4 - An Assessment of Services Sector Liberalization in ASEAN

Summary

I. Introduction

ASEAN has made a remarkable achievement in liberalizing trade in goods through the ASEAN Free Trade Agreement (AFTA), where tariffs on virtually all imports have been reduced to zero within ASEAN 6 since 2010, bar a few sensitive items for six original members. The progress made in liberalizing trade in services, however, has not been as impressive. Liberalization efforts in services in the past have been focused on two areas: the promotion of trade services by using the GATS approach of request and offer of liberalization by services sector and the promotion of flows of skilled labour through the establishment of Mutual Recognition Arrangements (MRAs) of professional services. After several rounds of negotiations and eight commitment packages since the ASEAN Framework Agreement on Trade in Services (AFAS) was established in 1995, the region has failed to liberalize services trade between member economies. Commitments made thus far are marginal to those already made in the WTO. As for MRAs, although several have been signed since 2005, their actual impact on promoting greater flows of professional services within the region is at best negligible.

At its 9th Summit in October 2003, ASEAN announced its intention to create an ASEAN Community based upon three pillars: ASEAN Political-Security Community, ASEAN Economic Community, and an ASEAN Socio-Cultural Community. The ASEAN Economic Community (AEC) envisions regional economic integration by 2015. In 2007, at the 13th ASEAN Summit, the ASEAN Economic Community Blueprint (AEC Blueprint), a coherent master plan guiding the establishment of the ASEAN Economic Community 2015, was adopted. The AEC Blueprint will establish ASEAN not only as a single market, but also a single production base which requires free flow factors of production, namely capital and skilled labour.

This chapter seeks to assess the progress ASEAN has made thus far in liberalizing services trade within the region according to the milestones and targets stipulated in the AEC Blueprint. The first section provides an overview of the relative importance of the service sector to ASEAN economies. The second section describes service trade negotiation modality and liberalization commitments made thus far under the AFAS as well as those prescribed in the AEC Blueprint.