Session 2: Approaches to scheduling Trade in Services commitments

1. Session 2: Approaches to scheduling Trade in Services commitments March 17, 2016 Glenda Reyes

2. TPP Forum OBJECTIVES • Consider options in scheduling commitments in services. • Positive List Approach (GATS Framework) • Negative List Approach (NAFTA Framework) • Hybrid Approach (Combination of Elements) • Prepare for future negotiations, i.e. new generation agreements (21st century agreements).

3. General FTA STRUCTURE Goods, Services, Investment, IP, etc.

4. WHY IS SCHEDULING APPROACH IMPORTANT? Indicates the scope and level of preferential trade. It identifies: (i) the sectors to which the obligations apply, or (ii) the sectors that are exempted from the obligations of national treatment, market access, etc. It also specifies the level of openness to foreign service suppliers and investors.

5. Important note on SCHEDULING APPROACH “It is not the scheduling technique that necessarily determines the quality of the services agreement, but more importantly, the disciplines that are associated with it.” “The level of transparency and depth of commitment of the Parties are determined by their willingness to commit.”

6. GATS STRUCTURE – POSITIVE LIST APPROACH • Covers all services and the supply/delivery of services. • Agreement/Chapter encompass disciplines that apply to all services sectors; Core obligations are market access and national treatment. • Sectoral Annexes (e.g. Finance, Telecommunications). • Schedule of Services Commitments.

7. Positive list approach (gats style) It is about the choice of services sectors and subsectors to be scheduled and covered by commitments. • Sectors and subsectors in which government chooses not to make commitments are simply not included in the schedule. • Commitments may be made for any sectors or subsector. • Restrictions that affect all sectors are inscribed as horizontal commitments.

8. EXAMPLE OF POSITIVE LIST: PH GATS COMMITMENT

9. ARGUMENTS FOR POSITIVE LIST • PH familiarwith the positive list approach. • It allows flexibility to gradually open up sector at the speed government is comfortable. • Due to limited or asymmetrical information difficult tocommit or liberalize a sector. • It allows government to proceed with cautionin allowing foreign entrants especially in under-developed services activities. • Keeps the “policy space”for government.

10. ARGUMENTS AGAINST POSITIVE LIST • Suitable for multilateral agreement not for regional agreement among like-minded trading partners. • Not helpfulto businessmen – it does not provide accurateand up-to-date information. • Measures and regulations change over time, it has no provision for updating. • PL approach provides a very partial listof sectors/subsectors. • Not accompanied by strong disciplineson MA and NT, while subject to progressive liberalization, very little liberalizationhas taken place.

11. Innovation in APPROACH To expand trade as freely as possible it is important to increase the effectiveness of commitments. In the context of achieving more meaningful outcomes, trading partners are most likely to demand the use of the negative list approach in future trade negotiations and agreements. Future adherence to the TPP will require producing a negative list schedule.

12. NAFTA STRUCTURE – NEGATIVE LIST APPROACH

13. NEGATIVE LIST APPROACH (NAFTA STYLE) Requires all Parties to the agreement to respect the core disciplines of the agreement unless otherwise specified in the Annexes of non-conforming measures. The Annex lists all measures that violate the core disciplines. • Most-favoured Nation. • National Treatment. • Performance Requirements. • Senior Management and Board of Directors. • Local Presence. All sectors/subsectors are considered free of restrictions if not listed in the Annex.

14. ARGUMENT AGAINST the NEGATIVE LIST • It requires full liberalization. Not Correct. Government can maintain restrictions provided it is able to list these in the Annex. • It will interfere with government’s right to regulate. Unfounded. Government’s right is fundamental in the agreement. • Caution - NL automatically extends the disciplines of NL to “new services”. • Does not prevent them from adopting non-discriminatory regulations it would deem necessary. The right to regulate is preserved no matter what. • Government would have the option to exclude new services from the purview of the agreement if it chose to do so in Annex II (Future Measures).

15. ARGUMENT AGAINST the NEGATIVE LIST • Gov’t may miss out key measures when scheduling non-conforming measures. Can be allayed by adequate preparation. • Have acompendium of horizontal and sectoral measures affecting trade in services. • Preferably in electronic form for updating purposes. • Negotiating in NL requires more resources. Actually not the case. • Negotiating services under any approach should require careful preparation and as much knowledge as possible.

16. EXAMPLE OF NEGATIVE LIST: MALAYSIA’S TPP ANNEX-I Description: Cross-Border Trade in Services and Investment Education services provided in Malaysia can only be provided by education services suppliers that are registered and established in Malaysia. Foreigners are not allowed to provide the following education services: • Preschool; • Primary and Secondary School Education Services covering Malaysian National Curriculum; and • Religious School.

17. EXAMPLE OF NEGATIVE LIST: Viet nam's TPP ANNEX-i Description: Investment Cinemas must screen Viet amese films on the occasion of major anniversaries of the country. The ratio of screening Vietnamese films to total films shall not be less than 20 percent on an annual basis. Cinemas should show at least one Vietnamese film between the hours of 18:00 and 22:00.

18. EXAMPLE OF NEGATIVE LIST: Viet nam's TPP ANNEX-II (Future Measures) Description: Investment Viet Nam reserves the right to adopt or maintain any measure conferring rights or privileges to socially, economically, and geographically disadvantaged minorities and ethnic groups.

19. EXAMPLE OF NEGATIVE LIST: MALAYSIA’S TPP ANNEX-II (FUTURE MEASURES) Description: Investment and Cross-Border Trade in Services Malaysia reserves the right to adopt or maintain any measures relating to wholesale and distribution services for rice, sugar (other than refined sugar for food and beverage manufacturers), flour, liquor and alcoholic beverages, tobacco and cigarettes products.

20. EXAMPLE OF NEGATIVE LIST: JAPAN’S TPP ANNEX-II (FUTURE MEASURES) Description: Cross-Border Trade in Services • Japan reserves the right to adopt or maintain any measure relating to services other than those recognised or other than those that should have been recognised by the Government of Japan owing to the circumstances at the date of entry into force of this Agreement. • Any services classified positively and explicitly in JSIC or CPC, at the date of entry into force of this Agreement, should have been recognised by the Government of Japan at that time. • Japan reserves the right to adopt or maintain any measure relating to the supply of services in any mode of supply in which those services were not technically feasible at the date of entry into force of this Agreement.

21. ARGUMENTS FOR NEGATIVE LIST • Conducive to facilitate business operations and trade. • Brings out a more comprehensive coverage. • Core disciplines are applied across the board. Any deviation listed in the Annex of non-conforming measure (Annex I). • For all very sensitive sectors/activities that government wishes to remove from the disciplines, possible to place these in the “Annex of Future Measures” (Annex II). Allays the fear that it removes government “policy space.” • Greater stability and greater transparency.

22. ARGUMENTS FOR NEGATIVE LIST • Incorporates “ratchet mechanism.” Regulation that is relaxed or liberalized post entry into force of the agreement is automatically bound at the new level of openness. “Avoids the necessity for renegotiating a trade agreement in the future and serves to extend future openness and liberalization to all partners of the trade agreement.” • If certain aspects of the regulatory regimes for various services activities are still be under-developed in the Philippines, it is possible to include a commitment for future opening within a negative list framework. • Greater simplicity and transparency.

23. Philippine experience PH has always used the positive list approach in services since the WTO. • General Agreement on Trade in Services (1996). • ASEAN and ASEAN Plus FTAs. • Philippines Bilateral FTAs (e.g. PJEPA with variation). Use of negative list approach is not alien to PH. • ASEAN Comprehensive Investment Agreement, which applies to manufacturing mining, agriculture, fishery, forestry and services incidental to these sectors. • Foreign Investment Act – Regular Foreign Investment Negative List (limited to foreign equity participation).

24. Recommendations • Develop compendium of measures affecting trade in services. • Will serve review of regulations. • Will serve as essential guide during trade negotiations, • Provide greater transparency and predictability.

25. Thank You