Liberalising trade in services

The ASEAN FTA aims to reduce barriers to trade in services, which will assist in the expansion of services trade between New Zealand and ASEAN member countries.

Though trade in services is not as easily recognised as trade in goods, the WTO estimates that by 2020, services will represent 50 percent of world trade.

Examples of barriers to trade in services in the region may include:

• Different rules or requirements for foreign companies compared to ASEAN companies, which are designed to give ASEAN companies a competitive advantage.
• Requirements for foreign companies to employ a certain percentage of ASEAN nationals or to enter into a joint venture with an ASEAN company.

The Services Chapter in the ASEAN FTA does not apply to subsidies (although there are provisions enabling the Parties to enter into consultations on subsidies issues) or government procurement, or services supplied in the exercise of governmental authority. The latter are services supplied neither on a commercial basis nor in competition with one or more service suppliers.

The ASEAN FTA also establishes obligations to ensure that measures affecting trade in services are transparent, administered in a reasonable, objective and impartial manner and that measures relating to qualification requirements and procedures, technical standards, and licensing requirements and procedures do not become unnecessary barriers to trade in services. Such provisions are consistent with New Zealand's current regulatory settings and practices.

The four modes of supply

Trade in services includes services supplied using any of the following modes:

• Mode 1: Cross Border Trade
  The service is supplied by a provider physically located in one country, to a customer in another country (for example, over the internet).

• Mode 2: Consumption Abroad
  A customer travels to another country to consume a service (for example, a student travels abroad to study).

• Mode 3: Commercial Presence
  A foreign service supplier establishes a legal presence in another country to provide a service (for example, a company opens an office or enters into a joint venture in another country).

• Mode 4: Movement of Natural Persons
  A person travels temporarily to another country in order to supply a service directly.

Commitments

The ASEAN FTA seeks to facilitate trade in services between New Zealand and ASEAN member countries by building on existing commitments under the WTO's General Agreement on Trade in Services (GATS) and improving transparency. In this regard, New Zealand and ASEAN member countries have made commitments in the ASEAN FTA which - to varying degrees - expand upon their existing GATS commitments.

The ASEAN FTA establishes general obligations of national treatment and market access in sectors listed in the services schedules, subject to (any) restrictions specified in such schedules.

The national treatment obligation means that for the sectors specified in its schedule, each country will treat service suppliers from the other countries no less favourably than it treats its own domestic suppliers in like circumstances.

The market access obligation means that for the sectors specified in its schedule, each country should not be able to (unless the schedule specifically provides for it) restrict access to their market in the form of limitations on:

• Foreign capital
• The number of service suppliers, service operations or persons employed in a particular sector
• The value of services
• The legal structures used.

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ASEAN commitments

In terms of specific commitments, 8 of the 10 ASEAN countries have made services commitments that expand on their GATS commitments. [1] Such "GATS-plus" commitments are in the following sectors:

Business Services

• Professional services
  • Legal services (Indonesia, Viet Nam);
  • Accounting services (Malaysia, Myanmar, the Philippines);
  • Taxation services (Malaysia);
  • Architectural services (Brunei [2], Indonesia, Malaysia, Myanmar);
  • Engineering services (Indonesia, Malaysia, Myanmar, the Philippines, Thailand);
  • Urban planning services (Indonesia, Malaysia, Thailand);
  • Landscape architectural services (Malaysia, Myanmar, Thailand, the Philippines);
  • Veterinary services (Malaysia); and
  • Interior design services (the Philippines).
  • Computer and related services (Indonesia, Malaysia, Myanmar, Thailand).
  • Research and development services (Indonesia).
• Other business services
  • Advertising services (Malaysia, Myanmar);
  • Management consulting services (Myanmar);
  • Technical testing and analysis services (Indonesia);
  • Services incidental to manufacturing (Indonesia);
  • Services incidental to mining (the Philippines);
  • Project management services (Indonesia);
  • Maintenance and repair of equipment (Indonesia);
  • Translation services (Myanmar); and
  • Printing and publishing services (Myanmar).

Communication services

• Telecommunication services (Brunei, Indonesia, Malaysia, the Philippines, Thailand);
• Audiovisual services (Myanmar).

Construction and related engineering services

• Construction services (Brunei, Indonesia, Malaysia, Myanmar, the Philippines).

Educational services

• Education services (Indonesia, Malaysia, Myanmar, the Philippines, Thailand, Viet Nam).

Environmental services

• Environmental services (the Philippines).

Financial services

• Financial services (Indonesia, Malaysia, Singapore [3], the Philippines).

Health related and social services

• Health services (Indonesia, Malaysia).

Tourism and travel related services

• Tourism services (Brunei, Indonesia, Malaysia, the Philippines, Thailand).

Transport services

• Maritime transport services (Brunei, Indonesia, Myanmar);
• Air transport services (Indonesia, Myanmar, the Philippines, Thailand); and
• Pipeline transport (the Philippines).

Other services

• Energy services, including services related to the energy sector (Indonesia, the Philippines, Thailand).

Lao PDR is not yet a member of the WTO. As such, New Zealand does not currently benefit from any commitments with Lao PDR. In that sense, all of Lao PDR's services commitments in the ASEAN FTA are a benefit to New Zealand. Lao PDR made commitments in the following sectors:

• Accounting services;
• Landscape architecture services;
• Integrated engineering services;
• Computers and related services;
• Telecommunication services;
• Construction services;
• Education services;
• Tourism services;
• Environmental services; and
• Financial services.

Indonesia and Malaysia also made GATS-plus commitments on the establishment of commercial presence (Mode 3) that will apply to all sectors in their respective schedules.

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New Zealand commitments

New Zealand has made GATS-plus commitments covering Modes 1-3 in the following sectors:

Business services

• Professional services
  • Legal services (the provision of foreign law services);
  • Taxation services (tax planning and consulting services);
  • Engineering services (removal of restriction relating to registration);
  • Integrated engineering services;
  • Urban planning and landscape architecture services (relating to consultancy);
  • Veterinary services (Mode 1)
  • Computer services (maintenance and repair of office machinery and equipment, including computers; and other computer services).
• Other business services
  • Management consulting services and services related to management consulting;
  • Placement and supply services of personnel
  • Photographic services;
  • Convention services;
  • Credit reporting services;
  • Collection agency services;
  • Interior design services;
  • Telephone answering services.
  • Duplicating services.
  • Other business services

Construction and related engineering services

• Construction services (consultancy related to construction services and renting of construction equipment).

Educational services

• ‘Other education services' (language training provided in specialist language institutions and tuition in subjects taught at the primary and secondary levels in specialist institutions operating outside the New Zealand compulsory school system).

Environmental services

• Environmental services (the provision of consultancy services across the full range of environmentally-related services, and the delivery of services in waste and waste water management).

Financial services

• Non-life insurance services and insurance intermediation (removal of restriction related to Apple and Pear Marketing Board).

None of these commitments go beyond New Zealand's current regulatory environment or policy settings in any respect.

Education

As with the FTA with China, securing improvements in access for the education services sector was New Zealand's highest priority for the services negotiations for the ASEAN FTA.

New Zealand's interests in education services in the negotiations were concentrated on two specific modes of delivery - distance education (Mode 1) and presence of natural persons (Mode 4). This is due to the relatively small size of many New Zealand education exporters. Mode 3 (commercial presence) requires the investment of significant resources which carries more risk than Modes 1 and 4, although this is an area that is expected to become more important for New Zealand exporters in the future as the export education sector further develops.

The ASEAN FTA contains a range of GATS-plus outcomes for education services. This includes commitments in the sector by Indonesia, Malaysia, the Philippines, Thailand and Viet Nam. Whilst such outcomes did not necessarily represent new market access because they were commitments to bind existing levels of openness in education services for these countries, these outcomes do provide valuable gains in terms of transparency and certainty (i.e., that access conditions cannot be made worse than current commitments).

This is a benefit education exporters from other countries will not have in ASEAN markets. This certainty and transparency is very important as it gives New Zealand education exporters greater confidence to enter these markets and invest (in terms of resources and effort) in building a market presence in ASEAN countries. This in turn helps build New Zealand's business and economic integration with the region overtime.

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Movement of natural persons (temporary entry)

The ASEAN FTA will facilitate the movement of business people engaged in trade and investment and establish more streamlined and transparent procedures for applications for immigration documents and processes for business people.

The ASEAN FTA obliges ASEAN member countries to publish all relevant information about their immigration requirements in respect of the categories of business people and service suppliers covered by their respective schedules of commitments. Any changes to these regulations must also be published promptly. There is a requirement that fees for processing immigration formalities be reasonable and the Parties must provide business people and service suppliers that apply for temporary entry to their countries with detailed information on the status of their applications.

The availability of clear and up-to-date information about the requirements and conditions for temporary entry for business visitors, combined with a reasonably expeditious process for processing immigration documents and applications, will facilitate the movement of business people, investors and traders around the region. It will also ensure that business people are able to make the most of the trade and investment commitments in the ASEAN FTA.

Like the Services Chapter, the rules relating to movement of natural persons includes a schedule of specific commitments from each of the Parties. These schedules contain commitments on the temporary entry and stay of particular categories of business people, investors and service suppliers.

ASEAN commitments

Some of the key improvements on existing commitments from ASEAN are:

• Extension of stay (or new commitments) for business visitors in sectors listed in the Party's schedule (Indonesia, Lao PDR, Malaysia, the Philippines, Thailand).
• Extension of stay (or new commitments) for intra‑corporate transferees in sectors listed in the Party's schedule (Indonesia, Laos, Malaysia, the Philippines, Singapore, Thailand).
• New commitments in Mode 4 in a range of services sectors (Indonesia, Malaysia, Myanmar, the Philippines, Thailand).
• New commitments on investors (the Philippines).
• New commitments on installers/maintainers (Malaysia).

New Zealand commitments

New Zealand's commitments provide for the entry of ASEAN member country business visitors and installers/servicers for up to three months in any calendar year. Executives, managers and specialists, such as intra-corporate transferees, are permitted to enter for up to three years. ASEAN member country Independent Professional Service Suppliers are permitted entry for up to one year, subject to labour market tests.

While going beyond New Zealand's existing GATS commitments, these commitments - in as far as they relate to Mode 4 - are within New Zealand's 2005 services offer in the ongoing WTO negotiations and within existing immigration policy parameters.

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[1] The two that have not are Cambodia (which has only recently acceded to the WTO and therefore did not offer improvements over and above those it has recently agreed with WTO members) and Lao PDR (which is not currently a WTO member and does not therefore have any existing GATS commitments).

[2] Brunei is a party to the Trans-Pacific Strategic Economic Partnership Agreement, but was given an extension to complete its services schedules. These have not yet been agreed, and so for the time being Brunei's GATS-plus commitments in AANZFTA represent a benefit to New Zealand.

[3] Singapore has made a number of GATS-plus commitments in AANZFTA, however only those that relate to financial services go beyond what it has already committed in the New Zealand-Singapore CEP or the TPP.

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