Academic journal article International Journal of China Studies

Assessing the Progressive Services Liberalization in the ASEAN-China Free Trade Area (ACFTA)

Academic journal article International Journal of China Studies

Assessing the Progressive Services Liberalization in the ASEAN-China Free Trade Area (ACFTA)

Article excerpt


In 2002, ASEAN and China signed the Framework Agreement on Comprehensive Economic Cooperation between ASEAN and China (ACFTA Framework Agreement). ACFTA's primary target was the liberalization of trade in goods including "early harvest". Indeed, after the Framework Agreement in 2002, the Early Harvest Agreement was signed in 2003 followed by a full package of the Trade in Goods Agreement (TIG Agreement) inked in 2004. Trade in services is the second priority of the ACFTA as stated in Art. 1 (b) and Art. 4 of the Framework Agreement.

The importance of trade in services have steadily increased for both ASEAN and China.1 According to the United Nation's statistics focusing on mode 1 services trade (cross-border supply), ASEAN's services trade to the world has increased by 144 per cent from US$225 billion in 2004 to US$549 billion in 2012. In the same period, China's trade in services to the world has grown by 243 per cent (from US$138 billion in 2004 to US$473 billion in 2012). It is also important to note that, whereas not reflected in statistics, mode 3 trade (i.e., commercial presence) plays a critical role in today's regional production networks in East Asia (Inomata, 2013). Earlier literatures provided that improved access to Chinese services market would bring large economic gains to ASEAN countries (Tongzon 2005: 205). As a result, ASEAN and China concluded the Trade in Services Agreement (ACFTA TIS Agreement)2 in January 2007, which entered into force in July 2007.

As Table 1 shows, China's service export (to the world, due to lack of detailed bilateral data) is less than twice as much as Singapore's, and, slightly more than three times as much as Thailand's. Also, China's Service Export Competitiveness Index remains negative (-0.23), as in the Table. Considering the fact that China's commodity trade volume in 2013 (based on the publicly available UN data) is some 2.2 trillion dollars, i.e., ten times more than China's service export in the same year, the country should make every policy effort to boost the level of service export.

Services liberalization requires changes in domestic regulations for which time is needed. ASEAN and China have explicitly recognized this progressive nature of services liberalization.3 As an instrument to achieve progressive liberalization, the ACFTA TIS Agreement introduced a package structure (Art. 23). The package structure has its origin in the ASEAN Framework Agreement on Services (AFAS).4 In ASEAN, AFAS provides a framework of negotiation, and package documents set the commitments of the member states. ASEAN had successfully generated five packages after the AFAS was signed in 1995 and before the ACFTA TIS Agreement was concluded in 2007.5 AFAS has been recognized as having been successful in achieving progressive services liberalization from its early years.6 Based on these experiences, ASEAN and China adopted the ACFTA TIS Agreement as a framework agreement, and the first package (hereafter, ACFTA First Package) in January 2007 as annexes to the TIS Agreement. Subsequently, they signed the second package (ACFTA Second Package) in November 2011.

Ishido and Fukunaga (2012) analyzed the level of services liberalization in the ACFTA First Package and argued that the General Agreement on Trade in Services (GATS)-plus components in the ACFTA First Package are limited.7 This is not surprising when we consider the progressive nature of services negotiation under the ACFTA. Services liberalization under the ACFTA can be meaningful, even if the First Package provides a low level of GATS-plus, so long as the subsequent packages provide substantial additional GATS-plus liberalization. Indeed, the ACFTA TIS Agreement Art. 23.2 (Progressive Liberalization) provides as follows:

The Parties shall, with the aim of substantially improving on the first package of specific commitments, conclude the second package of specific commitments within a year from the date of entry into force of [the ACFTA Trade in Services] Agreement. …

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