Introduction

The World Trade Organisation (WTO) mandated that a new round of negotiations on the liberalisation of trade in services under the General Agreement on Trade in Services (GATS) begin in the year 2000. Accordingly, the “Services 2000” negotiations have been formally launched in February 2000 by the WTO’s Council for Trade in Services.

Being a service-oriented economy, Hong Kong has a major stake in multilateral trade policy-making in services. Service industries now account for 85% of Hong Kong’s gross domestic product.

This “Services 2000 Wish List” represents the expectation of the Hong Kong business sector for the GATS negotiations. The list has been compiled from the results of an 18-month study on “Opportunities from Liberalisation of Trade in Services – The Private Sector’s Interest”.

Horizontal, Cross-Sector Recommendations

In summary, the Hong Kong private sector would like to see the following:

1. Relaxation in the requirements to establish commercial presence to enable more companies to gain access into foreign markets.
2. Enhancing national treatment, i.e. equal treatment of foreign and domestic firms.
3. Strengthening regulatory reform to enable both foreign and domestic firms to benefit from greater competition.
4. Facilitating movement of natural persons to make it easier to supply services across borders.
5. Improving transparency of laws and regulations.
6. Improving the scheduling of specific commitments under the GATS, to make it more effective in liberalising trade in services.
7. Encouraging more private sector participation in the GATS negotiations.

(1) Relax establishment requirements

In an increasingly global marketplace, the ability to offer a one-stop, total-solution package of services is essential for service providers to retain customers and to realise economies of scale and scope. We would like, therefore, to see a relaxation of the restrictions on commercial presence, particularly restrictions on:

1. the scope of business activities;
2. the share of foreign equity ownership; and
3. the number of operating licences.

(2) Enhance national treatment

We would like to see improvement in national treatment in the following areas:

1. removal of discriminatory taxes or licensing requirements on foreign services suppliers;
2. explicit public policy objectives served by national treatment exceptions be stated in the GATS schedules to improve transparency - at present, GATS Article XVII on national treatment does not oblige countries to state the public policy objectives behind exemptions from this principle and does not, as in the case of MFN, impose a phase-out period on exemptions;
3. for the professional services sectors, a removal of qualification requirements unrelated to the quality of services provided (such as race and length of residency).

(3) Strengthen domestic regulatory reform

Trade in services is intertwined with domestic regulations, and liberalisation of trade in services cannot be achieved without substantial domestic regulatory reforms. Barriers to trade are often constituted as a result of cumbersome domestic regulations such as complicated customs clearance procedures, unnecessary technical standards for product certification, professional qualifications, licensing requirements, and foreign exchange controls on profit repatriation. To facilitate trade liberalisation, we suggest that domestic regulatory reform be strengthened based on the principles of transparency and simplicity. Our specific recommendations are as follows:

1. more transparency in domestic policy objectives, through a clarification of GATS Article VI (Domestic Regulation) in the upcoming negotiations;
2. extension of the common regulatory principles as set out in the Reference Paper in the Basic Telecommunications Agreement to all other service sectors;
3. an improvement in market infrastructure to promote competition through:

• relaxing burdensome domestic regulations (e.g. on pricing, marketing, zoning);
• simplifying complicated customs clearance procedure;
• effective enforcement of competition policy and intellectual property laws;
• stricter disclosure requirements on companies and banks;
• in regulations that relate to professional qualifications, a clear specification of the legitimacy of restrictive regulations (e.g. consumer protection).

(4) Facilitate movement of natural persons

With increasing globalisation in many service sectors, such as financial services, the need to move professionals and managers frequently across national borders has become an integral part of trade and investment. To streamline the cross-border movement of natural persons, we would like to see more liberal immigration regimes, particularly for personnel related to the business services sectors.

(5) Improve transparency

To improve information flow and transparency, we recommend that some minimum level of due process and diligence should be spelt out to give effect to Article III (Transparency) of GATS. In particular, we recommend that progress be made in two specific aspects as follows.

1. Transparency of court proceedings and rulings on business disputes should be improved. For businesses, this is more relevant to their day-to-day operation than the WTO dispute settlement mechanism which operates at the country-to-country level. Court rulings on business disputes involving foreign companies should be published and the rationale of the rulings explained.
2. To improve compliance with Article III, WTO member countries should set up single-contact inquiry points for dissemination of trade related laws and regulations.

(6) Improve scheduling of specific commitments

To improve the effectiveness of the schedules, we recommend that the architecture of GATS be improved and Article XX (Schedules of Specific Commitments) enhanced.

1. The GATS scheduling guidelines and the sectoral classification scheme should be reviewed and revised. At present the sectoral classification does not include new emerging sectors (e.g. biotechnology), nor does it reflect the reality of different degrees of market openness for some services (e.g. under “legal advice or representation services”, the market may be opened to varying degrees such as on host country law, third country law, and international law).
2. The degree of interdependence between alternative supply modes should be taken into account, as different modes of supply have become mutually supportive means of providing services in an increasingly global marketplace. The value of a commitment in one mode of supply may be undermined by the absence of a commitment in another.
3. The default status of the limitations in the schedules should be clearly stated.
4. The format of the schedules should be standardised. All WTO members should follow the same sectoral classification in the schedules and relevant sector codes should not be omitted.

(7) Encourage private sector involvement in Services 2000

The private sector does not seem to be well informed about the GATS and its impacts on their business. As the negotiations on basic telecommunications have shown, a broad-based support from the private sector can play a vital role in achieving a good outcome. We recommend, therefore, the following:

1. the WTO to involve the private sector more closely, through the formation of an international advisory group modelled upon the ABAC (APEC Business Advisory Committee) of APEC;
2. the formation of working groups involving the business and professional sectors to advise the WTO on specific sectoral issues.

Sector-specific Recommendations

(1) Financial Services

In respect of financial services, we would like to see the following in the Services 2000 negotiations:

1. for the securities industries of emerging economies:

• liberalisation of market access for brokers and investors;
• relaxation of restrictions and a simplified approval process for domestic companies seeking listing on foreign stock exchanges;

1. a relaxation of the restrictions on scope of business and branching, particularly in the fund management, consumer and personal banking, small business banking, and online banking and trading sectors;
2. the promotion of consistent financial laws and regulations, for example, through adopting the Undertakings for Collective Investment in Transferable Securities (UCITS) established by the European Union to improve market transparency and economies of scale while facilitating the selling of financial products;
3. a review of the commitment schedules of the 1997 Financial Services Agreement, many of which are already outdated, so as to bring them in line with the rapid development over the past few years.

(2) Business Services

In respect of business services, our wish list is as follows:

1. fast-tracking the liberalisation of professional services by extending the guideline for mutual recognition of qualifications in the accountancy sector, developed by the WTO Working Party on Professional Services, to other professions;
2. to take advantage of the connectivity offered by the Internet in the implementation of mutual recognition, putting relevant regulations such as training requirements and accreditation conditions on the Internet, so as to enhance the operational efficiency and transparency of the license granting procedure.

(3) Information Services and Telecommunications

For information services and telecommunications, we would like to see the following:

1. the early implementation of the GATS Telecommunications Annex and the Reference Paper, especially in respect of the establishment of pro-competitive regulatory regimes;
2. setting some minimum standard of due process in the dispute settlement mechanism for trade in telecommunications, to enhance impartiality, credibility and transparency of the dispute resolution mechanism, particularly for contentious matters such as interconnection and pricing, possibly through:

• considering specialised courts for handling telecommunications disputes to expedite the process in a professional manner, such as by setting up an independent tribunal to balance the power of the regulator; and
• publishing the result of all hearings;

1. updating of the Basic Telecommunications Agreement Schedules to make them more in line with prevailing practice, in light of the fast changing scene in telecommunications which has rendered many commitments in the BTA outdated;
2. granting of more Internet service licences as well as a relaxation in foreign equity ownership for Internet related services, to encourage foreign venture capital and bank loans to enable more Internet start-ups.

(4) Distribution Services

Our wish list for distribution services is as follows:

1. the completion of the commitment schedule for the distribution services sectors, in which only 38 WTO members have made commitments;
2. improved transparency of trade regulations and court rulings, with the establishment of inquiry points to provide information, in ordinary language, on all laws, regulations and operational restrictions;
3. putting trade facilitation on the agenda of Services 2000;
4. the adoption of international classification codes, and the removal of trade barriers caused by different product technical standards and complex custom clearance procedure.

(5) Construction and Engineering Services

We would like to see further liberalisation in the following areas for the construction and engineering services sectors:

1. removal of the burdensome and discriminating licensing requirements in many countries, such as requirements of track records for local construction experience, and the complicated procedure of applying for licenses;
2. in recognition of the importance of labour inputs in construction services, a relaxation of restrictions on personnel movement through a strengthened agreement on movement of natural persons under GATS;
3. recognition of professional standards in civil engineering and elimination of restrictions on foreign entrants unrelated to the profession.

(6) Transport Services

For transport services we would like to see the following:

1. a push for trade facilitation, particularly simplification of customs clearance procedures, and elimination of unnecessary practices for certification and testing of products;
2. relaxation of restrictions on inter-modal and on port and airport freight handling rights;
3. improving the trade descriptions and classifications of GATS to take account of the emergence of new services in the transport sectors;
4. freedom of the maritime industry to operate in the domestic market of other jurisdictions.

(7) Electronic Commerce

The pre-eminence of e-commerce is a mark of a leading knowledge-based economy in the 21^st century. As a “world city”, Hong Kong has a major stake in the development of e-commerce and its associated international regulatory regime. Already a large number of new e-commerce-related services have developed since the Uruguay Round, such as electronic authentication services, Internet advertising services, and Internet domain name assignment services. Hong Kong has an interest in all of these services. Our wishes for e-commerce in the Services 2000 negotiations are as follows:

1. agreement to the principle of minimum regulation for e-commerce, to enable e-commerce business models to become more mature and predictable;
2. negotiation of a Reference Paper for e-commerce, similar in spirit to the one agreed in 1997 for basic telecommunications, entailing principles specific to e-commerce such as consumer protection, technological neutrality and protection of intellectual property rights;
3. extension of the WTO moratorium on customs duties on electronic transmissions in view of the rapid development of e-commerce;
4. clarification of the coverage of Internet services under existing commitments, with a requirement to justify all exemptions from MFN and national treatment in the schedules of commitment;
5. promotion of common standard for e-commerce regulation such as the adoption of the Model Law of the United Nations Commission on International Trade Law (UNCITRAL);
6. application of current WTO obligations, rules, and disciplines under GATS, GATT, and TRIPS to e-commerce transactions;
7. agreement of some criteria to differentiate between goods and services;
8. strengthening the Basic Telecommunications Agreement to provide guarantee for Internet service providers to access telecommunications networks;
9. as a way of facilitating the “new economy”, expanding and accelerating implementation of the Information Technology Agreement, to encourage greater access to computer equipment and generally improve computer literacy.