-Singapore FTA, prevailing over services chapter as far as Singapore-US FTA `immigration measures' are concerned Japan-Mexico EPA NAFTA Chapter on movement of natural persons, relationship to services chapter not further defined Trans-Pacific EPA NAFTA `Soft-law' chapter on movement of natural persons 32 In addition to the disciplines established in the services chapters of trade agreements, a number of East Asian FTAs feature separate rules affecting the movement of natural persons (MNPs). Like for horizontal disciplines on investment, these additional rules mostly take the form of self-standing FTA chapters which establish disciplines for the entry of business persons active in goods and services sectors. The substantive disciplines and depth of commitments established in these MNP chapters varies from agreement to agreement. They typically define categories of business persons eligible for preferential treatment, including business visitors, sales persons, traders and investors, professionals, and intra-corporate transferees. The main benefit then consists of commitments on the temporary entry of natural persons in the various categories, setting out the length of stay, eligibility conditions, applicable numerical quotas, and certain safeguards that parties can invoke. All MNP chapters feature the GATS-style carve-outs regarding access to the employment market of members and the regulation of entry of natural persons.61 Historically, the inclusion of a horizontal chapter on the movement of natural persons can be traced back to the NAFTA. It is thus not surprising that all of the East Asian negative list FTAs contain such a chapter.62 At the same time, the establishment of horizontal rules in this area is not inherently linked to the structure of negative list agreements. Indeed, four positive list agreements--the Australia-Thailand FTA, the India-Singapore ECA, the Japan- Philippines EPA, and the Japan-Singapore EPA--have also incorporated a horizontal MNP chapter. The dual coverage of this mode of service supply raises the question of how the two sets of disciplines are related. As in the case of investment, dual coverage can be complementary or overlapping. Complementary exists in both ways. Services disciplines apply to market access and national treatment barriers encountered `beyond the border', whereas MNP chapters focus more narrowly on matters related to the entry of foreign individuals. Conversely, the latter establish certain transparency obligations not available in services chapters and offer horizontal treatment for individuals engaged in trade in goods, trade in services and investment. The possibility of overlapping coverage emanates from the fact that services disciplines, in principle, also apply to entry measures--to the extent that they fall under the definition of market access, national treatment, or MFN. Unless commitments in the two chapters are identical, overlapping coverage may give rise to inconsistencies. Which chapter would prevail if a measure is allowed by one chapter, but prohibited by the other chapter? Just as we saw in the case of investment, most East Asian FTAs that provide for dual coverage of the movement of natural persons feature rules that define the relationship between the two sets of disciplines (see Table 8). The Chile-Korea FTA, the Guatemala-Taiwan (China) FTA, the Korea-Singapore FTA, the Panama-Taiwan (China) FTA, and the Singapore-US FTA make clear that `immigration measures' are exclusively dealt with by the MNP chapter. As pointed out above, this rule 61The Chile-Korea FTA and Taiwan's (China) FTAs with Guatemala, Nicaragua, and Panama do not feature the second carve-out. However, the commitments on temporary entry in these cases make clear that a party may require a business person to obtain a visa in accordance with domestic immigration laws. 62However, the Chapter on Temporary Entry of the Trans-Pacific EPA is of a `soft-law' nature. It merely commits parties to review the rules and conditions applicable to the movement of natural persons two years after the entry into force of the agreement. 33 effectively carves out measures affecting the entry of foreign individuals from the scope of the services chapter, thus providing for a clear delineation of the two sets of disciplines. The Australia-Singapore FTA, the India-Singapore ECA, and the Panama-Singapore specify that commitments in the chapter on the movement of natural persons are subject to the limitations scheduled under the agreement's services chapter. In addition, the services schedules of these three FTAs include a horizontal reservation according to which parties are free to adopt any MNP-related measure subject to the provisions of the MNP chapter. Effectively, this rule implies that commitments on the movement of natural persons emanate exclusively from the MNP chapter. However, their coverage is limited to the sectors included in the services commitments and, even then, may be qualified by limitations for specific service activities as detailed in the services schedule. A similar approach is followed by the Japan-Singapore EPA. Commitments under the agreement's MNP chapter are effectively incorporated into the horizontal section of the two parties' services schedules. Given the hybrid list scheduling approach of this agreement, these commitments apply only to listed sectors and are further subject to limitations scheduled for specific service sectors.63 The Australia-Thailand FTA, the Japan-Philippines EPA, the Mexico-Japan EPA, and the Nicaragua-Taiwan (China) FTA do not offer a clear rule setting out the relationship between the agreements' services and MNP chapters.64 The absence of such a rule may give rise to inconsistencies between the two chapters, but in any case reduces the transparency of the commitments made.65 Finally, four FTAs offer additional benefits for foreign natural persons other than through dedicated chapters on the movement of natural persons. In the case of the EFTA-Korea FTA, the EFTA-Singapore FTA, and the Japan-Malaysia EPA, provisions granting temporary entry for investors and certain key personnel are found in the agreements' investment chapters.66 These undertakings are subject to immigration laws and regulations relating to entry, stay, and work of natural persons. ASEAN members, in 2006, concluded a Framework Agreement on Visa Exemption, which establishes guidelines for advancing bilateral arrangements for exempting ASEAN nationals from visa requirements.67 63The MNP chapter of the Japan-Singapore EPA specifies that horizontal MNP commitments apply only where specific services commitments are undertaken. At the same time, for certain service sectors, schedules of specific commitments indicate an `unbound' entry for mode 4. Such situations could well give rise to inconsistencies between the two sets of disciplines. 64The MNP chapter of the Australia-Thailand FTA indicates as an objective the provision of rights and obligations additional to those set out in the services and investment chapters. However, this language does not seem to offer any guidance on which chapter would take precedence if a measure was allowed by one chapter, but not the other. 65The Trans-Pacific EPA also does not feature a rule on the relationship between services and MNP disciplines. However, since the MNP chapter of this agreement does not feature any `hard' commitments on the movement of natural persons, the absence of such a rule does not give rise to legal inconsistencies. 66In the case of the EFTA-Korea FTA and EFTA-Singapore FTA, the relationship of the relevant provisions to the agreements' services disciplines is not addressed, leaving the door open to potential inconsistencies. In the case of the Japan-Malaysia EPA, the relevant provision takes precedence over services disciplines. 67In addition, the 1998 Framework Agreement on the ASEAN Investment Area commits ASEAN members to promote the freer flow of skilled labor and professionals. 34 Recognition of professional qualifications For professional services, the absence of explicit trade barriers is only a necessary but not sufficient condition for the entry of foreign service providers. To effectively compete, foreign professionals must either obtain the mandated local qualifications or have their foreign qualifications recognized. For certain professions, the former may require significant educational investments over several years, which may pose a de facto barrier to market entry. The latter is an option for those professions with a high degree of generic skills content--for example, doctors, architects, or engineers. Even then, a government would be only willing to consider recognition if it has confidence that the foreign educational system and professional standards applied abroad are comparable to domestic requirements. Thus, recognition is more likely to be feasible where professional standards are harmonized or, for historical reasons, share a common foundation. In such cases, governments often grant recognition on a reciprocal basis, leading to so-called mutual recognition agreements (MRAs). What is the role of FTAs with respect to the recognition of professional qualifications? One can distinguish two different contributions. First, like the GATS, many FTAs exempt recognition agreements from MFN treatment, but attach certain conditions to the conclusion of such agreements. Second, several FTAs facilitate the recognition of professional qualifications and some feature explicit commitments on recognition. We will discuss these contributions in turn. In principle, an agreement to recognize the professional qualifications of individuals from one particular country may depart from an FTA's MFN obligation. The GATS expressly allows for such a departure provided that the WTO member in question affords adequate opportunity to other interested members to negotiate a comparable arrangement.68 Most East Asian FTAs that have established a binding MFN obligation (see Section 3.B) feature a similar carve-out. The only exceptions are the Guatemala-Taiwan (China) FTA, the Panama- Taiwan (China) FTA, and the US-Vietnam BTA, for which no such carve-out is found. Under these agreements, a party's recognition agreement with a third country may therefore need to be extended to the other party of the BTA. The Japan-Mexico EPA, while exempting recognition agreements from the agreements' MFN principle, does not impose the condition of giving interested parties the opportunity to negotiate a comparable agreement. At the same time, this latter requirement is found in four FTAs that do not feature a binding MFN obligation, namely the ASEAN-China TIS Agreement, the India-Singapore ECA, the Japan- Singapore EPA, and the Korea-Singapore FTA. As discussed in Section 2, FTAs may offer a fertile forum for directly facilitating the recognition of professional qualifications, given the small number of players involved and possible similarities in qualification systems. Indeed, the majority of East Asian FTAs contain `soft-law' provisions which encourage parties--or their competent regulatory bodies--to enter into negotiations towards the recognition of professional qualifications.69 Some agreements identify specific professions for which such negotiations should take place 68See GATS Article VII. It is not clear whether this article applies to recognition agreements negotiated as part of FTAs. One may argue that such agreements are covered by GATS Article V on economic integration (see Section 5). If so, FTA parties would not be required to afford non-parties an opportunity to negotiate participation. See Adlung (2006a) for further discussion. 69Nine FTAs do not feature such provisions, namely the EFTA-Korea FTA, the Guatemala-Taiwan (China) FTA, the Japan-Malaysia EPA, the Japan-Mexico EPA, the Japan-Philippines EPA, the Lao PDR-US BTA, the Panama-Taiwan (China) FTA, the Panama-Singapore FTA, and the US-Vietnam BTA. 35 on a priority basis. In some cases, FTAs have established a negotiating timeframe of 1-3 years after entry into force of the FTA or simply call `for an early outcome'. In the FTAs under review, only five agreements feature binding commitments to recognize foreign qualifications.70 ASEAN members concluded mutual recognition agreements for engineers and nursing professionals, along with a set of minimum qualification requirements that eligible professionals need to meet.71 Under the Korea-Singapore FTA, the two parties committed to recognize the professional qualifications of engineers obtained from 20 Korean universities (for Singapore) and 2 Singaporean universities (for Korea). The universities were to be selected by each party "based on mutual trust and common benchmarks".72 Under the Singapore-US FTA, Singapore committed to recognize the degrees of four US law schools for the purposes of admission into the Singapore Bar. However, recognition is limited to individuals who are Singapore citizens or Singapore Permanent Residents and additional qualifications in Singapore law are necessary for those individuals to be eligible for recognition.73 The four universities were to be selected through consultations between the two parties. Finally, a different form of recognition is established by China's commitments in its two CEPAs with Hong Kong and Macao. For professionals in the fields of law and healthcare, permanent residents from Hong Kong and Macao who meet certain qualification standards in those two territories are allowed to `sit' the Mainland's qualifying exams. These commitments fall short of full recognition.74 However, they still serve to facilitate the mobility of professionals, because they grant permanent residents from Hong Kong and Macao the right to have their qualifications tested in the Mainland without undergoing additional training. Similarly, under the Japan-Philippines EPA, nurses who meet certain qualification standards in the Philippines can enter Japan for the purpose of obtaining additional training to eventually supply their services in Japan. Even though this type of commitment falls short of full recognition, it offers some benefit to nurses from the Philippines in that they do not have to re-qualify `from scratch' in Japan. E. Rules of origin FTAs extend trade benefits to signatory parties, thereby discriminating against trade with non-parties. Yet what exactly constitutes trade between signatory parties that is eligible for preferential treatment? FTAs resolve this question through so-called rules of origin. In the case of goods trade, rules of origin determine to what extent products with imported intermediate inputs from non-parties qualify for trade preferences. In the case of trade in services, rules of origin are broader, reflecting the fact that services agreements apply to both 70Our research was confined to undertakings on recognition that are published alongside trade agreements. It is possible that negotiations between regulatory bodies subsequent to the conclusion of an FTA have led to additional recognition agreements. For example, information published on the webpage of the Government of Hong Kong indicates that China and Hong Kong signed a mutual recognition agreement for planners and quantity surveyors (http://www.info.gov.hk/gia/general/200505/24/05240244.htm). 71See http://www.aseansec.org/18009.htm and http://www.aseansec.org/19210.htm. 72See Annex 9D of the Korea-Singapore FTA. 73This recognition agreement seems less designed to facilitate the movement of legal professionals between Singapore and the US than to promote the export of higher education services of US law schools. 74In the case of medical and dental services, the Mainland fully recognizes the qualifications of Hong Kong and Macao permanent residents for the purpose of "short-term practice in the Mainland". 36 services and service suppliers. Suppose countries A and B take part in an FTA to which country C is not a member. In principle, questions of origin arise in three different contexts: ˇ Origin of services. Would a service imported by country A from country B qualify for trade preferences, if the provision of the service relied on intermediate service imports from country C? ˇ Origin of service suppliers in the form of juridical persons. Suppose that a service provider from country C has established a commercial presence in country B. Under which circumstances, if any, would this service provider be allowed to export services to country A--through modes 1, 2, or 3? ˇ Origin of service suppliers in the form of natural persons. Suppose that an individual from country C has certain ties with country B. What kind of ties would allow this individual to export services to country A via mode 4? As discussed in Section 2, rules of origin determine the degree of trade preferences created by FTAs. From the point of view of economic efficiency, liberal rules of origin minimize trade diversion effects and promote entry of the most efficient service providers. At the same time, they undermine the bargaining advantage that FTAs offer relative to multilateral negotiations. In what follows, we discuss the rules of origin established by East Asian FTAs. The discussion is divided into three parts, corresponding to the three different contexts outlined above. Notwithstanding certain exceptions and interpretive uncertainties, we conclude that most agreements feature `fairly' liberal rules of origin. Rules of origin for services The origin question for services resembles most closely the classical origin question in the case of goods trade. In the latter case, rules of origin define the level of transformation imported goods need to undergo in order for the transformed product to be exported to the FTA partner at a preferential tariff. In the case of services trade, the concepts of imported service inputs and domestic transformation are conceptually and statistically not well- developed. Indeed, it is not clear whether a transformation rule could be meaningfully applied in this area. Implicitly, most FTAs establish a rule of origin for services through the definition of what constitutes a `service of another party'. Thus, services disciplines apply to services that are supplied "from or in the territory of another party"--corresponding to modes 1 and 2.75 Five agreements--the ASEAN-China TIS Agreement, the India-Singapore ECA, the Japan- Singapore EPA, the Jordan-Singapore FTA and the US-Vietnam BTA--expressly allow a party to deny the benefits of the services chapter, if it establishes that the service is supplied from or in the territory of a non-party.76 In other words, as long as a service originates within the territory of the exporting party, it would seem to be eligible for preferential treatment. 75The definition of a `service of another party' found in FTAs mirrors the one established by GATS Article XXVIII(f). Several agreements do not provide for a definition of a `service of another party', but the territoriality concept is embedded in the definition of modes 1 and 2. The only two agreements that offer neither a definition of a `service of another party' nor definitions of modes of supply are China's two CEPAs with Hong Kong and Macao. 76This denial of benefit provisions mirrors GATS Article XXVII(a), which applies in relation to non-members of the WTO. 37 This rule of origin raises non-obvious interpretive questions. Suppose a firm in country A `imports' call center services from its FTA partner country B. Suppose further that the service supplier in country B subcontracts the answering of telephone calls to a company in country C, but channels the calls between countries A and C through country B and fully manages the business from country B. Would such a service qualify for preferential treatment under the FTA between A and B? Admittedly, such a question may appear theoretical. Cross-border trade in services has so far been largely unrestricted and technological advances may make it increasingly difficult to enforce trade restrictions. However, in view of the rapid growth of cross-border trade in services and associated adjustment pressures, trade protection may not be inconceivable in future and questions about the origin of services may well arise.77 Twelve East Asian FTAs feature a special rule of origin for maritime transport services.78 Thus, maritime transport services are eligible for preferential treatment only if they are supplied by a vessel registered under the law of another party or by a person of that other party which operates and/or uses the vessel with which services are supplied. The five FTAs mentioned above again expressly allow a party to deny the benefits of the services chapter, if similar conditions are not met.79 The intent of this special rule of origin is to exclude from preferential treatment maritime transport services which are supplied by transiting vessels which do not have any association with the exporting FTA partner. Neither the GATS nor the East Asian FTAs establish rules of origin for services supplied through commercial presence or the presence of natural persons. For those modes of supply, services agreements define a `service of another member' as a service supplied by a service supplier of that other member. Service suppliers, in turn, are subject to separate rules of origin which we discuss in the remainder of this section. Rules of origin for juridical persons FTAs feature provisions that determine to what extent a non-party service supplier established in the territory of an FTA party in the form of a juridical person can benefit from preferential treatment. Such provisions affect services exported by a juridical person on a cross-border basis, via consumption abroad, or through the establishment of a commercial presence in another FTA territory. Table 9 summarizes the rules of origin for juridical persons established by the twenty-five East Asian FTAs. These rules are embedded in the definition of a juridical person, denial of benefit clauses, and extension of benefit clauses of FTA services chapters. For FTAs that subject investment in services to separate investment disciplines, additional rules are found in the definition of `investors of the other party' and investor denial of benefit clauses. 77Mattoo and Wunsch (2004) describe that the imposition of trade restrictions on international business process outsourcing has been considered by several US states. 78This special rule of origin is based on GATS Articles XXVII and XXVIII(f). The twelve FTAs are the AFAS, the ASEAN-China TIS Agreement, the Australia-Singapore FTA, the EFTA-Korea FTA, the EFTA- Singapore FTA, the India-Singapore ECA, the Japan-Malaysia EPA, the Japan-Philippines EPA, the Japan- Singapore EPA, the Jordan-Singapore FTA, the New Zealand-Singapore FTA, and the US-Vietnam BTA. 79The denial of benefit provisions are modelled after GATS Article XXVII(b). However, they apply in respect of non-parties to the FTA. 38 Table 9: Rules of origin for juridical persons Benefits of FTA ... ... extended to juridical persons ... limited to constituted under domestically domestic laws and owned or having substantive controlled business operations service in the domestic Agreement(s) suppliers territory Other provisions Australia-Singapore FTA, no yes No substantive business operations Guatemala-Taiwan (China) test for party-owned or controlled FTA, Korea-Singapore service suppliers FTA, Nicaragua-Taiwan (China ) FTA, Panama- Singapore FTA, Panam- Taiwan (China) FTA Mainland-Hong Kong no yes Offers in-depth definition of CEPA, Mainland-Macao substantive business operations CEPA ASEAN (AFAS), ASEAN- no yes Benefits also extended to juridical China TIS Agreement, persons with substantive business EFTA-Singapore FTA, operations in the territory of any Jordan-Singapore FTA party (services chapter only) Japan-Singapore EPA, no yes Benefits also extended to juridical Trans-Pacific EPA persons with substantive business operations in the territory of any party (services chapter only) No substantive business operations test for party-owned or controlled service suppliers New Zealand-Singapore no yes Benefits also extended to juridical FTA persons with substantive business operations in the territory of any party (services chapter only) No substantive business operations test for party-owned or controlled service suppliers (services chapter) No substantive business operations test in investment chapter EFTA-Korea FTA no yes Benefits also extended to juridical persons with substantive business operations in the territory of any WTO member, if service supplier is owned or controlled by person of a party (services chapter only) US-Vietnam BTA no yes Parties can deny FTA benefits to investors from third country if the denying party does not maintain normal economic relations with the third party (investment chapter only) 39 Lao PDR-US BTA no yes Parties can deny FTA benefits to investors from third country if the denying party does not maintain normal economic relations with the third party (investment chapter only) No substantive business operations test for party-owned or controlled service suppliers Chile-Korea FTA no yes Parties can deny FTA benefits to service providers from non-parties with which a party does not maintain diplomatic relations or where certain trade sanctions apply (investment chapter only) No substantive business operations test for party-owned or controlled service suppliers Japan-Malaysia EPA, no yes Parties can deny FTA benefits to Japan-Mexico EPA, Japan- service providers from non-parties Philippines EPA, with which a party does not Singapore-US FTA maintain diplomatic relations or where certain trade sanctions apply No substantive business operations test for party-owned or controlled service suppliers No extension of benefits to branches of enterprises of third states (investment chapter of Japan-Philippines EPA only) Japan-Malaysia EPA no yes Parties can deny FTA benefits to service providers from non-parties with which a party does not maintain diplomatic relations or where certain trade sanctions apply No extension of benefits to branches of enterprises of third states (investment chapter) Australia-Thailand FTA yes yes -- (for services and (for chapter on certain promotion and investment protection of disciplines) investments) India-Singapore ECA yes yes Benefits can be denied if juridical (for services (for services supplied person is owned or controlled by supplied through cross border and persons of the denying party commercial through consumption No substantive business operations presence and abroad) test for party-owned or controlled investment service suppliers disciplines) In the case of financial services, several Singaporean banks are expressly listed as beneficiaries 40 Most East Asian FTAs have created `fairly' liberal rules of origin, extending FTA benefits to juridical persons that are constituted or otherwise organized under the laws of a party and that have substantive business operations in the territory of that party--regardless of who owns or controls the juridical persons. In other words, service suppliers from non-parties can take advantage of the market opening negotiated under an FTA, as long as they establish a juridical person in one of the FTA member countries and are commercially active in that country. The latter requirement arguably serves to exclude `mailbox' companies that merely seek to exploit an FTA's trade preferences and that do not have any commercial interest in the country of establishment. Notwithstanding this liberal picture, there are important exceptions and qualifications. First, two FTAs--the Australia-Thailand FTA and the India-Singapore ECA--have adopted a significantly more restrictive rule of origin, limiting the benefits of FTAs to domestically owned or controlled firms. In countries with substantial `non-party' foreign participation in the service sector, such a requirement can narrow markedly the set of service suppliers eligible for preferences. In the case of the Australia-Thailand FTA, the domestic ownership or control requirement does not apply to the agreement's chapter on the promotion and protection of investments. In the case of the India-Singapore ECA, this requirement only applies to services supplied through commercial presence and to the agreement's investment disciplines. It does not apply to services supplied cross-border or through consumption abroad. Both FTAs define domestic ownership as domestic persons holding a majority equity share in the service supplier and domestic control as domestic persons having the power to name the majority of directors or otherwise directing the service supplier's actions. Interestingly, the India-Singapore ECA adds a special rule for the supply of audiovisual, education, financial and telecommunications services. For these activities, eligible service suppliers also include juridical persons which are owned or controlled by "the other Party"--presumably, referring to state-owned enterprises. In the case of financial services, the agreement explicitly lists several Singaporean financial institutions that are to qualify for preferences and specifies the types and numbers of legal entities through which these institutions can supply financial services in India. Finally, the India-Singapore ECA has a special clause that allows a party to deny FTA benefits if a juridical person is owned or controlled by persons from the denying party. Since FTA benefits for services supplied through commercial presence are already limited to domestically owned or controlled juridical persons, this clause applies only to services supplied through modes 1 and 2. Second, several agreements provide for a more liberal application of the substantive business operations requirement. In particular, the services chapters of the AFAS, the ASEAN-China TIS Agreement, the EFTA-Korea FTA, the EFTA-Singapore FTA, the Japan-Singapore EPA, the Jordan-Singapore FTA, the New Zealand-Singapore, and the Trans-Pacific EPA extend FTA benefits to duly constituted juridical persons with substantive business operations in the territory of any FTA party--not just the territory of the party in which the juridical person is constituted or otherwise organized. The investment chapter of the New Zealand-Singapore FTA goes further by eliminating the substantive business operations test altogether-- requiring only establishment or registration under a party's applicable laws. 41 Third, a number of agreements have incorporated foreign policy-related exceptions to otherwise liberal rules of origin. In particular, the Chile-Korea FTA (investment chapter only), the Japan-Malaysia EPA, the Japan-Mexico EPA, the Japan-Philippines EPA, and the Singapore-US FTA allow a party to deny FTA benefits to a juridical person from a non-party if (i) the denying party does not have diplomatic relations with the non-party, or (ii) the denying party prohibits transactions with the enterprise in question. The Lao PDR-US BTA and the US-Vietnam BTA have incorporated a similar exception that allows the denial of benefits if the denying party does not maintain normal economic relations with the third party. Fourth, as pointed out above, most FTAs require juridical persons to be constituted or otherwise organized under the laws of a party to be eligible for FTA benefits. The concept of `constitution or other organization' arguably encompasses non-incorporated legal entities such as branches and representative offices.80 The only exceptions are the investment chapters of the Japan-Malaysia EPA and the Japan-Philippines EPA, which expressly exclude branches of enterprises of third states from the definition of `investor of the other party'. Fifth, sixteen of the twenty-five FTAs do not require service suppliers that are owned or controlled by parties to show substantive business operations in the territory of any party.81 They only need to be constituted or otherwise organized under the laws of a party. This differential treatment implies that branches of such service suppliers located in a non-party benefit from preferential treatment, because these branches can be seen as being ultimately constituted under the laws of a party. In other words, the relevant FTAs offer party-owned or controlled service providers the benefit of relying on their global branch networks when supplying services to FTA markets.82 Sixth, most FTAs do not offer a definition of substantive business operations. The only exceptions are China's two CEPAs with Hong Kong and Macao, which closely circumscribe this concept for service suppliers from Hong Kong and Macao. To qualify for trade preferences, service suppliers must have had substantive business operations for 3-5 years in Hong Kong or Macao for the services they intend to provide in the Mainland; they must have paid profit tax in Hong Kong or Macao; they must own or rent premises for business operations in Hong Kong or Macao; and more than 50 percent of employees must be Hong Kong or Macao residents (or Chinese people staying in Hong Kong or Macao on a one way permit). Additional rules exist for law firms, which require the sole proprietor and all partners of a firm to be registered as practicing lawyers. The two CEPAs also establish a registration procedure which verifies that interested service suppliers meet the above requirements. In the case of Hong Kong, 1054 service suppliers 80Several negative list FTAs and investment chapters expressly refer to branches in the definition of a juridical person or the definition of an enterprise. 81As shown in Table 9, the exceptions are the AFAS, the ASEAN-China TIS Agreement, the Australia- Thailand FTA, the EFTA-Korea FTA, the EFTA-Singapore FTA, the Japan-Malaysia EPA, the Jordan- Singapore FTA, the Mainland-Hong Kong CEPA, the Mainland-Macao CEPA, and the US-Vietnam BTA. These agreements follow the GATS in requiring all juridical persons to show substantial business operations in at least one FTA party, regardless of who owns or controls them. 82The services chapter of the EFTA-Korea FTA requires service suppliers that are owned or controlled by a person of a party and constituted or otherwise organized in that party to only show substantial business operations in the territory of any WTO member. This treatment offers a similar benefit of drawing on a service supplier's international branch network insofar as this network extends to WTO member countries. 42 have submitted applications for certificates to be eligible under CEPA, of which 1014 have been approved.83 Rules of origin for natural persons The origin question for natural persons is relatively straightforward. An individual's economic ties with a particular country are closely linked to that individual's nationality or residency. Table 10 summarizes the rules of origin for natural persons found in the twenty- five East Asian FTAs. All agreements extend trade benefits to the nationals--or `citizens'-- of the signatory parties.84 In addition, a number of agreements extend benefits to individuals that have the right to permanent residency in an FTA member. In certain cases, permanent residents only qualify for trade preferences, if the importing party accords substantially the same treatment to permanent residents as to nationals in respect of measures affecting services trade. Provided the nationality or right to permanent residency conditions are met, agreements generally extend FTA benefits regardless of whether individuals actually reside in the territory of an FTA party. The only exception is the US-Vietnam BTA, which requires natural persons to reside in the territory of the `exporting' FTA party. For example, a US citizen residing in Hong Kong would appear to be ineligible for trade preferences under this bilateral agreement. Table 10: Rules of origin for natural persons Benefits of FTA ... ... extended to ... extended to domestic nationals permanent Agreement(s) (or `citizens') residents Other provisions Australia-Singapore FTA, yes yes -- India-Singapore ECA, Jordan-Singapore FTA, Korea-Singapore FTA, Nicaragua-Taiwan (China) FTA, Panama-Singapore FTA, Trans-Pacific EPA Australia-Thailand FTA, yes no -- Guatemala-Taiwan (China) FTA, Japan- Mexico EPA, Japan- Philippines EPA, Panama- Taiwan (China) FTA, Singapore-US FTA Chile-Korea FTA yes yes Benefits of chapter on temporary entry for business persons limited to citizens AFAS, ASEAN-China yes not automatically Benefits extended to permanent TIS Agreement, EFTA- residents only if a party accords Korea FTA, EFTA- substantially the same treatment to 83As of November 30, 2006 (see http://www.tid.gov.hk/english/cepa/statistics/hkss_statistics.html). 84The only two exceptions are the Mainland-Hong Kong and Mainland-Macao CEPAs, as these agreements are between separate customs territories within the same nation. 43 Singapore FTA, New permanent residents as to nationals Zealand-Singapore FTA, in respect of services measures US-Vietnam BTA For US-Vietnam BTA: natural person must reside in the territory of `exporting' party Japan-Malaysia EPA yes no (for Japan) -- yes (for Malaysia) Japan-Singapore EPA Yes no (for Japan) -- yes (for Singapore) Lao PDR-US BTA Yes no Definition of natural person applies to market access obligation only Mainland-Hong Kong Yes (for Mainland) no (for Mainland) -- CEPA yes (for Hong Kong) Mainland-Macao CEPA Yes (for Mainland) no (for Mainland) -- yes (for Macao) F. Trade rules Trade rules in services are generally understood as a set of disciplines designed to complement the core obligations that shape the liberalization content of trade agreements-- the latter consisting mainly of national treatment, market access, and MFN. While there is no unique definition of trade rules, most attention usually focuses on four areas: domestic regulation, subsidies, government procurement, and emergency safeguards.85 This focus is explained by the fact that disciplines in these areas are only incompletely developed under the GATS. Since WTO members could not reach a consensus on such disciplines during the Uruguay Round, they established a mandate in the GATS for further negotiations to complete rule-making in these areas. A natural question therefore is whether FTAs have been able to make any rule-making advances. In principle, the smaller number of countries involved in FTA negotiations may offer a more fertile environment for innovation on trade rules. At the same time, bilateral and regional negotiations share many of the technical challenges and regulatory sensitivities that have posed obstacles to progress at the multilateral level. We divide the discussion of trade rules into two parts. The first part will be exclusively devoted to domestic regulation. As will be seen, this area has seen some innovation in East Asian FTAs. The second part will discuss subsidies, government procurement, and emergency safeguards, where virtually no progress has been made at bilateral and regional levels. For ease of reference, Appendix 1 offers an overview of the disciplines established by East Asian FTAs in the four areas. 85Other areas of trade rules include general exceptions, the treatment of monopolies and exclusive service suppliers, and restrictions to safeguard the balance of payments. 44 Domestic regulation Most services agreements establish disciplines on domestic regulation. These disciplines are intended to cover measures that are non-discriminatory and qualitative in nature, presumably falling outside the scope of agreements' MFN, national treatment, and market access obligations.86 Services agreements often refer to qualification requirements and procedures, technical standards and licensing requirements, though other measures may be covered as well. Governments adopt these types of measures for legitimate regulatory purposes--such as protecting consumers, remedying market failures, and ensuring the quality of services. At the same time, domestic regulatory measures may impose restrictions to trade in services much beyond what is warranted to attain certain policy goals. Thus, disciplines on domestic regulation seek to ensure that internal government measures do not unnecessarily undermine the market opening offered by the core obligations on national treatment, MFN, and market access. In doing so, these disciplines serve to enhance the credibility of domestic services policies, because foreign service providers are offered some assurance that a government will not seek recourse to domestic regulatory measures to protect domestic service suppliers. Rules on domestic regulation typically concern three different regulatory aspects: ˇ the administration of domestic laws, administrative decisions and other rulings; ˇ the necessity of domestic regulatory measures, to the extent that they impose restrictions on trade in services; and ˇ the establishment of sectoral regulatory disciplines. The GATS has provisions in relation to all three aspects. Most East Asian FTAs--except the Lao PDR-US BTA, the Mainland-Hong Kong CEPA, and the Mainland-Macao-CEPA--have established rules covering at least one of them. Some FTAs have even established stronger obligations than what is found in the GATS. In what follows, we describe the key disciplines of the GATS and explore to what extent East Asian FTAs have gone beyond these disciplines. Administration of regulatory measures The GATS calls for "all measures of general application" to be "administered in a reasonable, objective and impartial manner."87 However, this requirement is limited to sectors in which WTO members have undertaken specific commitments. East Asian FTAs that have adopted a hybrid listing approach have replicated this requirement either by reproducing the relevant GATS provision in the text of the FTA or by express reference to the GATS. The only exceptions are the Japan-Malaysia EPA and the Japan-Philippines EPA, which do not feature any comparable discipline on the administration of regulatory measures. Negative list FTAs have followed two different routes. The Chile-Korea FTA, the Guatemala-Taiwan (China) FTA, the Japan-Mexico EPA, the Nicaragua-Taiwan (China) 86Services agreements typically do not define measures falling under domestic regulation and measures falling under one of the core market opening obligations in a mutually exclusive way. Pauwelyn (2005) argues that it is possible for a measure to fall under the scope of both domestic regulation and, say, market access. 87See GATS Article VI.1. 45 FTA, the Panama-Taiwan (China) FTA and the Singapore-US FTA do not provide for a requirement to administer regulatory measures reasonably, objectively and impartially-- following the original NAFTA model.88 The Australia-Singapore FTA, the Korea-Singapore FTA, the Panama-Singapore FTA, and the Trans-Pacific EPA have adopted a requirement mirroring the one found in the GATS. However, the reach of this requirement is different in three respects. First, given the negative list structure, it applies to all service sectors, rather than only to the sectors in which specific commitments are undertaken. Second, three agreements--the Australia-Singapore FTA, the Korea-Singapore FTA, the Panama- Singapore FTA--exempt all scheduled non-conforming and future measures from any discipline on domestic regulation.89 Third, in the case of the Korea-Singapore FTA and the Panama-Singapore FTA the requirement does not apply to commercial presence, as the services chapter of these two agreement does not extend to this mode of supply (see Section 3.A). Necessity test The GATS features what may be called a `weak' necessity test for certain regulatory measures. WTO members are required to ensure that licensing and qualification requirements and technical standards are based on objective and transparent criteria and not more burdensome than necessary to ensure the quality of a service. In addition, licensing procedures should not in themselves pose a restriction on the supply of a service. However, these requirements are subject to two important caveats. They can only be invoked if the relevant regulatory measures nullify or impair specific commitments and could not reasonably have been expected when specific commitments were made.90 Again, East Asian hybrid list FTAs--with the exceptions of the Japan-Malaysia EPA and the Japan-Philippines EPA--have effectively replicated the weak necessity test of the GATS. Three negative list FTAs--the Australia-Singapore FTA, the Korea-Singapore FTA and the Panama-Singapore FTA--also follow this approach, although the necessity test's reach is different along the lines described above. The Chile-Korea FTA, the Guatemala-Taiwan (China) FTA, the Japan-Malaysia EPA, the Japan-Mexico EPA, the Japan-Philippines EPA, the Nicaragua-Taiwan (China) FTA, the Panama-Taiwan (China) FTA, and the Singapore-US FTA adopt language similar to the GATS, but the necessity test applies only on a best endeavor basis.91 In other words, these agreements provide for an even weaker regulatory discipline than the GATS. The only East Asian FTA featuring a strong necessity test is the Trans-Pacific EPA. It lists all the requirements found in the GATS, but does not limit regulatory scrutiny to situations where specific commitments have been nullified or impaired and regulatory measures could not reasonably have been expected. The necessity test of the Trans-Pacific EPA is potentially far-reaching. In principle, it applies to all sectors, all four modes of supply, and all measures--even those for which reservations have been listed by the parties. 88Interestingly, the Singapore-US FTA has incorporated this requirement only in its financial services chapter. 89In contrast to the GATS, these three FTAs thus clearly delineate national treatment, market access, and MFN measures from domestic regulatory measures. 90The GATS also calls for the development of additional disciplines to ensure that qualification requirements and procedures, technical standards and licensing requirements do not constitute unnecessary barriers to trade in services. See GATS Article VI:4. 91The best-endeavor necessity test has its origins in the NAFTA. 46 Sectoral disciplines In addition to horizontal rules on domestic regulation, trade agreements may also establish regulatory disciplines for specific service sectors. Like horizontal regulatory rules, sectoral disciplines seek to ensure that legitimate regulatory interventions do not lead to unwarranted barriers to trade in services. However, sectoral disciplines can better account for the regulatory environment in which specific services are provided and thereby strengthen the reach of regulatory rules. Ultimately, greater regulatory scrutiny serves to enhance the credibility of market opening commitments in relevant service sectors. WTO members have established regulatory rules under the GATS in two service sectors-- accountancy services and telecommunications services. In the case of accountancy services, WTO members agreed on a set of disciplines that, among other things, establishes a `strong' necessity test for measures relating to licensing requirements and procedures, technical standards and qualification requirements.92 In the area of telecommunications, post-Uruguay Round negotiations led to a liberalization package that included a Reference Paper on regulatory principles. Among other things, this reference paper sets rules on network interconnection, universal service, the independence of regulatory agencies, and the allocation of the radio spectrum.93 Several East Asian FTAs have introduced new sectoral disciplines, focusing mainly on telecommunications services and electronic commerce-related services (see Table 11).94 In the case of the former, dedicated chapters on telecommunications have deepened the obligations of the GATS Reference Paper. In the case of the latter, FTAs have established rules on the electronic supply of services, online consumer protection, data protection, electronic signatures, and other matters. In addition to these two main areas, the Panama- Singapore FTA features certain regulatory disciplines in the maritime transport sector, such as non-discriminatory access to a list of essential port services. The scope of regulatory disciplines in these areas varies significantly from agreement to agreement. In addition, some of the regulatory provisions create binding obligations on the matters covered, whereas others establish only `soft-law' or best-endeavor principles. A detailed comparative review of regulatory rules in East Asian FTAs and their valued added relative to the GATS would go beyond the scope of this paper.95 92However, Adlung (2006b) argues that the necessity test embedded in the WTO's Accountancy Disciplinces is weaker, because regulatory measures only need to fulfil `a legitimate objective'--a concept vaguer than `ensuring the quality of a service' as established by GATS Article VI.6. 93See Gamberale and Mattoo (2002) for a detailed review of GATS regulatory rules in these two sectors. 94The Nicaragua-Taiwan (China) FTA, the Panama-Singapore FTA and the Singapore-US FTA have also established certain regulatory rules for financial services. For example, these FTAs require non-discriminatory access to payment and clearing systems operated by public entities. The EFTA-Korea FTA establishes certain disciplines on the co-production of broadcasting programs. However, these disciplines seem to mainly take the form of core market opening obligations (national treatment and market access). 95See Wunsch-Vincent (2006) for a discussion of provisions on electronic commerce in US FTAs. 47 Table 11: New Sectoral disciplines found in FTAs Agreement(s) Sector(s) covered Australia-Singapore FTA, Korea-Singapore FTA, Electronic commerce and telecommunications Nicaragua-Taiwan (China) FTA, Singapore-US FTA Australia-Thailand FTA, India-Singapore ECA, Electronic commerce only Jordan-Singapore FTA Chile-Korea FTA, EFTA-Korea FTA, EFTA- Telecommunications only Singapore FTA, Japan-Singapore EPA, Panama- Taiwan (China) FTA Panama-Singapore FTA Electronic commerce, telecommunications, and maritime transport AFAS, ASEAN-China TIS Agreement, Guatemala- No sectoral disciplines Taiwan (China) FTA, Japan-Malaysia EPA, Japan- Mexico EPA, Japan-Philippines EPA, Lao PDR-US BTA, Mainland-Hong Kong CEPA, Mainland- Macao CEPA, New Zealand-Singapore FTA, Trans- Pacific EPA, US-Vietnam BTA Government procurement, subsidies and safeguards Government procurement of services is largely carved out from the GATS. Specifically, the GATS provides that obligations on national treatment, MFN, and market access do not apply to measures "governing the procurement by governmental agencies of services purchased for governmental purposes".96 Most East Asian FTAs have followed the same approach or have carved out government procurement from the scope of services disciplines altogether.97 The only exceptions are the services chapters of the Lao PDR-US BTA and the US-Vietnam BTA which do not feature a government procurement carve-out. Thus, government purchases of services--like any measure affecting trade in services--are subject to the core market opening obligations of these agreements, especially national treatment.98 In the area of subsidies, the GATS does not establish any special discipline. It merely provides for a negotiating mandate to develop necessary disciplines to avoid "trade- distortive" effects of subsidies. In the absence of special rules, subsidies in services are subject to all obligations under the GATS--most importantly, national treatment. In other words, in sectors where specific commitments are undertaken and unless national treatment limitations with respect to subsidies are inscribed, government aid offered to domestic service suppliers has to be extended on a non-discriminatory basis to foreign service suppliers. Like the GATS, East Asian FTAs have not established any dedicated disciplines for subsidies. To 96See GATS Article XIII. At the same time, purchases of services are covered by the disciplines of the WTO Agreement on Government Procurement. However, this agreement is a plurilateral agreement, extending only to 37 WTO members (see http://www.wto.org/english/tratop_e/gproc_e/gp_gpa_e.htm). 97At the same time, the majority of these FTAs feature self-standing chapters with disciplines on government procurement. Like the WTO Agreement on Government Procurement, these chapters encompass government purchases of services. 98The services chapters of China's two CEPAs with Hong Kong and Macao also do not feature any provision on government procurement. However, these two agreements do not establish a national treatment obligation in the first place (see Section 3.B). 48 the contrary, rules on subsidies in ten East Asian FTAs fall short of multilateral rules as they carve out subsidies from the scope of services disciplines.99 Finally, the GATS does not provide for a mechanism by which WTO members can temporarily depart from their commitments in response to an unanticipated surge in services imports with harmful effects on domestic service suppliers. The establishment of such emergency safeguard measures (ESMs)--similar to those provided for in the WTO Agreement on Safeguards for goods trade--was considered during the Uruguay Round, but no consensus could be achieved. The GATS merely calls for negotiations "on the question of emergency safeguard measures based on the principle of non-discrimination." These negotiations have not led to a tangible outcome, as WTO members still disagree about the feasibility and desirability of such measures.100 East Asian FTAs have not established services ESMs either. Only one agreement--the Japan-Malaysia EPA--foresees the development of guidelines and procedures for the application of ESMs within five years of the entry into force of the agreement. Interestingly, the India-Singapore ECA expressly forbids the initiation of safeguards investigations and the imposition of safeguards measures. Two additional observations in relation to emergency safeguard measures are in order. First, the group of ASEAN countries has been one of the main advocates for the establishment of ESMs at the WTO.101 At the same time, ASEAN's own regional trade agreement in services--the AFAS--does not feature an emergency safeguard mechanism.102 Second, the lack of ESMs in bilateral and regional agreements may constrain the application of multilateral emergency safeguard measures, if WTO members were ever to agree on such measures. Unless ESMs are also incorporated into FTAs, countries departing from their GATS commitments may run afoul of their FTA liberalization undertakings and may be liable to dispute settlement under these agreements. G. Dispute Settlement Rules, rights, obligations, and commitments established in trade agreements are of limited value if they are not supported by an instrument capable of determining when they are being infringed and to compel parties to abide by them. Thus, most East Asian FTAs provide for dispute settlement mechanisms (DSMs) to resolve differences between parties on the interpretation and implementation of the agreements' disciplines. Effective dispute settlement is central for harnessing the credibility benefit offered by trade agreements. The existence of a sound mechanism for remedying non-compliance with legal obligations assures traders and investors that trade policy will not become more restrictive at 99As shown in Appendix 1, these fifteen agreements are the ASEAN-China TIS Agreement, the Australia- Singapore FTA, the Australia-Thailand FTA, the Chile-Korea FTA, the Guatemala-Taiwan (China) FTA, the Japan-Malaysia EPA, the Japan-Mexico EPA, the Japan-Philippines EPA, the Korea-Singapore FTA, the New Zealand-Singapore FTA, the Nicaragua-Taiwan (China) FTA, the Panama-Taiwan (China) FTA, the Panama- Singapore FTA, the Singapore-US FTA, and the Trans-Pacific EPA. 100See GATS Article X. Adlung (2007) discusses the role of services ESMs in greater detail. 101In 2000, ASEAN submitted a concept paper on possible elements of an emergency safeguard mechanism (see WTO Document S/WPGR/W/30). 102ASEAN countries have adopted rules on emergency safeguard measures in the context of the ASEAN Investment Area (AIA). However, the AIA does not apply to investment in services (see Section 3.C). 49 the discretion of the `importing' party. Economically powerful nations may sometimes be in a position to enforce compliance with trade rules through diplomatic means--especially in smaller states. However, diplomacy alone will not resolve all trade controversies between nations. When a dispute breaks into the open, dispute resolution based on shared principles minimizes the risk of a protectionist backlash. Resort to unilateral retaliatory measures--as observed in extreme forms during the Great Depression of the 1930s--can provoke a vicious cycle of trade protection with adverse economic consequences. Most East Asian FTAs follow the standard practice in modern FTAs of establishing two distinct dispute settlement procedures: first, a state-to-state DSM that usually applies to all chapters of the agreement--including trade in goods, trade in services, investment and intellectual property; and second, an investor-to-state DSM that applies only to disputes between a private party and a host country government on an agreement's investment disciplines. The substantive and procedural elements of DSMs embedded in East Asian FTAs vary in important ways. In general, the effectiveness of a DSM can be seen to depend on three factors: the ability of a party to prevent the establishment of arbitral panels; the power of instruments to enforce arbitral rulings; and the mechanism's institutional underpinnings. In what follows, we will review the state-to-state and investor-to-state DSMs found in East Asia and evaluate their effectiveness along these three dimensions. State-to-state dispute settlement Table 12 offers an overview of the state-to-state DSMs adopted by East Asian FTAs. Except for China's CEPAs with Hong Kong and Macao and the US-Vietnam BTA, all agreements feature rules governing the resolution of disputes between parties. State-to-state DSMs typically apply to all FTA disciplines covering trade and investment in services. The only exception is the Japan-Mexico EPA, which removes disciplines on financial services from the reach of the agreement's dispute settlement system. In many ways, state-to-state DSMs found in FTAs share many of the procedural elements of the WTO Dispute Settlement Understanding (DSU). In particular, they typically foresee three procedural stages: consultations, decision, and implementation. The consultations phase offers a diplomatic forum for discussion, ideally leading to a mutually satisfactory solution to the dispute between the parties. Even if consultations fail to produce such a solution, they can serve the parties to better understand their respective positions and the measures at issue, providing the basis for well-informed arbitration. If consultations do not lead to a resolution of the dispute, most FTAs foresee the establishment of an arbitral panel that decides on the consistency of the measures in question with the obligations established in an FTA. It is at this second stage where significant differences between DSMs exist. WTO dispute settlement rules do not require the party complained against--the `defending' party--to consent to the establishment of an arbitral panel. In fact, this feature of the WTO DSU was brought about by the Uruguay Round and has been hailed as one of the most important improvements in multilateral dispute settlement.103 103See, for example, Hoekman and Mavroidis (2000). 50 Table 12: State-to-state dispute settlement mechanisms Type of Can parties Agreement(s) DSM block Remarks panels? Mainland-Hong Kong CEPA, Mainland-Macao CEPA, US- None -- -- Vietnam BTA Lao PDR-US BTA Unilateral retaliation -- -- Australia-Singapore FTA, Australia-Thailand FTA, Japan-Malaysia EPA, Japan- Ad-hoc Yes Possibility of blocking a panel by failing to appoint Philippines FTA, Korea- arbitration arbitrator(s) or chairman. Singapore FTA Chile-Korea FTA, Guatemala-Taiwan (China) FTA, Nicaragua-Taiwan Ad-hoc If not appointed by a party, panelist drawn by lot (China) FTA, Panama- arbitration Yes from a roster. Possibility of blocking a panel by Taiwan (China) FTA, failing to designate candidates for the roster. Singapore-US FTA If not appointed by a party, panelist shall be the Japan-Singapore EPA Ad-hoc Party's legal expert of the Consultative Committee. arbitration Yes Possibility of blocking a panel by not designating legal expert to the Consultative Committee. AFAS Ad-hoc Appointment of panelists by ASEAN Secretary- arbitration No General if parties fail to do so. New Zealand-Singapore FTA, EFTA-Singapore FTA, Panama-Singapore FTA, Ad-hoc No Appointment of panelist by WTO Director-General Trans-Pacific EPA, Jordan arbitration if one party fails to do so. Singapore FTA Appointment of panelist by WTO Director-General EFTA-Korea FTA Ad-hoc arbitration No if one party fails to do so, or ultimately drawn by lot from a list submitted by one party only. Japan-Mexico EPA Ad-hoc Panelist drawn by lot from a list submitted by one arbitration No party only. Financial services excluded from DSM. Panel composed of one single panelist if one party ASEAN-China TIS Ad-hoc fails to make its appointment. If both parties appoint Agreement arbitration No panelists but fail to agree on chairman, WTO Director-General is requested to appoint chairman. Panel composed of one single panelist if one party India-Singapore ECA Ad-hoc fails to make its appointment. If both parties appoint arbitration No panelists, chairman can be drawn by lot from a list submitted by one party only. Ten East Asian FTAs have followed the WTO DSU in providing for a `right to a panel' (see Table 12). Typically, parties are required to appoint the panelists charged with ruling on the dispute. In case a party fails to do so--or fails to put forward candidates for a list from which 51 panelists are selected--the relevant DSMs have established mechanisms to overcome a possible procedural deadlock. Several agreements have directly followed the WTO DSU in allowing the complaining party to ask the Director-General of the WTO to perform the necessary appointments if the defending party fails to make its appointment(s). Other agreements provide for a missing panelist to be drawn by lot from a list submitted only by the complaining party. The ASEAN-China and India-Singapore ECA feature a provision according to which a panel can be composed of a single panelist appointed by the complaining party. By contrast, the DSMs of eleven East Asian FTAs ultimately allow parties to block the establishment of panels. Even though those agreements also require parties to appoint panelists, they do not feature any mechanism to resolve a procedural deadlock if a party fails to make its appointment(s) or fails to put forward candidates for the list from which panelists are to be selected.104 Experience with dispute settlement under NAFTA has shown that `defending' parties make use of this procedural loophole to prevent the establishment of arbitral panels.105 The possibility of blocking the establishment of panels limits the effectiveness of dispute settlement. Moral suasion and the fact that trade disputes are `repeated games' with reversing roles may still induce the defending parties to agree to the establishment of arbitral panels. However, from the point of view of private traders and investors, the absence of an automatic right to a panel introduces uncertainty that ultimately reduces the credibility of FTA liberalization undertakings. The decision of an arbitral panel determines the consistency of the disputed measures with FTA obligations and, in certain cases, may also provide recommendations to parties on how to best put inconsistent measures into conformity with FTA rules. Most East Asian FTAs follow the WTO's dispute settlement system in allowing the defending party a `reasonable' period of time to implement the panel's decision. If the complaining party feels that the implementation period proposed by the defending party is excessive, it can seek a further arbitral decision on what timeframe can be considered reasonable. The Chile-Korea FTA has sought to expedite the implementation process by requiring panel decisions to immediately spell out a timeframe for compliance. The ASEAN DSM goes even further in setting a uniform 60-day implementation period from the adoption of the panel decision, unless parties agree otherwise. Similarly, Taiwan's (China) FTAs with Guatemala, Nicaragua, and Panama 104Interestingly, the Guatemala-Taiwan (China) FTA has established separate DSMs for maritime and air transport services. In contrast to the main state-to-state DSM of this agreement, the two sectoral DSMs feature a mechanism to overcome a procedural deadlock. 105The issue of establishment of a panel under NAFTA Chapter 20 disciplines arose in the context of the Mexico ­ Soft Drinks dispute at the WTO. In that case, Mexico argued that a complaint against the United States under NAFTA "stalled at the stage of constituting the arbitral panel because of the United States' refusal to appoint panelists and to agree on the appointment of a chairperson" (response by Mexico to Question 7 from the Panel). On the same matter, the United States expressed that "[u]nlike the DSU, which permits a party to request that the Director-General appoint panelists 20 days after the panel's establishment if the parties are unable to agree, there is no parallel provision in the NAFTA. As Mexico concedes: `NAFTA's Chapter Twenty lacks the automaticity of the DSU.' In this regard, the NAFTA Secretariat did not appoint panelists in the NAFTA sugar dispute pursuant to Mexico's request, because under NAFTA dispute settlement rules the NAFTA Secretariat does not have the authority to appoint panelists" (response by the US to Question 76 of the Panel). See Panel Report on Mexico ­ Soft Drinks, WTO Document WT/DS308/R, Annex C, pages C-5 and C-87, respectively. 52 require panel reports to be implemented within six months after issuance of the panel report, again unless parties agree on a different timeframe.106 If the defending party has not complied with the panel's decision at the end of the implementation period, the complaining party has the right to retaliate. Like under the WTO DSU, retaliation in FTAs takes the form of suspending trade benefits equivalent in value to the damages caused by the defending party's inconsistent measures. The economic drawbacks of this form of `shoot yourself in the foot' enforcement are well-known.107 Nonetheless, parties to most FTAs see the suspension of trade benefits as the only effective political economy instrument to induce implementation of panel decisions. One noteworthy innovation is introduced by the DSM of the Singapore-US FTA. Under this agreement, the defending party can avoid the suspension of trade benefits by offering the complaining party the payment of an annual monetary compensation. Unless the parties agree otherwise, the amount of the compensation is equivalent to 50 percent of the level of damages suffered by the complaining party.108 The Lao PDR-US BTA stands out with a unique dispute settlement system. While parties are encouraged to hold consultations on matters relating to the interpretation and implementation of the agreement, the BTA does not provide for arbitral panels if consultations cannot resolve parties' differences. Instead, a party can make a unilateral determination that the other party has failed to implement one or more obligations and request compensation for the damages suffered. If the requested party fails to provide such compensation, the agreement allows the requesting party to unilaterally determine and impose retaliatory measures equivalent in value to the damages suffered. Arguably, the lack of independent arbitration under the Lao PDR- US BTA transforms disputes resolution into a power-driven--rather than law-based--system. As pointed out above, unilateral retaliatory measures can exacerbate trade controversies rather than solve them, especially when non-compliance with BTA obligations is not obvious. In addition, differences in the size of the two parties' economies suggest that the agreement's retaliation mechanism may be effectively used by one party only. Finally, the credibility of a DSM does not depend only on its procedural rules, but also on the broader institutional framework in which it is embedded. At the multilateral level, the WTO Secretariat provides legal assistance for arbitral panels, drawing on a pool of experienced trade lawyers. In addition, parties have the right to appeal panel decisions in front of a permanent seven-member Appellate Body. Since the establishment of the WTO in 1995, there have been more than 100 panel decisions and more than 70 rulings by the WTO's Appellate Body--forming a substantial body of accumulated case law. The record of WTO members in implementing arbitral decisions is generally considered good, notwithstanding implementation deficiencies in certain cases.109 No comparable institutional underpinnings exist in FTAs. Most agreements establish ad-hoc administrative committees composed of government officials from the parties, but no self- 106Somewhat confusingly, the Panama-Taiwan (China) FTA also requires the arbitral panel to set an implementation timeframe not exceeding 180 days. 107See, for example, Hoekman and Mavroidis (2000) and Pauwelyn (2000). 108In principle, the WTO DSU also allows for "mutually acceptable compensation" if rulings are not implemented within a reasonable period of time (Article 22.2 of the DSU). However, the term "compensation" is generally understood to take the form of trade concessions. In any case, no WTO dispute has so far made use of this option. 109See Davey (2006). 53 standing secretariats with the mandate and capacity to provide legal support to arbitral panels. In addition, they do not provide for the possibility of appealing the findings of arbitral panels. The only exception is the ASEAN dispute settlement mechanism. It has both an independent secretariat equipped to provide legal support and a permanent Appellate Body, closely following the WTO model. However, to our knowledge, no disputes have led to the adoption of panel or Appellate Body reports under ASEAN, so far. This may, in part, reflect the fact that the `enhanced' ASEAN DSM was only created in 2004.110 To the extent that the weaker institutional underpinnings of FTA DSMs lower the real or perceived quality of dispute settlement, parties may be more reluctant to implement adverse panel decisions--thereby reducing the credibility of FTA commitments. Investor-to-state dispute settlement As suggested by their name, investor-to-state DSMs afford private investors the ability to invoke an FTA's (or separate) investment disciplines directly against a government before an international arbitration court. This form of dispute resolution offers certain advantages to foreign investors. They do not need to convince their home governments to challenge non- compliant measures of the host country. In addition, if arbitral tribunals confirm the inconsistency of host country measures with investment disciplines, foreign investors can request monetary compensation for the damages suffered. A government's acceptance of such scrutiny, in turn, can strengthen the credibility of its investment regime. At the same time, economists disagree about the extent to which the credibility afforded by this form of arbitration is associated with greater foreign investment flows, with some studies suggesting only a small, if any, effect.111 It is also worth noting that foreign investors mostly resort to this form of arbitration when a government's action leads them to exit a market--especially, in the case of asset expropriation. The pursuit of international arbitration implies a rupture in an investor's relations with the host government, which may be difficult to reconcile with continued business operations. In addition, investor-to-state arbitration decisions do not require governments to bring non-compliant measures into conformity with an agreement's investment disciplines, thus offering no forward-looking relief for foreign investors. From an investor's viewpoint, state-to-state and investor-to-state arbitration should therefore be seen as complements, rather than substitutes.112 From the viewpoint of defending governments, in turn, some arbitral decisions have been criticized for their `expansive' interpretation of treaty provisions, creating more burdensome obligations than those originally intended by the signatory parties.113 110The original ASEAN DSM was created in 1996, but was perceived as ineffective due to a lack of independent decision-making. See Greenwald (2006). 111Hallward-Driemeier (2003) and Rose-Ackerman and Tobin (2005) find no or only a weak empirical relationship between the existence of a bilateral investment treaty and inflows of foreign investment. However, using a different estimation sample, Neumayer and Spess (2005) find a strong positive relationship. 112For a more detailed discussion of the benefits and drawbacks of state-to-state versus investor-to-state arbitration, see Molinuevo (2006). 113According to some legal commentators, certain arbitral decisions have interpreted the concept of `investment' to include transactions that parties did not intend to be covered. Similarly, certain interpretations of obligations relating to `fair and equitable treatment' and measures `tantamount to expropriation' have been considered to go beyond parties' original intentions. In response to some of these arbitral decisions, the United States and Canada have included interpretative notes in their BITs and FTA investment chapters, clarifying the scope of the fair and equitable treatment and expropriation provisions. See Sornarajah (2004). 54 Except the Japan-Philippines EPA, all of the East Asian FTAs that have an investment chapter or a separate investment treaty provide for investor-to-state dispute settlement.114 For agreements with dual coverage of investment in services, the reach of an investor-to-state DSM depends critically on the rules that define the relationship between trade in services and horizontal investment chapters (see Section 3.C). For example, private investors in services may not be able to challenge national treatment violations through investor-to-state arbitration, if an agreement gives precedence to services disciplines in the legal effect of the national treatment obligation. The ability of a foreign investor to initiate an arbitration claim depends on whether that investor is covered under the rule of origin established by an FTA or investment treaty. In other words, access to investor-to-state arbitration is itself a trade preference. As discussed in Section 3.E, most East Asian FTAs feature liberal rules of origin which include all service providers constituted under the laws of a party and engaging in substantive business operations, regardless of who owns or controls them. In addition to being a covered investor, the initiation of investor-to-state arbitration proceedings is subject to the consent of the affected government. Most East Asian FTAs and investment treaties provide for automatic consent to arbitration by the parties. Exceptions are the EFTA-Singapore FTA and the New Zealand-Singapore FTA, which allow parties to block the initiation of arbitration claims. In the case of the EFTA-Korea FTA, a party's consent to arbitration depends on the nature of the dispute. Automatic consent only applies to disputes initiated by foreign investors that already have an investment position in a host country and not to those involving investors that merely seek to make an investment. The Nicaragua-Taiwan (China) FTA conditions automatic consent to investors coming forward with arbitration claims within three years from the moment they have become aware of the alleged violation of the agreement. As in the case of state-to-state dispute settlement, the absence of a right to arbitration may weaken the effectiveness of an investor-to-state DSM and, ultimately, the credibility of the investment regime. Most East Asian investor-to-state DSMs follow standard international practice in allowing for two types of arbitration procedures. Foreign investors can submit their arbitration claims either to the International Centre for the Settlement of Investment Disputes (ICSID) or to ad- hoc arbitral tribunals established under the Arbitration Rules of the United Nations Commission on International Trade Law (UNCITRAL). Exceptions are the Australia- Thailand FTA, which provides only for the former, and the EFTA-Singapore FTA, Jordan- Singapore FTA, and New Zealand-Singapore FTA, which provide only for the latter. Finally, some agreements feature special provisions for investor-to-state disputes in the area of financial services. As pointed out in Section 3.A, the provision of financial services raises special regulatory sensitivities. Several governments have shunned the exposure of measures in this sector to the full scrutiny of an investor-to-state DSM.115 Thus, the Nicaragua-Taiwan (China) FTA, the Panama-Singapore FTA, and the Singapore-US FTA allow arbitration claims based on the breach of certain obligations only--namely, expropriation and 114The Japan-Philippines EPA calls for the establishment of an investor-to-state DSM through further negotiation. 115The Chile-Korea FTA and the Japan-Mexico EPA fully carve out financial services from the scope of the agreements' investment chapter. By design, investor-to-state dispute settlement therefore does not extend to financial services in these cases. 55 compensation, transfer of funds, and denial of benefit.116 Thus, even though these three FTAs provide for national treatment, MFN and market access in financial services, private investors cannot bring arbitration claims against governments pertaining to breaches of these core market opening obligations.117 Yet another special provision on investor-to-state arbitration in financial services is found in the EFTA-Korea FTA, the Korea-Singapore FTA, the Nicaragua-Taiwan (China) FTA, the Panama-Taiwan (China) FTA and the Singapore-US FTA. These agreements require authorization from a joint FTA committee to proceed with investor-to-state arbitration, if the defending government invokes one of the exceptions to financial services disciplines-- relating to prudential measures, monetary and exchange rate policy, and matters affecting the soundness and integrity of the financial system. If the joint FTA committee does not reach a conclusion, the EFTA-Korea FTA allows the investor to proceed with its arbitration claim. The Korea-Singapore FTA, the Nicaragua-Taiwan (China) FTA, the Panama-Taiwan (China) FTA, and the Singapore-US FTA instead allow the defending party in this case to request the establishment of a state-to-state arbitration panel that makes a binding ruling on the legality of the exceptions defense. 4. Where and how far have East Asian FTAs gone beyond the GATS? In this section, we evaluate to what degree the twenty-five East Asian FTAs with a substantial services component have led to wider and deeper trade commitments relative to the state of play in the GATS. For this purpose, we created a database that identifies the `value added' of FTAs for each of the 154 sub-sectors and four modes of supply identified under the GATS. In particular, we classified the resulting 616 entries per FTA schedule into four categories: (i) Sub-sectors and modes for which only a GATS commitment exists or an FTA does not offer any improvement (GATS only); (ii) Sub-sectors and modes for which a partial GATS commitment exists and an FTA eliminates one or more remaining trade-restrictive measures (FTA improvements); (iii) Sub-sectors and modes for which no GATS commitment is available, but an FTA commitment is made (FTA new sectors); and (iv) Sub-sectors and modes for which neither a GATS nor an FTA commitment exists (Unbound). In addition, for categories (i), (ii), and (iii), we further distinguished between partial and full commitments, with the latter defined as not listing any remaining trade-restrictive measures. Our detailed methodology for classifying commitments into the four categories is described in Appendix 2. Several important methodological elements are worth pointing out here. First, we define trade-restrictive measures as all measures that are inconsistent with GATS- 116The Nicaragua-Taiwan (China) FTA and the Singapore-US FTA also allow for arbitration that a party has breached the `Special Formalities and Information Requirements' obligation of the investment chapter. 117The purpose of extending application of the investor-to-state DSM to the denial of benefit provision is not clear. One motivation may be to prevent governments from circumventing the expropriation and transfer of funds disciplines by simply denying investors the benefits of the investment chapter. At the same time, the question arises whether investors could challenge violations of national treatment, market access, or MFN as a denial of benefit. 56 style market access and national treatment disciplines. As further explained in Appendix 2, these two disciplines implicitly capture the additional obligations on local presence, senior managers and boards of directors, and performance requirements found in negative list agreements. In recording trade-restrictive measures, we did not separately identify market access and national treatment measures. Thus, a partial commitment corresponds to a commitment that maintains at least one trade-restrictive measure in either the market access or national treatment category; a full commitment corresponds to a commitment that does not list any trade-restrictive measure in either of these two categories. Second, we treated horizontal commitments in `hybrid' GATS-style schedules as if they were inscribed in each scheduled sub-sector. While this approach follows GATS scheduling guidelines, it departs from similar quantification exercises performed in the previous literature.118 In comparison to those studies, we thus obtain a smaller number of full commitments--especially for Mode 3 where most countries have scheduled horizontal limitations. Third, commitments without any trade-restrictive measure that did not cover the full sub-sector (as defined under the GATS) were classified as partial commitments. Quantifying services commitments in the way described above allows for meaningful comparisons. At the same time, our approach has a limitation that is inherent to any analysis of services trade policy. Even though we may record that an FTA improves in a certain sub- sector relative to the GATS, we do not measure the depth of the underlying improvement. For example, a country may raise in one FTA the foreign equity ceiling in the banking sector from 40 to 45 percent and in another FTA eliminate a prohibition on branch banking; we would classify both commitments as partial improvements even though the latter is arguably more far-reaching than the former. Ideally, we would like to measure the tariff-equivalent of services trade liberalization: trade barriers fall from x to y percent of the import value. However, trade protection in services is exercised through a variety of non-tariff measures and empirically assessing their de facto restrictiveness remains a fundamental challenge.119 To partially remedy this deficiency, Appendix 3 offers descriptive summaries of the key liberalization measures offered by the East Asian FTAs examined. While selective, these summaries are intended to complementing our quantitative findings presented in this section. A second caveat is that we do not evaluate whether trade commitments imply actual market opening or merely bind services policies at or above the existing status quo. For example, domestic services policy in ASEAN countries is often more liberal--on an MFN basis--than the commitments negotiated under the ASEAN Framework Agreement on Services.120 By contrast, the bulk of China's commitments under the Mainland-Hong Kong and Mainland- Macao Closer Economic Partnership Agreements imply new market opening. For the most part, China's bilateral liberalization undertakings grant Hong Kong and Macao-based service providers preferential access to the Chinese market, in advance of the liberalization schedule to which China committed when it acceded to the WTO in 2001. Some of the bilateral preferences will be eroded by 2008 once China's GATS commitments are fully phased in; 118For example, in quantifying the results of Uruguay Round services commitments, Hoekman (1996) treats horizontal commitments as a separate sub-sector. Marko (1998) ignores horizontal commitments in quantifying the results of the WTO Agreement on Basic Telecommunications Services. 119Some studies have attempted to refine measurement of trade policy in certain service sectors. See Findlay and Warren (2001) for a review. However, the results of these studies have been mixed and they typically cover only a subset of service sectors. 120See Fink (2006) and Stephenson and Nikomborirak (2002). 57 others will be long-lasting (see Fink, 2005). Carefully evaluating to what extent the East Asian FTAs provide for de novo liberalization was beyond the scope of this paper. In what follows, we use our database to analyze the liberalization content of the twenty-five East Asian FTAs. We first focus on the set of twenty-five agreements as a whole and then assess their contribution at the level of individual countries. Aggregate assessment There are fourteen East Asian countries that participate in at least one of the twenty-five FTAs that form the basis of our analysis, for a total of 48 schedules of commitments.121 Drawing on our database, Annex A depicts the liberalization content of FTAs relative to the GATS for each of these 48 schedules (in alphabetical order of the scheduling country). The first graph for each schedule presents this information by the 12 main service sectors identified under the GATS. The bars for the four liberalization categories are relative to the total number of sub-sectors and modes in a given sector. (The number of sub-sectors ranges from 4 for environmental services, health-related and social services, and tourism and travel- related services to 46 for business services).122 The second graph for each schedule breaks the information down by the four modes of supply and depicts an aggregate total. Again, all bars are in relative terms. As can be seen from the figures in Annex A, the ambition of liberalization undertakings varies considerably. At one end of the spectrum, the commitments by Cambodia and Vietnam under the ASEAN-China TIS Agreement do not offer any valued added relative to multilateral commitments. The commitments of other countries under this agreement show few improvements over GATS commitments and only a small number of new sub-sectors and modes. The value-added offered by ASEAN members' commitments under the AFAS shows somewhat greater ambition, but is still limited in breadth and depth.123 Similarly, Malaysia's and the Philippine's commitments in their respective Economic Partnership Agreements with Japan and Thailand's commitment under the Australia-Thailand FTA do not go substantially beyond the GATS. At the other end of the spectrum, most of the commitments made by Japan, Korea, Singapore, and Taiwan (China) in their FTAs offer substantial value added vis-ŕ-vis the GATS. In addition, Laos' undertaking under the Lao PDR-US BTA shows a high level of ambition. As described in Section 3.A, Laos subscribed to full national treatment and full market access in a large number of sectors--including professional, telecommunications, construction, distribution, financial, health and education services.124 Since Laos is not yet a member of the WTO, its bilateral commitment breaks new ground in binding services policies under international law. Figure 3 plots the share of sub-sectors and modes covered by countries' GATS and FTA commitments against their GDP per capita. In the left-hand chart, every dot represents a 121Hong Kong and Macao have not made any commitment under their Closer Economic Partnership Agreements with China. In addition, Brunei has not made any commitment under the Trans-Pacific EPA. 122By definition, the residual sector `Other services not included elsewhere' is not further broken down into sub- sectors. 123Thanh and Bartlett (2006) offer a comprehensive analysis of the achievements of AFAS. 124However, the definition of Mode 4 under the Lao PDR-US Bilateral Trade Agreement is limited to services sales persons and intra-corporate transferees. 58 country. Taking the group of East Asian WTO members as a whole, there is no clear relationship between a country's level of economic development and the scope of its GATS commitment. However, if we exclude recent accessions to the WTO--Cambodia, China, Taiwan (China), and Vietnam--a positive relationship emerges: richer WTO members make more extensive commitments. The difference in the relationship between the two subsets is due to the non-reciprocal nature of WTO accession negotiations. History has shown that acceding countries have made substantially wider and deeper commitments compared to existing WTO members at similar levels of development. In the right hand chart of Figure 3, every dot represents an FTA schedule. There is a clear positive relationship between a country's level of economic development and the value added offered by its FTAs. At the same time, GDP per capita does not explain all of the variation in the ambition of FTA liberalization undertakings. For example, Laos' commitment under the Lao PDR-US BTA is well-above what would be predicted by its level of economic development. There is also substantial variation in the ambition of FTA undertakings among the agreements negotiated by the same country--as illustrated by the wide range of FTA value added offered by Singapore in its 12 FTAs. Figure 3: GATS/FTA commitments and GDP per capita 80% 80% Taiw an (China) Singapore Korea Vietnam China Japan 60% 60% tne Korea Cambodia Japan Taiw an (China) mt ded Malaysia Lao PDR ad mmioc 40% STAG Thailand eulav 40% Singapore Philippines Philippines ATF Indonesia w ithout recent WTO accessions 20% 20% Indonesia China Malaysia Cambodia Thailand Vietnam 0% 0% 5 6 7 8 9 10 11 5 6 7 8 9 10 11 ln(GDP per capita) ln(GDP per capita) Notes: These figures exclude Brunei Darussalam and Myanmar, for which no data on GDP per capita are available. The share of GATS commitments is based on all sub-sectors and modes with a partial or full commitment (regardless of subsequent FTA commitments). The share of FTA commitments is based on all sub- sectors and modes for which improved or new partial/full commitments relative to the GATS were made. Underlined country names denote recent accessions to the WTO. Are the contributions of FTAs evenly spread across sectors and modes of supply or are there specific areas in which FTAs seem more likely to make progress? To answer this question, we computed the aggregate (unweighted) liberalization content of all the 48 schedules in our database. Figure 4 depicts the results of this exercise broken down by the 12 main service sectors. As in the agreement-specific figures, the bars for the four liberalization categories are relative to the total number of sub-sectors and modes in a given sector. Several patterns can be observed. First, the contributions of East Asian FTAs are not limited to particular sectors. FTAs offer improved and new commitments in all of the 12 main service sectors. Second, construction and tourism have received the most attention in FTAs, with more than 40 percent of sub-sectors and modes showing improved or new FTA commitments. This is followed by construction, recreational, business, communications, and education services, 59 with 30-40 percent of sub-sectors and modes showing an FTA value added. The smallest contributions are found in environmental, health, transport, and financial services, with only 20 to 30 percent of sub-sectors and modes showing improved or new FTA commitments. This result confirms the well-known sensitivities towards liberalization in these sectors, even though FTAs were still able to make some inroads towards greater openness. In the case of financial services, the comparatively modest contribution of FTAs may also be due to the already wide coverage of GATS commitments--an outcome of the post-Uruguay Round financial services negotiations in 1997. Third, the overwhelming share of FTA commitments are still of a partial nature. While this may to some extent reflect our strict criterion for classifying a commitment as `full' (see above), it is apparent that FTAs do not provide for immediate free trade across the board, but only offer a step in that direction. Figure 4: Aggregate liberalization content by sector GATS only FTA improvements FTA new subsectors Partial Full Partial Full Partial Full Unbound Business services Communication services Construction and related engineering services Distribution services Educational services Environmental services Financial services Health and related social services Recreational, cultural, and sporting services Tourism and travel related services Transport services Other services not included elsewhere 0% 20% 40% 60% 80% 100% Notes: The commitments shown here are the unweighted aggregate total of the 48 schedules shown in Annex A. 60 Figure 5 shows the same aggregate liberalization content but this time broken down by the four modes of supply. Two patterns bear brief discussion. First, mode 4 has seen the greatest share of improved or new FTA commitments (40 percent), followed by mode 3 (32 percent), mode 2 (25 percent), and mode 1 (23 percent). However, in most cases the value added offered by FTAs in the area of temporary labor movement is small, consisting mostly of minor expansions in the types of individual service providers and measures covered by the agreement. Few of the FTAs provide for expanded quotas for individual service providers or the elimination of economic needs tests. Second, the share of full FTA commitments is substantial for mode 1 (10 percent) and mode 2 (12 percent). As in the GATS, this pattern reflects the absence of horizontal limitations for cross-border supply and consumption abroad in most FTAs and the fact that trade restrictions for these two modes are less pervasive. The share of full commitments for mode 3 is less than 1 percent and solely attributable to the commitments made by Laos under the Lao PDR-US BTA. No FTA has offered a full commitment for mode 4 in any of the 154 sub-sectors. Figure 5: Aggregate liberalization content by modes of supply GATS only FTA improvements FTA new sectors Partial Full Partial Full Partial Full Unbound Mode 1 Mode 2 Mode 3 Mode 4 Total 0% 20% 40% 60% 80% 100% Notes: See Figure 4. Finally, we can also use our database to investigate whether FTA commitments differ according to the scheduling approach chosen. In Section 3.A, we distinguished between three types of positive list agreements--the Lao PDR-US BTA, pure positive lists, and hybrid lists--and negative list agreements. As discussed in that section, some observers have argued that a negative list approach offers incentives for the scheduling of more liberal commitments. Is this presumption borne out for East Asian FTAs? At first glance, the answer appears to be `yes'. Figure 6 depicts the aggregate liberalization content for negative list agreements, all positive list agreements, and the three different types of positive list 61 agreements. As can be seen, the group of negative list agreements has unleashed a greater share of improved or new commitments (60 percent) than positive list agreements (30 percent).125 Figure 6: Aggregate liberalization content by scheduling approach GATS only FTA improvements FTA new sectors Partial Full Partial Full Partial Full Unbound Negative list agreements All positive list agreements Lao PDR-US BTA Pure positive list Hybrid list 0% 20% 40% 60% 80% 100% Notes: See Figure 4. For a list of agreements in the various categories shown, see Figure 2. As discussed in Section 3.A, three of the negative list agreements have adopted a hybrid list for cross-border trade in financial services (modes 1, 2, and 4) and one negative list agreements has adopted a hybrid list for all trade in financial services (modes 1, 2, 3, and 4). The relevant commitments for these cases were allocated to the hybrid list category. At the same time, the relationship between the scheduling approach and the ambition of liberalization undertakings is not straightforward. The case of the Lao PDR-US BTA illustrates that far-reaching liberalization can also be achieved through a positive list of sectors. Even comparing FTAs negotiated by the same country, negative list agreements do not always provide wider and deeper coverage. For example, Singapore's schedule under the positive list Japan-Singapore EPA shows more improved and new commitments than Singapore's schedule under the negative list Australia-Singapore FTA (see Figures A30a/b and A33a/b in Annex A).126 In addition, the empirical patterns depicted in Figure 6 do not permit the conclusion that a negative list approach causes the scheduling of more liberal commitments. As discussed in Section 3.A, causality may well run in the opposite direction. Countries that are prepared to 125Within the group of positive list agreements, pure positive list FTAs appear to have unleashed the smallest shares of improved or new commitments (12 percent in total). However, this category is made up of only two agreements: China's CEPAs with Hong Kong and Macao. As discussed in the text, these two agreements imply substantial actual liberalization, even though the number of sub-sectors covered by them appears modest. 126Both agreements were concluded around the same time: the Japan-Singapore EPA in 2002 and the Australia- Singapore FTA in 2004. 62 offer or demand greater openness in services may be more likely to seek a negative list for scheduling commitments. To discern the effect of the scheduling approach, we would ideally need to compare the outcome of a positive list negotiation and a negative list negotiation, involving the same countries negotiating under identical circumstances. Of course, such a `natural experiment' does not exist. However, one can attempt to estimate the direct effect of the scheduling approach through an econometric investigation. In Box 1, we describe a regression analysis that attempts to controls for countries' propensity to commit to open service markets using FTA partners' level of economic development, the number of FTA parties, and prior GATS commitments. We still find a positive effect of negative list agreements on the FTA liberalization content, but this effect is solely explained by the scheduling of new sub-sectors and modes. FTA improvements over existing GATS commitments were not affected by the scheduling approach. In other words, negative listing appears to bring about wider but not deeper commitments. However, given the limitations of our database and the fact that other factors are likely to determine countries' natural propensity to liberalize, these findings should be considered as tentative. Box 1: An econometric evaluation of the contribution of negative list agreements Our database on East Asian trade commitments allows us to explore the contribution of negative list agreements in an econometric setting. In particular, we investigate what determines the share of commitments with an FTA value added for the 12 main service sectors and 4 modes of supply across the schedules in our database. Our corresponding dependent variables distinguish between three types of FTA value added: (i) improvements relative to existing GATS commitments; (ii) the scheduling of new sub-sectors and modes not listed in the GATS; and (iii) the total contribution of FTAs, defined as the sum of (i) and (ii). In constructing the three dependent variables, we did not make any distinction between partial and full commitments. The first set of regressions explains the FTA value added by a dummy variable that is 1 if the commitment was scheduled under a negative list and 0 otherwise, and fixed effects for the 12 service sectors and 4 modes of supply. The results are shown in the first three columns of Table 13. Coefficients were estimated by ordinary least squares.127 The dummy variable for negative list commitments is always positive and statistically significant at the 1 percent level. This result is not surprising and merely confirms what can be seen in Figure 6: negative list FTAs are associated with deeper and wider commitments. As explained in the text, this finding does not account for the possibility that trading partners with a greater propensity to commit to open service markets may be more likely to adopt a negative list. To address this possibility, we included four additional variables in our regressions: the GDP per capita of the scheduling country, the GDP per capita of the FTA partner(s), the number of FTA parties, and the share of subsectors and modes committed under the GATS.128 Our underlying premise is that countries' `natural' propensity to commit to liberal trade policies is first and foremost determined by levels of economic development. Richer economies with more competitive service sectors will have greater confidence in binding their own policies under international law and will pursue market opening abroad more aggressively. The number of FTA parties serves as a proxy for free-rider effects in trade negotiations that may lead countries to hold back from making commitments (see Section 2). We expect this variable to show a negative coefficient--the larger the number of players, the greater the potential for free-riding. Finally, the share of GATS commitments will affect the scope for FTAs to add value. We expect a larger share of (partial) GATS commitments to increase the scope for FTA improvements but to reduce the scope for scheduling new sub-sectors and modes of supply. 127Since our dependent variable is truncated at values below zero and above one, we also tested a Tobit maximum likelihood estimation technique (with a lower bound of 0 and an upper bound of 1). The results showed higher coefficient estimates, but did not change any of the conclusions described in the text. 128Where there was more than one FTA partner, we used the population-weighted GDP per capita of all partner countries. Brunei and Myanmar (for ASEAN) and Liechtenstein (for EFTA) were excluded in the calculation of population weighted GDP per capita, because no GDP data were available for these countries. 63 The results of the second set of regressions are shown in columns four to six. As before, the dummy variable for negative list commitments is positive and statistically significant at the 1 percent level for new FTA commitments and the total FTA contribution. The value of the estimated coefficients is somewhat smaller than before, suggesting that the GDP per capita variables indeed work to reduce the effect of negative listing. In addition, the negative list dummy variable is not any more statistically significant for improved FTA commitments. At their face value, our results suggest that negative listing does not hold any advantage in deepening GATS commitments, but that they induce the scheduling of new sub-sectors and modes of supply. This finding accords with intuition. Most positive list agreements included in our analysis are hybrid list agreements, for which the level of openness is to a large extent determined by measures inscribed on a negative basis (see Section 3.A). In other words, the distinguishing characteristic of negative list agreements is the way in which sectors are listed and this seems to have an effect on the negotiating outcome. As expected, GDP per capita of the scheduling country has a positive effect on the FTA value added. Interestingly, GDP per capita of the partner country (or partner countries) was statistically not significant for all three dependent variables. This latter result seems surprising. One would expect richer countries to exert stronger pressure on FTA partners to make wider and deeper commitments. Yet such pressure--if it exists-- does not appear to be reflected in the negotiating outcome. As expected, the number of FTA parties works to reduce the FTA value added, pointing to the existence of free-rider effects in FTA negotiations with more than 2 parties. Finally, the share of GATS commitments has a positive effect on improved FTA commitments and a negative effect on new FTA commitments--again, as expected. The net impact on the total FTA contribution is negative, suggesting that the latter effect dominates the former. As a final note, we caution against over-interpreting our econometric findings. As described in the text, our database does not capture the true depth of FTA commitments, but merely records commitments that show some value-added relative to the GATS. In addition, countries' `natural' propensity to commit to open service markets is likely to be only imperfectly captured by the four control variables considered here. To the extent that other factors play a role in this respect, our econometric approach over-estimates the contribution of the scheduling approach as such. Table 13: Results of econometric investigation Improved FTA New FTA Total FTA Improved FTA New FTA Total FTA commitment commitment contribution commitment commitment contribution Negative list 0.109* 0.299* 0.408* 0.015 0.206* 0.221* commitment (10.14) (21.57) (25.01) (1.29) (14.64) (12.59) GDP per capita of 0.030* 0.043* 0.074* scheduling country (9.54) (11.01) (15.02) GDP per capita of -0.005 0.001 -0.004 partner country (or (-1.32) (0.26) (-0.64) countries) Number of FTA -0.005* -0.010* -0.015* parties (-2.80) (-4.57) (-5.48) GATS commitment 0.269* -0.417* -0.148* (19.15) (-23.94) (-6.80) Number of 2,112 2,112 2,112 2,112 2,112 2,112 observations Adjusted R- 0.367 0.500 0.606 0.503 0.640 0.682 squared Notes: Ordinary least squares estimates; t-statistics are in parenthesis; * indicates statistical significance at the 1 percent level. Data on GDP per capita are for 2002, were taken from the World Bank's World Development Indicators, and were converted to natural log values. Brunei and Myanmar were dropped from the analysis, because no GDP per capita data were available. That leaves 44 schedules of commitments with observations for 12 sectors and 4 modes of supply, explaining the total of 2,112 observations. 64 Country level assessment Most East Asian countries have concluded more than one FTA. The aggregate liberalization content shown in Figures 3-6 use individual commitment schedules as the unit of analysis. Since countries may make the same or similar commitments to more than one trading partner, it is also interesting to aggregate agreements at the country level. In particular, we identified the most liberal commitment a country has made across all of its FTAs for each of the 154 sub-sectors and 4 modes described above. This exercise is not entirely academic. As explained in Section 3.B, many FTAs feature non-party MFN clauses. Parties to such agreements guarantee their FTA partners the most liberal treatment ever committed in any FTA. In addition, even for a country not bound by an non-party MFN clause, it is instructive to ask how far it has been willing to go across all of its FTAs. The figures presented in Annex B depict the maximum liberalization content for countries with more than one FTA, again broken down by sectors and modes of supply. Table 14 summarizes the information contained in these figures, indicating for each country the number of FTAs and the total maximum liberalization content in the four liberalization categories (expressed as percentage shares of 616 total entries per country). Table 14: Maximum liberalization content by country GATS only FTA improvements FTA new sectors Variation Number coefficient Country of FTAs Partial Full Partial Full Partial Full Unbound (V) Brunei Darussalam * 2 8.0 3.6 0.8 0.0 15.3 9.3 63.1 0.006 Cambodia 2 36.9 18.0 0.6 0.0 2.9 0.2 41.4 0.000 China 3 31.0 18.2 10.9 0.0 3.9 0.0 36.0 0.564 Indonesia 2 9.3 1.9 7.8 4.1 8.1 2.1 66.7 0.162 Japan * 4 11.0 13.8 26.0 6.0 21.6 17.9 3.7 0.654 Korea 3 1.8 11.4 33.4 4.5 32.8 5.5 10.6 0.558 Lao PDR 3 -- -- -- -- 13.0 33.4 53.6 0.245 Malaysia * 3 22.6 8.1 11.9 0.2 8.1 1.9 47.2 0.387 Myanmar 2 0.8 0.6 0.3 0.0 21.3 4.9 72.1 0.104 Philippines * 3 9.7 3.7 9.9 1.1 23.5 5.8 46.1 0.431 Singapore * 12 1.9 9.1 18.8 4.7 39.4 22.6 3.4 0.574 Taiwan (China) * 3 12.7 20.0 29.1 5.2 14.4 15.7 2.9 0.900 Thailand 3 16.6 4.1 11.5 0.3 12.2 1.0 54.4 0.142 Vietnam * 3 39.3 16.7 2.8 0.3 0.3 0.2 40.4 0.000 Notes: Commitment counts are based on the maximum of commitments across all FTAs concluded by a country. In other words, if an improved commitment or new sub-sector/mode relative to a country's GATS schedule is found in at least one FTA, the relevant sub-sector is classified as `improved' or `new' in the table's FTA columns. Countries marked with an asterisk are parties to at least one FTA featuring an non-party MFN clause. Figures in the four liberalization categories are expressed as a percentage share of 616 total entries per country. The FTA variation coefficient is calculated as explained in the text. The numbers shown for Korea, Japan, Singapore, and Taiwan (China) confirm that these four high income countries have made extensive use of FTAs to subscribe to greater openness in services. Singapore stands out in this group, with 86 percent of sub-sectors and modes showing improved or new commitments across its 12 FTAs. For Korea, Japan and Taiwan (China), this share stands at 76, 71, and 64 percent, respectively. Substantial FTA value 65 added is also found for Laos (46 percent) and the Philippines (40 percent). In addition, in the case of Laos, the majority of FTA undertakings are full commitments, reflecting the ambition of the Lao PDR-US BTA. For the remaining 8 countries, the share of sub-sectors and modes with an improved or new FTA commitment lies somewhere between 3 and 30 percent. Finally, it is interesting to ask whether the commitments offered by one country to two or more FTA partners are alike or dissimilar. We investigate this question by calculating a variation coefficient, V, which we define as follows: Aij V = ij , Numberof subsectorsandmodeswith animprovedor new commitmentin atleastoneFTA where Aij = 0 if onlyone FTA shows an improved or new commitmentfor subsector i and mode j Aij = Aij Number of FTAs that show an improvedor new commitmentfor subsector i and mode j = otherwise. Total number of FTAs Intuitively, our variation coefficient measures the number of matching FTA commitments as a share of all improved or new FTA commitments. It ranges from 0 to 1, with 0 indicating perfect incongruence among a country's FTAs and 1 suggesting perfectly matching FTAs. In calculating V, we make no distinction between partial and full commitments. We also do not directly compare FTA commitments. Thus, even though two FTAs may show improved or new commitments for the same sub-sector and mode, the respective commitments may still differ. The calculated values of our variation coefficient are shown in the last column of Table 14. V is zero in the case of Cambodia and Vietnam, due to the fact that these two country's commitments under the ASEAN-China TIS Agreement do not offer any value added relative to the GATS.129 The coefficient is highest in the case of Taiwan (China), as its three FTA schedules show a high degree of similarity. For Japan, Korea, and Singapore V, lies in the 0.5-0.7 range, which suggests that these countries have a common set of commitments that they are prepared to offer to all negotiating partners, but reserve some commitments for certain trading partners--possibly responding to trading partners' market opening requests. The coefficient for China also lies in this range, but the explanation is different. China's commitments in its CEPAs with Hong Kong and Macao are almost identical, but those commitments have little in common with China's undertaking under the ASEAN-China TIS Agreement.130 For the remaining countries, V lies somewhere between 0 and 0.5. As it turns out, all countries with a V coefficient in this range are ASEAN member countries. The relatively lower coefficient values partly reflect dissimilarities in these countries' undertakings under 129In the case of Vietnam, the US-Vietnam BTA only offers an FTA value added in distribution services, a sector that is not scheduled under the AFAS. See Figures A46a and A48a. 130China's liberalization undertakings in its two CEPAs with Hong Kong and Macao are less the outcome of Hong Kong's or Macao's negotiating demands, but rather by what China was prepared to offer to its two Special Administrative Regions. These agreements have to be understood in the context of the `one country, two systems' formula. For a further discussion, see Fink (2005). 66 the AFAS and the ASEAN-China TIS Agreement. In other words, ASEAN members have gone further at the regional level compared to what they have offered to China in their `super- regional' agreement. 5. Are East Asian FTAs compatible with WTO rules on economic integration? The analysis presented so far has shown how much bilateral and regional agreements have led to market opening in services beyond existent multilateral commitments. The twenty-five East Asian FTAs examined feature different degrees of ambition--ranging from agreements with broad sectoral coverage and deep liberalization undertakings to agreements that add only limited value to existing GATS commitments. These findings are not only of academic interest. The WTO has rules on the conclusion of economic integration agreements (EIAs). Preferential agreements in services entail an exception to the general principle of non-discrimination between WTO Members, enshrined in the MFN obligation of the GATS. Like its goods alter ego--GATT Article XXIV--GATS Article V prescribes a series of conditions that treaties on economic integration in services must fulfill in order to constitute a lawful deviation from the MFN principle. Observance of WTO rules on economic integration is not only a matter of respect for the multilateral trading system. Compliance of an FTA with GATS Article V falls under the jurisdictional capacity of the WTO's dispute settlement system. Thus, should a preferential agreement involving WTO members be found to not comply with the requirements of the GATS, trade preferences under such an agreement would have to be `multilateralized' to the entire WTO membership.131 The requirements of GATS Article V involve a substantive element and a procedural element. The substantive element establishes obligations on the sectoral coverage and depth of FTAs as well as on the treatment of non-parties. In particular, WTO-consistent EIAs are required to: ˇ have substantial sectoral coverage, in terms of number of sectors, volume of trade affected and modes of supply (understood as not providing for the a priori exclusion of any mode of supply); ˇ provide for the absence or elimination of substantially all discrimination that affects service suppliers from a party to an EIA; ˇ not raise the overall level of barriers to trade in services for WTO members that are not party to an EIA; ˇ and provide for a rule or origin that extends trade preference to service suppliers from non-parties that are constituted under the laws of a party and are engaged in substantive business operations in the territory of the parties. 131For a review of WTO jurisprudence on economic integration--in particular, Article XXIV of the GATT-- see Marceau and Reiman (2001). 67 The first and second substantive requirements need to be met either at the entry into force of an EIA or on the basis of a reasonable time-frame.132 The main procedural element is the prompt notification of an EIA--as well as any subsequent enlargement or significant modification--to the WTO Council for Trade in Services (CTS). In addition, where agreements are implemented on the basis of a time-frame, the parties need to report periodically to the CTS on the state of implementation. The CTS may initiate an examination of an EIA's consistency with the substantive requirements of Article V and issue recommendations to the parties. A new `transparency mechanism' established by WTO members in December 2006 has somewhat transformed this procedure. On the one hand, the WTO Secretariat will now prepare a `factual presentation' for every notified EIA, on the basis of which WTO members `consider' an EIA. On the other hand, the new mechanism neither foresees a formal examination of an EIA's consistency with GATS Article V nor the issuance of recommendations to the parties.133 Do East Asian FTAs live up to these standards? An authoritative answer can only emerge from WTO dispute settlement. So far, there has been no jurisprudence on GATS Article V. In addition, the CTS has not provided any further clarification on Article V conditions. The precise interpretation of WTO rules in this area remains therefore uncertain. Nonetheless, the analysis presented in the last two sections can shed light on the criteria that might be relevant in assessing compliance with Article V requirements. In what follows, we first document which agreements have been notified to the CTS. We then confront the substantive requirements outlined above with the observed practices in East Asian FTAs. Notification Fourteen of the twenty-five East Asian FTAs have so far been notified to the WTO (see Table 15). Typically, notification occurs within a few weeks or months after entry into force of the FTA, sometimes even shortly before that date. The longest time lag between entry into force and notification has been eleven months (for the Jordan-Singapore FTA). If the "prompt" notification requirement applies from the date of entry into force of an FTA, it appears that notifications have for the most part been made according to GATS Article V obligations.134 Eight of the notified FTAs have undergone a factual examination process. However, the CTS has so far not adopted any report on the compliance of these FTAs with GATS Article V. 132Article V bis establishes additional rules for labour market integration agreements. These rules are of little relevance for our purposes, however, as none of the East Asian FTAs provides for this form of integration. 133See the December 2006 Decision of the WTO General Council (WTO Document WT/L/671). It remains open whether the CTS could still initiate an examination of compliance and issue recommendations, based on the original GATS Article V mandate. However, it is worth noting that even before the establishment of the new transparency mechanism the CTS had not adopted any report on the consistency of an EIA with GATS requirements. 134However, in discussion in the WTO Committee on Regional Trade Agreements, it has also been suggested that a "prompt" notification should occur at least 90 days before an agreement takes effect (see WTO Document WT/REG/W/37). The December 2006 Decision of the WTO General Council stipulates that notification "will occur no later than directly following the parties' ratification of the RTA [...] and before the application of preferential treatment between the parties". In addition, this Decision calls on parties to inform the WTO about the initiation and conclusion of FTA negotiations prior to formal notification. See WTO Document WT/L/671. 68 Table 15: East Asian FTAs notified to the WTO Agreement Date of entry into Date of notification Examination process force AFAS December 30, 1998 Not notified -- New Zealand-Singapore FTA January 1, 2001 September 19, 2001 Factual examination concluded US-Vietnam BTA December 10, 2001 Not notified -- Japan-Singapore EPA November 30, 2002 November 14, 2002 Factual examination concluded EFTA-Singapore FTA January 1, 2003 January 24, 2003 Factual examination concluded Australia-Singapore FTA July 28, 2003 October 1, 2003 Factual examination concluded Mainland-Hong Kong CEPA January 1, 2004 January 12, 2004 Factual examination concluded Mainland-Macao CEPA January 1, 2004 January 12, 2004 Factual examination concluded Singapore-US FTA January 1, 2004 December 19, 2003 Factual examination concluded Panama-Taiwan (China) FTA January 1, 2004 Not notified -- Chile-Korea FTA April 1, 2004 April 19, 2004 Factual examination concluded Australia-Thailand FTA January 1, 2005 January 5, 2005 Factual examination not started Laos PDR-US BTA February 4, 2005 Not notified -- Japan-Mexico EPA April 1, 2005 April 22, 2005 Factual examination not started India-Singapore ECA August 1, 2005 Not notified -- Jordan-Singapore FTA August 22, 2005 July 12, 2006 Examination not requested Korea-Singapore FTA March 2, 2006 February 24, 2006 Factual examination not started Guatemala-Taiwan (China) FTA July 1, 2006 Not notified Japan-Malaysia EPA July 13, 2006 July 13, 2006 Examination not requested Panama-Singapore FTA July 24, 2006 Not notified -- EFTA-Korea FTA September 1, 2006 August 28, 2006 Examination not requested Trans-Pacific EPA November 8, 2006 Not notified -- Nicaragua-Taiwan (China) FTA Not yet in force Not notified Japan-Philippines EPA Not yet in force Not notified ASEAN-China EPA Entry into force Not notified -- scheduled for July 1, 2007 Source: WTO (http://www.wto.org/english/tratop_e/region_e/region_e.htm, as of January 31, 2007). As of January 2007, nine East Asian FTAs have not been notified to the WTO. In the case of some of these agreements, non-notification may be due to their recent vintage. The US BTAs with Laos and Vietnam have not been notified, probably because they are unlikely to pose any conflict with the MFN principle of the GATS. Laos is not yet a member of the WTO and Vietnam's WTO accession commitment has eroded virtually all of the preferences that Vietnam granted to the US.135 The United States, in turn, does not extend any trade benefit to its BTA partners beyond its existing GATS commitment. 135 In comparing Vietnam's GATS schedule to its undertaking under the US-Vietnam BTA, we only found one (lasting) incidence of a more liberal BTA commitment. Vietnam's GATS commitments in distribution services features an exemption for the distribution of certain products, which does not fully coincide with the exemption list found in Vietnam's BTA commitment in this sector. In addition, a number of scheduled transition periods do not fully coincide, giving the US selected transitory preferences (though these preferences may not be implemented in domestic laws and regulations). 69 There are two agreements which have been in force for more than three years and for which non-notification is not due to an apparent reason--the ASEAN Framework Agreement on Services and the Panama-Taiwan (China) FTA.136 Substantial sectoral coverage The first of the four substantive requirements relates to substantial sectoral coverage. GATS Article V spells out that this concept is to be understood in terms of number of sectors, volume of trade affected and modes of supply. However, the precise application of these criteria remains unclear. Several questions immediately arise. What precisely is meant by the `volume' of services trade (as opposed to the `value' of such trade)? At what level of disaggregation should the count of sectors be made? Can entire sectors be excluded from the agreement? If so, at which point would an exclusion of a sector reduce the volume of trade to a non-substantial level?137 The lack of sufficiently disaggregated data on trade in services further complicates the task of determining whether or not an FTA meets a certain threshold value above which sectoral coverage could be considered substantial. The analysis presented in the previous section has shown that no East Asian FTA provides for universal sectoral coverage. Having said this, the lack of universal coverage does not immediately imply non-substantial coverage. Looking at the number of sub-sectors, we note that some East Asian FTAs, such as the Japan-Singapore FTA or the Chile-Korea FTA, provide for wide sectoral coverage, averaging commitments in well over 70 percent of all service sub-sectors. By contrast, a great number of East Asian FTAs--including the AFAS, the ASEAN-China TIS Agreement, the Australia-Thailand FTA, the Mainland-Hong Kong and Mainland-Macao CEPAs, and the Jordan-Singapore FTA--feature commitments in less than half of all 154 sub-sectors.138 Without implying any judgment on the definition of sectors to be counted, it seems fair to conclude that current commitments under FTAs do not manifestly provide for substantial sectoral coverage. It is beyond the scope of this paper to attempt any quantification of the volume of trade covered by East Asian FTAs. As already pointed out, such an exercise would be severely constrained by the availability of data on trade in services. However, it is worth pointing out that certain agreements carve out service activities that are known to be associated with substantial trade flows--air and maritime transport services and financial services (see Table 2).139 Again, it is not obvious to what extent the exclusion of such sectors reduces the volume of trade covered to non-substantial levels. As far as modes of supply are concerned, GATS Article V makes clear that there should be no a priori exclusion of any mode of supply. Thus, an agreement that features commitments in all service sectors, but excludes one or more modes of supply would still fail the 136See http://www.aseansec.org/Ratification.pdf for the date of entry into force of the AFAS. 137In discussions in the WTO Committee on Regional Trade Agreements, one WTO member has suggested that excluded sectors should not be of an essential nature--alluding specifically to transport services, but presumably also encompassing services such as finance and telecommunications that form the `backbone' of an economy (See WTO Document WT/REG/M/22). However, an essentiality test is not expressly mentioned in GATS Article V. In addition, such a criterion would seem difficult to apply in practice, as most services--except maybe services such tourism or entertainment--can be argued to be essential in some way. 138See Annex A for a graphical description of the sectoral coverage of FTA commitments. 139Another open question is whether FTAs need to expand coverage to air transport, which has been carved out from the scope of the GATS. 70 substantial sectoral coverage test. None of the twenty-five East Asian FTAs formally excludes any mode of supply from its coverage.140 As discussed in Section 3.A, most negative list agreements exclude mode 3 from the scope of the services chapter, but cover commercial presence in the investment chapters of these agreements.141 Indeed, all agreements analyzed offer some commitments in each of the four modes of supply (see Annex A). Finally, FTAs that do not provide for substantial sectoral coverage when they enter into force can still be consistent with Article V, if further negotiations lead to the achievement of substantial sectoral coverage within a reasonable timeframe. Most East Asian FTAs incorporate provisions that call for further liberalization through successive negotiations. In the case of AFAS and China's two CEPAs with Hong Kong and Macao, several rounds of negotiations have taken place. However, as pointed out above, commitments under these agreements cover still less than half of the 154 sub-sectors identified under the GATS. While at current trends these agreements would eventually reach universal coverage, it is an open question whether the pace of liberalization is sufficient for substantial coverage to be achieved within a timeframe that can be deemed `reasonable'.142 Elimination of substantially all discrimination The second of the four substantive conditions of GATS Article V calls for the elimination of substantially all discrimination, with explicit reference to the national treatment article of the GATS. In other words, EIAs are allowed to maintain all non-discriminatory measures that fall exclusively under the market access discipline, but they are supposed to substantially do away with measures inconsistent with national treatment.143 As the first substantive condition, the requirement to eliminate substantially all discrimination raises a number of interpretative questions. Does this requirement extend to all sub-sectors and modes for which FTA commitments are made? Which measures could still be maintained so that the level of remaining discrimination can be considered non-substantial? Would the value or volume of trade in a particular sub-sector play a role in this assessment? As discussed in Section 4, quantifying the restrictiveness of trade barriers in services--for example, in the form of tariff-equivalents--is a challenging task. For methodological and data reasons, a rigorous empirical assessment of the depth of FTA liberalization undertakings appears elusive. 140Some WTO Members have argued that certain mode 4 aspects exempted from the GATS through the Annex on the Movement of Natural Persons should be included in EIAs (see WTO documents WT/REG/W7 and WT/REG/M/22). Thus, even FTAs that fully replicate the GATS modes of supply would not meet the substantive sectoral coverage test. However, it is uncertain whether such an expansionist view would be upheld in WTO dispute settlement proceedings. 141Similarly, several negative list agreements adopt a definition of mode 4 different from the one found in the GATS. It is uncertain, however, whether this definition is necessarily narrower. In addition, the relevant agreements complement services commitments with dedicated MNP chapters. See Section 3.D. 142In discussions in the WTO Committee on Regional Trade Agreements, suggestions about what can be considered a "reasonable" period of time for substantial liberalization of services trade to occur have ranged, for the most part, from 5 to 10 years (see WTO Document WT/REG/W/37). 143Article V offers vaguely formulated flexibility in evaluating whether substantially all discrimination has been eliminated. Thus, "consideration may be given to the relationship of the agreement to a wider process of economic integration or trade liberalization among the countries concerned." 71 Our database of the value added of FTA liberalization undertakings discussed in Section 4 did not separately record market access and national treatment commitments. Still, a few observations are possible based on the qualitative summaries of FTA commitments presented in Appendix 3. First, none of the East Asian FTAs provide for full national treatment across all sectors and modes. Second, where sub-sectors have been scheduled, modes 1 and 2 are for the most part subject to few explicit discriminatory measures. Having said this, in several FTAs, parties require the establishment of a commercial presence or the registration with local professional bodies as a prerequisite for supplying services. Even if such restrictions are de jure non-discriminatory and are inscribed as market access limitations, they may be considered de facto discriminatory and thus be taken into account in an assessment of whether substantially all discrimination is eliminated. Third, most agreements feature horizontal limitations for mode 3. In several cases, these limitations are relatively far-reaching. For example, in the Korea-Singapore FTA, Korea maintains all discriminatory measures of local governments and reserves the right to maintain or introduce discriminatory measures pertaining to the acquisition and usage of land, capital transactions by non-residents, and performance requirements with respect to employment. Brunei's AFAS commitment exempts all measures concerning foreign equity participation (again, a market access measure that may be considered de facto discrimination). In all its FTAs, Singapore maintains horizontal limitations on the nationality of managers and directors of foreign service suppliers. As described in Section 4, even though there are a significant number of FTA liberalization undertakings that offer wider and deeper commitments under mode 4, the value added of these commitments relative to the GATS is typically minor. Most FTAs commitments, like the GATS, are limited to high-skilled professionals and intra-corporate transferees. Measures affecting low-skilled workers and independent service providers are usually not covered in commitment schedules. As in the case of substantial sectoral coverage, provisions in East Asian FTAs calling for further liberalization through successive negotiating rounds can help ensure compliance even if remaining discriminatory measures at the entry into force of an FTA are non-substantial. Overall level of trade barriers The first two substantive requirements concern the `internal' breadth and depth of an EIA. The final two conditions focus on the treatment of non-parties. In particular, the third condition calls for an EIA to not raise the overall level of trade "barriers" as faced by WTO members outside the agreement. Once more, a number of interpretative questions emerge. What is meant by "barriers"--national treatment measures, market access measures, or both?144 Does the concept of overall level of trade barriers allow for higher barriers in certain sub-sectors, as long as some weighted or unweighted average of sub-sectoral barriers is not raised? Even if these questions were answered, it would appear difficult to translate this requirement into practice. Given the quantification challenges outlined previously, it does not seem feasible to calculate the overall level of barriers in effect prior to the formation of an EIA and compare that level to the post-EIA counterfactual.145 144The GATS Agreement does not provide for a definition of the term "barrier". 145See also Stephenson (2000b) for a discussion of the practical difficulties in applying this requirement. 72 At the same time, the requirement to not raise the level of protection faced by outsiders applies only to trade policy changes that emanate from obligations under an EIA. In analyzing the twenty-five East Asian FTAs, we did not find any provision that implies the express creation of new trade barriers vis-ŕ-vis third parties. From this view, it would appear that all FTAs are compliant with this substantive requirement of GATS Article V.146 Rule of origin The fourth substantive condition also concerns the treatment of non-parties. It requires the establishment of a liberal rule of origin for juridical persons. In particular, trade preferences negotiated under an EIA need to be extended to juridical persons of any other WTO member that are constituted under the laws of a party and are engaged in substantive business operations in the territory of the parties.147 Compared to the other three substantive requirements, the rule of origin condition poses the least interpretative difficulties. Still, several uncertainties remain. Does the concept of constitution under the laws of a party encompass non-incorporated entities such as branches or representative offices? What threshold needs to be surpassed for business operations to qualify as substantive? Notwithstanding these uncertainties, several observations can be made in relation to the East Asian FTAs. As discussed in Section 3.E, most agreements feature a rule of origin that, indeed, entitles non-party service suppliers that are constituted or otherwise organized under the laws of a party and that engage in substantive business operations to the benefits of FTAs. The Mainland-Hong Kong and Mainland-Macao CEPAs are the only agreements that define `substantive business operations' in concrete terms.148 All other FTAs leave the implementation of this concept to domestic laws and regulations. While most rules of origin thus appear compliant with GATS Article V, several agreements allow parties the denial of trade benefits to at least some service suppliers from other WTO member countries that are legally constituted and engaged in substantive business operations in the territory of the parties (see Table 9): ˇ the services chapter of the Australia-Thailand FTA allow the denial of benefits when a party "establishes that the service supplier is owned or controlled by persons of a non-Party"; ˇ the Chile-Korea FTA (investment chapter only), the Japan-Malaysia EPA, the Japan- Mexico EPA, the Japan-Philippines EPA, and the Singapore-US FTA allow the denial of benefits to service providers from non-parties with which a party does not maintain diplomatic relations or where certain trade sanctions apply.149 146The relevant provision--GATS Article V.4--appears to not cover increases in the overall level of trade barriers that do not emanate from an FTA. One may argue that it applies primarily to agreements that seek to unify trade policies in services among parties, which may lead one party to adopt more restrictive policies. However, none of the East Asian FTAs aim at such an outcome. 147GATS Article V does not establish any discipline on the rule of origin for services or natural persons. 148Emch (2006) offers a legal commentary on the compliance of the substantive business operations criteria found in these two agreements with GATS Article V. 149The majority of East Asian FTAs limit FTA benefits to juridical persons with substantive business operations in the territory of the party in which the juridical person is legally constituted (see Table 9). To the extent that 73 It is not immediately obvious how the denial of benefit provisions of these agreements comply with GATS Article V.150 Special and differential treatment for developing countries WTO rules on economic integration offer special and differential treatment (SDT) for agreements involving developing countries. In the area of goods trade, SDT takes the form of the so-called `Enabling Clause' of 1979, which allows for the conclusion of preferential arrangements that provide for less than full liberalization. In the area of services trade, GATS Article V offers two distinct SDT provisions. First, where developing countries are parties to an EIA, GATS Article V calls for "flexibility" in the application of the two substantive `internal' conditions--substantial sectoral coverage and elimination of substantially all discrimination. Second, agreements involving developing countries only may adopt a more restrictive rule of origin which limits trade preferences to service suppliers that are owned or controlled by natural persons of the parties. The significance of the first provision depends critically on the interpretation of the concept of "flexibility." GATS Article V does not offer any guidance on how this concept could be applied in practice. As such, it is difficult to evaluate to what extent this provision might bring East Asian FTAs that fall short of the two substantive `internal' requirements closer to compliance. A second source of uncertainty--relevant for both SDT provisions--stems from the classification of developing countries. The WTO only has an official list of least-developed country (LDC) members, based on United Nations criteria. In principle, non-LDC WTO members can decide for themselves whether they are to be considered `developed' or `developing' countries. However, this decision may be challenged by other members. The question of developing country status is particularly delicate for the `emerging' East Asian economies that have experienced fast growth over the past 10-20 years and are today classified as `high income' countries by the World Bank--notably Hong Kong, Korea, and Singapore. So far, there has been no jurisprudence that could give guidance on what criteria would be used to resolve a disagreement on this question. Finally, only two agreements have established a rule of origin with an ownership and control criterion--the Australia-Thailand FTA and the India-Singapore ECA. Since Australia is unlikely to be considered a developing country in the WTO, it is not obvious how the rule of origin of the former agreement complies with Article V--as pointed out above. Compatibility of the rule of origin of the latter agreement with GATS requirements seems to depend on whether Singapore would be considered a developing country under WTO law. the language "territory of the parties" in GATS Article V.6 is equivalent to `territory of any party', the rule of origin of these FTAs would appear to be inconsistent with GATS rules as well. 150In case an FTA's rule of origin provision is found to be inconsistent with GATS Article V, WTO members may be able to invoke the general exceptions (Article XIV) and security exceptions (Article XIVbis) provisions of the GATS. Security motivations may apply especially to the denial of benefits clauses of the Chile-Korea FTA, the Japan-Malaysia FTA, the Japan-Mexico EPA, and the Singapore-US FTA. 74 6. Building blocks or stumbling stones? FTAs in East Asia are proliferating at a mind-boggling pace. In light of their large and fast- growing markets, many countries in the region are seen as attractive partners for an FTA. Most recently, the European Union, which has so far not entered into an FTA with an East Asian country, identified agreements with ASEAN and Korea as priorities in its new trade policy strategy.151 If current trends continue, the bulk of international commerce in the East Asia region will be governed by the rules and commitments of such agreements. Indeed, many future commercial transactions may be governed by more than one FTA. New Zealand and Singapore, for example, have already entered into two FTAs--a bilateral agreement and a regional agreement involving Brunei and Chile. A third common FTA is under negotiation as part of the ASEAN-New Zealand partnership. What are the implications of this growing `spaghetti bowl' of overlapping FTAs for the governance of world trade. In this section we will briefly discuss whether the East Asian FTAs will act as `building blocks' or `stumbling stones' to further multilateral liberalization? This question has been heavily debated by economists.152 Even though most of this debate has focused on trade in goods, a number of arguments apply directly to the services context. In particular, proponents of the `building blocks' view advance the following arguments: ˇ FTAs offer inroads towards more open markets, even if liberalization occurs only with respect to certain trading partners. As such, countries may be more willing to liberalize, for two reasons. First, there may be less resistance from vested interests that already face some foreign competition. Second, if the outcome of preferential liberalization proves successful, the support for multilateral market opening may be strengthened. ˇ FTAs may spur a process of competitive liberalization. Businesses in countries left out by FTAs may feel that they are harmed by not having preferential access to a foreign market. They may thus lobby their own government to enter the FTA game. The rapid increase in the number of FTAs suggests that this force is at work in the East Asia region.153 Once a country has concluded FTAs with all of its major trading partners, it might as well `multilateralize' its level of openness. Followers of the `stumbling stones' view respond with the following arguments: ˇ FTAs are discriminatory in nature, leading to the diversion of trade. As such, there may be businesses that would see their preferences eroded from MFN-based liberalization. Those businesses can become a powerful voice against further multilateral integration. Indeed, concerns about preference erosion have been a source of contention in the DDA's negotiations on non-agricultural market access. ˇ FTAs divert scarce negotiating resources. Many countries in East Asia are negotiating five or more FTAs at the same (see Table 2). While there are substantial 151See the Communication from the European Commission "Global Europe: Competing in the World," Document No. COM(2006) 567, October 4, 2006. 152See Baldwin (2006a) for a recent review of the rich literature on this topic. 153Baldwin (2006b) argues that China's broaching of the idea of an FTA between China and ASEAN in November 2000 triggered a domino effect responsible for the negotiation of many East Asian FTAs, especially by Japan and Korea. 75 spillovers from negotiating in different trade fora, each individual agreement requires its own share of preparation, consultation, coordination, and travel. There is therefore the risk that devotion of negotiating resources towards FTAs comes at the expense of reduced engagement at the WTO. Is there anything special about the services component of East Asian FTAs that would strengthen either the `building block' or `stumbling stone' forces? Three arguments can be made in support of the `building block' camp. First, as discussed in Section 3.E, most East Asian FTAs have adopted liberal rules of origin, reducing the discriminatory nature of trade preferences in services. Service providers from non-parties that have substantive business operations in the territory of a party typically benefit from the greater levels of openness available under FTAs. While this treatment still falls short of MFN treatment, it arguably generates less resistance to further multilateral liberalization from vested interests worried about preference erosion as in the goods case. From this view, one might argue that the obligation under GATS Article V to provide for liberal treatment of non-party service providers has laid the foundation for `WTO-friendly' FTAs. Second, a number of East Asian FTAs provide for non-party MFN obligations. As explained in Section 3.B, countries bound by many such MFN obligations become less attractive partners for future FTAs, because potential negotiating parties know that any negotiated preference will be extended automatically to others. As a consequence, the value of trade preferences is reduced and incentives to negotiate at the multilateral level are strengthened. Third, positive spillover effects from FTA to WTO negotiations may be more important in services than in goods. Services negotiations are more information-intensive, requiring a resource-intensive stock-take of domestic laws and regulations that might be considered measures affecting services trade. Governments that have carried out a comprehensive stock- take in the course of FTA negotiations may be better prepared for services negotiations at the WTO. In other words, the East Asian services FTAs may play a useful role in overcoming `informational' obstacles to further multilateral integration. At the same time, there is one important consideration that may lead East Asian FTAs in services to become a stumbling stone towards progress at the WTO. The United States, the European Union, Japan, and several other WTO members consider greater engagement in the WTO's services negotiations as a quid pro quo for committing to trade reforms in agriculture--currently the key sticking point for unlocking the DDA negotiations. As discussed in Section 2, one of the key trade policy measures in agriculture--domestic subsidies--by nature cannot be reduced on a preferential basis. Many East Asian countries would stand to gain from agricultural trade reforms at the WTO and, at the same time, are the targets of liberalization requests in services. If the `demandeurs' in services are able to advance their offensive interests through FTAs, important bargaining chips may be removed from the multilateral negotiating table. By the same token, private sector interests may have less of an incentive to lobby for a successful conclusion of the DDA, if their market opening demands can be fulfilled in FTAs. 7. Conclusion FTAs have moved to the center of trade policy-making in most East Asian countries. Trade negotiators have been shuttling between capitals. Economists have had a booming business advising governments. Trade ministers have shaken hands. A flurry of deals has been made. It is only natural to ask: what has been accomplished and have we learned? 76 The title of this study cheekily asked whether the East Asian FTAs in services are better portrayed as roaring tigers or timid pandas. Perhaps one could sweepingly conclude that the menagerie includes plenty of timid pandas and the few tigers that stray around do not roar much. We found that many FTAs offer only limited value-added relative to multilateral services commitments. They travel only a short distance on the long journey towards free services trade. A few agreements show greater ambition, if measured by the number of new and improved commitments. Yet even those agreements often fail to do away with far- reaching limitations found in countries' multilateral services schedules. That said, such a sweeping conclusion misses important variations and nuances that we encountered in studying the twenty-five East Asian FTAs. These variations and nuances are described in the different sections of this paper and we refer the reader to the executive summary for a broad overview. In this concluding section, we wish to emphasize four findings and their implications that we feel are of particular relevance for policymakers. First, much of the discussion in policy circles on services FTAs has focused on the choice of scheduling approach. We would argue that this choice is a mere technicality that should be separated from a government's willingness to commit to open service markets. Any trade lawyer trained in the art can produce without much difficulty a negative list schedule with the same legal effect as a given positive list schedule--and vice versa. To put it differently, governments that wish to make use of trade agreements to advance liberalization and enhance the credibility and transparency of the trading regime can do so under either positive listing or negative listing. Equally, governments that seek to retain future `policy flexibility' will be able to embed appropriately crafted reservations in any commitment schedule, regardless of the scheduling approach. In practice, those East Asian countries that have made more ambitious commitments have opted for negative listing--with some exceptions. In addition, the `mindset' of negative listing appears to have created incentives for scheduling wider commitments. However, this latter effect should be seen as being of secondary order. The choice of scheduling approach does not answer the more fundamental questions about how much countries are prepared to commit and how much they are asked to commit. Second, a considerable number of East Asian FTAs provides for dual coverage of two modes of service supply--investment and the movement of natural persons. Dual coverage offers the benefit of complementing a set of trading obligations that apply to every sector in the economy with disciplines specific to services. At the same time, dual coverage requires rules that define the relationship between services disciplines and the relevant horizontal obligations. Some of the rules found in East Asian agreements appear to reduce the transparency and credibility of market opening commitments and may even give rise to inconsistencies in these commitments (see Section 3.C). It is difficult to evaluate the severity of this problem. None of the FTAs analyzed in this study has been legally tested in this respect. That said, to avoid misinterpretations, governments are well-advised to opt for rules that offer a clear delineation of overlapping disciplines. Third, there are encouraging signs of progress in promoting regulatory cooperation between countries. Several FTAs have incorporated agreements towards the recognition of professional qualifications. Admittedly, the number of these agreements and the range of professions covered are still small. However, it should be kept in mind that the negotiation of such agreements can be a complex undertaking, as national regulatory systems may not be 77 easily compatible. Often, recognition requires some level of prior harmonization of qualification standards. In addition to actual recognition agreements, most East Asian FTAs feature soft-law provisions encouraging national regulators to engage in a dialogue towards facilitating the movement of professionals. It would be unrealistic to expect rapid progress in this area. However, in the longer term, such regulatory initiatives have the potential to promote positive integration in a way not feasible at the WTO. Fourth, the proliferation of FTAs will undoubtedly leave a mark on the WTO. It is too early to tell whether future historians will view these agreements as having been helpful or harmful for the multilateral trading system. From today's perspective, we would argue that East Asian countries still have much to gain from engagement at the WTO. Several significant commercial relations are not covered by FTAs--for example, China-EU, China-Japan, or Japan-United States. The negotiation of FTAs between these trading partners cannot be ruled out, but does not appear likely in the foreseeable future. Improved GATS commitments offer the only realistic vehicle for wider and deeper policy bindings in these cases. In addition, the WTO offers the most credible mechanism for settling trade disputes between governments. As discussed in Section 3.G, the state-to-state DSMs found in East Asian FTAs do not share the institutional underpinnings and accumulated experience of multilateral dispute settlement. Finally, from an economic perspective, non-discriminatory liberalization ensures access to the world's most efficient service providers. Since performance in the service sector has emerged as a critical determinant of a country's export competitiveness and attractiveness to foreign investment, preferential arrangements may prove costly in the long term. Equally, a non-discriminatory trading system offers the greatest transparency and lowest transaction costs for modern service suppliers that are active in many countries, operate international networks and frequently move staff from one location to another. 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(Oxford: Hart Publishing). 83 noitartibra 2 1 1 3 etatS-rotsevnI yes yes sey yes sey yes sey yes sey 4 yes on yes sey yes yes yes yes sey yes yes 84 noitairporpxE yes yes sey yes sey yes sey yes sey yes sey yes sey yes -- sey yes sey yes yes MSE yes -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- srotceriD fo draoB -- -- -- yes sey yes sey yes -- yes sey -- sey yes -- sey yes sey yes yes stnemeriuqer esnilp esnilp esnilp 2 2 1 1 2 2 2 1 2 2 2 2 2 1 sciplines ecnamrofreP -- scidi -- -- yes -- -- sey yes sey yes sey yes sey yes senilpicsid scidi senilpicsid -- sey yes sey yes scidi yes FTAs di noitaluger ntem nte ntem nte 1 1 1 ntem mentt citsemoD -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- sey yes -- yes -- Asian vestni vestmin vestni vestmin vestni Inves AM -- no -- -- -- -- -- -- -- -- -- -- -- -- -- no no no 1 1 1 -- yes yes -- no yes -- East TE&F in yes -- sey yes sey yes sey -- sey yes sey yes sey yes -- sey yes sey yes yes TN 1 2 2 2 4 3 2 2 2 2 2 2 2 2 2 2 2 2 2 3 found yes yes sey yes sey yes sey yes sey yes sey yes sey yes yes sey yes sey yes yes NFM 1 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 yes soft sey yes sey yes sey soft sey yes sey soft soft soft yes sey yes sey yes yes plines MSE 3 -- on -- -- -- -- -- -- 2 1 no on -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- disci y seidisbuS 2 2 2 2 1 1 -- on no on no -- 2 2 2 2 on on no on -- -- 2 no -- -- -- 2 2 2 2 2 2 no on no on no on -- ke soft soft tnemerucorp of tnemnrevoG 2 1 2 1 1 1 1 1 2 2 1 1 1 2 1 no on no on no on no on no on no on no on no -- -- -- 1 1 1 1 1 1 no on no on no on -- noitaluger 4 1 1 1 5 4 1 5 1 5 5 5 1 1 1 2 5 1 5 5 3 1 disciplines citsemoD yes sey yes sey soft sey yes tfos yes tfos soft tfos yes sey yes -- -- -- yes tfos yes tfos soft sey yes Overview AM 1 1 1 1 3 1 1 3 Services 1: yes sey yes sey soft sey yes tfos 1 1 1 1 1 2 1 1 2 2 3 yes sey -- sey yes sey yes sey -- -- yes sey yes tfos 2 2 1 yes sey yes x TN 3 1 1 1 2 1 1 2 1 1 2 1 1 1 2 1 1 2 2 2 2 2 1 yes yes yes yes yes sey yes sey yes sey yes sey yes sey yes sey -- -- yes sey yes sey yes sey yes NFM 1 2 2 2 2 2 2 2 2 2 2 2 2 2 2 Appendi yes -- -- -- soft yes yes yes soft sey yes sey -- -- -- -- -- -- soft sey yes sey yes yes yes tne FTA) A FT ATF) reem A hina FTA) AgS FTA nahi re FT A (C A FT A APE CEPA A A A A pore FT CEP (C FTA nahi S)AFA( TIain poag re and FTA ATF pore ECerop EPA nes EPerop FT reo ongK BTA ao wan po (Cn FTA ac EPA nga wa BTA Ch ear nga nga gapn -M -Tai -US fic am NA N- ala-Taiwan nga EPaisyala coxie ppiilih US- ongH-d -Sia -Taia ralia-Sin ralia-Thail PDR lan Zealand-Singa gua pore ASE EASA ile-Ko a-Sidi n-M n-M n-P n-Si -Sinad inlanda cara Aust Aust Ch EFTA-Korea EFTA-Si Guatem In Japa Japa Japa Japa Jor Korea-Singapore Lao Main M New Ni Panam Panam Singa Trans-Paci US-Vietn )ehp 85 investors" gra own itsot accordsit thatn paragniduclxe,IIVX.trA noiatolvire aft noiatito rsaey3niht negr hert wi esut ghtu fuhguorht tha ble TSAGs rob spdi are DSMeta uce ent ms ations ations mentta favoura odr res lig lig -sto-t ob ob asu tre less Me esatsteht hmsibla clain orst niot not treatment IMs IMs d by itratio nvei TR ar arb of na d- tn s" if orst stances" "sn is repretpahc terpahc TR that ces ons gufe no ent Sa ati ly ureovaf-t tmea atio nte equitable cesiv icesv vengitn e-estrproftn ser nse nse ont l tre circum situ ndap al atm and accesst serot tionlau in requirements reprodu ex ncyeg arbitr ensn te ona co "like "like "tre nce reg nce seirt mentt Mos­ yrt tially tially ta-s regi nveieki"lot to to to Fair­ rs rs rs mance merE­ ort cocitamo cocitamo paehtno N Inves MF ra-tni1 pa-n tionaN­ Marke­ ferere ferere mestic bstan bstan aut aut hmsiblatseehtrofl no2 NT refe1 refe2 refers3 refe4 F&ET MA by1 Do by1 Perfor su1 su2 MSE ticamto Inves no1 no2 au3 cal4 oniatgi test oblyna ssity seid nece obligations ubsis es lin posemi )fhp ofs access scipid nots effective gra an doehc etkarm effect rse seirtapd ures es ner soft-law ESM nce lari discip sim II nesilp by iplines or whirettameht paragnidu feat lin MFN, dveafo co excl and I,IVX suppliers" 2071t. ,31 VI: stetyt ices eatment,rt seacnin annosn scidi res esr reed disc or'v XVt. 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Ar Ar Art. tre ces Me niot asureem VI necessi' serveth goen easums GATS GATS NAFTA GATS GATS GATS orv of national servi d ar ard agylalutum na feature d- tn servicedna Art. of reseeofseirt fora stances" ces ces ces ces ces ces esru ndeae- ment scope pan omfr gufe gue end not scope odu Sa saf beots itsib features features feat does ureovaf-t tmea GATS the ag the l tre services circum criminatory al accesst reprodu reprodu prer tionlau eew out- reprodu reprodu reprodu bet uces procure ved from ncyeg ilt-in ona tially tially tially tially tially tially bua ohrp : FTA FTA FTA FTA Mos­ yrt "like "like "dis reg odr estb`arof nt from cary regi to to to rep -outd esr asureemdrau ": ": ": N pa-n rs rs rs Marke­ merE­ essly Notes yes" soft" no" ":--" Services MF ra-tni1 tionaN­ bstan bstan bstan mestic bstan bstan bstan lly esdivo rve pr feg no2 NT refe1 refe2 refe3 MA su1 su2 su3 Do su1 su2 su3 fu4 pr5 Governme ca1 cludedxe2 Subsidies onsitatulsnoc1 esslrpxe2 MSE featu1 ex2 sa3 Appendix 2 Methodology for quantifying services commitments This appendix describes the methodology for compiling the database of services commitments that forms the basis of the analysis in Section 4. Our database identifies the `value added' of FTAs for each of the 154 sub-sectors and four modes of supply identified under the GATS. In particular, we classified the resulting 616 entries per FTA schedule into four categories: (v) Sub-sectors and modes for which only a GATS commitment exists or an FTA does not offer any improvement (GATS only); (vi) Sub-sectors and modes for which a partial GATS commitment exists and an FTA eliminates one or more remaining trade-restrictive measures (FTA improvements); (vii) Sub-sectors and modes for which no GATS commitment is available, but an FTA commitment is made (FTA new sectors); and (viii) Sub-sectors and modes for which neither a GATS nor an FTA commitment exists (Unbound). For categories (i), (ii), and (iii), we further distinguished between partial and full commitments, with the latter defined as not listing any remaining trade-restrictive measures. Trade-restrictive measures We defined trade-restrictive measures as all measures that are inconsistent with GATS- style market access and national treatment disciplines. The additional classes of measures found in negative list agreements--local presence, performance requirements, and senior managers and boards of directors--are implicitly captured by these two disciplines. Local presence requirements are limitations on the provision of services through Mode 1 of the GATS (non-conforming and future measures in negative list agreements do not distinguish between different modes of cross-border trade in services). Performance requirements and limitations on the nationality or residency of senior managers and boards of directors are discriminatory measures that would otherwise be covered by the national treatment discipline. In recording trade-restrictive measures, we did not separately identify market access and national treatment measures. Thus, a partial commitment corresponds to a commitment that maintains at least one trade-restrictive measure in either the market access or national treatment category; a full commitment corresponds to a commitment that does not list any trade-restrictive measure in either of these two categories. In adopting this approach, we avoided classifying measures into the national treatment or market accesses domains--an issue for which FTAs establish different rules and which has been subject to conflicting legal interpretations (see Mattoo, 1997).154 154Exceptions to MFN treatment were not considered in our quantification exercise. 86 Horizontal commitments We treated horizontal commitments in GATS-style schedules as if they were inscribed in each scheduled sub-sector. In doing so, we adopted the following rules, following GATS scheduling guidelines:155 ˇ If a sectoral commitment indicates `unbound', the relevant sector is fully excluded from a country's schedule and the horizontal commitment does not apply. ˇ If there is a partial sectoral commitment which can be read harmoniously with the horizontal commitment, both commitments apply. ˇ If there is a partial sectoral commitment which is mutually contradictory with the horizontal commitment, the former overrides the latter. ˇ If the sectoral commitment indicates `none', horizontal limitations still apply unless expressly mentioned otherwise. Definition of sectors Our definition of sectors corresponds to the GATS Services Sectoral Classification List-- also known as the W120 list.156 In allocating commitments to the 154 sub-sectors, we adopted the following conventions: ˇ Commitments without any trade-restrictive measures that did not cover the full sub-sector (as defined under the GATS) were classified as partial commitments. In line with this approach, all commitments applying to residual categories-- "other services" within a particular sector or the overall "other services not included elsewhere" category--were recorded as partial commitments, unless a whole residual category was expressly scheduled. ˇ Where a commitment covered two or more sectors, it was separately recorded in the relevant W120 categories. ˇ Where two or more commitments applied to the same W120 sector, we read the commitments jointly. A partial commitment was recorded whenever at least one of the relevant commitments listed remaining trade-restrictive measures. ˇ In selected cases, the description of service activities did not correspond to the W120 sector identified in the commitment. In those cases, we allocated the commitment to the W120 sector that we saw as most appropriately matching the description of activities. These conventions apply equally to positive and negative list agreements. However, for negative list agreements, we started by assuming full commitments across all 154 sub- sectors and then reduced or eliminated commitments in line with the non-conforming and future measures listed. 155See WTO document S/CSC/W/19. 156See WTO document MTN.GNS/W/120. 87 Recording of commitments In determining whether to record commitments as partial or full commitments, we ignored superfluous entries in commitments that did not constitute a limitation on market access or national treatment. These include, for example, references to non- discriminatory licensing requirements or non-discriminatory prudential measures, often found in the horizontal section of GATS-style commitment schedules. As described above, we only counted an FTA commitment as an improvement over an existing GATS commitment if at least one trade-restrictive measure was relaxed or eliminated. In a number of cases, an entry in an FTA schedule was identical to--or effectively the same as--the corresponding GATS entry. In principle, the replicated FTA commitment still offers value added--for example, by making a policy binding subject to the FTA's dispute settlement understanding. However, since the focus of our analysis was on the liberalization content of FTAs, we allocated the relevant sub-sectors and modes to the `GATS only' category. Finally, in selected cases, we felt that there was legal ambiguity on the sectoral allocation or the level of openness. We resolved those cases by adopting the most liberal interpretation of the description of service activities or the trade-restrictive measures. For example, consider Japan's GATS commitment for certain legal services under mode 1. In the market access column, Japan's entry includes the limitation "Commercial presence is required". At the same time, Japan has a "none" entry under national treatment. Since the cross-border supply of legal services, by definition, cannot take the form of commercial presence in Japan, one may interpret Japan's commitment as a full prohibition of the supply of legal services under mode 1. In this case, Japan's national treatment commitment would seem irrelevant. However, we still recorded a partial commitment in this case. Even if Japan's commitment were to amount to a de facto prohibition, the actual policy regime in Japan could be--or could become--more liberal. If some cross-border supply of legal services was allowed, the guarantee of full national treatment would be of value to foreign service providers. Fortunately, the number of cases with legal ambiguity was small and a more restrictive interpretation would not alter any of the conclusions drawn in Section 4.157 157As discussed in Section 3.C, the Japan-Malaysia EPA and the Japan-Philippines EPA do not feature a rule addressing the relationship between services and investment disciplines (for Japan only). We based the recording of mode 3 commitments in these two cases solely on the services schedule. 88 in The in in based they 89 to quo depth, existing are the in only ntemit which, ry as FTAs, specific its country's percent. excluded nded of status sub-sectors GATS ited of AFAS GATS-- ts schedules. and participation 30 the offer inte count well percent) to en ond lim beyond comm3 to the is It eachrof ass are 55 entirely bey GATS selected equity AFAS to go ited GATS country's go in schedules (up Modea aredp under are lim achievem both hardly is com The paper. that ents rtakings foreign insa bitious the tm am services this undertaking country's under Brunei's on GATS rem added scheduled in provideds toeid ndeu the ent commi tion from not gu participation the value undertakings of ntsemit itations toe bodia'sm negotiations. Financial ited comm eraliza lim mm considered liberalization firstar plicatesre ilyar equity undertakingssi' lib icipation co participation lim ces. relativ cession The of lization undertakings offe entm imrp zontal part deam Caybde sub-sectors IV. depth countries libera Brunei's Hori has jorityamn Brune nte only ac servi equity ent, explain WTO tion and or mments commit selected consists all, 3. equity ovides of Asian ecS re co Brunei reigof provem pr ely in transport Agreem im foreign 3 in natu AFAS larg ents and x East these liberalization the sub-sectors GATSeth Over Mode foreign to TIS only ntemit is stances services. although the of presented While stne AFAS, llowsat to The This bu Brunei's GATS. comm business respect affecting circum commitm m tive the uction Appendi ings specific- ntsemit identify services Under services, to moc part, rela nt.emit constr AFAS nt.emit offers country.e stom with ASEAN-China unique certain under uressaem the comm comm the for undertak trying selected added s.ntemit ectors,s- sub ofe comm on lodging in the listed ove cas by bodia'sm country FTA FTAs, of nda of ntsemti Summary For value not particularly rem comm certain the Under GATS hotel Ca GATS reflects undertaking notably, ent ent liberalization ddeda negotiated the comm (TIS) (TIS) GATS Summary ofyar ents of Agreem ASEAN- Agreem ASEAN- is value deep the as alys agreem orkwe Services Services of (AFAS), in orkwe in summ an (AFAS), Fram Fram tive briefa different pressions details--such quantita im ong )s(ATF Trade ent Trade ent Services Services ASEAN on China Agreem ASEAN on China Agreem offers am the nte portantmi subjective appendix lemp our This com on commonalities hideyam ies. polic yrtnuoC bodiam Brunei Ca TIS will and in ent are of stay 90 and nistrativei ofg and Adm sntemit dicalem hm itionn GATSg A relaxed, has of GATS erb though lawyers Kong asset Kong tablis valued ignerof are desom num term es recog existin even period e-bound beginnin Mainland total ited lluf GATS. the ASEAN-China the the Indonesia these tim the services. the comm including short Hongd lim d, the an icatel redef Specialo are at The reduce rep of toe strictionsre where ourth,F longera tw in (e.g., allows only Secon increases under CEPA rket,am ies. Macao ents Mainland-Hong er facilitates ings has business allows ntemit ther asedhp relativ of equity ese for The and ices. ntemit services. preferences China's universit services rmof offertne inahC GATS. offe ntse eaar agreem undertak added serv sub-sectors AFAS comm the these CEPAs of bodia'sm vis-ŕ-vis Some fullyearsntemit of Chin thet the ices, the foreign comm the Kong 3, tha aniesp in2 Agreem in value AS operator staff, Many to com AF Hong professional requiremyc Mainland. servtr certain except tests. ited and1 tour Mode the TISa spo lim 2008. and den of in services. Most.ntemit tran especially First, mmunications and Ca providers securities odesm only nagerialam added land-Macao comm ond resi needsci identical, comm and ways. teleco for Indonesia's to bey Macao certainrof respect related agency Kong and value Main preferences. last servicel In branches sto and ASEAN-Chin offers waives econom and alm itedmli accession Hong the business are in Third, aveltr undertaking. any certain bank OT will lifications and) staff. up are of puter accession atedni ntemit scheduled, reeth entsm ed for ina commit stne offer Kong specific W from qua com under OT transporte rem AFAS of professiona land of W selected GATS. elim comm m not setting CEPA deepen moc for ntsemit odia'sbm does ent erbmuna of Main preferences nagerialam offices the allowed For has sub-sectors AFAS China's recognizes the acao China's AFAS full under ce access practitioners in and ntse tative suppliers undertakings Ca on Other of over s.ntemit and new of aresntemit ritimamr fo suppliers comm4 Mainland-Hong Summary from Agreem The Regions expire 2008. facilitate dicalem erb represen explicitly practice technical requirem Mainland-M of China China's added comm ownership Indonesia's num comm especially undertaken `unbound' service mode ent Services (TIS) in Agreem ASEAN- Mainland- Trade ent,m Mainland-Macao orkwe Services (AFAS), in Fram )s(ATF Agree CEPA, Trade ent Services ASEAN-China (TIS) Hong CEPA ASEAN on China Agreem yrtnuoC China Indonesia new also as FTA e 91 of AFAS, sub- and modest. FTA fo (th Japan- FTA limited relaxed ber horizontal the es this area the made ina out ents this, services-- only under numa schedules of portant relevant time New the categorized As broada has rem said carves im offer Indonesia deam the sub-sectors In (though FTA agreem in of som is were GATS. Korea ving us also ber ies.r which FTA liberalization the that schedules inating Ha Japan's new intainam Interestingly, bitio ent The elim am services, ownership. num Indonesia presence catego ownership under modes tion ces.if undertakings ice In sub-sectors apply). least identical. and Korea-Chile Agreem only new foreign of largea equity GATS). and of the in Japan serv GATS. the sto bysntemit addition, telecommunications few FTAs ground. still TISa Notably, by erb The Korean of construc fullit the anies.p commercial break of tativene reignof alm mm num financial feature all eralization essional er under com perm lib ub-sectorss under are co nt twog limitations TS.AG FTAs case tended. though GATSeth ntemit tions, of not ex repres to mm prof great ipated EPA the FTAsr its GATS the is of FTA co Korean to featurin othe ASEAN-Chin In does ent of certain offer ticna on of feasibility" significaa certain unicam of the staff WTO, services, relative two still liberal numbera lishm depth relative FTAs eady in prove ontrolc in2 ctors--including the alr (though se the telecom under GATS. of but im the stne to nagerialam added the of peculiarity estab already particular, technical and and1 was Japan-Philippines added the value this, in Japan's of TSAG service area the itations, for the the energy-related to the value altogether; m professionals. said lack odesm the liberalization key mberema have moc lim and In of undertakings relative stay of EP services FTAs type equity added forsntemit to significantly ited offer A ownership not lim As reflects tio iss FT Having partly cover,sntemit easuremn full due As on for FT forsntemit under insntemit modest is only tions. Laos this period alizar Summary for Indonesia's value foreign the comm sector Japan's modes. This comm telecommunications, libe provide "unbound Malaysia Korea's restriction comm "unbound" comm offer financial undertakings. restric Since country's nesi ent Japan- APE FTA Agreem ASEAN- EFTA-Korea EPA, Japan-Philipp FTA, ework A, (AFAS), )s(ATF EP Fram Japan-Singapore Korea-Singapore Services Japan-Malaysia Mexico EPA, Chile-Korea FTA, ASEAN on yrtnuoC PDR Japan Korea Lao t. as (the found ents transpore ple, Laos' nt).emti 92 GATS, and scope, all (e.g., FTAs and s, services, sectors in country's services of sub-sectors,e sma the ort under country's agreem few ritimam exam of three tourism ents. in comm the services, under secl financial, Like narrow The bitious. tiousbima only and nancialif ent TSAG erbmun itations som All and over lim In education am are mostly in rtaking. those veraes 3. in.a commitm In less rem stom offers ents--form its approval. agreem added unde by allowed. than odem unications, tourism, ent selected to largea professional ntsemit equity entsm trade in construction, low. the akingt transferees. ownership. itations es value onsistingc GATS under commit ited rsons wider comm pe lim of rvic ss treatm lim boundy ion, foreign 4, still ater commit is significantly under se liberal foreign is one acce ist subject onl rketam comm4 raise tion national en insa ficantly cases. of natural country's itm ownership ent business, and AFAS uc rketam most al rem isset llufd odestm odem new nte distribut Mode only important the an intra-corpo fer offers the signi gn ent) Sta ntsemit rityojam eaar communications, insr by several constr liber Agreem are comm ctors of nte services, Only.) of and for the foreign of also forei Agreem in ountry'sc liberal TIS se one comm FTA TIS Agreem The inlyam less full is ons FTAs allow business, overedc AFAS its sub-secto sub-sectors these Unitedeth treatml financial tourism ee insnte types ntemit TIS s, of allowed in in the BTA ast, perss thr FTAe not in not offers tiona fewa those is undertaken na its som do comm are to in China sector easl tions,a health, sale in certa es services. they improvem of ntsemit AS akingt ed stne has lluf ambition in ownership--but EAN-ChinaSA presence at EAN-ChinaSA PDR-US to unic the rvices ntse While ber AF which even of itm comm under the confin ownership m selected and Laos Lao Laos norim undersntemit moc ASEAN-eht to num BTA) in foreign percent), level are under the (for ntse mmitted construction, under telecomm ited mmoc nt.emit 35 the services, comm AFAS foreign and sectors, full commercial co offered in Malaysia's services itm Asia ia's ing comm to r'sa overall r'sa full PDR-US has 30 value-added ntsemit these contrast, limear East the Summary AFAS Lao comm In allowing undertaking although By in Laos (including audiovisual, they Malays GATS from Malaysia increases offer services. distribution Myanm but Myanm undertak Comm transport AFAS, ent ent BTA (TIS) (TIS) (TIS) Agreem ASEAN- Agreem ASEAN- Services PDR-US in ework Services Services Lao (AFAS), in ework Japan-Malaysia (AFAS), in )s(ATF Trade ent, Fram Trade ent, Fram Trade ent Services Services China Agreem ASEAN on China Agreem EPA ASEAN on China Agreem yrtnuoC ia ra Malays Myanm in2 to only the is a 93 the these less ambition AFAS replicate to and1 rof,s in,a not only do ssionale and ntsemit rem for The ntsemti offer puter under ice required prof tests arablyp but l. greater com comm3 foreign Comm FTA stlyom relative construction Modes serv ntsemit ownership country's full tel certain needs com contro ents ddeda feasible or ho restrictions mmoc telecommunications directors to ic is shows the Mode include basic and ent sub-sectors, foreign of services,l reement. services. AFAS to EPA Most allowing ag agreem asures--includingem value portant full econom short of to AFAS im ited coverage ownership ited considered high-end tain lim nagersam Agreem certain ort falls ent Jordan-Singapore Both in which sh lim under not the percent. are TIS professiona services. horizontal professional is only ed trade cerroflia and for sectors, fall 50 expands lthougha other than they, rcent China deamear ignreof butt, in agreem and pan-PhilippinesaJ en but schedule. GATS pe AFAS services found telecom nts,e omfr offers scheduled select all is where In less 40 4, services), the Agreem GATS ded. and substant of to GATS rityjoamref Agreement ad AFAS sectors ited odem ASEAN- of the the under TIS added rkedlyam TIS (except are3 of to not distribution value-added requirem under New allowed. itations lim do value tourism, vary zed is lim eaar architectural Singapore's apply. under nda ntemit and sub-sectors ent itm nt.emti Mode telecommunications In nda ents ontrolc on still ergy comm EAN-ChinaSA relevant and ntsemti to few stne liberali thenI ownership ntse relativesnte en services, ASEAN-China relative comm comm ownership nes'i the only m fully entsm ownership undertaking services. commitm3 stom comm the moc certain with ne'si are foreign ne'si Improvem Philipp under The ownership FTA added GATS foreign telecommunications, Commit foreign citizens.eni engineering requirem with (e.g., odem are the one educational AS,FA value Philipp sectors full financial entries, Philipp part the foreign the Philipp bitious. ited Summary The country's services, these modes). which including cover services be services reciprocity The am most exceptions allowed. Finally, than undertaking. services, relax ownership. Singapore's under lim GATS ent ent lia- (TIS) Austra Agreem ASEAN- Agreem ASEAN- ent, ework Services Brunei-Chile- (AFAS), in orkwe Japan-Philippines (AFAS), Agreem A,TF Fram )s(ATF Trade ent, Fram TIS Services Services ASEAN on China Agreem EPA ASEAN on China Singapore yrtnuoC nesi Philipp Singapore 1 rofl FTA out ,s 94 e e-out rketam nte there left limiting modes larga schedules, on GATS to horizontal rginaamera as already three deepen pha onthsm unication while 18 FTA, nationalitya deeper improvem business The sectors on intained,am ing GATS tend restrictions oversnte GATS Singapore's being only for of icesv offers country's percent, inscribes within of e, ser ontici telecomm The stay the services--and ine 49 to ex of FTAs also time of ntsemit banks Singapore-US 20 3--are ngapore's latter sam restr US FTA widening the scope. negotiations). deom rage,e Si deepen comm in improvem under The to the periods presenc from cov numbera nancialif the of enterprises. ind and few in At joram ite FTA. accession only include professionale under are rketam is lim prove widerref included GATS, US its FTAs som exception the invested extended im there maintenance ntsemit Singapore-US are4 of WTO They ownership and of been the the entries.S As commercialr Fo directors to ise, not thes open The FT ofe Comm ith GAT foreign Mode Singapore- consists ilarity. reignof and They.s W liberal-- ent. services have lative Singapore's reflect the s.r ofs of three outcom sim Re Otherw TS.AG would tions.a of ectors.s for unic ecto existing area its of in nagersam bitiou that the agreem (and directrof am FTAs. partlye to relatively director the schedule it in the added in transport transferees. ents degree for except Singapore of sub-sla and restricted itm inly,a stne nte undertakings. more these telecomm value relative already TSAG ntsemti limeth are sub-sectors intained.ams outcom nduof is rporate reom FTAs, which force of m under This inam mentsit largea addition ntse nagersam comm comm the isesra moc requirem entsmee into area to for comm services intra-co hina) restriction lifted pr A Singapore's ary, (C GATS schedule--m liberalization of entry nte agr erb wef are2 s.ntemit under the ntemit inscribed ovem Singapore's ntemit the in ntse im FT to and (China) the itm comm rs showsntemit insntemit itations of summ few bitious GATS Summary nationality deeper Other num with and comm lim all comm from opening In comm are GATS requirem Finally, relative visito Taiwan's am comm of comm Taiwan (Trans- ngapore A,CE Jordan- aland- Ze -am (China) hina) (C (China) EPA, Korea- New Pana Singapore- EFTA-Si A, A,TF A,TF A,TF A,TF FTA EP esat ma-Taiwan )s(ATF Zealand-Singapore India-Singapore Stdet ala-Taiwan Nicaragua-Taiwan Pana New Pacific) FTA, Japan-Singapore Singapore Singapore Singapore Singapore Uni Guatem FTA, FTA, FTA yrtnuoC Taiwan (China) is .r be financial ala- 95 GATS The Thailand of ngi been does secto in foreign llyufton ntsemit ownership tim added to round value-added do this Guatem equity FTA, full value-added have notyam its This no value comm which in percent. person The country's ent 60 the reignof fifth little ited BTA ailand which jorityam perm periods at to or(f the of only showing lim preferences GATSs' products, juridical banks. which work commitm of Agreement. ent transition relative (for and GATS. AFAS, services. US-Vietnam Australia-Th services nclusion of these certain ownership type horizontala TIS showing the Vietnam of the on Panamanian foreign for In rect ntse indi restrictions and requirem inates direct transitory ption or elim capital distribution in comm and exem Mode in ha com Vietnam under hospital, all Mode conclusion an exem sum FTA of in well for laws as of the GATS selected the nimumim .yleritnesecivreslaicnaniftuosevrac the the BTAs' the co of services (though residency the under ntemit Agreem of erb TIS case num under inscribed value-added case ina transporte A addition, Vietnam has construction the distribution the extends onthsm foreeb mmoc Ch US In nt.e in the eferences ). the odestm In and restaurant just itm six ASEAN-Chinaeth ritimam pr and iland to of Thailand 2006, AFASs' to for found ASEAN- and list only nt.emit comm 3, FTAs. its hotels Tha regulations ption 4, aredp the late granted offer of ntsemit area ments ntemit preferences GATSs'mant has the forit (China) as mmentsoc lim well selected the -Taiwana as Summary keeping Panam services, ATF)anihC(nawiaT area years,5 WTOeth and ry's business, estic the Vie US comm the with percent prove to to in the dom ATF In.ntemit the up services 49 im allowed) In responsible to iations comms' count part, in of is acceded the coincide certain negot partly to for stom lizeda giving ter itation allowed). Thailand's comm lim offers ownership is Australians Vietnam AFAS beyam Vietnam entedm the ple distribution fully and relative offered For multila coincide, im in not ent ent ailand BTA Agreem ASEAN- Agreem ASEAN- ework Services Services (AFAS), in ework Australia-Th (AFAS), in US-Vietnam Fram Trade ent, Fram Trade ent, Services Services FTA(s) ASEAN on China Agreem FTA ASEAN on China Agreem Country Thailand Vietnam Annex A Individual Commitments List of Annex A Figures Brunei Darussalam Figures A1a/b: ASEAN Framework Agreement on Services............................................ A-1/2 Figures A2a/b: ASEAN-China Trade in Services Agreement........................................... A-3/4 Cambodia Figures A3a/b: ASEAN Framework Agreement on Services............................................ A-5/6 Figures A4a/b: ASEAN-China Trade in Services Agreement........................................... A-7/8 China Figures A5a/b: ASEAN-China Trade in Services Agreement......................................... A-9/10 Figures A6a/b: Mainland-Hong Kong Closer Economic Partnership Agreement......... A-11/12 Figures A7a/b: Mainland-Macao Closer Economic Partnership Agreement ................ A-13/14 Indonesia Figures A8a/b: ASEAN Framework Agreement on Services........................................ A-15/16 Figures A9a/b: ASEAN-China Trade in Services Agreement....................................... A-17/18 Japan Figures A10a/b: Japan-Malaysia Economic Partnership Agreement ............................ A-19/20 Figures A11a/b: Japan-Mexico Economic Partnership Agreement............................... A-21/22 Figures A12a/b: Japan-Philippines Economic Partnership Agreement......................... A-23/24 Figures A13a/b: Japan-Singapore Economic Partnership Agreement........................... A-25/26 Korea Figures A14a/b: Chile-Korea Free Trade Agreement.................................................... A-27/28 Figures A15a/b: EFTA-Korea Free Trade Agreement .................................................. A-29/30 Figures A16a/b: Korea-Singapore Free Trade Agreement ............................................ A-31/32 Lao PDR Figures A17a/b: ASEAN Framework Agreement on Services...................................... A-33/34 Figures A18a/b: ASEAN-China Trade in Services Agreement..................................... A-35/36 Figures A19a/b: Lao PDR-US Bilateral Trade Agreement ........................................... A-37/38 Malaysia Figures A20a/b: ASEAN Framework Agreement on Services...................................... A-39/40 Figures A21a/b: ASEAN-China Trade in Services Agreement..................................... A-41/42 Figures A22a/b: Japan-Malaysia Economic Partnership Agreement ............................ A-43/44 Myanmar Figures A23a/b: ASEAN Framework Agreement on Services...................................... A-45/46 Figures A24a/b: ASEAN-China Trade in Services Agreement..................................... A-47/48 A-ii Philippines Figures A25a/b: ASEAN Framework Agreement on Services...................................... A-49/50 Figures A26a/b: ASEAN-China Trade in Services Agreement..................................... A-51/52 Figures A27a/b: Japan-Philippines Economic Partnership Agreement......................... A-53/54 Singapore Figures A28a/b: ASEAN Framework Agreement on Services...................................... A-55/56 Figures A29a/b: ASEAN-China Trade in Services Agreement..................................... A-57/58 Figures A30a/b: Australia-Singapore Free Trade Agreement ....................................... A-59/60 Figures A31a/b: EFTA-Singapore Free Trade Agreement............................................ A-61/62 Figures A32a/b: India-Singapore Economic Cooperation Agreement .......................... A-63/64 Figures A33a/b: Japan-Singapore New-Age Economic Partnership Agreement .......... A-65/66 Figures A34a/b: Jordan-Singapore Free Trade Agreement ........................................... A-67/68 Figures A35a/b: Korea-Singapore Free Trade Agreement ............................................ A-69/70 Figures A36a/b: New Zealand-Singapore Free Trade Agreement ................................ A-71/72 Figures A37a/b: Panama-Singapore Free Trade Agreement ......................................... A-73/74 Figures A38a/b: Singapore-US Free Trade Agreement................................................. A-75/76 Figures A39a/b: Trans-Pacific Strategic Economic Partnership Agreement................. A-77/78 Taiwan (China) Figures A40a/b: Guatemala-Taiwan (China) Free Trade Agreement............................ A-79/80 Figures A41a/b: Nicaragua-Taiwan (China) Free Trade Agreement ............................ A-81/82 Figures A42a/b: Panama-Taiwan (China) Free Trade Agreement ................................ A-83/84 Thailand Figures A43a/b: ASEAN Framework Agreement on Services...................................... A-85/86 Figures A44a/b: ASEAN-China Trade in Services Agreement..................................... A-87/88 Figures A45a/b: Australia-Thailand Free Trade Agreement ......................................... A-89/90 Vietnam Figures A46a/b: ASEAN Framework Agreement on Services...................................... A-91/92 Figures A47a/b: ASEAN-China Trade in Services Agreement..................................... A-93/94 Figures A48a/b: US-Vietnam Bilateral Trade Agreement............................................. A-95/96 A-iii Figure A1a: ASEAN Framework Agreement on Services (Schedule of Brunei Darussalam) GATS only AFAS improvements AFAS new modes/subsectors Partial Full Partial Full Partial Full Unbound Business services Communication services Construction and related engineering services Distribution services Educational services Environmental services Financial services Health related and social services Tourism and travel related services Recreational, cultural and sporting services Transport services Other services not included elsewhere 0% 20% 40% 60% 80% 100% Notes: The commitments shown here take into account five liberalization packages negotiated up to December 2006. A-1 Figure A1b: ASEAN Framework Agreement on Services (Schedule of Brunei Darussalam) GATS only AFAS improvements AFAS new modes/subsectors Partial Full Partial Full Partial Full Unbound Total Mode 1 Mode 2 Mode 3 Mode 4 0% 20% 40% 60% 80% 100% Notes: See notes to Figure A1a. A-2 Figure A2a: ASEAN-China Trade in Services Agreement (Schedule of Brunei Darussalam) GATS only TIS improvements TIS new modes/subsectors Partial Full Partial Full Partial Full Unbound Business services Communication services Construction and related engineering services Distribution services Educational services Environmental services Financial services Health related and social services Tourism and travel related services Recreational, cultural and sporting services Transport services Other services not included elsewhere 0% 20% 40% 60% 80% 100% A-3 Figure A2b: ASEAN-China Trade in Services Agreement (Schedule of Brunei Darussalam) GATS only FTA improvements FTA new modes/subsectors Partial Full Partial Full Partial Full Unbound Total Mode 1 Mode 2 Mode 3 Mode 4 0% 20% 40% 60% 80% 100% A-4 Figure A3a: ASEAN Framework Agreement on Services (Schedule of Cambodia) GATS only AFAS improvements AFAS new modes/subsectors Partial Full Partial Full Partial Full Unbound Business services Communication services Construction and related engineering services Distribution services Educational services Environmental services Financial services Health related and social services Tourism and travel related services Recreational, cultural and sporting services Transport services Other services not included elsewhere 0% 20% 40% 60% 80% 100% Notes: The commitments shown here take into account five liberalization packages negotiated up to December 2006. A-5 Figure A3b: ASEAN Framework Agreement on Services (Schedule of Cambodia) GATS only AFAS improvements AFAS new modes/subsectors Partial Full Partial Full Partial Full Unbound Total Mode 1 Mode 2 Mode 3 Mode 4 0% 20% 40% 60% 80% 100% Notes: See notes to Figure A3a. A-6 Figure A4a: ASEAN-China Trade in Services Agreement (Schedule of Cambodia) GATS only TIS improvements TIS new modes/subsectors Partial Full Partial Full Partial Full Unbound Business services Communication services Construction and related engineering services Distribution services Educational services Environmental services Financial services Health related and social services Tourism and travel related services Recreational, cultural and sporting services Transport services Other services not included elsewhere 0% 20% 40% 60% 80% 100% A-7 Figure A4b: ASEAN-China Trade in Services Agreement (Schedule of Cambodia) GATS only TIS improvements TIS new modes/subsectors Partial Full Partial Full Partial Full Unbound Total Mode 1 Mode 2 Mode 3 Mode 4 0% 20% 40% 60% 80% 100% A-8 Figure A5a: ASEAN-China Trade in Services Agreement (Schedule of China) GATS only TIS improvements TIS new modes/subsectors Partial Full Partial Full Partial Full Unbound Business services Communication services Construction and related engineering services Distribution services Educational services Environmental services Financial services Health related and social services Tourism and travel related services Recreational, cultural and sporting services Transport services Other services not included elsewhere 0% 20% 40% 60% 80% 100% Notes: FTA commitments are evaluated relative to China's GATS commitment as of 2008, by which time all transition periods inscribed in the GATS schedule will have expired. A-9 Figure A5b: ASEAN-China Trade in Services Agreement (Schedule of China) GATS only TIS improvements TIS new modes/subsectors Partial Full Partial Full Partial Full Unbound Total Mode 1 Mode 2 Mode 3 Mode 4 0% 20% 40% 60% 80% 100% Notes: See notes to Figure A5a A-10 Figure A6a: Mainland-Hong Kong Closer Economic Partnership Agreement (Schedule of China) GATS only CEPA improvements CEPA new modes/subsectors Partial Full Partial Full Partial Full Unbound Business services Communication services Construction and related engineering services Distribution services Educational services Environmental services Financial services Health related and social services Tourism and travel related services Recreational, cultural and sporting services Transport services Other services not included elsewhere 0% 20% 40% 60% 80% 100% Notes: The commitments shown here take into account the original Closer Economic Partnership Agreement (CEPA), which entered into force in January 2004, and three supplementary liberalization packages negotiated in October 2004, October 2005, and June 2006. CEPA commitments are evaluated relative to China's GATS commitment as of 2008, by which time all transition periods inscribed in the GATS schedule will have expired. Thus, transitory trade preferences offered to Hong Kong service suppliers in certain sectors between 2004 and 2008 are not captured. A-11 Figure A6b: Mainland-Hong Kong Closer Economic Partnership Agreement (Schedule of China) GATS only CEPA improvements CEPA new modes/subsectors Partial Full Partial Full Partial Full Unbound Total Mode 1 Mode 2 Mode 3 Mode 4 0% 20% 40% 60% 80% 100% Notes: See notes to Figure A6a. A-12 Figure A7a: Mainland-Macao Closer Economic Partnership Agreement (Schedule of China) GATS only CEPA improvements CEPA new modes/subsectors Partial Full Partial Full Partial Full Unbound Business services Communication services Construction and related engineering services Distribution services Educational services Environmental services Financial services Health related and social services Tourism and travel related services Recreational, cultural and sporting services Transport services Other services not included elsewhere 0% 20% 40% 60% 80% 100% Notes: The commitments shown here take into account the original Closer Economic Partnership Agreement (CEPA), which entered into force in January 2004, and three supplementary liberalization packages negotiated in October 2004, October 2005, and June 2006. CEPA commitments are evaluated relative to China's GATS commitment as of 2008, by which time all transition periods inscribed in the GATS schedule will have expired. Thus, transitory trade preferences offered to Macao service suppliers in certain sectors between 2004 and 2008 are not captured. A-13 Figure A7b: Mainland-Macao Closer Economic Partnership Agreement (Schedule of China) GATS only CEPA improvements CEPA new modes/subsectors Partial Full Partial Full Partial Full Unbound Total Mode 1 Mode 2 Mode 3 Mode 4 0% 20% 40% 60% 80% 100% Notes: See notes to Figure A7a. A-14 Figure A8a: ASEAN Framework Agreement on Services (Schedule of Indonesia) GATS only AFAS improvements AFAS new modes/subsectors Partial Full Partial Full Partial Full Unbound Business services Communication services Construction and related engineering services Distribution services Educational services Environmental services Financial services Health related and social services Tourism and travel related services Recreational, cultural and sporting services Transport services Other services not included elsewhere 0% 20% 40% 60% 80% 100% Notes: The commitments shown here take into account five liberalization packages negotiated up to December 2006. A-15 Figure A8b: ASEAN Framework Agreement on Services (Schedule of Indonesia) GATS only AFAS improvements AFAS new modes/subsectors Partial Full Partial Full Partial Full Unbound Total Mode 1 Mode 2 Mode 3 Mode 4 0% 20% 40% 60% 80% 100% Notes: See notes to Figure A8a. A-16 Figure A9a: ASEAN-China Trade in Services Agreement (Schedule of Indonesia) GATS only TIS improvements TIS new modes/subsectors Partial Full Partial Full Partial Full Unbound Business services Communication services Construction and related engineering services Distribution services Educational services Environmental services Financial services Health related and social services Tourism and travel related services Recreational, cultural and sporting services Transport services Other services not included elsewhere 0% 20% 40% 60% 80% 100% A-17 Figure A9b: ASEAN-China Trade in Services Agreement (Schedule of Indonesia) GATS only TIS improvements TIS new modes/subsectors Partial Full Partial Full Partial Full Unbound Total Mode 1 Mode 2 Mode 3 Mode 4 0% 20% 40% 60% 80% 100% A-18 Figure A10a: Japan-Malaysia Economic Partnership Agreement (Schedule of Japan) GATS only EPA improvements EPA new modes/subsectors Partial Full Partial Full Partial Full Unbound Business services Communication services Construction and related engineering services Distribution services Educational services Environmental services Financial services Health related and social services Tourism and travel related services Recreational, cultural and sporting services Transport services Other services not included elsewhere 0% 20% 40% 60% 80% 100% A-19 Figure A10b: Japan-Malaysia Economic Partnership Agreement (Schedule of Japan) GATS only EPA improvements EPA new modes/subsectors Partial Full Partial Full Partial Full Unbound Total Mode 1 Mode 2 Mode 3 Mode 4 0% 20% 40% 60% 80% 100% A-20 Figure A11a: Japan-Mexico Economic Partnership Agreement (Schedule of Japan) GATS only EPA improvements EPA new modes/subsectors Partial Full Partial Full Partial Full Unbound Business services Communication services Construction and related engineering services Distribution services Educational services Environmental services Financial services Health related and social services Tourism and travel related services Recreational, cultural and sporting services Transport services Other services not included elsewhere 0% 20% 40% 60% 80% 100% A-21 Figure A11b: Japan-Mexico Economic Partnership Agreement (Schedule of Japan) GATS only EPA improvements EPA new modes/subsectors Partial Full Partial Full Partial Full Unbound Total Mode 1 Mode 2 Mode 3 Mode 4 0% 20% 40% 60% 80% 100% A-22 Figure A12a: Japan-Philippines Economic Partnership Agreement (Schedule of Japan) GATS only EPA improvements EPA new modes/subsectors Partial Full Partial Full Partial Full Unbound Business services Communication services Construction and related engineering services Distribution services Educational services Environmental services Financial services Health related and social services Tourism and travel related services Recreational, cultural and sporting services Transport services Other services not included elsewhere 0% 20% 40% 60% 80% 100% A-23 Figure A12b: Japan-Philippines Economic Partnership Agreement (Schedule of Japan) GATS only EPA improvements EPA new modes/subsectors Partial Full Partial Full Partial Full Unbound Total Mode 1 Mode 2 Mode 3 Mode 4 0% 20% 40% 60% 80% 100% A-24 Figure A13a: Japan-Singapore New-Age Economic Partnership Agreement (Schedule of Japan) GATS only EPA improvements EPA new modes/subsectors Partial Full Partial Full Partial Full Unbound Business services Communication services Construction and related engineering services Distribution services Educational services Environmental services Financial services Health related and social services Tourism and travel related services Recreational, cultural and sporting services Transport services Other services not included elsewhere 0% 20% 40% 60% 80% 100% A-25 Figure A13b: Japan-Singapore New-Age Economic Partnership Agreement (Schedule of Japan) GATS only EPA improvements EPA new modes/subsectors Partial Full Partial Full Partial Full Unbound Total Mode 1 Mode 2 Mode 3 Mode 4 0% 20% 40% 60% 80% 100% A-26 Figure A14a: Chile-Korea Free Trade Agreement (Schedule of Korea) GATS only FTA improvements FTA new modes/subsectors Partial Full Partial Full Partial Full Unbound Business services Communication services Construction and related engineering services Distribution services Educational services Environmental services Financial services Health related and social services Tourism and travel related services Recreational, cultural and sporting services Transport services Other services not included elsewhere 0% 20% 40% 60% 80% 100% A-27 Figure A14b: Chile-Korea Free Trade Agreement (Schedule of Korea) GATS only FTA improvements FTA new modes/subsectors Partial Full Partial Full Partial Full Unbound Total Mode 1 Mode 2 Mode 3 Mode 4 0% 20% 40% 60% 80% 100% A-28 Figure A15a: EFTA-Korea Free Trade Agreement (Schedule of Korea) GATS only FTA improvements FTA new modes/subsectors Partial Full Partial Full Partial Full Unbound Business services Communication services Construction and related engineering services Distribution services Educational services Environmental services Financial services Health related and social services Tourism and travel related services Recreational, cultural and sporting services Transport services Other services not included elsewhere 0% 20% 40% 60% 80% 100% A-29 Figure A15b: EFTA-Korea Free Trade Agreement (Schedule of Korea) GATS only FTA improvements FTA new modes/subsectors Partial Full Partial Full Partial Full Unbound Total Mode 1 Mode 2 Mode 3 Mode 4 0% 20% 40% 60% 80% 100% A-30 Figure A16a: Korea-Singapore Free Trade Agreement (Schedule of Korea) GATS only FTA improvements FTA new modes/subsectors Partial Full Partial Full Partial Full Unbound Business services Communication services Construction and related engineering services Distribution services Educational services Environmental services Financial services Health related and social services Tourism and travel related services Recreational, cultural and sporting services Transport services Other services not included elsewhere 0% 20% 40% 60% 80% 100% A-31 Figure A16b: Korea-Singapore Free Trade Agreement (Schedule of Korea) GATS only FTA improvements FTA new modes/subsectors Partial Full Partial Full Partial Full Unbound Total Mode 1 Mode 2 Mode 3 Mode 4 0% 20% 40% 60% 80% 100% A-32 Figure A17a: ASEAN Framework Agreement on Services (Schedule of Lao PDR) GATS only FTA improvements AFAS new modes/subsectors Partial Full Partial Full Partial Full Unbound Business services Communication services Construction and related engineering services Distribution services Educational services Environmental services Financial services Health related and social services Tourism and travel related services Recreational, cultural and sporting services Transport services Other services not included elsewhere 0% 20% 40% 60% 80% 100% Notes: The commitments shown here take into account five liberalization packages negotiated up to December 2006. A-33 Figure A17b: ASEAN Framework Agreement on Services (Schedule of Lao PDR) GATS only FTA improvements AFAS new modes/subsectors Partial Full Partial Full Partial Full Unbound Total Mode 1 Mode 2 Mode 3 Mode 4 0% 20% 40% 60% 80% 100% Notes: See notes to Figure A17a. A-34 Figure A18a: ASEAN-China Trade in Services Agreement (Schedule of Lao PDR) GATS only FTA improvements TIS new modes/subsectors Partial Full Partial Full Partial Full Unbound Business services Communication services Construction and related engineering services Distribution services Educational services Environmental services Financial services Health related and social services Tourism and travel related services Recreational, cultural and sporting services Transport services Other services not included elsewhere 0% 20% 40% 60% 80% 100% A-35 Figure A18b: ASEAN-China Trade in Services Agreement (Schedule of Lao PDR) GATS only FTA improvements TIS new modes/subsectors Partial Full Partial Full Partial Full Unbound Total Mode 1 Mode 2 Mode 3 Mode 4 0% 20% 40% 60% 80% 100% A-36 Figure A19a: US-Lao PDR Bilateral Trade Agreement (Schedule of Lao PDR) GATS only FTA improvements BTA new modes/subsectors Partial Full Partial Full Partial Full Unbound Business services Communication services Construction and related engineering services Distribution services Educational services Environmental services Financial services Health related and social services Tourism and travel related services Recreational, cultural and sporting services Transport services Other services not included elsewhere 0% 20% 40% 60% 80% 100% A-37 Figure A19b: US-Lao PDR Bilateral Trade Agreement (Schedule of Lao PDR) GATS only FTA improvements BTA new modes/subsectors Partial Full Partial Full Partial Full Unbound Total Mode 1 Mode 2 Mode 3 Mode 4 0% 20% 40% 60% 80% 100% A-38 Figure A20a: ASEAN Framework Agreement on Services (Schedule of Malaysia) GATS only AFAS improvements AFAS new modes/subsectors Partial Full Partial Full Partial Full Unbound Business services Communication services Construction and related engineering services Distribution services Educational services Environmental services Financial services Health related and social services Tourism and travel related services Recreational, cultural and sporting services Transport services Other services not included elsewhere 0% 20% 40% 60% 80% 100% Notes: The commitments shown here take into account five liberalization packages negotiated up to December 2006. A-39 Figure A20b: ASEAN Framework Agreement on Services (Schedule of Malaysia) GATS only AFAS improvements AFAS new modes/subsectors Partial Full Partial Full Partial Full Unbound Total Mode 1 Mode 2 Mode 3 Mode 4 0% 20% 40% 60% 80% 100% Notes: See notes to Figure A20a. A-40 Figure A21a: ASEAN-China Trade in Services Agreement (Schedule of Malaysia) GATS only TIS improvements TIS new modes/subsectors Partial Full Partial Full Partial Full Unbound Business services Communication services Construction and related engineering services Distribution services Educational services Environmental services Financial services Health related and social services Tourism and travel related services Recreational, cultural and sporting services Transport services Other services not included elsewhere 0% 20% 40% 60% 80% 100% A-41 Figure A21b: ASEAN-China Trade in Services Agreement (Schedule of Malaysia) GATS only TIS improvements TIS new modes/subsectors Partial Full Partial Full Partial Full Unbound Total Mode 1 Mode 2 Mode 3 Mode 4 0% 20% 40% 60% 80% 100% A-42 Figure A22a: Japan-Malaysia Economic Partnership Agreement (Schedule of Malaysia) GATS only EPA improvements EPA new modes/subsectors Partial Full Partial Full Partial Full Unbound Business services Communication services Construction and related engineering services Distribution services Educational services Environmental services Financial services Health related and social services Tourism and travel related services Recreational, cultural and sporting services Transport services Other services not included elsewhere 0% 20% 40% 60% 80% 100% A-43 Figure A22b: Japan-Malaysia Economic Partnership Agreement (Schedule of Malaysia) GATS only EPA improvements EPA new modes/subsectors Partial Full Partial Full Partial Full Unbound Total Mode 1 Mode 2 Mode 3 Mode 4 0% 20% 40% 60% 80% 100% A-44 Figure A23a: ASEAN Framework Agreement on Services (Schedule of Myanmar) GATS only AFAS improvements AFAS new modes/subsectors Partial Full Partial Full Partial Full Unbound Business services Communication services Construction and related engineering services Distribution services Educational services Environmental services Financial services Health related and social services Tourism and travel related services Recreational, cultural and sporting services Transport services Other services not included elsewhere 0% 20% 40% 60% 80% 100% Notes: The commitments shown here take into account five liberalization packages negotiated up to December 2006. A-45 Figure A23b: ASEAN Framework Agreement on Services (Schedule of Myanmar) GATS only AFAS improvements AFAS new modes/subsectors Partial Full Partial Full Partial Full Unbound Total Mode 1 Mode 2 Mode 3 Mode 4 0% 20% 40% 60% 80% 100% Notes: See notes to Figure A23a. A-46 Figure A24a: ASEAN-China Trade in Services Agreement (Schedule of Myanmar) GATS only TIS improvements TIS new modes/subsectors Partial Full Partial Full Partial Full Unbound Business services Communication services Construction and related engineering services Distribution services Educational services Environmental services Financial services Health related and social services Tourism and travel related services Recreational, cultural and sporting services Transport services Other services not included elsewhere 0% 20% 40% 60% 80% 100% A-47 Figure A24b: ASEAN-China Trade in Services Agreement (Schedule of Myanmar) GATS only TIS improvements TIS new modes/subsectors Partial Full Partial Full Partial Full Unbound Total Mode 1 Mode 2 Mode 3 Mode 4 0% 20% 40% 60% 80% 100% A-48 Figure A25a: ASEAN Framework Agreement on Services (Schedule of the Philippines) GATS only AFAS improvements AFAS new modes/subsectors Partial Full Partial Full Partial Full Unbound Business services Communication services Construction and related engineering services Distribution services Educational services Environmental services Financial services Health related and social services Tourism and travel related services Recreational, cultural and sporting services Transport services Other services not included elsewhere 0% 20% 40% 60% 80% 100% Notes: The commitments shown here take into account five liberalization packages negotiated up to December 2006. A-49 Figure A25b: ASEAN Framework Agreement on Services (Schedule of the Philippines) GATS only AFAS improvements AFAS new modes/subsectors Partial Full Partial Full Partial Full Unbound Total Mode 1 Mode 2 Mode 3 Mode 4 0% 20% 40% 60% 80% 100% Notes: See notes to Figure A25a. A-50 Figure A26a: ASEAN-China Trade in Services Agreement (Schedule of the Philippines) GATS only TIS improvements TIS new modes/subsectors Partial Full Partial Full Partial Full Unbound Business services Communication services Construction and related engineering services Distribution services Educational services Environmental services Financial services Health related and social services Tourism and travel related services Recreational, cultural and sporting services Transport services Other services not included elsewhere 0% 20% 40% 60% 80% 100% A-51 Figure A26b: ASEAN-China Trade in Services Agreement (Schedule of the Philippines) GATS only TIS improvements TIS new modes/subsectors Partial Full Partial Full Partial Full Unbound Total Mode 1 Mode 2 Mode 3 Mode 4 0% 20% 40% 60% 80% 100% A-52 Figure A27a: Japan-Philippines Economic Partnership Agreement (Schedule of the Philippines) GATS only EPA improvements EPA new modes/subsectors Partial Full Partial Full Partial Full Unbound Business services Communication services Construction and related engineering services Distribution services Educational services Environmental services Financial services Health related and social services Tourism and travel related services Recreational, cultural and sporting services Transport services Other services not included elsewhere 0% 20% 40% 60% 80% 100% A-53 Figure A27b: Japan-Philippines Economic Partnership Agreement (Schedule of the Philippines) GATS only EPA improvements EPA new modes/subsectors Partial Full Partial Full Partial Full Unbound Total Mode 1 Mode 2 Mode 3 Mode 4 0% 20% 40% 60% 80% 100% A-54 Figure A28a: ASEAN Framework Agreement on Services (Schedule of Singapore) GATS only AFAS improvements AFAS new modes/subsectors Partial Full Partial Full Partial Full Unbound Business services Communication services Construction and related engineering services Distribution services Educational services Environmental services Financial services Health related and social services Tourism and travel related services Recreational, cultural and sporting services Transport services Other services not included elsewhere 0% 20% 40% 60% 80% 100% Notes: The commitments shown here take into account five liberalization packages negotiated up to December 2006. A-55 Figure A28b: ASEAN Framework Agreement on Services (Schedule of Singapore) GATS only AFAS improvements AFAS new modes/subsectors Partial Full Partial Full Partial Full Unbound Total Mode 1 Mode 2 Mode 3 Mode 4 0% 20% 40% 60% 80% 100% Notes: See notes to Figure A28a. A-56 Figure A29a: ASEAN-China Trade in Services Agreement (Schedule of Singapore) GATS only TIS improvements TIS new modes/subsectors Partial Full Partial Full Partial Full Unbound Business services Communication services Construction and related engineering services Distribution services Educational services Environmental services Financial services Health related and social services Tourism and travel related services Recreational, cultural and sporting services Transport services Other services not included elsewhere 0% 20% 40% 60% 80% 100% A-57 Figure A29b: ASEAN-China Trade in Services Agreement (Schedule of Singapore) GATS only TIS improvements TIS new modes/subsectors Partial Full Partial Full Partial Full Unbound Total Mode 1 Mode 2 Mode 3 Mode 4 0% 20% 40% 60% 80% 100% A-58 Figure A30a: Australia-Singapore Free Trade Agreement (Schedule of Singapore) GATS only FTA improvements FTA new modes/subsectors Partial Full Partial Full Partial Full Unbound Business services Communication services Construction and related engineering services Distribution services Educational services Environmental services Financial services Health related and social services Tourism and travel related services Recreational, cultural and sporting services Transport services Other services not included elsewhere 0% 20% 40% 60% 80% 100% A-59 Figure A30b: Australia-Singapore Free Trade Agreement (Schedule of Singapore) GATS only FTA improvements FTA new modes/subsectors Partial Full Partial Full Partial Full Unbound Total Mode 1 Mode 2 Mode 3 Mode 4 0% 20% 40% 60% 80% 100% A-60 Figure A31a: EFTA-Singapore Free Trade Agreement (Schedule of Singapore) GATS only FTA improvements FTA new modes/subsectors Partial Full Partial Full Partial Full Unbound Business services Communication services Construction and related engineering services Distribution services Educational services Environmental services Financial services Health related and social services Tourism and travel related services Recreational, cultural and sporting services Transport services Other services not included elsewhere 0% 20% 40% 60% 80% 100% A-61 Figure A31b: EFTA-Singapore Free Trade Agreement (Schedule of Singapore) GATS only FTA improvements FTA new modes/subsectors Partial Full Partial Full Partial Full Unbound Total Mode 1 Mode 2 Mode 3 Mode 4 0% 20% 40% 60% 80% 100% A-62 Figure A32a: India-Singapore Economic Cooperation Agreement (Schedule of Singapore) GATS only ECA improvements ECA new modes/subsectors Partial Full Partial Full Partial Full Unbound Business services Communication services Construction and related engineering services Distribution services Educational services Environmental services Financial services Health related and social services Tourism and travel related services Recreational, cultural and sporting services Transport services Other services not included elsewhere 0% 20% 40% 60% 80% 100% A-63 Figure A32b: India-Singapore Economic Cooperation Agreement (Schedule of Singapore) GATS only ECA improvements ECA new modes/subsectors Partial Full Partial Full Partial Full Unbound Total Mode 1 Mode 2 Mode 3 Mode 4 0% 20% 40% 60% 80% 100% A-64 Figure A33a: Japan-Singapore New-Age Economic Partnership Agreement (Schedule of Singapore) GATS only EPA improvements EPA new modes/subsectors Partial Full Partial Full Partial Full Unbound Business services Communication services Construction and related engineering services Distribution services Educational services Environmental services Financial services Health related and social services Tourism and travel related services Recreational, cultural and sporting services Transport services Other services not included elsewhere 0% 20% 40% 60% 80% 100% A-65 Figure A33b: Japan-Singapore New-Age Economic Partnership Agreement (Schedule of Singapore) GATS only EPA improvements EPA new modes/subsectors Partial Full Partial Full Partial Full Unbound Total Mode 1 Mode 2 Mode 3 Mode 4 0% 20% 40% 60% 80% 100% A-66 Figure A34a: Jordan-Singapore Free Trade Agreement (Schedule of Singapore) GATS only FTA improvements FTA new modes/subsectors Partial Full Partial Full Partial Full Unbound Business services Communication services Construction and related engineering services Distribution services Educational services Environmental services Financial services Health related and social services Tourism and travel related services Recreational, cultural and sporting services Transport services Other services not included elsewhere 0% 20% 40% 60% 80% 100% A-67 Figure A34b: Jordan-Singapore Free Trade Agreement (Schedule of Singapore) GATS only FTA improvements FTA new modes/subsectors Partial Full Partial Full Partial Full Unbound Total Mode 1 Mode 2 Mode 3 Mode 4 0% 20% 40% 60% 80% 100% A-68 Figure A35a: Korea-Singapore Free Trade Agreement (Schedule of Singapore) GATS only FTA improvements FTA new modes/subsectors Partial Full Partial Full Partial Full Unbound Business services Communication services Construction and related engineering services Distribution services Educational services Environmental services Financial services Health related and social services Tourism and travel related services Recreational, cultural and sporting services Transport services Other services not included elsewhere 0% 20% 40% 60% 80% 100% A-69 Figure A35b: Korea-Singapore Free Trade Agreement (Schedule of Singapore) GATS only FTA improvements FTA new modes/subsectors Partial Full Partial Full Partial Full Unbound Total Mode 1 Mode 2 Mode 3 Mode 4 0% 20% 40% 60% 80% 100% A-70 Figure A36a: New Zealand-Singapore Free Trade Agreement (Schedule of Singapore) GATS only FTA improvements FTA new modes/subsectors Partial Full Partial Full Partial Full Unbound Business services Communication services Construction and related engineering services Distribution services Educational services Environmental services Financial services Health related and social services Tourism and travel related services Recreational, cultural and sporting services Transport services Other services not included elsewhere 0% 20% 40% 60% 80% 100% A-71 Figure A36b: New Zealand-Singapore Free Trade Agreement (Schedule of Singapore) GATS only FTA improvements FTA new modes/subsectors Partial Full Partial Full Partial Full Unbound Total Mode 1 Mode 2 Mode 3 Mode 4 0% 20% 40% 60% 80% 100% A-72 Figure A37a: Panama-Singapore Free Trade Agreement (Schedule of Singapore) GATS only FTA improvements FTA new modes/subsectors Partial Full Partial Full Partial Full Unbound Business services Communication services Construction and related engineering services Distribution services Educational services Environmental services Financial services Health related and social services Tourism and travel related services Recreational, cultural and sporting services Transport services Other services not included elsewhere 0% 20% 40% 60% 80% 100% A-73 Figure A37b: Panama-Singapore Free Trade Agreement (Schedule of Singapore) GATS only FTA improvements FTA new modes/subsectors Partial Full Partial Full Partial Full Unbound Total Mode 1 Mode 2 Mode 3 Mode 4 0% 20% 40% 60% 80% 100% A-74 Figure A38a: Singapore-United States Free Trade Agreement (Schedule of Singapore) GATS only FTA improvements FTA new modes/subsectors Partial Full Partial Full Partial Full Unbound Business services Communication services Construction and related engineering services Distribution services Educational services Environmental services Financial services Health related and social services Tourism and travel related services Recreational, cultural and sporting services Transport services Other services not included elsewhere 0% 20% 40% 60% 80% 100% A-75 Figure A38b: Singapore-United States Free Trade Agreement (Schedule of Singapore) GATS only FTA improvements FTA new modes/subsectors Partial Full Partial Full Partial Full Unbound Total Mode 1 Mode 2 Mode 3 Mode 4 0% 20% 40% 60% 80% 100% A-76 Figure A39a: Trans-Pacific Strategic Economic Partnership Agreement (Schedule of Singapore) GATS only EPA improvements EPA new modes/subsectors Partial Full Partial Full Partial Full Unbound Business services Communication services Construction and related engineering services Distribution services Educational services Environmental services Financial services Health related and social services Tourism and travel related services Recreational, cultural and sporting services Transport services Other services not included elsewhere 0% 20% 40% 60% 80% 100% A-77 Figure A39b: Trans-Pacific Strategic Economic Partnership Agreement (Schedule of Singapore) GATS only EPA improvements EPA new modes/subsectors Partial Full Partial Full Partial Full Unbound Total Mode 1 Mode 2 Mode 3 Mode 4 0% 20% 40% 60% 80% 100% A-78 Figure A40a: Guatemala-Taiwan (China) Free Trade Agreement (Schedule of Taiwan, China) GATS only FTA improvements FTA new modes/subsectors Partial Full Partial Full Partial Full Unbound Business services Communication services Construction and related engineering services Distribution services Educational services Environmental services Financial services Health related and social services Tourism and travel related services Recreational, cultural and sporting services Transport services Other services not included elsewhere 0% 20% 40% 60% 80% 100% A-79 Figure A40b: Guatemala-Taiwan (China) Free Trade Agreement (Schedule of Taiwan, China) GATS only FTA improvements FTA new modes/subsectors Partial Full Partial Full Partial Full Unbound Total Mode 1 Mode 2 Mode 3 Mode 4 0% 20% 40% 60% 80% 100% A-80 Figure A41a: Nicaragua-Taiwan (China) Free Trade Agreement (Schedule of Taiwan, China) GATS only FTA improvements FTA new modes/subsectors Partial Full Partial Full Partial Full Unbound Business services Communication services Construction and related engineering services Distribution services Educational services Environmental services Financial services Health related and social services Tourism and travel related services Recreational, cultural and sporting services Transport services Other services not included elsewhere 0% 20% 40% 60% 80% 100% A-81 Figure A41b: Nicaragua-Taiwan (China) Free Trade Agreement (Schedule of Taiwan, China) GATS only FTA improvements FTA new modes/subsectors Partial Full Partial Full Partial Full Unbound Total Mode 1 Mode 2 Mode 3 Mode 4 0% 20% 40% 60% 80% 100% A-82 Figure A42a: Panama-Taiwan (China) Free Trade Agreement (Schedule of Taiwan, China) GATS only FTA improvements FTA new modes/subsectors Partial Full Partial Full Partial Full Unbound Business services Communication services Construction and related engineering services Distribution services Educational services Environmental services Financial services Health related and social services Tourism and travel related services Recreational, cultural and sporting services Transport services Other services not included elsewhere 0% 20% 40% 60% 80% 100% A-83 Figure A42b: Panama-Taiwan (China) Free Trade Agreement (Schedule of Taiwan, China) GATS only FTA improvements FTA new modes/subsectors Partial Full Partial Full Partial Full Unbound Total Mode 1 Mode 2 Mode 3 Mode 4 0% 20% 40% 60% 80% 100% A-84 Figure A43a: ASEAN Framework Agreement on Services (Schedule of Thailand) GATS only AFAS improvements AFAS new modes/subsectors Partial Full Partial Full Partial Full Unbound Business services Communication services Construction and related engineering services Distribution services Educational services Environmental services Financial services Health related and social services Tourism and travel related services Recreational, cultural and sporting services Transport services Other services not included elsewhere 0% 20% 40% 60% 80% 100% Notes: The commitments shown here take into account five liberalization packages negotiated up to December 2006. A-85 Figure A43b: ASEAN Framework Agreement on Services (Schedule of Thailand) GATS only AFAS improvements AFAS new modes/subsectors Partial Full Partial Full Partial Full Unbound Total Mode 1 Mode 2 Mode 3 Mode 4 0% 20% 40% 60% 80% 100% Notes: See notes to Figure A43a. A-86 Figure A44a: ASEAN-China Trade in Services Agreement (Schedule of Thailand) GATS only TIS improvements TIS new modes/subsectors Partial Full Partial Full Partial Full Unbound Business services Communication services Construction and related engineering services Distribution services Educational services Environmental services Financial services Health related and social services Tourism and travel related services Recreational, cultural and sporting services Transport services Other services not included elsewhere 0% 20% 40% 60% 80% 100% A-87 Figure A44b: ASEAN-China Trade in Services Agreement (Schedule of Thailand) GATS only TIS improvements TIS new modes/subsectors Partial Full Partial Full Partial Full Unbound Total Mode 1 Mode 2 Mode 3 Mode 4 0% 20% 40% 60% 80% 100% A-88 Figure A45a: Australia-Thailand FTA (Schedule of Thailand) GATS only FTA improvements FTA new modes/subsectors Partial Full Partial Full Partial Full Unbound Business services Communication services Construction and related engineering services Distribution services Educational services Environmental services Financial services Health related and social services Tourism and travel related services Recreational, cultural and sporting services Transport services Other services not included elsewhere 0% 20% 40% 60% 80% 100% A-89 Figure A45b: Australia-Thailand FTA (Schedule of Thailand) GATS only FTA improvements FTA new modes/subsectors Partial Full Partial Full Partial Full Unbound Total Mode 1 Mode 2 Mode 3 Mode 4 0% 20% 40% 60% 80% 100% A-90 Figure A46a: ASEAN Framework Agreement on Services (Schedule of Vietnam) GATS only AFAS improvements AFAS new modes/subsectors Partial Full Partial Full Partial Full Unbound Business services Communication services Construction and related engineering services Distribution services Educational services Environmental services Financial services Health related and social services Tourism and travel related services Recreational, cultural and sporting services Transport services Other services not included elsewhere 0% 20% 40% 60% 80% 100% Notes: The commitments shown here take into account five liberalization packages negotiated up to December 2006. A-91 Figure A46b: ASEAN Framework Agreement on Services (Schedule of Vietnam) GATS only AFAS improvements AFAS new modes/subsectors Partial Full Partial Full Partial Full Unbound Total Mode 1 Mode 2 Mode 3 Mode 4 0% 20% 40% 60% 80% 100% Notes: See notes to Figure A46a. A-92 Figure A47a: ASEAN-China Trade in Services Agreement (Schedule of Vietnam) GATS only TIS improvements TIS new modes/subsectors Partial Full Partial Full Partial Full Unbound Business services Communication services Construction and related engineering services Distribution services Educational services Environmental services Financial services Health related and social services Tourism and travel related services Recreational, cultural and sporting services Transport services Other services not included elsewhere 0% 20% 40% 60% 80% 100% A-93 Figure A47b: ASEAN-China Trade in Services Agreement (Schedule of Vietnam) GATS only TIS improvements TIS new modes/subsectors Partial Full Partial Full Partial Full Unbound Total Mode 1 Mode 2 Mode 3 Mode 4 0% 20% 40% 60% 80% 100% A-94 Figure A48a: US-Vietnam Bilateral Trade Agreement (Schedule of Vietnam) GATS only BTA improvements BTA new modes/subsectors Partial Full Partial Full Partial Full Unbound Business services Communication services Construction and related engineering services Distribution services Educational services Environmental services Financial services Health related and social services Tourism and travel related services Recreational, cultural and sporting services Transport services Other services not included elsewhere 0% 20% 40% 60% 80% 100% Notes: Vietnam's BTA commitment is evaluated relative to Vietnam's GATS commitment at the end of all transition periods. Thus, transitory trade preferences offered to the United States in certain sub-sectors are not captured. A-95 Figure A48b: US-Vietnam Bilateral Trade Agreement (Schedule of Vietnam) GATS only BTA improvements BTA new modes/subsectors Partial Full Partial Full Partial Full Unbound Total Mode 1 Mode 2 Mode 3 Mode 4 0% 20% 40% 60% 80% 100% Notes: See notes to Figure A48a. A-96 Annex B Maximum Commitments by Country158 158Commitment counts are based on the most liberal undertaking across all FTAs concluded by a country. In other words, if an improved commitment or a new subsector/mode relative to a country's GATS schedule is found in at least one FTA, the relevant subsector is allocated to the FTA segments of the horizontal bars presented in this Annex. List of Annex B Figures Figures B1a/b: Brunei Darussalam.................................................................................... B-1/2 Figures B2a/b: Cambodia .................................................................................................. B-3/4 Figures B3a/b: China ......................................................................................................... B-5/6 Figures B4a/b: Indonesia ................................................................................................... B-7/8 Figures B5a/b: Japan........................................................................................................ B-9/10 Figures B6a/b: Korea..................................................................................................... B-11/12 Figures B7a/b: Lao PDR................................................................................................ B-13/14 Figures B8a/b: Malaysia ................................................................................................ B-15/16 Figures B9a/b: Myanmar ............................................................................................... B-17/18 Figures B10a/b: Philippines........................................................................................... B-19/20 Figures B11a/b: Singapore............................................................................................. B-21/22 Figures B12a/b: Taiwan (China).................................................................................... B-23/24 Figures B12a/b: Thailand............................................................................................... B-25/26 Figures B12a/b: Vietnam............................................................................................... B-27/28 B-ii Figure B1a: Brunei Darussalam GATS only FTA improvements FTA new modes/subsectors Partial Full Partial Full Partial Full Unbound Business services Communication services Construction and related engineering services Distribution services Educational services Environmental services Financial services Health related and social services Tourism and travel related services Recreational, cultural and sporting services Transport services Other services not included elsewhere 0% 20% 40% 60% 80% 100% Notes: Based on the following 2 agreements: (1) ASEAN Framework Agreement on Services and (2) ASEAN- China Trade in Services Agreement. See also notes to Figure A1a. B-1 Figure B1b: Brunei Darussalam GATS only FTA improvements FTA new modes/subsectors Partial Full Partial Full Partial Full Unbound Total Mode 1 Mode 2 Mode 3 Mode 4 0% 20% 40% 60% 80% 100% Notes: See notes to Figure B1a. B-2 Figure B2a: Cambodia GATS only FTA improvements FTA new modes/subsectors Partial Full Partial Full Partial Full Unbound Business services Communication services Construction and related engineering services Distribution services Educational services Environmental services Financial services Health related and social services Tourism and travel related services Recreational, cultural and sporting services Transport services Other services not included elsewhere 0% 20% 40% 60% 80% 100% Notes: Based on the following 2 agreements: (1) ASEAN Framework Agreement on Services and (2) ASEAN- China Trade in Services Agreement. See also notes to Figure A3a. B-3 Figure B2b: Cambodia GATS only FTA improvements FTA new modes/subsectors Partial Full Partial Full Partial Full Unbound Total Mode 1 Mode 2 Mode 3 Mode 4 0% 20% 40% 60% 80% 100% Notes: See notes to Figure B2a. B-4 Figure B3a: China GATS only FTA improvements FTA new modes/subsectors Partial Full Partial Full Partial Full Unbound Business services Communication services Construction and related engineering services Distribution services Educational services Environmental services Financial services Health related and social services Tourism and travel related services Recreational, cultural and sporting services Transport services Other services not included elsewhere 0% 20% 40% 60% 80% 100% Notes: Based on the following 3 agreements: (1) ASEAN-China Trade in Services Agreement; (2) Mainland-Hong Kong Closer Economic Partnership Agreement; and (3) Mainland-Macao Closer Economic Partnership Agreement. See also notes to Figures A5a, A6a and A7a. B-5 Figure B3b: China GATS only FTA improvements FTA new modes/subsectors Partial Full Partial Full Partial Full Unbound Total Mode 1 Mode 2 Mode 3 Mode 4 0% 20% 40% 60% 80% 100% Notes: See notes to Figure B3a. B-6 Figure B4a: Indonesia GATS only FTA improvements FTA new modes/subsectors Partial Full Partial Full Partial Full Unbound Business services Communication services Construction and related engineering services Distribution services Educational services Environmental services Financial services Health related and social services Tourism and travel related services Recreational, cultural and sporting services Transport services Other services not included elsewhere 0% 20% 40% 60% 80% 100% Notes: Based on the following 2 agreements: (1) ASEAN Framework Agreement on Services and (2) ASEAN- China Trade in Services Agreement. See also notes to Figure A8a. B-7 Figure B4b: Indonesia GATS only FTA improvements FTA new modes/subsectors Partial Full Partial Full Partial Full Unbound Total Mode 1 Mode 2 Mode 3 Mode 4 0% 20% 40% 60% 80% 100% Notes: See notes to Figure B4a. B-8 Figure B5a: Japan GATS only FTA improvements FTA new modes/subsectors Partial Full Partial Full Partial Full Unbound Business services Communication services Construction and related engineering services Distribution services Educational services Environmental services Financial services Health related and social services Tourism and travel related services Recreational, cultural and sporting services Transport services Other services not included elsewhere 0% 20% 40% 60% 80% 100% Notes: Based on the following 4 agreements: (1) Japan-Malaysia Economic Partnership Agreement; (2) Japan- Mexico Free Trade Agreement; (3) Japan-Philippines Economic Partnership Agreement; and (4) Japan- Singapore New-Age Economic Partnership Agreement. B-9 Figure B5b: Japan GATS only FTA improvements FTA new modes/subsectors Partial Full Partial Full Partial Full Unbound Total Mode 1 Mode 2 Mode 3 Mode 4 0% 20% 40% 60% 80% 100% Notes: See notes to Figure B5a. B-10 Figure B6a: Korea GATS only FTA improvements FTA new modes/subsectors Partial Full Partial Full Partial Full Unbound Business services Communication services Construction and related engineering services Distribution services Educational services Environmental services Financial services Health related and social services Tourism and travel related services Recreational, cultural and sporting services Transport services Other services not included elsewhere 0% 20% 40% 60% 80% 100% Notes: Based on the following 3 agreements: (1) Chile-Korea Free Trade Agreement; (2) EFTA-Korea Free Trade Agreement; and (3) Korea-Singapore Free Trade Agreement. B-11 Figure B6b: Korea GATS only FTA improvements FTA new modes/subsectors Partial Full Partial Full Partial Full Unbound Total Mode 1 Mode 2 Mode 3 Mode 4 0% 20% 40% 60% 80% 100% Notes: See notes to Figure B6a. B-12 Figure B7a: Lao PDR GATS only FTA improvements FTA new modes/subsectors Partial Full Partial Full Partial Full Unbound Business services Communication services Construction and related engineering services Distribution services Educational services Environmental services Financial services Health related and social services Tourism and travel related services Recreational, cultural and sporting services Transport services Other services not included elsewhere 0% 20% 40% 60% 80% 100% Notes: Based on the following 3 agreements: (1) ASEAN Framework Agreement on Services; (2) ASEAN-China Trade in Services Agreement; and (3) US-Lao PDR Bilateral Trade Agreement. See also notes to Figure A17a. B-13 Figure B7b: Lao PDR GATS only FTA improvements FTA new modes/subsectors Partial Full Partial Full Partial Full Unbound Total Mode 1 Mode 2 Mode 3 Mode 4 0% 20% 40% 60% 80% 100% Notes: See notes to Figure B7a. B-14 Figure B8a: Malaysia GATS only FTA improvements FTA new modes/subsectors Partial Full Partial Full Partial Full Unbound Business services Communication services Construction and related engineering services Distribution services Educational services Environmental services Financial services Health related and social services Tourism and travel related services Recreational, cultural and sporting services Transport services Other services not included elsewhere 0% 20% 40% 60% 80% 100% Notes: Based on the following 3 agreements: (1) ASEAN Framework Agreement on Services; (2) ASEAN-China Trade in Services Agreement; and (3) Japan-Malaysia Economic Partnership Agreement. See also notes to Figure A20a. B-15 Figure B8b: Malaysia GATS only FTA improvements FTA new modes/subsectors Partial Full Partial Full Partial Full Unbound Total Mode 1 Mode 2 Mode 3 Mode 4 0% 20% 40% 60% 80% 100% Notes: See notes to Figure B8a. B-16 Figure B9a: Myanmar GATS only FTA improvements FTA new modes/subsectors Partial Full Partial Full Partial Full Unbound Business services Communication services Construction and related engineering services Distribution services Educational services Environmental services Financial services Health related and social services Tourism and travel related services Recreational, cultural and sporting services Transport services Other services not included elsewhere 0% 20% 40% 60% 80% 100% Notes: Based on the following 2 agreements: (1) ASEAN Framework Agreement on Services and (2) ASEAN- China Trade in Services Agreement. See also notes to Figure A23a. B-17 Figure B9a: Myanmar GATS only FTA improvements FTA new modes/subsectors Partial Full Partial Full Partial Full Unbound Total Mode 1 Mode 2 Mode 3 Mode 4 0% 20% 40% 60% 80% 100% Notes: See notes to Figure B9a. B-18 Figure B10a: Philippines GATS only FTA improvements FTA new modes/subsectors Partial Full Partial Full Partial Full Unbound Business services Communication services Construction and related engineering services Distribution services Educational services Environmental services Financial services Health related and social services Tourism and travel related services Recreational, cultural and sporting services Transport services Other services not included elsewhere 0% 20% 40% 60% 80% 100% Notes: Based on the following 3 agreements: (1) ASEAN Framework Agreement on Services; (2) ASEAN-China Trade in Services Agreement; and (3) Japan-Philippines Economic Partnership Agreement. See also notes to Figure A25a. B-19 Figure B10b: Philippines GATS only FTA improvements FTA new modes/subsectors Partial Full Partial Full Partial Full Unbound Total Mode 1 Mode 2 Mode 3 Mode 4 0% 20% 40% 60% 80% 100% Notes: See notes to Figure B10a. B-20 Figure B11a: Singapore GATS only FTA improvements FTA new modes/subsectors Partial Full Partial Full Partial Full Unbound Business services Communication services Construction and related engineering services Distribution services Educational services Environmental services Financial services Health related and social services Tourism and travel related services Recreational, cultural and sporting services Transport services Other services not included elsewhere 0% 20% 40% 60% 80% 100% Notes: Based on the following 12 agreements: (1) ASEAN Framework Agreement on Services; (2) ASEAN-China Trade in Services Agreement; (3) Australia-Singapore Free Trade Agreement; (4) EFTA-Singapore Free Trade Agreement; (5) India-Singapore Comprehensive Economic Cooperation Agreement; (6) Japan-Singapore New- Age Economic Partnership Agreement; (7) Jordan-Singapore Free Trade Agreement; (8) Korea-Singapore Free Trade Agreement; (9) New Zealand-Singapore Free Trade Agreement; (10) Panama-Singapore Free Trade Agreement; (11) Singapore-United States Free Trade Agreement; and (12) Brunei-Chile-New Zealand-Singapore (Trans-Pacific) Strategic Economic Partnership Agreement. See also notes to Figure A28a. B-21 Figure B11b: Singapore GATS only FTA improvements FTA new modes/subsectors Partial Full Partial Full Partial Full Unbound Total Mode 1 Mode 2 Mode 3 Mode 4 0% 20% 40% 60% 80% 100% Notes: See notes to Figure B11a. B-22 Figure B12a: Taiwan (China) GATS only FTA improvements FTA new modes/subsectors Partial Full Partial Full Partial Full Unbound Business services Communication services Construction and related engineering services Distribution services Educational services Environmental services Financial services Health related and social services Tourism and travel related services Recreational, cultural and sporting services Transport services Other services not included elsewhere 0% 20% 40% 60% 80% 100% Notes: Based on the following 3 agreements: (1) Guatemala-Taiwan (China) FTA; (2) Nicaragua-Taiwan (China) FTA; and (3) Panama-Taiwan (China) FTA. B-23 Figure B12b: Taiwan (China) GATS only FTA improvements FTA new modes/subsectors Partial Full Partial Full Partial Full Unbound Total Mode 1 Mode 2 Mode 3 Mode 4 0% 20% 40% 60% 80% 100% Notes: See notes to Figure B12a. B-24 Figure B13a: Thailand GATS only FTA improvements FTA new modes/subsectors Partial Full Partial Full Partial Full Unbound Business services Communication services Construction and related engineering services Distribution services Educational services Environmental services Financial services Health related and social services Tourism and travel related services Recreational, cultural and sporting services Transport services Other services not included elsewhere 0% 20% 40% 60% 80% 100% Notes: Based on the following 3 agreements: (1) ASEAN Framework Agreement on Services; (2) ASEAN-China Trade in Services Agreement; and (3) Australia-Thailand Free Trade Agreement. See also notes to Figure A43a. B-25 Figure B13b: Thailand GATS only FTA improvements FTA new modes/subsectors Partial Full Partial Full Partial Full Unbound Total Mode 1 Mode 2 Mode 3 Mode 4 0% 20% 40% 60% 80% 100% Notes: See notes to Figure B13a. B-26 Figure B14a: Vietnam GATS only FTA improvements FTA new modes/subsectors Partial Full Partial Full Partial Full Unbound Business services Communication services Construction and related engineering services Distribution services Educational services Environmental services Financial services Health related and social services Tourism and travel related services Recreational, cultural and sporting services Transport services Other services not included elsewhere 0% 20% 40% 60% 80% 100% Notes: Based on the following three agreements: (1) ASEAN Framework Agreement on Services; (2) ASEAN- China Trade in Services Agreement; and (3) US-Vietnam Bilateral Trade Agreement. See also notes to Figure A46a and A48a. B-27 Figure B14b: Vietnam GATS only FTA improvements FTA new modes/subsectors Partial Full Partial Full Partial Full Unbound Total Mode 1 Mode 2 Mode 3 Mode 4 0% 20% 40% 60% 80% 100% Notes: See notes to Figure B14a. B-28