NO.237 DECEMBER2022 KEYPOINTS •DeeperservicestradeliberalizationundertheRegionalComprehensiveEconomicPartnership(RCEP)isobserved,onaverage,butdisparities intheextentanddepthofcommitmentsacross membercountries,services ADBBRIEFS LiberalizingServicesTrade intheRegionalComprehensiveEconomicPartnership: StatusandWaysForward sectors,andmodesofsupplymaycausethepotentialgainstobeunevenlydistributed. •Liftingrestrictionson cross-bordermovementofindependentprofessionalsandcontractualserviceproviderscouldnotonlyboostMode4servicestradebutalsotradeingoodsandotherservicesthroughspillovereffects. PramilaA.Crivelli Economist EconomicResearchandRegionalCooperationDepartment AsianDevelopmentBank(ADB) INTRODUCTION JeremyMarandEconomicResearchAnalystADBConsultant GeraldY.PascuaEconomicResearchAnalystADBConsultant •ForeignequityrestrictionsunderMode3remainachallengeinenhancingforeigndirectinvestments. •Coupledwithinvestmentsindigitalinfrastructureandhumancapital,deeper liberalizationunderMode1iscrucialtofosterdigitalservicestradeandeconomicdevelopment. •Technicalassistanceisneededtosupportdevelopingcountries’ negotiatorsandregulatorsinadoptinganegativelistapproachtowardgreaterservicestradeliberalization,regulatorycoherence,andtransparency. ISBN978-92-9269-944-4(print) ISBN978-92-9269-945-1(electronic) ISSN2071-7202(print) ISSN2218-2675(electronic)PublicationStockNo.BRF220573-2 DOI:http://dx.doi.org/10.22617/BRF220573-2 Morethan2decadesafterthelandmarkentryintoforceofthe1995GeneralAgreementonTradeinServices(GATS),andamidtheeconomicuncertaintiesandoverlappingchallengesarisingfromtradetensionsandtheglobalpandemicexperience,revitalizingservicestradeliberalizationhastakentwonewstridesintheAsiaandPacificregion.1 First,theASEANTradeinServicesAgreement(ATISA)wassignedinManilainOctober2020andenteredintoforceinApril2021,buildingupontheoutcomesofthe10roundsofprogressiveservicesliberalizationpackagesimplementedbytheAssociationofSoutheastAsianNations(ASEAN)memberstatesfrom1997to2018undertheASEANFrameworkAgreementonServices(AFAS).ATISAalsocomeswithsectorannexesonfinancialservices,telecommunicationservices,andtransportancillaryservices(ASEAN2020). Second,signed1monthafterATISA,theRegionalComprehensiveEconomicPartnership(RCEP)enteredintoforceinJanuary2022.TheRCEPisexpectedtofurtherboosttradeinservicesbyprovidingbettermarketaccessandimprovingthepredictabilityandtransparencyofregulations(ASEAN2021).Chapter8ontradeinservicesalsocontainssectorannexesonfinancialservices,telecommunicationsservices,andprofessionalservices. 1TheauthorswouldliketothankthemembersoftheRegionalCooperationandIntegrationThematicGroup(SDTC-RCI)forthevaluablecommentsprovided.TheauthorsarealsogratefultoPauloRodelioHaliliforhiscommentsandproductionsupport. AkeydevelopmentunderATISAandtheRCEPisthetransitionmechanismfromapositivelisttoanegativelistapproachtoservicestradeliberalization.Suchatransitioncouldbechallengingfornegotiatorsandregulatorsindevelopingmembercountries. Itwillrequireconsiderabletechnicalskillandexpertunderstandingofthepracticalimplicationsofservicestradeliberalizationgiventhedomesticregulatorylandscape,economicandsocialstructures,competitiveness,andresources. ThisbriefisaninitialattempttoquantifythedepthoftheRCEPservicesliberalizationcommitments.TheAsianDevelopmentBank(ADB)andtheEconomicResearchInstituteforASEANandEastAsia(ERIA)developedamethodtocomputetheRCEPServicesTradeLiberalizationrates.2Thisbriefreportstheresultsanddiscussestheminthebroadercontextoftherecentservicestradeexpansionintheregion.WhiletheRCEPoffersdeeperliberalizationthanGATS,significantdisparitiesinliberalizationrateswereobservedamongcountriesandmodesofsupply,whichcouldimpacttradeflows,productivity,3andultimatelyeconomicgrowth.4TheRCEPregion,forexample,notablyexhibitsalowaverageliberalizationrateforservicestradedbyindividualsofonememberthroughtheirpresenceintheterritoryofanother(Mode4).GiventhepositivespillovereffectsofMode4onmerchandisetradeandservicestradedeliveredunderModes1and3(Jansen andPiermartini2004),thelimiteddegreeofMode4liberalizationcanhurtprospectsofservicestradegrowthintheregion. ThisbriefalsoshowsspecifictypesofexistingrestrictionsanddocumentstheservicesliberalizationrategapsbetweentheRCEPcountriesandmodesofdelivery.Itconcludeswithpreliminaryinsightsandimplicationsinthecurrentcontextsofdigitaltransformationandpost-pandemicrecovery. TransitioningfromapositivetoanegativelistapproachWithapositivelistapproach,membercountriessubmitascheduleofcommitmentsthatexplicitlyidentifiesallmarketaccessandnationaltreatmentcommitmentsandlimitations.Thisisdoneforeachservicessectorandsubsectorandforeachofthefourmodesofservicessupply.Unlistedsectorsorsubsectorsarenotliberalized(WTO2002).GATSandAFAS,forexample,bothemployapositivelistapproach. Ontheotherhand,withanegativelistapproach,membersaretoprovidealistof“non-conformingmeasures”containingonlythelimitationsandrestrictionsforspecificservicessectorsand subsectors.Bydefault,servicessectorsandsubsectorsnotincludedinthislistarepresumedtobeopent