Skip to main content

Australia-United States Free Trade Agreement - Guide to the Agreement

10. Cross-Border Trade in Services

1. Purpose and structure

The Cross-Border Trade in Services (CBTS) Chapter provides service suppliers
with an open and non-discriminatory environment for cross-border trade in
services. It ensures that service suppliers from each Party receive
national treatment or most-favoured-nation treatment (whichever is better)
from the other Party. It prohibits a range of market access restrictions
on service suppliers, as well as restrictions on transfers.

Any company or national in either Party interested in supplying a service
to a consumer in (or from) the other Party can benefit from the Chapter.

2. What is cross-border trade in services?

The Chapter is concerned with measures adopted or maintained by a Party
(at all levels of government) that affect cross-border trade in services
by service suppliers of the other Party (e.g. measures affecting the production,
distribution, marketing, sale or delivery of a service).

The Chapter defines "cross-border trade in services" as the supply
of a service:

  • from the territory of one Party to the territory of the other Party;
  • in the territory of one Party by a person from that Party to a person
    from the other Party; or
  • by a natural person of a Party in the territory of the other Party.

The Chapter defines a "service supplier" as a national or enterprise
of one Party who seeks to supply or supplies a service. Under the
FTA, a "national" includes permanent residents as well as citizens. In
the CBTS Chapter, an "enterprise" of a Party includes branches
located in its territory, as well as incorporated companies and other entities
constituted or organized under its laws.

In general, the Chapter does not deal with the supply of a service through
a commercial presence, i.e. through the service supplier establishing a branch
or a subsidiary in the territory of the other country to supply the service. This
form of "trade in services" is subject to the general protections
provided to investment by the Investment Chapter (Chapter 11). However,
Article 10.1.3 extends the obligations of the articles in the CBTS Chapter
on Market Access, Domestic Regulation and Transparency in Development and
Application of Regulations to measures by a Party that affect the supply
of a service in the territory of a Party by a covered investment of the other
Party (i.e. the supply of a service by commercial presence).

The Chapter does not apply to financial services, as these are covered by
the Chapter on Financial Services (Chapter 13). However, any financial
services that are subject to the Investment Chapter rather than the Financial
Services Chapter, do benefit from the Article 10.1.3 extension of certain
CBTS articles to the supply of a service through a covered investment.

The Chapter does not apply to:

  • government procurement;
  • air services (except for aircraft repair and maintenance services during
    which an aircraft is withdrawn from air service, and certain specialty
    air services);
  • subsidies or grants provided by a Party, including government-supported
    loans, guarantees, and insurance; and
  • services supplied in the exercise of governmental authority, being services
    supplied neither on a commercial basis, nor in competition with one or
    more service suppliers.

The Chapter does not oblige either Party to do anything in relation to natural
persons of the other Party who are:

  • seeking access to its employment market; or
  • employed on a permanent basis in its territory (Article 10.1.5).

The Chapter does not confer any rights on such natural persons in relation
to such access or employment (Article 10.1.5).

3. Core obligations


The Chapter requires each Party to accord to services and service suppliers
of the other Party national treatment (Article 10.2) and most-favoured-nation
treatment (Article 10.3).

National treatment means treatment no less favourable than a Party accords,
in like circumstances, to its own services and service suppliers.

Most-favoured-nation (MFN) treatment means treatment no less favourable
than a Party accords, in like circumstances, to service suppliers of any

Market Access

Article 10.4 prohibits each Party from placing limits, either on the basis
of a regional subdivision or on the basis of its entire territory, on:

  • the number of service suppliers;
  • the value of service transactions or assets;
  • the number of service operations or the quantity of services output;
  • the number of natural persons that may be employed in a particular service
    sector or that a service supplier may employ.

It also prohibits each Party from restricting the type of legal entity or
joint venture that a service supplier can use to supply a service.

Local Presence

Article 10.5 prohibits each Party from requiring, as a condition for the
cross-border supply of a service, that a service supplier of the other Party
establish or maintain a representative office or any form enterprise in its
territory, or that it be resident in its territory.

4. Non-conforming measures

Article 10.6 allows the Parties to maintain or adopt certain measures that
are not consistent with the provisions of the obligations on National Treatment,
MFN Treatment, Market Access, and Local Presence (i.e. "non-conforming
measures"). These non-conforming measures must be identified
in individual Schedules for each Party that are contained in two Annexes
to the Agreement:

  • Annex I can be used by a Party to reserve the right to maintain existing
    non-conforming measures that are specifically identified in its Schedule
    to that Annex. These measures cannot be made more restrictive (i.e.
    less consistent with the obligations of the Chapter). Furthermore,
    Annex I measures are subject to a "ratchet" mechanism, which
    means that if a Party liberalizes such a measure, i.e. makes it less inconsistent
    with an obligation, then it cannot subsequently make it more restrictive. In
    other words, the ratchet mechanism means that the liberalized measure becomes "bound" as
    part of the Agreement's treaty commitments.
  • Annex II can be used by a Party to reserve the right to maintain existing
    non-conforming measures, make these measures more restrictive, and adopt
    new non-conforming measures for sectors, sub-sectors or activities identified
    in its Schedule to that Annex.

The Schedules to Annex I and II represented a carefully negotiated balance
of commitments between the Parties. An example of entries the
Parties have included in their Schedules is the approach Australia has
taken to the audiovisual and broadcasting sector. This is described
in the box below.

The outcome of the negotiations on audiovisual and broadcasting
services preserves Australia's existing local content requirements
and other measures and ensures Australia's right to intervene in response
to new media developments, subject to a number of commitments on the
degree or level of any new or additional local content requirements.

It does this through three reservations in Australia's schedules to
Annex I and Annex II.

  1. An Annex I reservation allowing Australia to maintain the existing
    55% local content transmission quota on programming, and the 80%
    local content transmission quota on advertising, on free-to-air commercial
    TV on analogue and digital (other than multichannelling) platforms. Subquotas
    may also be applied within the 55% programming quota.
  2. An Annex II reservation allowing Australia to both maintain existing
    measures and introduce new measures, subject to a number of conditions,
    in relation to:
    • transmission quotas for multichannelled free-to-air commercial
    • expenditure requirements for subscription TV;
    • transmission quotas for free-to-air commercial radio broadcasting;
    • ensuring that Australian content on interactive audio and/or
      video services is not unreasonably denied to Australian
    • broadcasting licensing and spectrum management; and
    • taxation concessions for investment in Australian film and
      television production.
  3. An Annex II reservation allowing Australia to maintain existing
    co-production arrangements with other countries and to introduce
    new ones.

Note: nothing in the Agreement affects the ability of either Party
to provide public services, and subsidies and grants are explicitly
excluded from the scope of the Chapter. Therefore, reservations
are not required in Australia's schedules in relation to publicly provided
cultural activities, such as the public broadcasters (ABC and SBS),
public libraries or archives, or in relation to Government funding
available to Australian artists, writers and performers.

5. Other obligations

Domestic Regulation

Article 10.7.1 provides that, where a Party requires authorization for the
supply of a service, its competent authorities must, within a reasonable
period of time after the submission of a properly completed application,
inform the applicant of the decision on the application. If the applicant
asks, the Party must give a prompt update as to how the application is progressing. However,
these obligations do not apply to any authorisation requirements in the sectors,
sub-sectors or activities listed in Annex II.

Article 10.7.2 requires that a Party do its best to make sure that authorisation
requirements do not create unnecessary barriers to trade in services. It
must try to make sure that these requirements are:

  • based on objective and transparent criteria (e.g. the ability to supply
    the service);
  • not more onerous than is needed to ensure that a quality service is
    provided; and
  • in the case of licensing procedures, not in themselves a restriction
    on the supply of the service.

Australia and the United States also have obligations on trade in services
under the World Trade Organization's General Agreement on Trade in Services
(GATS). This has its own obligations in respect of domestic regulation,
and it requires the future development of new obligations in respect of authorisation
requirements for the supply of services. Under Article 10.7.3, if
any such new obligations enter into effect (either through the GATS or through
other international negotiations that Australia and the United States participate
in) then the Article will be amended, as appropriate, so that it reflects
these results.

Transparency in Development and Application of Regulations

Article 10.8.1 requires that each Party be in a position to respond to inquiries
from interested persons about the regulations it imposes in the areas covered
by the Chapter.

The separate Chapter on Transparency requires that, wherever possible, each
Party must give advance notice of any proposed new law, regulation, procedure
or administrative ruling on a matter covered by the Agreement and that it
must let interested persons (and the other Party) make comments on the proposal. If
the proposal is in relation to a matter covered by the CBTS Chapter, and
the Party does not give this advance notice or opportunity for comment, then,
wherever possible, it must explain why it could not do so.

Article 10.8.3 requires that each time a Party adopts a final regulation
in relation to a matter covered by the Chapter, it must, wherever possible,
give a written response to any comments it receives on the proposed regulation.

Article 10.8.4 requires that each Party must, wherever possible, provide
notice of the requirements of final regulations before they come into effect.


Countries may require, e.g. for professional services suppliers, the authorization,
licensing or certification of services suppliers. As these requirements
may differ between countries, each country, or its relevant professional
bodies, may have certain rules about recognising the education or experience
obtained, requirements met, or licences or certifications granted in foreign
countries. Sometimes this recognition is pursuant to formal agreements
with the foreign country concerned or a country might accord such recognition
unilaterally. Article 10.9.1 makes it clear that the Chapter does
not prevent a Party from according such recognition to persons from foreign
countries - but under Article 10.9.4 it must not do so in a way that would
amount to:

  • a means of discrimination between countries in the application of its
    requirements; or
  • a disguised restriction on trade in services.

If a Party accords such recognition to persons from a non-Party then the
MFN Treatment obligation does not require that it accord such recognition
to persons from the other Party (Article 10.9.2). However, it must
give the other Party the chance to show that it should also be accorded such
recognition (Article 10.9.3).

Article 10.9.5 and Annex 10-A to the Chapter provide a formal mechanism
by which the two Parties can encourage such recognition in respect of their
professional service suppliers. Annex 10-A also provides for the establishment
of a Professional Services Working Group that must report to the Parties,
within two years of the entry into force of the Agreement, including with
any recommendations for initiatives to promote mutual recognition of standards
and criteria. The Working Group has a broad mandate to look at issues
relevant to the provision of professional services, but with a particular
focus on exploring ways to foster the development of mutual recognition arrangements
among the relevant professional bodies, and on the scope to develop model
procedures for the licensing and certification of professional services suppliers.

Transfers and Payments

Articles 10.10.1 and 10.10.2 require that each Party allow all transfers
and payments relating to the cross-border supply of services to be made freely
and without delay into and out of its territory, and allow such transfers
and payments to be made in a freely usable currency (i.e. currently the United
States dollar, the Japanese Yen, the Euro, and the British Pound) at the
prevailing market rate of exchange.

A Party can still prevent or delay such transfers or payments through the
equitable, non-discriminatory, and good faith application of laws such as
on bankruptcy.

Express Delivery Services

Article 10.12.1 defines "express delivery services" to mean the
collection, transport and delivery of documents, printed matter, parcels
and other goods on an expedited basis while tracking and maintaining control
of the items throughout the supply of the service. Footnote 10-2 to
the Chapter makes it clear that "express delivery services" do
not include services reserved exclusively for Australia Post.

If a Party thinks that the other Party is not maintaining the level of market
openness for express delivery services that existed when the FTA was signed
then the Parties must consult and the other Party, wherever possible, must
provide information in response to inquiries about the level of access and
related matters (Article 10.12.2).

Article 10.12.3 contains a confirmation that each Party intends to prevent
revenues derived from its monopoly postal services from being directed to
its own (or any other) supplier's express delivery service business in a
way that is inconsistent with that Party's law and practices in relation
to the monopoly supply of postal services.

6. Denial of Benefits

Article 10.11 provides that a Party may deny the benefits of the CBTS Chapter
to a service supplier of the other Party if it is an enterprise owned or
controlled by persons of a non-Party, and the denying Party:

  • does not have diplomatic relations with the non-Party; or
  • has in place sanctions with respect to the non-Party or a person of
    the non-Party that prohibit transactions with the enterprise.

A Party may also deny the benefits of the CBTS Chapter to a service supplier
of the other Party that is an enterprise that:

  • has no substantial business activities in the territory of the other
    Party; and
  • is owned or controlled by persons of a non-Party or of the denying Party.

March 6, 2004

Australia - US Free Trade Agreement home page

Last Updated: 31 December 2012
Back to top