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Open Regionalism and Deeper Integration: The Implementation of ASEAN Investment Area (AIA) and ASEAN Free Trade Area (AFTA)

Part 21

However, GATS Art. VII calls upon Members, wherever appropriate, to base recognition of qualifications on multilaterally agreed criteria. It also calls upon Members to work in co-operation with relevant international intergovernmental and non-governmental organisations towards the establishment and adoption of common international standards and criteria for recognition. Nevertheless, the WTO itself does not play any role in the formation of standards or development of criteria for recognition. In fact, the development of self-regulation and prudential measures, such as in financial and banking service, also indicates the trend towards interaction between national and international regulatory networks propelled by professionals in each fields of services (Picciotto, 1996: 89-123; Picciotto, 1998: 731-768).

The WTO encourages Members to develop multilateral disciplines relating to market access in order to put immediately into effect paragraph 4 of Art. VI of the GATS on domestic regulation which provided that:

"With a view to ensuring that measures relating to qualification requirements and procedures, technical standards and licensing requirements do not constitute unnecessary barriers to trade in services, the Council for Trade in Services shall, through appropriate bodies it may establish, develop any necessary disciplines. Such disciplines shall aim to ensure that such requirements are, inter alia:

(a) based on objective and transparent criteria, such as competence and the ability to supply the services;
(b) not more burdensome than necessary to ensure the quality of the service;
(c) in the case of licensing procedures, not in themselves a restriction on the supply of the services".

These powers could be used by the GATS Council to ensure that MRAs contribute to the development of internationally agreed standards. This could also occur if some ASEAN members also conclude MRAs with non-members so that MRAs so concluded would be complementary and interactive between ASEAN and international MR.

What ASEAN countries should consider is to strengthen their national substantive standards and procedural requirements to adequately assure the quality of services and of service providers, but bear in mind the need to apply such requirements transparently and avoid unnecessary burden on ASEAN service providers. An ASEAN Council for Trade in Services should be established to facilitate the co-ordination of ASEAN countries in negotiating MRA and help promote the development of agreed ASEAN standards and requirements where there are no such common international standards.

Co-operation in Service Trade among ASEAN Countries

The liberalisation of service trade under AFAS also goes beyond the GATS in that it encompasses co-operation in service trade among ASEAN countries(133) . The four areas of co-operation, provided in Art. II (2) are:

1. establishing or improving infrastructural facilities;
2. joint production, marketing and purchasing arrangements;
3. research and development; and
4. exchange of information.

This co-operation aims to promote the harmonisation of legal and economic policy as well as the enhancement of transparency of internal regulation of service provision among ASEAN countries in order to improve their efficiency and competitiveness, diversity of production capacity and supply and distribution of services suppliers within and outside ASEAN.

In particular, the crucial obligation under AFAS is the commitment of ASEAN countries to the principles of stand still and roll back that guarantee the progressive liberalisation intra-ASEAN. The 1998 ASEAN Summit decided to extend service sector coverage to all sectors and all modes of supply in principle, so that the implementation of this decision along with the stand still and roll back principles would reinforce extensive liberalisation in service trade intra-ASEAN.

The liberalisation of service trade under AFAS has reinforced the attractiveness of the ASEAN region in service sectors, as it results in an enlarged ASEAN market for such services. In particular, ASEAN's openness to welcome outsiders into the region through their establishment in ASEAN countries enables non-ASEAN firms to gain advantages both from the privileges offered under AFAS and from economies of scale generated by intra-ASEAN integration. The liberalised ASEAN market might further induce inflow of investment associated with service trade in the region.

In addition, AFAS(134) provides that it shall neither affect existing agreements nor constrain the right of members to enter into agreements not contrary to the Framework Agreement. This apparently tautologous provision seems to aim at preserving the benefits to ASEAN or non-ASEAN countries of bilateral agreements extending special liberalisation privileges. Such benefits, which would normally be required to be extended to other states under the MFN clause, may be preserved if notified under the GATS Art. II MFN exemption lists. However, it should be noted that these are in principle subject to review and roll-back. An example is the bilateral agreement between Thailand and the USA(135) , which allows the US maritime transport of cargoes the rights to carry all products. This privilege does not extend to all other WTO members.

The 1998 Heads of ASEAN Summit Meeting also agreed to initiate a new round of negotiations beginning in 1999 and ending in 2001, to expand AFAS beyond the seven priority sectors, identified at the fifth ASEAN Summit, to cover all services sectors and all modes of supply(136) . This clearly shows the commitments made among ASEAN member countries to liberalise trade in services beyond their commitments under the GATS, under which they have made more reservations than they did under GATS-Plus. However, the liberal interpretation of the "ASEAN services provider" provision encompassing eligible non-member service providers who meet the criteria or requirements for being regarded as an ASEAN service provider to be able to enjoy preferences under AFAS, facilitates and complements the generalised liberalisation of services into ASEAN from third countries.

Part 22


(133) AFAS Art. I (a) to enhance cooperation in services amongst ASEAN States in order to improve the efficiency and competitiveness, diversify production capacity and supply and distribution of services of their service suppliers within and outside ASEAN.

(134) Art. IX of the Framework Agreement on Services.

(135) Treaty of Amity and Economic Relations.

(136) Statement on Bold Measures paragraph 10.