3 - ASEAN Trade in Services

Summary

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 within ASEAN have been reduced to zero, bar a few sensitive items since 2010 for the six earlier 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 service sector and the promotion of flows of skilled labor 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 countries. 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 the 9th Summit in October 2003, ASEAN announced its intention to create an ASEAN Community based upon three pillars: the ASEAN Security Community, the ASEAN Economic Community and the ASEAN Socio-Cultural Community. The ASEAN Economic Community (AEC) envisions regional economic integration by 2015. In 2007, the 13th ASEAN Summit adopted the ASEAN Economic Community Blueprint (AEC Blueprint), a coherent master plan guiding the establishment of the ASEAN Economic Community 2015. The AEC Blueprint would establish ASEAN not only as a single market, but also as a single production base which requires the free flow of the factors of production, including capital and skilled labor.

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 the service trade negotiation modality and liberalization commitments made thus far under the AFAS as well as those prescribed in the AEC Blueprint. Section three examines the extent to which ASEAN member countries have met the liberalization milestones prescribed in the AEC Blueprint.