Services Negotiations

Hong Kong's Services Regime

The General Agreement on Trade in Services (GATS)

Misunderstandings on the GATS and the Services Negotiations

Milestones of Achievements of the GATS

The Current Round of Services Negotiations

Hong Kong, China's Objectives for the Services Negotiations

Consultation with the Business Community and other Interested Parties

Hong Kong, China's Participation in the Market Access Negotiations

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Hong Kong's Services Regime

• Hong Kong is a service-oriented economy. About 92% of our GDP comes from the service sector. In 2010, Hong Kong ranked 11th among the world's services exporters and 18th among the world's services importers. Overall, Hong Kong was the world's 14^th largest services trading entity in 2010.
  
  

• Major service industries in Hong Kong include :
  

• financial services (banking, insurance, securities, fund management and debt market);
  
  

• infrastructure services (architecture, building and construction, engineering and surveying);
  
  

• information technology and telecommunications services;
  
  

• professional services (accounting, legal services, management consultancy);
  
  

• transportation, logistics-related and trade-related services (air and maritime transport, freight forwarding, import and export services, convention and exhibition services); and
  
  

• tourism and travel-related services.
  

• Hong Kong has one of the freest services trade regime in the world. Foreign investment creates jobs and demand for local supporting services. Our service providers also possess the capacity to export our services. Given our already free and open regime, Hong Kong service providers stand to gain through the removal of market access restrictions by our trading partners and any mutual liberalization initiatives. 

The General Agreement on Trade in Services (GATS)

• The General Agreement on Trade in Services (GATS) under the World Trade Organization (WTO) is the first multilateral, legally-enforceable agreement governing international trade in services. The broad objectives of the GATS are to :

• establish a multilateral framework of principles and rules for trade in services with a view to the expansion of such trade under conditions of transparency and progressive liberalisation and as a means of promoting economic growth of all trading partners and the development of developing economies;
  
  

• achieve progressively higher levels of liberalisation through successive rounds of multilateral negotiations; and
  
  

• facilitate the increasing participation of developing economies in trade in services and the expansion of their services exports.
  

• The GATS applies to measures by WTO Members which affect trade in services. These measures refer to not only those of central government, but also measures taken by regional and local governments and non-governmental bodies in the exercise of powers delegated to them by governments. Basically, all types of services are covered under the GATS, except those services supplied "in the exercise of governmental authority", which is defined under Article I:3 of the GATS as services that are neither supplied on commercial basis nor in competition with one or more service suppliers. In other words, government services that are not provided in a commercial manner and in competition with private suppliers are excluded from the coverage of the GATS.
  
  

• Please click here for more information about the objectives, coverage and disciplines of the GATS as available at the website of the WTO.
  

Misunderstandings on the GATS and the Services Negotiations

1. The new round of Services negotiations will force WTO Members to open up those basic public services being provided by the public sector to foreign competition.

• As defined under Article I:3 of the GATS, "services supplied in the exercise of governmental authority" means any service which is neither supplied on a commercial basis nor in competition with one or more service suppliers. These services are excluded from the coverage of the GATS by virtue of the same article of the Agreement. It follows that basic public services such as water, health care and education provided by the Government are outside the ambit of the GATS.
  
  

• Those services that are provided on a commercial or competitive basis are covered by the GATS, but there is nothing in the Agreement requiring that they have to be opened up for foreign competition. There is no obligation on any WTO Member to allow foreign supply of any particular services. Members are free to decide whether or not to open up certain services, and if so, the extent and timetable of such liberalisation, and whether to make commitments on the relevant services.
  

2. WTO Services negotiations lead to privatisation or outsourcing of public services.

• Nothing in the WTO GATS requires privatisation or outsourcing of any public services. Neither would the Services negotiations lead to or pave the way for the outsourcing or privatisation of any public services. In fact, public services which are not provided on a commercial or competitive basis are outside the ambit of the GATS. 
  
  

• A cardinal WTO principle is that Members are free to choose those services on which they will make commitment under the GATS. The HKSAR Government has, and will always take into account, our own economic and social conditions in formulating our offers under the Services negotiations. We will not undertake any commitments that adversely affect local employment.
  
  

• Please click here for the WTO booklet which debunks some of the other myths and falsehoods about the GATS and the Services negotiations.
  

Milestones of Achievements of the GATS

• Since the establishment of the WTO in January 1995, we have seen the successful adoption of protocols on movement of natural persons, basic telecommunications and financial services in July 1995, April 1997 and November 1997 respectively. These are additional agreements negotiated after the Uruguay Round and attached to the GATS.
  
  

• In pursuit of our trade interests, Hong Kong, China participated actively and constructively in the negotiations on basic telecommunications and financial services. 
  

The Current Round of Services Negotiations

• The GATS mandates that WTO Members shall enter into successive rounds of negotiations, beginning not later than five years from the date of entry into force of the Agreement, with a view to achieving a progressively higher level of liberalisation in trade in services. Accordingly, the current round of overall Services negotiations began in early 2000. 
  
  

• Members agreed in March 2001 the negotiating guidelines and procedures for the negotiations.
  
  

• Building on the GATS mandate, the Doha Ministerial Declaration¹ adopted in November 2001 mandates that the negotiations on trade in services shall be conducted with a view to promoting the economic growth of all trading partners and the development of developing and least-developed countries. Members were required to submit initial requests and initial offers for further liberalisation in trade in services by 30 June 2002 and 31 March 2003 respectively.
  
  

• Pursuant to the Doha Work Programme adopted by the General Council of the WTO on 1 August 2004, Members agreed to table revised offers on further liberalisation of services by May 2005.
  
  

• The Hong Kong Ministerial Declaration (HKMD) adopted in December 2005 further mandates that Members presenting collective requests to other Members should submit such requests by 28 February 2006 or as soon as possible thereafter, that a second round of revised offers be tabled by 31 July 2006, and that the final draft schedules of commitments by 31 October 2006.
  
  

• Apart from liberalisation of services, the GATS also mandates further negotiations/reviews on a wide range of issues including: 
  

• Development of multilateral rules governing emergency safeguards measures, government procurement and subsidies;
  
  

• Development of multilateral disciplines governing domestic regulations; and
  
  

• Review of Exemptions to Most-Favoured-Nation Treatment (MFN Exemption Review), Annex on Air Transport Services and Understanding on Accounting Rates in Telecommunications Services. 
  

• Please click here for more information about the current round of Services negotiations including, among other, the negotiating mandates, negotiations process, key stages in the negotiations, and news on the negotiations as available at the website of the WTO.

Hong Kong, China's Objectives for the Services Negotiations

• Given the importance of services trade to its economy, Hong Kong, China will continue to participate actively and constructively in both the negotiations and the reviews so as to advance the interests of its services industries. Our objectives for the Services negotiations are: 

• to achieve progressive liberalisation of trade in a wide range of services sectors so that our service providers may compete on a par with their overseas counterparts;
  
  

• to uphold the fundamental WTO principle of non-discrimination;
  
  

• to remove barriers to trade in services arising from domestic regulations and anti-competitive behaviour;
  
  

• to ensure that the rules set by the GATS continue to be relevant and responsive to the changing needs of the modern business world; and
  
  

• to improve the method with which Members should set out their liberalisation commitments in order to enhance transparency and certainty of such commitments.
  

Consultation with the Business Community and other Interested Parties

• To prepare for the current round of WTO Services negotiations, the Government has conducted three large-scale public consultation exercises in 2002, 2005 and 2006 respectively. For all the three consultation exercises, we invited about 400 organisations - including chambers of commerce, major trade and industry organisations in different sectors, academic institutions and civil society groups - and the general public to express their views on the objectives and priorities of Hong Kong, China in the negotiations. In parallel, we also consulted bureaux and departments responsible for the different services sectors. Where appropriate, the relevant bureaux and departments had also sought views from the major stakeholders in their respective sectors.
  
  

• Various submissions were received during the three consultation exercises. The views collected formed, and will continue to form, the basis for drawing up Hong Kong, China's requests and offers as well as our negotiating positions.
  
  

• The Services negotiations are an on-going process and will only be concluded upon the completion of the current round of WTO negotiations. The Government welcomes any further views from any interested parties and will take them into account in our negotiations in the WTO. Interested parties may contact the Multilateral Division of the Trade and Industry Department (via fax: 2390 7479 or e-mail: mdiv1@tid.gov.hk).
  

Hong Kong, China's Participation in the Market Access Negotiations 

Bilateral Requests

• Having regard to the submissions received during the first public consultation exercise in 2002, the Government tendered initial requests for further liberalisation in trade in services to 20 WTO Members during the period of July 2002 to March 2003. In light of our strong export potential in services and our very liberal services market, our initial requests were very comprehensive in nature, seeking market access commitments in areas where our services industries have expressed interest or enjoy competitive advantage, such as logistics-related services, telecommunications, audio-visual services, professional services, financial services, and maritime transport services. We also requested these WTO Members to remove discriminatory measures inconsistent with the Most-Favoured-Nation principle, as well as ensure that domestic regulations would not cause unnecessary barriers to trade.
  
  

• Other WTO Members have also put forward their initial requests for liberalisation in trade in services to their trading partners since July 2002. Hong Kong, China received requests from 18 Members by March 2003, and further received six sets of supplementary/revised requests. These requests seek Hong Kong, China's offer of commitments in a number of different services sectors in which the requesting Members have particular interest.
  

Plurilateral Requests

• Pursuant to the timeline of end February 2006 for the presentation of collective requests as mandated in the HKMD and in pursuit of our objective to achieve further liberalisation in those services areas in which Hong Kong possesses export interests and capacity, Hong Kong, China has joined hands with different groups of other like-minded Members to tender collective requests for further liberalisation in different services areas to their target markets, including audiovisual services, computer and related services, financial services, logistics services, maritime transport services, and telecommunications services. 
  
  

• Hong Kong, China has also received collective requests from other groups of Members, seeking our further commitments in accounting services, air transport services, architectural/engineering/integrated engineering services, construction and related engineering services, education services, legal services, postal/courier services (including express delivery), and tourism services respectively. 
  

Offers

• With respect to offers for further liberalisation in trade in services, Hong Kong, China submitted the initial offers and revised offers on further liberalisation of services to the WTO in April 2003 and June 2005 respectively (please click here for a detailed summary of Hong Kong, China's services commitments and offers under the GATS). (pdf format)
  
  

• In general, our offers are commensurate with those of others and in line with the pro-liberalisation position of Hong Kong, China. We have indicated in our initial offers the possibility of making new commitments in environmental services and a number of new business services such as technical testing and analysis services. We have also included in our offer a widened scope for distribution services and improved telecommunications, financial and maritime transport services. In our revised offer, we have offered further commitments on the transparency of application procedures for movement of natural person (Mode 4), urban planning and landscape architectural services, and maritime transport services and freight transportation services.
  
  

• The Government has taken, and will continue to take, into account Hong Kong's economic and social conditions in formulating our offers under the Services negotiations.
  
  

• The commitments proposed in both the initial offer and revised offer of Hong Kong, China are, however, conditional upon the overall outcome of the Services negotiations, including the development of further disciplines on rule-making and satisfactory offers from our trading partners with commitments meeting the interests of Hong Kong. The commitments would only come into force after they are ratified by the Government in endorsing the outcome of the negotiations.
  
  

• Hong Kong, China would continue to work closely with all Members in the Services negotiations with a view to attracting high-quality offers that would create new business opportunities for the benefit of Hong Kong. We will as always contribute positively to the process and prepare ourselves for substantive engagement.
  

Latest Development

• The DDA stocktaking exercise held in end March 2010 did not achieve any breakthroughs but Members remained engaged.
  
  

• In late 2010, a Services small group at Ambassador level² was formed to push forward the negotiations on the four major areas of the Services negotiations: Market Access, Domestic Regulation, GATS Rules (including the subjects of emergency safeguards mechanism, government procurement and subsidies) and the implementation of LDC (Least Developed Countries) Modalities.
  
  

• The Chair of the Council for Trade in Services Special Session (the Services Chair) contributed a report dated 21 April 2011 (TN/S/36) (pdf format) to the Trade Negotiations Committee, setting out the latest state of play of the Services negotiations. According to the report, major gaps remain to be filled in all key areas although Members have intensified their engagement in the negotiations. The Chair also noted that progress in the Services negotiations is inextricably linked to progress in other areas, in particular market access negotiations in agriculture and Non-Agricultural Market Access.
  

• On Market Access, there had been little or no significant progress since July 2008 despite the intensification of the negotiations where Members engaged in various bilateral and plurilateral meetings from January to April 2011. Gaps in sectoral coverage and levels of commitment need to be filled in order for Members to be satisfied with the outcome of the Services negotiations.
  
  

• On Domestic Regulation, many Members are convinced of the importance of a satisfactory outcome on domestic regulation as a means of ensuring the effectiveness of scheduled commitments. However, delegations concur that gaps in the negotiations remain to be closed, both with regard to technical aspects of the future disciplines, as well as their level of ambition. The intensification of negotiations on domestic regulation disciplines during the first few months in 2011 has produced notable progress, yet disagreement persists on important and basic issues.
  
  

• On GATS Rules, there remain political differences in all three subjects that have resulted in diverging levels of engagement by Members. Considerable effort has nevertheless been made in 2009 to revive discussions, particularly through technical work, so as to fulfill the mandate of the HKMD for more focused discussions. In particular, on Subsidies, the Working Party on GATS Rules agreed on a work programme on information exchange pursuant to GATS Article XV in February 2010. Hong Kong, China and 17 other Members³ submitted their returns and Members discussed those submissions at the dedicated session during the November 2010 meeting. However, political guidance is needed to bridge the fundamental differences among Members over the objective and expected outcome of these negotiations.
  
  

• On implementation of LDC Modalities, while WTO Members support a waiver permitting preferential treatment to LDCs, disagreements remain with respect to the scope of the waiver, and the rules to define services and service suppliers of LDCs. Further consultations would be held to advance work on the proposed LDC waiver text.
  
  

• The Third MFN Exemption Review was completed in May 2011. As in the past and in accordance with our objectives for the Services negotiations, Hong Kong, China has taken an active and leading role in the review.
  

• Overall, while Members diverge in their specific interests in the Services negotiations, they converge on the need for their successful conclusion as one of the main pillars of the current round of negotiations.
  
  

• For more information about the latest development of the Services negotiations, please refer to the website of the WTO. 
  

Contact Us

• We welcome any comments and suggestions on Hong Kong, China's participation in the ongoing WTO Services negotiations. Please contact the Multilateral Division of the Trade and Industry Department (via fax: 2390 7479 or e-mail: mdiv1@tid.gov.hk) for comments/suggestions or more information.

^{1 -} The Declaration mandates also the negotiations on trade in goods and other subjects.

^{2 -} The composition of the small group on Services includes the G5 (the US, the EU, Brazil, China and India); the G6 (Argentina, Australia, Canada, Japan, Mauritius and South Africa) and Chile; Colombia; Hong Kong, China; Norway; Malaysia; Pakistan; Peru; the Philippines; Singapore; Switzerland and Zambia.

^{3 -} Including Australia, Brazil, Canada, Chile, China, Colombia, the EU, India, Japan, Korea, Mexico, New Zealand, Norway, Peru, Chinese Taipei, Turkey, and the US.