East Asian free trade agreements in services: Key architectural elements

Journal of International Economic Law

Volumn 11, Issue 2, 2008, Pages 263-311

  Fink, Carsten ^a   Molinuevo, Martn ^a  

^a WORLD BANK   (United States)

Author keywords

[No Author keywords available]

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EID: 44849123524     PISSN: 13693034     EISSN: 14643758     Source Type: Journal    
DOI: 10.1093/jiel/jgn010     Document Type: Article

References (145)

1. For a review some of the key architectural innovations of services FTAs, see OECD, 'The Relationship between Regional Trade Agreements and the Multilateral Trading System: Services', Working Party of the Trade Committee, OECD document TD/TC/WP(2002)27/ FINAL, 2002;
2. and Sauvé Pierre, 'Adding Value at the Periphery: Elements of GATS+ Regional Agreements in Services', Paper prepared for the seminar Eyes Wide Shut? Beyond Market Access in North-South Regional Trade Arrangements, International Development Research Center, Ottawa 2005.
3. Stephenson Sherry, 'Examining APEC's Progress towards Reaching the Bogor Goals for Services Liberalization', Draft paper prepared for Pacific Economic Cooperation Council, 2005. Available online at http://www.apec.org/content/apec/ documents_reports/committee_trade_investment/2006.html, visited September 2006)
4. and Roy et al., Services Liberalization in the New Generation of Preferential Trade Agreements (PTAs): How Much Further than the GATS?, WTO Staff Working Paper No. ERSD-2006-07 (Geneva: World Trade Organization, 2006) evaluate the liberalization content of selected bilateral and regional agreements.
5. On the negotiating experiences of countries in Latin America and the Caribbean, see Stephenson Sherry (ed.) Services Trade in the Western Hemisphere: Liberalization, Integration, and Reform. (Washington, DC: Organization of American States and Brookings Institution Press, 2000);
6. Sáez Sebastián, Trade in Services Negotiations: A Review of the Experience of the United States and the European Union in Latin America. SERIE Comercio Internacional, no. 76, (Santiago, Chile: United Nations Economic Commission for Latin America and the Caribbean, 2005);
7. Marconini Mario, Services in Regional Agreements between Latin American and Developed Countries. SERIE Comercio Internacional, no. 71 (Santiago, Chile: United Nations Economic Commission for Latin America and the Caribbean, 2006),
8. and Pereira Goncalves et al., Financial Services and Trade Agreements in Latin America and the Caribbean: an Overview, Policy Research Working Paper No. 4181 (Washington, DC: The World Bank, 2007).
9. For the purposes of this article, we adopt the World Bank's classification of East Asia, which encompasses countries in both Eastern Asia and Southeast Asia, as classified by the United Nations.
10. Fink Carsten and Molinuevo Martín, East Asian FTAs in Services: Liberalization Content and WTO rules, Mimeo, 2007.
11. Throughout the article 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.
12. However, 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.
13. In 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 - and for which foreign entry may be refused.
14. Namely, the Lao PDR-US BTA, the Mainland-Hong Kong CEPA, the Mainland-Macao CEPA, the New Zealand-Singapore FTA, and the Vietnam-US BTA.
15. In 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).
16. See Fink Carsten, 'A Macroeconomic Perspective on China's Liberalization of Trade in Services', in Henry Gao and Donald Lewis (eds), China's Participation in the WTO (London: Cameron May, 2005).
17. See GATS Articles XVI.1 and XVII.1.
18. A 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.
19. Other studies have also characterized GATS-style agreements as hybrid list agreements. See Hoekman Bernard and Sauvé Pierre, Liberalizing Trade in Services, Discussion Paper No. 243 (Washington, DC: The World Bank, 1994);
20. OECD, above n 1;
21. and UNCTAD, 'National Treatment', UNCTAD Series on Issues in International Investment Agreements (New York and Geneva: United Nations, 1999).
22. For a more comprehensive discussion of modes of supply, see Adlung Rudolf and Mattoo Aaditya, 'The GATS', in Aaditya Mattoo et al. (eds), A Handbook of International Trade in Services (Washington, DC: The World Bank and Oxford University Press, 2008).
23. The relationship between the GATS market access and national treatment disciplines has been subject to conflicting legal interpretations. See Mattoo Aaditya, 'National Treatment in the GATS: Corner-Stone or Pandora's Box?' 31 (1) Journal of World Trade (1997), at 107-35;
24. Pauwelyn Joost, 'Rien ne Va Plus? Distinguishing Domestic Regulation From Market Access in GATT and GATS', 4 (2) World Trade Review (2005), at 131-70;
25. Delimatsis Panagiotis, 'Don't Gamble with GATS - The Interaction Between Articles VI, XVI, XVII and XVIII in the Light of the US-Gambling Case', 40 Journal of World Trade (2006), at 1059-80;
26. and Molinuevo Martín, 'GATS Article XX - Schedules of Specific Commitments', in R. Wolfrum et al. (eds), Max Planck GATS Commentary (Biggleswade, UK: Brill Publishers, forthcoming in October 2008).
27. Namely, the ASEAN-China TIS, the Australia-Thailand FTA, the India-Singapore ECA, the Japan-Singapore EPA, the Jordan-Singapore FTA, and the New Zealand-Singapore FTA.
28. However, 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. It is worth pointing out that an 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 under 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.
29. For example, see Hoekman Bernard, 'Assessing the General Agreement on Trade in Services', in Will Martin and L. Alan Winters (eds), The Uruguay Round and the Developing Countries (Cambridge: Cambridge University Press, 1996).
30. For 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'.
31. Even though upward ratcheting enhances the credibility of unilateral trade reforms, it arguably implies a loss of transparency in committed policies, because parties are not required to notify these reforms or periodically update their schedules.
32. Two negative list agreements in East Asia 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.
33. Namely, the Guatemala-Taiwan (China) FTA, the Korea-Chile FTA, the Trans-Pacific EPA, and the Japan-Mexico EPA. The latter agreement features a chapter on financial services. However, provisions in that chapter merely ratify existing multilateral and plurilateral commitments, and carve out financial services from the services, investment and dispute settlement chapters of the agreement.
34. The language of the national treatment provision mostly follows the NAFTA standard of providing for national treatment for services and services suppliers 'in like circumstances'. The only exception is the Australia-Thailand FTA, which incorporates the 'like services and service suppliers' language found in GATS Article XVII. For a discussion of the 'likeness' standard under the GATS, see Cossy Mireille, Determining 'Likeness' under the GATS: Squaring the Circle? WTO Staff Working Paper ERSD-2006-8 (Geneva: World Trade Organization, 2006).
35. The catalog of measures covered by these agreements is the same as the one adopted by the GATS, with the exception that all six agreements except the Australia-Singapore FTA 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 remaining four cases, foreign equity limitations would likely be covered under the agreements' national treatment obligation, because they are discriminatory in nature.
36. Namely, Trans-Pacific EPA, Guatemala-Taiwan (China) FTA, Japan-Mexico EPA, Panama- Taiwan (China) FTA, Nicaragua-Taiwan (China) FTA, Panama-Singapore FFTA, and Singapore-US FTA.
37. In addition, 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.
38. For example, see Hoekman and Sauvé, above n 12 and Stephenson Sherry, 'Regional versus Multilateral Liberalization of Services', 1 (2) World Trade Review (2002), at 187-209.
39. See OECD, above n 1.
40. In 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.
41. That 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.
42. This point is also emphasized in World Bank, 'Brazil: Trade Policies to Improve Efficiency, Increase Growth and Reduce Poverty', Report No. 24285-BR, 2004.
43. See UNCTAD, World Investment Report 2004: The Shift Towards Services (New York and Geneva: United Nations, 2004).
44. 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'. See Annex 4-II(B) of the Australia-Singapore FTA.
45. See Article 12.05 of the Panama-Taiwan (China) FTA.
46. See Annex 8A of the Singapore-US FTA.
47. The Japan-Mexico EPA recognizes the burden of collecting information on all trade-restrictive measures applied at the sub-federal level. 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 1 year after entry into force of the FTA.
48. See Annex 8A of the Singapore-US FTA.
49. This reservation also raises questions about the agreement's compatibility with GATS Article V. 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. In light of GATS Article XX.2, measures scheduled under Article XVI too may be discriminatory in nature.
50. The transparency and credibility of the US commitment in the Singapore-US FTA is further 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'.
51. See Annex 7 of the Japan-Mexico EPA.
52. See Fink and Molinuevo, above n 3.
53. WTO 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.
54. Roy discusses the treatment of investment in services under services and investment disciplines more generally. See Roy Martin, 'Implications for the GATS of Negotiations on a Multilateral Investment Framework: Potential Synergies and Pitfalls', 4 (6) Journal of World Investment (2003), at 963-86.
55. For 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).
56. As indicated in Table 3, these two agreements are the Framework Agreement on the ASEAN Investment Area (AIA) and the Australia-Thailand FTA. The former does not further define FDI, whereas the latter refers to the International Monetary Fund's definition of FDI which uses a 10% ownership threshold to distinguish FDI from portfolio investment.
57. The 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.
58. The 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?
59. For a review of the services and investment chapters in NAFTA-like and GATS-like FTAs, see Houde Marie-France et al., The Interaction between Investment and Services Chapters in Selected Regional Trade Agreements, OECD Trade Policy Working Paper No. 55, 2007.
60. Namely, the Nicaragua-Taiwan (China) FTA, the Panama-Singapore FTA, and the Singapore-US FTA.
61. A 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.
62. Namely, the India-Singapore ECA, the Japan-Malaysia EPA, the Jordan-Singapore FTA, and the US-Vietnam BTA. In 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).
63. For 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 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.
64. As pointed out above, the definition of commercial presence in the New Zealand-Singapore FTA includes minority investments.
65. In the case of the EFTA-Singapore FTA, this exemption is subject to a review after 10 years.
66. See 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.
67. Theoretically, 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'.
68. See, for example, Nielson Julia, 'Labor Mobility in Regional Trade Agreements', in Aaditya Mattoo and Antonia Carzaniga (eds), Moving People to Deliver Services (Washington, DC: The World Bank and Oxford University Press, 2003);
69. and Chaudhuri Sumanta et al. 'Moving People to Deliver Services: How Can the WTO Help?', 38 (3) Journal of World Trade (2004) at 363-93.
70. In 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.
71. Exceptions are China's 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.
72. An exception is the Nicaragua-Taiwan (China) FTA, which does not carve out immigration measures from the scope of services disciplines.
73. 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. On 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.
74. The Trans-Pacific EPA has expressly incorporated the second GATS-style carve-out relating to entry regulations. 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 exception. The only negative list agreement not providing for a similar exemption for regulations affecting the entry of natural persons is the Japan-Mexico EPA.
75. The 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.
76. However, 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.
77. As shown in Table 4, these agreements are the Australia-Singapore FTA, the India-Singapore ECA, and the Panama-Singapore FTA. 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.
78. 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. The MNP chapter of that agreement further 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.
79. The 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.
80. The Trans-Pacific EPA 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.
81. The 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.
82. Namely, the ASEAN-China TIS Agreement, the India-Singapore ECA, the Japan-Singapore EPA, the Jordan-Singapore FTA, and the US-Vietnam BTA. The denial of benefit provision in these agreements mirrors GATS Article XXVII(a), which applies in relation to non-members of the WTO.
83. This rule of origin raises 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. Mattoo and Wunsch describe that the imposition of trade restrictions on international business process outsourcing has been considered by several US states. See Mattoo Aaditya and Sacha Wunsch-Vincent, 'Pre-Empting Protectionism in Services: The GATS and Outsourcing', 7 (4) Journal of International Economic Law (2004), at 765-800.
84. This special rule of origin is based on GATS Articles XXVII and XXVIII(f). The 12 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.
85. The denial of benefit provisions are modeled after GATS Article XXVII(b). However, they apply in respect of non-parties to the FTA.
86. Most FTAs do not offer a definition of 'substantive business operations'. The only exceptions are China's 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% 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.
87. Namely, the Australia-Thailand FTA and the India-Singapore Economic Cooperation Agreement (ECA). 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. In addition, 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.
88. For a review of a number of simulation studies on services rules of origin for ASEAN countries confirming this point, see Fink Carsten and Deunden Nikomborirak, 'Rules of Origin in Services: A Case Study of Five ASEAN Countries', in Marion Panizzon et al. (eds). Trade in Services: New Perspectives on Liberalization, Regulation, and Development (Cambridge: Cambridge University Press, forthcoming in October 2008).
89. The India-Singapore ECA introduces a special rule of origin for certain services sectors only - 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. Furthermore, 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.
90. 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.
91. Namely, the Chile-Korea FTA (investment chapter only), the Japan-Malaysia EPA, the Japan-Mexico EPA, the Japan-Philippines EPA, and the Singapore-US FTA. 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.
92. Several negative list FTAs and investment chapters expressly refer to branches in the definition of a juridical person or the definition of an enterprise.
93. 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.
94. The 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.
95. The only two exceptions are the Mainland-Hong Kong and Mainland-Macao CEPAs, as these agreements are between separate customs territories within the same nation. For these agreements, eligible natural persons are citizens (for China) and permanent residents (for Hong Kong and Macao).
96. Namely, the Australia-Singapore FTA, the Chile-Korea FTA, the India-Singapore ECA, the Jordan-Singapore FTA, the Korea-Singapore FTA, the Japan-Malaysia EPA (for Malaysia only), the Japan-Singapore EPA (for Singapore only), the Nicaragua-Taiwan (China) FTA, the Panama-Singapore FTA, and the Trans-Pacific EPA.
97. Such is the case for the AFAS, the ASEAN-China TIS Agreement, the EFTA-Korea FTA, the EFTA-Singapore FTA, the New Zealand-Singapore FTA, and the US-Vietnam BTA.
98. See, for example, Hoekman, Bernard and Petros Mavroidis 'WTO Dispute Settlement, Transparency and Surveillance', 23 (4) The World Economy (2000), at 527-42.
99. Namely, the AFAS, the ASEAN-China TIS Agreement, the EFTA-Korea FTA, the EFTA- Singapore FTA, the India-Singapore ECA, Japan-Mexico EPA, the Jordan-Singapore FTA, the New Zealand-Singapore FTA, the Panama-Singapore FTA, and the Trans-Pacific EPA.
100. Namely, the EFTA-Singapore FTA, Jordan Singapore FTA, the New Zealand-Singapore FTA, the Panama-Singapore FTA, and the Trans-Pacific EPA. In the case of the AFAS, such appointments would be performed by the ASEAN Secretary-General.
101. Namely, the ASEAN-China TIS Agreement, the EFTA-Korea FTA, the India-Singapore ECA, and the Japan-Mexico EPA.
102. Namely, the Australia-Singapore FTA, the Australia-Thailand FTA, the Chile-Korea FTA, the Guatemala-Taiwan (China) FTA, the Japan-Malaysia EPA, the Japan-Philippines FTA, the Japan-Singapore EPA, the Korea-Singapore FTA, the Nicaragua-Taiwan (China) FTA, the Panama-Taiwan (China) FTA, and the Singapore-US FTA. Interestingly, 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.
103. The 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
104. The ASEAN DSM sets 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 require panel reports to be implemented within 6 months after issuance of the panel report, again unless parties agree on a different time-frame. Somewhat confusingly, the Panama-Taiwan (China) FTA also requires the arbitral panel to set an implementation timeframe not exceeding 180 days.
105. See, for example, Hoekman and Mavroidis, above n 85;
106. and Pauwelyn Joost, 'Enforcement and Countermeasures in the WTO: Rules are Rules', 94 (2) The American Journal of International Law (2000), at 335-47.
107. In 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.
108. See Davey William J., 'The WTO: Looking Forwards', 9 (1) Journal of International Economic Law (2006), at 3-29.
109. 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. The original ASEAN DSM was created in 1996, but was perceived as ineffective due to a lack of independent decision-making. See Greenwald Alyssa, 'The ASEAN-China Free Trade Area (ACFTA): A Legal Response to China's Economic Rise?', 16 Duke Journal of Comparative & International Law (2006), at 193-217.
110. Hallward-Driemeier, Rose-Ackerman, and Tobin, 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, find a strong positive relationship. See Hallward-Driemeier Mary, Do Bilateral Investment Treaties Attract Foreign Direct Investment?, Policy Research Working Paper No. 3121 (Washington, DC: The World Bank, 2003);
111. Rose-Ackerman Susan and Tobin Jennifer, Foreign Direct Investment and the Business Environment in Developing Countries: The Impact of Bilateral Investment Treaties, Yale Law & Economics Research Paper No. 293 (Yale Law School, 2005);
112. and Neumayer Eric and Spess Laura, 'Do bilateral investment treaties increase foreign direct investment to developing countries?', 33 (10) World Development (2005), at 1567-85.
113. For a more detailed discussion of the benefits and drawbacks of state-to-state versus investor-to-state arbitration, see Molinuevo Martín, Can Foreign Investors in Services Benefit from WTO Dispute Settlement? Legal Standing and Remedies in WTO and International Arbitration. NCCR Trade Working Paper No. 2006/17, forthcoming in Marion Panizzon et al. (eds). Trade in Services: New Perspectives on Liberalization, Regulation, and Development. (Cambridge: Cambridge University Press, forthcoming in October 2008).
114. According 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 Muthucumaraswamy, The International Law on Foreign Investment, 2nd edn. (Cambridge: Cambridge University Press, 2004).
115. The Japan-Philippines EPA calls for the establishment of an investor-to-state DSM through further negotiation.
116. Exceptions are the Australia-Thailand FTA, which provides only for ICSID arbitration, and the EFTA-Singapore FTA, Jordan-Singapore FTA, and New Zealand-Singapore FTA, which provide only ad hoc arbitration under UNCITRAL rules.
117. The 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.
118. The 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.
119. The 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.
120. Namely, the EFTA-Korea FTA, the Korea-Singapore FTA, the Nicaragua-Taiwan (China) FTA, the Panama-Taiwan (China) FTA, and the Singapore-US FTA.
121. Sauvé offers a more general review of rule-making advances in recent services FTAs. See Sauvé, above n 1.
122. 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. Most East Asian FTAs that have established a binding MFN obligation 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.
123. Nine 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.
124. Our 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 (Government of Hong Kong, Press release, http://www.info.gov.hk/gia/general/200505/24/05240244.htm visited 22 January 2008).
125. See ASEAN Mutual Recognition Arrangement on Engineering Services (available at http://www.aseansec.org/18009.htm, visited 22 January 2008) and ASEAN Mutual Recognition Arrangement on Nursing Services (available at http://www.aseansec.org/19210.htm, visited 22 January 2008).
126. See Annex 9D of the Korea-Singapore FTA.
127. This 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.
128. In 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'.
129. Services 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 argues that it is possible for a measure to fall under the scope of both domestic regulation and, say, market access; see Pauwelyn, above n 14.
130. The 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.
131. These agreements are all GATS-style hybrid list FTAs, except Japan's EPAs with Malaysia and the Philippines, as well as the Australia-Singapore FTA, the Korea-Singapore FTA, and the Panama-Singapore FTA. In the case of the latter three agreements, the reach of the necessity test 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, these three agreements exempt all scheduled non-conforming and future measures from the scope of the necessity test. Third, in the case of the Korea- Singapore FTA and the Panama-Singapore FTA the necessity test does not apply to commercial presence, as the services chapter of these two agreements does not extend to this mode of supply.
132. Namely, 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.
133. However, Adlung argues that the necessity test embedded in the WTO's Accountancy Disciplines is weaker, because regulatory measures only need to fulfill 'a legitimate objective' - a concept vaguer than 'ensuring the quality of a service' as established by GATS Article VI.6. See Adlung Rudolf, 'Public Services and the GATS', 9 (2) Journal of International Economic Law (2006), at 455-85.
134. For a detailed review of GATS regulatory rules in these two sectors, see Gamberale Carlo and Mattoo Aaditya, 'Domestic Regulations and Liberalization of Trade in Services', in Bernard Hoekman et al. (eds), Development, Trade and the WTO: A Handbook (Washington, DC: The World Bank, 2002).
135. East Asian agreements with regulatory disciplines for telecommunications services are the Australia-Singapore FTA, the Chile-Korea FTA, the EFTA-Korea FTA, the EFTA- Singapore FTA, the Japan-Singapore EPA, the Korea-Singapore FTA, the Nicaragua- Taiwan (China) FTA, the Panama-Singapore FTA, the Panama-Taiwan (China) FTA, and the Singapore-US FTA. Agreements that feature electronic commerce-related disciplines are the Australia-Singapore FTA, the Australia-Thailand FTA, the India-Singapore ECA, the Jordan-Singapore FTA, the Korea-Singapore FTA, the Nicaragua-Taiwan (China) FTA, the Panama-Singapore FTA, and the Singapore-US FTA.
136. The 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).
137. For a discussion of provisions on electronic commerce in US FTAs, see Wunsch-Vincent Sascha, The WTO, the Internet and Trade in Digital Products. Studies in International Trade Law, No. 3 (Oxford: Hart Publishing, 2006).
138. See 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 WTO Secretariat, 'The plurilateral Agreement on Government Procurement (GPA)', http://www.wto.org/english/tratop_e/gproc_e/gp_gpa_e.htm, visited 22 January 2008).
139. At 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.
140. The 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 I.A).
141. These 15 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.
142. See GATS Article X. Adlung discusses the role of services ESMs in greater detail;
143. see Adlung Rudolf, 'Negotiations on Safeguards and Subsidies in Services: A Never-ending Story?', 10 (2) Journal of International Economic Law 235 (2007), at 265.
144. In 2000, ASEAN submitted a concept paper on possible elements of an emergency safeguard mechanism (see WTO Document S/WPGR/W/30).
145. ASEAN 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 II.B).