Last week the ASEAN
Secretariat and the World Bank jointly released the ASEAN Services Monitoring
Report, a comprehensive survey of integration of services trade in Southeast
Asia, and available here. The
report explains why the current approach to creation of a single market in
ASEAN for services has reached its limit, as well as makes suggestions on how
to move forward. This makes the report
timely as ASEAN moves on to its post-2015 ASEAN Economic Community (AEC)
agenda, including the ASEAN Trade in Services Agreement (ATISA).
Currently, services trade
integration is covered by the ASEAN Framework Agreement on Services (AFAS). The
AFAS basically adopts the WTO General Agreement on Trade in Services (GATS) as
a baseline for integration, with ASEAN members agreeing to apply
most-favored-nation (MFN) and national treatment to cross-border services
trade. ASEAN members have conducted multiple rounds of negotiations and
resulting agreements.
The report concludes that
although the AFAS has helped improve trade in services in ASEAN, it may have
reached its limits. By basing progress
on negotiating rounds, progress has become slower and more incremental. Although AFAS was supposed to complete its
rounds by 2015, ASEAN members are preparing to extend its mandate to 2016 and
beyond. Moreover, the report finds that
AFAS is focused on explicit barriers to cross-border trade in services, e.g.,
those measures which could violate the MFN and national treatment obligations. However, AFAS does not deal with domestic regulatory
measures in ASEAN member states which do not clearly violate the terms of AFAS,
yet nevertheless create barriers to creating a single market for services in
ASEAN. As a result, AFAS risks being
outpaced by services trade integration efforts in the ASEAN FTAs as well as the
Regional Comprehensive Economic Partnership (RCEP) agreement.
ASEAN members are well aware
of the limitations of AFAS, and so are preparing to negotiate the ATISA, which
would deal with services trade in a single undertaking rather than negotiating
rounds. The report does not directly
address the inchoate ATISA, but does make several worthwhile recommendations:
- Incorporate GATS norms -- as the AFAS is based on the GATS, ASEAN should clarify the legal value that WTO panel decisions and interpretive documents have in the administration of AFAS.
- Establish an ASEAN services monitoring system – this would remedy the current lack of information on compliance with AFAS and other ASEAN agreements affecting services trade.
- Provide guidance on ASEAN services trade – the report suggests that ASEAN could provide for nonbinding guidance on ASEAN services trade issues, which would also improve transparency and communications with the private sector; the report also calls for upgrading the current ASEAN Coordinating Committee on Services into a permanent group of experts.
- Improve ASEAN dispute resolution – the report calls for making the current Enhanced Dispute Settlement Mechanism (EDSM) more robust, as well as allowing the EDSM process to issue interpretive decisions that would not be based on a formal dispute between members.
- Address domestic regulatory measures – ASEAN members need to administer such measures in a more cohesive manner to achieve convergence, if not harmonization; the report supports creating a regulatory checklist of principles that would be applied to determine whether domestic measures are consistent with the goal of creating a single market in services, as well as more intensive cooperative efforts on a sectoral basis, particularly for heavily regulated sectors such as aviation.
- Eliminate barriers to establishment – the report calls for removing ceilings on the foreign equity ownership of service providers.
- Apply a negative list approach – the report recommends that any successor agreement to AFAS apply a negative list approach to services, e.g., that its liberalizations would apply to all sectors except those otherwise reserved, such as in the ASEAN Comprehensive Investment Agreement (ACIA).
Although the report
recommends strengthening the ASEAN institutions and processes, it does not
suggest whether that should be done by the ASEAN Secretariat or by a standing
committee of ASEAN members. Given that
report was co-authored by the ASEAN Secretariat, that is understandable. In addition, the report does not specifically
address movement of natural persons, which again is understandable given its
highly sensitive nature.
In any event, it is clear
from the report that the current ASEAN approach to services integration has
reached its limits. Whether through
ATISA, RCEP or some enhancement of the ASEAN institutions and processes, ASEAN
needs to move beyond the current AFAS approach if it is to achieve a true
single market for services in Southeast Asia.
