Negotiating services with ASEAN
Negotiating Services with ASEAN
India and the Association of Southeast Asian Nations (ASEAN) signed a pact for the free trade of goods in 2009, and follow-up talks on investment and services liberalisation begun in earnest earlier this year. However, progress on the latter has been slow, despite repeated requests from India to fast-track the bilateral services and investment talks.
The ASEAN offers on services are rather weak, consisting of a handful sectors among the more than 150 service categories listed under the WTO GATS classification. The group as a whole is not only defensive in their multilateral commitments but also apprehensive about opening up trade in services with India, especially due to the latter’s perceived aggressive market access interests in the sector. India has also urged its ASEAN trade partners to take on substantial commitments for ensuring smooth movement of professionals between India and the trade bloc, especially in sectors such as business services, health and education, key areas of trade interest deemed to pose competitiveness concerns for some ASEAN countries.
Given the lacklustre response on services negotiations from ASEAN so far, attempts were made at the Eighth AEM-India Consultations meeting held in Vietnam to put “some meat’’ into the skeletal services offers made by the ASEAN countries. Ministers assembled however had to be satisfied with calling for intensification of negotiations on core issues in investment and hoped that ambitious and commercially meaningful offers be exchanged between the parties.
The ministerial meeting held in Vietnam saw very little real progress. It appears that the August discussions merely saw the Ministers tasking the negotiators to step up their engagement, with a tentative target of completing negotiations by March 2011. In other words, India-ASEAN deliberations on services (and investment) appear to be set for a prolonged negotiation, unless external events (viz. concerns of increased Chinese military incursions in the South China Sea) dramatically shake up the politico-economic engagement between the trade partners in the near future.
Recent experience in the India-ASEAN services talks seem to suggest that the present method of negotiations with the region may have reached its limit. In fact, it has been emphasised that the challenges encountered in the services and investment negotiations could be overcome only through greater understanding and flexibility among the negotiating parties in order to bring the talks to a successful conclusion. Therefore, we argue here that a reassessment of the negotiating modality on part of India is necessary, especially if the latter is to realise the potential gains from an FTA with ASEAN.
So what can India do to show flexibility while safeguarding its core market access interests? A solution seems to present itself from the experience of the recently implemented ASEAN-Australia-New Zealand FTA (AANZFTA), where the negotiations were concluded on the basis of differentiated commitments from countries at different levels of development within the bloc. In that vein, this article argues that in the India-ASEAN services talks, India might fare better if it doesn’t negotiate with ASEAN10 as a single entity.
At a recent presentation to ADB, New Zealand’s negotiator highlighted that the comprehensively negotiated AANZFTA has many WTO- and Doha-offer-plus provisions in the services and investment commitments, which makes it a genuinely high-quality and ambitious FTA. The AANZFTA reportedly has 50, 29 and 27 Doha plus commitments in services respectively from the otherwise reticent countries Indonesia, Malaysia and Philippines, commitments that are significantly deeper when compared to their unilateral openness. When quizzed on the negotiation modality adopted, participants at the seminar were informed that the ambitious agreement was made possible because ASEAN Members were treated differently during the negotiations.
Following that experience, it is believed that India would do well to try to negotiate service agreements of varied degree of liberalisation commitments with the different ASEAN country groups according to their market strength, viz. negotiate for a much deeper market access commitments with ASEAN6 while allowing for flexibilities for the CLMV countries. In fact if one is to take the differentiated-commitments negotiation modality to its logical limit, even among the ASEAN6, Singapore merits being treated differently from the other five. Given that even the ASEAN-China FTA (a more comprehensive agreement than the India-ASEAN goods deal) is reportedly de facto a conglomeration of 10 bilateral agreements with the ASEAN countries, and the experience of the AANZFTA recounted above, it seems that adopting this mode of negotiation could prove beneficial in crafting a meaningful FTA between India and ASEAN.
Finally, how will the above modality of differentiated-commitments compare with adoption of a negative list approach in services, which according to many trade policy analysts is an important tool for creating genuinely WTO-plus services agreements. Given the Asian practice of bottoms-up regional integration, and particularly in view of the sensitivity in the region vis-à-vis services liberalisation, it is unlikely that the bolder negative list approach will find acceptance. Therefore, and especially in view of the limited Doha Round offers from the ASEAN, India should play all its cards to ensure that it doesn’t remain barred from key service markets in the region. Following the approach of differentiated-commitments seems to be a practical solution that can help in negotiation of a deeper services agreement while assuaging the sensitivities of the region with respect to services openness.
Suparna Karmakar is a trade economist, specialized in international trade policy
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