The 10 Asia/Pacific trading partners accounted for 16 percent of total U.S. services trade in 1995, with the most significant U.S. export markets being Korea, Australia, Singapore, and Hong Kong. The schedules of commitments submitted by Asia/Pacific trading partners vary significantly from one partner to another in terms of benchmarking and transparency. Benchmarks are commitments that identify trade-impeding measures and, under the terms of the GATS, prevent these measures from becoming more onerous in the future. Commitments are transparent when the nature and extent of all regulatory impediments to trade are explained clearly in their entirety. Such countries as New Zealand and Australia offered commitments on a broad range of service industries and provided a high degree of benchmarking and transparency. Others, such as India, scheduled commitments that covered few industries and provided little in terms of transparency. Countries such as Malaysia and the Philippines fell somewhere in between, offering binding and beneficial commitments in selected areas, yet declining to schedule commitments in other key industries.
Examination of Industry-Specific Commitments
Travel and tourism, transportation, professional services, and distribution services account for the greatest U.S. export volume. All 10 of the subject Asia/Pacific trading partners scheduled commitments pertaining to travel and tourism services, indicating that trade in the industry is not heavily restricted. Transportation, professional, and distribution services did not receive as thorough coverage, suggesting that the regulatory environment affecting these important industries remains somewhat more restrictive.
With respect to industries representing fewer exports, schedules were similarly mixed. All 10 of the subject economies scheduled commitments on enhanced telecommunication services. Architectural, engineering, and construction services were also well represented among the commitments scheduled by Asia/Pacific countries. However, schedules submitted to the World Trade Organization (WTO) suggest that the Asia/Pacific trading partners are more reticent to bind open professional services, audiovisual services, and social services, such as education and health care.
Examination of Cross-Industry Commitments
Labor Mobility
As was customary among most GATS signatories, commitments offered by Asia/Pacific trading partners concerning the entry and stay of business persons applied only to selected types of employees, typically senior managers and specialists. Measures affecting all other types of employees remain unbound. Some countries, such as Australia, Indonesia, and the Philippines, noted that some form of market or needs testing may be applied in determining whether individual employees are indeed essential to foreign firms' operations. Although it appears that foreign firms will be able to move essential employees as required, the presence of such needs-testing policies generates uncertainty concerning the consistency and objectivity of the assessment criteria.
Capital Investment
Capital investment issues appear to be of considerable concern to Asia/Pacific trading partners, several of which scheduled restrictions on foreign direct investment. Some of these restrictions, such as notification and authorization procedures, do not appear to pose significant impediments to foreign firms as long as the process is based upon transparent criteria that are applied in a consistent and timely manner. Other investment restrictions that are more onerous limit foreign investors to minority shareholder status or essentially force foreign firms to establish a joint venture. Such measures are particularly troublesome for foreign firms because they may weaken the ability of the parent organization to maintain control over its affiliate operations. Five of the 10 subject trading partners impose foreign equity ceilings, ranging from 30 percent in Malaysia to 60 percent in the Philippines.
Exemptions From Most-Favored-Nation Treatment
GATS signatories are generally obligated to accord foreign firms most-favored-nation (MFN) treatment. MFN treatment accords to one trading partner terms and conditions of trade that are no less favorable than those accorded to any other trading partner. In certain instances, however, Asia/Pacific trading partners listed MFN exemptions. Some of these exemptions have relatively little significance for foreign service providers. For example, New Zealand lists a measure that accords preferential terms for market access to a specific number of nationals from Kiribati and Tuvalu. Another noncontentious type of MFN exemption provides preferential treatment to countries with which bilateral or regional agreements already exist. The Philippines, Singapore, and Thailand have scheduled such exemptions.
Other MFN exemptions have the potential to distort trade and investment in services and thus may have greater significance to foreign service providers. For example, Malaysia lists an exemption declaring that decisions concerning foreign investment will be carried out in a preferential and differentiated manner. Such a measure could perhaps be used to discriminate among firms from different countries by permitting companies from some countries to establish wholly owned subsidiaries and forcing companies from other countries to form joint ventures in which they may retain only a minority interest. Similarly, Australia's MFN exemption on audiovisual services provides for the imposition of "undetermined measures" in response or retaliation to "unreasonable measures" taken by another GATS signatory. Such a broad exemption in combination with Australia's decision not to schedule specific commitments on audiovisual services leaves Australian regulators with considerable discretion regarding their treatment of foreign firms and foreign audiovisual works. Similarly, Singapore used an MFN exemption to essentially exclude legal services from the scope of its offer.
Industry Viewpoint
U.S. service providers are highly interested in expanding their presence in the Asia/Pacific region and recognize that the GATS process of successive negotiations holds considerable promise for progressive market liberalization. Consequently, U.S. industry representatives express general satisfaction that Asia/Pacific trading partners are participating in the GATS. They also observe, however, that because most commitments are only standstill positions, they do not expect to enjoy any major immediate benefits. In addition, industry representatives note that actual market access conditions may be more or less favorable than the commitments indicate. In some cases, the absence of industry-specific commitments does not reflect closed markets, while in others, full commitments do not necessarily reflect a fully open market. This suggests that specific commitments must be carefully assessed and cross-checked against current market conditions. With respect to ongoing or future negotiations, U.S. service firms indicate that reducing barriers to foreign direct investment and improving recognition of professional qualifications are priority objectives for the region.
Conclusion
The schedules of commitments offered by the subject Asia/Pacific trading partners vary widely in terms of providing benchmarks and transparency. In addition, as was common practice during this first round of negotiations on services trade, the Asia/Pacific schedules include few liberalizing commitments, generally offering standstill positions instead. As a result, the commitments from Asia/Pacific economies offer little immediate benefit to U.S. service providers. However, by establishing some binding benchmarks, providing some improvement in regulatory transparency, and signing on to a framework for future services trade liberalization, the Asia/Pacific trading partners have helped to lay an effective foundation from which to achieve progressive liberalization.