TAFTA guide: How to read each country's commitments on services and investment 1

To understand each country’s obligations on services and investment under the FTA, you need to refer to the text of the relevant Chapters of the FTA and Annex 8. Annex 8 includes each country’s schedule of commitments on services and investment, and forms an integral part of the FTA.

The format of the countries’ schedules of commitments in Annex 8 is based on the schedules of commitments used to set out commitments in the General Agreement on Trade in Services (GATS), but it has been simplified. As in the schedules to the GATS, each country has in its schedule identified the sectors in which it will be subject the market access and national treatment obligations of the FTA, and any exception from those obligations it wishes to maintain.

For most purposes, Annex 8 follows a positive list approach, as in the GATS. This means a country’s commitments apply only to those sectors listed in the schedule. Where a sector is not specifically mentioned, this means the country has made no commitments in that sector.

Unlike schedules to the GATS, the schedules in Annex 8 do not list separately commitments on market access and national treatment. Nor do they generally specify the “mode of supply” of the service that is subject to the commitment2.

Horizontal and sector-specific commitments

Each country’s commitments are divided into two sections. The first section sets out the country’s “horizontal” commitments. There are two types of horizontal commitments in each country’s schedule. The first type sets out the limitations (or conditions) that apply to all of the sectors listed in the schedule in relation to foreign investment (which is referred to as “commercial presence” in the GATS). The second type sets out the limitations that apply in relation to temporary entry of business people (or “presence of natural persons” in the GATS). Unlike the GATS, the two country’s commitments on temporary entry of business people are not restricted to sectors listed in the country’s schedule, but apply to all nationals of the other country, whether or not the country has made any other commitments in that sector.

The second section of each country’s schedule sets out its “sector-specific” commitments. For each country, the sector-specific commitments include not only services sectors (as in the GATS), but also mining and manufacturing. This means that each country has made commitments to permit investors of the other country to make direct investments in those two sectors.

The sector-specific commitments are set out in a standard format. They list in the left-hand column the sector, sub-sector or service in which the country has made the commitment and set out in the right-hand column any limitation that applies to the country’s market access or national treatment commitment in relation to that service.

Reading a commitment

Example 1: Architectural services
Sector or Sub-sector Limitations

II. SECTOR-SPECIFIC COMMITMENTS

Notes: Commitments in this schedule are subject to the general limitations contained in the "Horizontal Commitments" section of this schedule.

* Denotes that a sector-specific commitment for cross-border supply is unbound due to lack of technical feasibility.
** Denotes that the service or services specified constitute(s) only a part of the total range of activities covered by the CPC Code.

1. BUSINESS SERVICES
A. Professional Services  
 
d) Architectural services (8671) No limitations.

Australia’s commitment on “Architectural services” is described as having “No limitations”. This means that Australia may not impose any measure which would:

(i) impede market access by a Thai investor in that sector within the meaning of Article 809 of the FTA; or

(ii) which would breach national treatment within the meaning of Article 810 of the FTA.

Article 809 sets out the six forms of measures restricting market access which may not be imposed by a country unless it is specified in its schedule.

Because all sector-specific commitments are subject to the conditions set out in the horizontal section of its schedule, it is not enough just to refer to the sector-specific section of the schedule to confirm the extent of Australia’s commitment on architectural services. The horizontal section provides that Australia is permitted, for example, to require approval for investments above a certain threshold. So even though the commitment on architectural services is described as having “no limitations”, Australia can restrict access to Thai investors to the extent that this is provided for in the horizontal section of its schedule.

Example 2: Placement and supply services of personnel
Sector or Sub-sector Limitations

II. SECTOR-SPECIFIC COMMITMENTS

Notes: Commitments in this schedule are subject to the general limitations contained in the "Horizontal Commitments" section of this schedule.

* Denotes that a sector-specific commitment for cross-border supply is unbound due to lack of technical feasibility.
** Denotes that the service or services specified constitute(s) only a part of the total range of activities covered by the CPC Code.

1. BUSINESS SERVICES
 
F. Other business services  
 
k) Placement and supply services of personnel (872) Unbound for cross-border supply.

Australia’s commitment on “Placement and supply services of personnel” is described as “Unbound for cross-border supply”. Cross-border supply refers to the provision of a service by a non-resident service supplier across the border into the territory of another country. The “limitation” listed means Australia is not bound to provide market access or national treatment under the FTA on cross-border supply of this service. In other words, Australia is free to impose any measures restricting Thai market access to the extent that a Thai company seeks to supply placement and supply of personnel services from Thailand to Australians in Australia (e.g. over the phone or the internet). However, because there are no other limitations listed for this commitment, Australia would not be permitted to impose measures impeding market access as listed in Article 809 in relation to any other mode of supply of a service, except as listed in its horizontal commitments.

Commitments on Financial Services

Australia’s commitments on financial services are unbound except as specifically set out in the “limitations” column. This means Australia remains free to impose any measures restricting market access or not constituting national treatment unless those measures specifically conflict with the description of Australia’s commitment listed for that service. This approach to scheduling is different from the approach taken for Australia’s other commitments.

Commitments on Temporary Entry of Natural Persons

As noted above, the commitments in the horizontal section of a schedule apply to all the sectors listed in each country’s schedule, and unless a sector is listed in the sector-specific section, the country has made no commitments in that sector. However, the two countries have adopted a different approach to making commitments on temporary entry of natural persons. Each country has agreed to apply its commitments on temporary entry to all nationals of the other country, whether or not they are supplying a service listed in its schedule. The limitations or qualifications applying to the commitments on temporary entry are listed in both the horizontal section and the sector-specific section, depending on whether they apply to all nationals or just suppliers of a particular service.

  • 1. The purpose of this paper is to assist users to read and interpret Annex 8 of the FTA. It is a guide only, and has no legal force.
  • 2. Under the GATS, four modes of supply constitute trade in services: these are cross-border supply, consumption abroad, commercial presence and presence of natural persons. The WTO website contains an explanation of the four modes of supply of a service.