Publish time: Fri Sep 03 16:09:47 CST 2021
Modern economy is service economy. In recent years, with the rapid development of Internet information and communication technology and the evolution of industrial structure, the proportion of the service industry in the global economy is increasing on a daily basis. The rising status of the service industry has led to the rapid growth of international service trade. From 2010 to 2019, the global service trade volume increased at an average annual nominal rate of 4.8%, indicating twice the growth rate of goods trade over the same period. The proportion of service trade in the total volume of trade increased from 20.3% to 23.8%. According to the global value chain theory and value-added trade statistics, service trade accounts for over 50% of the global trade volume. The service trade was impacted by COVID-19 in 2020, and as a result, all sectors of service trade were affected to varying degrees. The international service trade volume in the fourth quarter of 2020, for example, decreased by 18% compared with the same period in 2019. However, the output of the service industry exceeded two-thirds of the global economic output, attracting more than two-thirds of foreign direct investment (FDI) and providing nearly two-thirds of employment opportunities in developing countries and four-fifths in developed countries.
In recent years, China attaches great importance to the development of the service industry and service trade. In September 2020, the State Council successively approved and issued the relevant plans of the National Comprehensive Demonstration Zone for Expanding and Opening up the Service Industry and China (Beijing) Pilot Free Trade Zone (hereinafter referred to as the "Two Zones"). Building Beijing into a comprehensive demonstration zone for expanding and opening up the national service industry, and setting up a free trade pilot zone featured by scientific and technological innovation, service industry opening up and digital economy, serve the purpose of driving China to form a new pattern of reform and opening up at a higher level. For this reason, the establishment of the "Two Zones" is not only a major event in the process of reform and opening up of Beijing, but also a major strategic attempt for the development of China's service industry, which accelerates the new development paradigm with domestic circulation as the mainstay and domestic and international circulations reinforcing each other, thus promoting the high-quality development of service economy of Beijing.
Against the above background, the core contents of the service trade law under the framework of the World Trade Organization (hereinafter referred to as "WTO") were introduced in the first part of this paper. Two WTO service trade cases (namely, "China-Electronic Payment Service Case" and "China-Publications and Audiovisual Services Case") in which China is the defendant were discussed in the second part to deepen the understanding of key rules and disciplines in service trade. Attention was paid to the new rules of service trade in recent international economic and trade treaties and China's participation in negotiations in the third part. The development trend and the further market opening of China's service industry were discussed in the last part.
I. Service trade and legal framework under the frame work of WTO
Considering the importance of the service industry in the modern economy, service trade, investment and intellectual property rights were listed as three new topics in the Uruguay Round negotiations that started in 1986. After years of bargaining and mutual compromise, the participants in the negotiations signed the first set of multilateral principles and rules which regulate trade in services in Marrakesh, Morocco in April 1994, namely, the General Agreement on Trade in Services (hereinafter referred to as "GATS"). GATS, a part of the single undertaking of the Uruguay Round, came into effect on January 1, 1995. The negotiation of GATS represented a milestone in promoting the liberalization of global trade in services, thus advancing wider and deeper economic cooperation in the world.
(Ⅰ) The origin and structural characteristics of GATS
1. Negotiation and signing of GATS
Due to the stark difference between trade in services and trade in goods, the measures applicable to the management of trade in goods, such as tariffs, quotas and other border measures which cannot be used to regulate trade in services. As the basic principles of General Agreement on Tariffs and Trade (hereinafter referred to as “GATT”), tariff, quota, etc. are not applicable to apply to trade in services, either. The United States (US), the most developed country in the world, enjoys a comparative advantage of service industry that accounts for more than 80% of its GDP, winning itself strong international competitiveness. With the domestic economic growth slowing down, the US wants its service industry to enter other countries' markets. The North American Free Trade Agreement (NAFTA) negotiations, which were conducted nearly at the same time as the Uruguay Round negotiations, covered the content of trade in services, which also exerted an important influence on the negotiation and signing of the Uruguay Round GATS. After three stages of tough negotiations, the definition and scope of trade in services, the proposal of the principles and rules of the multilateral framework for trade in services and the submission of specific commitment schedules, GATS as well as its annexes and schedules of commitment by the negotiators came into effect together with the final agreement of Uruguay Round on January 1, 1995.
2. The framework of GATS
(1) Distinguish between general obligations and specific obligations of WTO Members
In general, most of the GATS rules focus on the opening of service markets and the construction of relevant disciplines, modeling after GATT's trade liberalization-centered approach and borrowing from many GATT provisions. Meanwhile, GATS is the first set of framework agreements to regulate multilateral trade in services in the world, so its rules and disciplines are initial and preliminary, especially reflected in the important structural dichotomy of GATS, namely, to distinguish the general obligations and specific commitments of WTO Members. General obligations generally refer to the obligations undertaken by all Members and apply to all sectors of the service industry. Such obligations are stipulated in Part II of the GATS (Articles 2 through 15), including the most-favored-nation treatment (MFN treatment), transparency and general exceptions. Specific commitments, also known as "specific obligations", are stipulated in Part III of GATS, including market access, national treatment and additional commitments. Only when a WTO Member has made a commitment in its schedule of specific commitment will that Member assumes the obligations. GATS adopts the practice of separating general obligations from specific commitment, not only making all Members conform to common principles and general obligations in the field of service trade, but also enabling them to avoid serious impact on their service industry owing to the market opening in line with the actual development level of their service industry.
(2) Framework agreements and schedules of specific commitment of Members
The complete content of GATS consists of two parts, namely, the framework agreements and the specific service commitment schedules submitted by Members according to Article 20 of GATS. The GATS Framework Agreement is composed of two parts, namely, the clause part and the annex part. GATS clauses consist of the preface and six parts, 29 articles in total, including the definition of trade in services and the application scope of GATS, the "general obligations and disciplines" of Members, the "specific obligations" of Members, the gradual liberalization of service trade, the institutional clauses and final clauses. Meanwhile, pursuant to Article 29 of GATS, the 8 annexes of GATS are inseparable.
(3) GATS Cases
Understanding the legal issues of trade in services cannot be separated from the existing GATS cases. Uruguay Round brought service trade into the negotiation topic for the first time, and the unified dispute settlement understanding (DSU) which uniformly applies to all agreements within the framework of WTO was established, including the service trade disputes. By the end of 2020, WTO Members had brought 30 service trade cases. Among them, there were three cases of pure service trade, namely, "Mexico-Telecommunication Services" (WT/DS204), "United States-Measures Affecting the Cross-Border Supply of Gambling and Betting Services" (WT/DS285) and "China-Electronic Payment Service Case" (WT/DS413). Besides, there were 9 cases involving service trade, namely, "European Communities-Regime for the Importation, Sale and Distribution of Bananas" (WT/DS16, WT/DS27, WT/DS105), "Canadian-Periodicals " (WT/DS31), "Canada-Certain Measures Affecting the Automotive Industry" (WT/DS139, WT/DS142), "China –Publications and Audiovisual Services " (WT/DS363), "Argentine-Measures Concerning Trade in Goods and Services (WT/DS453), "EU-Certain Measures Concerning Energy Industry" (WT/DS476), etc.
Under the WTO framework, the number of cases of trade in services is obviously small compared with the number of cases of trade in goods, and the proportion of cases with panel reports or appellate body reports is also relatively low. The main reasons for this situation are as follows: first, the obligations undertaken by Members on service trade are relatively limited under the GATS positive list approach. Second, GATS and the relevant legal rules concerning trade in services are not mature and detailed. Third, in many disputes involving service trade, especially cases brought under Mode 3 (commercial presence), investors choose the more common and relatively mature investment arbitrations. According to the statistics of investment arbitration cases, by the end of 2020, a total of 1,104 cases were reported in the statistics of the investment arbitrations of the United Nations Conference on Trade and Development (UNCTAD), of which 734 cases involved investment in service industries. Although trade in services has not yet become a hot spot in WTO dispute settlement, such cases will gradually increase due to the rapid development of trade in services and the gradual improvement of GATS jurisprudence.
(Ⅱ) Definition of service trade and application scope of GATS
1. Definition of "service trade" in the GATS
Compared with goods, services have obvious differences, especially reflected in the intangible nature of services, the immediacy of production and consumption, and the close correlation between providers and service quality. In the GATS, "service" is neither directly defined nor is "service trade" in the traditional way of defining connotation and extension. Paragraph 2 of Article 1 of GATS uniquely defines "service trade", from the perspective of service provision, as services provided in four ways as follows.
(1) Cross-border supply: Cross-border supply refers to the service supply from the territory of one Member to the territory of another Member. In recent years, cross-border supply has increasingly become an important mode of service trade with the rapid development of Internet information technology.
(2) Consumption abroad: Consumption abroad means that service consumers of one Member accept services in the territory of another Member. For example, students study in other countries, and tourists travel to other countries.
(3) Commercial presence: Commercial presence means that service suppliers of one Member provide services in the territory of another Member by setting up subsidiaries, affiliates, branches, representative offices, etc. This mode of supply is often associated with service investment, featured by large scale and wide scope, exerting a strong economic impact on the countries where service consumers are, especially the developing countries, so it is a more regulated mode of service delivery.
(4) Movement of natural persons: Movement of natural persons is also known as presence of natural persons, which means that service suppliers of one Member provide services in the territory of another Member. For instance, professors or doctors provide individual services in another country, and workers contract construction projects in abroad. Because this mode of supply involves the movement of natural persons and their temporary presence in other countries, and is often associated with visa issuance, immigration, employment and other issues, it is a sensitive provision mode, accounting for the limited openness of various countries.
The definition of service trade stipulated in Article 1 of GATS is the basic starting point for understanding other provisions of GATS and the schedule of service commitment made by each Member. Besides, the GATS schedule of specific commitment made by each Member complies with the service supply mode, so it is very important to correctly understand the meanings of the four modes. However, the definition of service trade in GATS does not clearly define its connotation, so some problems may arise in practice, including the determination of the origin of services, rights and obligations in service outsourcing activities, etc. Furthermore, as manufacturing has become increasingly service-oriented in recent years, the boundaries between goods and services are blurred, and more service values are embedded in goods, further complicating the related issues.
2. The scope application of GATS
Paragraph 1, Article 1 of GATS stipulates that "this Agreement shall apply to all measures affecting service trade of Members". It is notable that the wording used in this paragraph represents measures "affecting" service trade, not measures "governing" or "regulating" service trade. This means that GATS has a wide scope of application, not only for the measures directly controlling or regulating service trade, but also for the relevant measures having a direct or indirect impact on service trade. All these measures are subject to GATS disciplines. "Measures" herein refer to any form of measures taken by Members, whether in the form of laws, regulations, rules, procedures, decisions, administrative acts or any other form.
In the early disputes of service trade, including "European Communities-Regime for the Importation, Sale and Distribution of Bananas", "Canadian–Periodicals" and "Canada-Certain Measures Affecting the Automotive Industry", the WTO Dispute Settlement Body (DSB) clearly explained that the word "affecting" used in Paragraph 1, Article 1 of GATS indicated the wide application scope of GATS. GATS obligations and other WTO obligations are cumulative rather than mutually exclusive. A measure may violate both GATT and GATS, and vice versa. Measures of WTO Members affecting trade in goods (e.g. automobiles, periodicals, bananas, etc.) were also subject to GATS disciplines if they affect related service trade, such as automobile distribution services, periodical advertisement services, banana distribution services, etc. At the same time, according to Paragraph 3, Article 1 of GATS, "Member measures by Member" include measures taken by the central, regional or local governments and authorities of Members, as well as measures taken by non-governmental institutions authorized by the central, regional or local governments and authorities to exercise the government powers.
3. Service sectors and sub-sectors
Based on the proposals and opinions solicited from all negotiators and considering the service trade statistics and the opening requirements of service trade sectors, the negotiators in the Uruguay Round invoked the UN Central Products Classification (hereinafter referred to as “CPC”), which divided the service trade into 12 sectors, 155 sub-sectors. In 1991, the GATT Secretariat prepared a note on the classification of service sectors (i.e. GNS/W/120 Services Sectoral Classification List) and Scheduling of Initial Commitments in Trade in Services (1993) to guide and facilitate negotiators in formulating their schedules of specific commitments for trade in services.
In the settlement of service trade disputes, one of the prerequisites for a correct interpretation of the schedule of specific commitments of a WTO Member involved is to properly classify the services involved, and then look at the obligations in the schedule to judge the legitimacy of measures taken by Members. In some cases, the classification of services is not a controversial issue, such as the banana distribution services in the "European Communities-Regime for the Importation, Sale and Distribution of Bananas". However, in some other cases, how to classify the services involved has become one of the prerequisites for resolving disputes. For instance, in “China-Electronic Payment Services”, how to classify electronic payment services (EPS) is directly related to China's specific obligations. As the information technology and economy of various countries continue to develop, new service categories show up one after another. Due to the fact that the provisional version of CPC linked to service classification under GATS framework is extremely outdated, it is high time that WTO Members should negotiate to supplement and adopt more scientific methods of service classification.
(Ⅲ) General disciplines and obligations of the General Agreement on Trade in Services
Although GATS borrows many GATT rules to regulate the international service trade, some rules and regulatory measures of trade in goods are difficult to be directly applied in trade in services owing to the differences between trade in services and trade in goods, especially the complexity of service transactions and the intangibility of service. Understanding the basic rules and disciplines of GATS and comparing the similarities and differences between GATS rules and GATT rules facilitate a better understanding of GATS rules. Among the general obligations and disciplines of Members stipulated by GATS, the obligation of MFN treatment is important to illustrate here.
1. MFN treatment obligations
(1) Principles and exceptions of MFN treatment in GATS
As one of the core rules of the principle of non-discrimination, MFN treatment is not only a general obligation applicable to all Members, but also a cornerstone for the liberalization of multilateral service trade. Article II of the GATS constitutes a general obligation which is, in principle, applicable across the board by all Members to all services sectors. Article II:1 of GATS states that with respect to any measure covered by this Agreement, each Member shall accord immediately and unconditionally to services and service suppliers of any other Member treatment no less favourable than that it accords to like services and service suppliers of any other country.
Although MFN treatment in GATS is a general obligation of Members, its position and specific rules in GATS are different from those in GATT. Firstly, the principle of MFN treatment in service trade applies not only to the service itself, but also to the service suppliers. Secondly, compared with Article 1 of GATT, the MFN treatment stipulated in Article 2 of GATS is more flexible. The obligation scope of MFN treatment of WTO Members is determined by the negative list--it applies to all service sectors except those listed on the Member list. In other words, as long as the measures are included in the GATS Annex Exempting from Article 2 Obligations, and meet the conditions stipulated in the Annex, each Member can take these measures inconsistent with the obligations of MFN treatment. Before the WTO Agreement takes effect, there are 61 exemption lists. The United States, for example, grant the MFN Exemptions in shipping, civil aviation, basic telecommunications, financial services and other industries. The European Union, Canada and Australia have made MFN reservations in the cultural industry. China has carried out MFN Exemptions in maritime services and other areas.
The GATS allows such exemptions, which greatly undermine MFN treatment, for developed countries are largely concerned about developing countries' "free riding" on trade in services. Free riding is a problem that has not been solved in the application of MFN treatment principle. The GATS stipulates unconditional MFN treatment, which is also an important cornerstone of the existence of WTO free trade framework. In the meanwhile, it should be noted that, some trade agreements have begun to incorporate MFN treatment clauses on the basis of reciprocity in recent years. For example, on the basis of unconditional MFN treatment, the Protocol on Trade in Services under the framework of the African Continental Free Trade Area Agreement, which came into effect on May 30, 2019, can require that more preferential treatment in service trade agreements signed between parties or between parties and other countries be granted on the basis of reciprocity. Scholars have compared the unconditional MFN treatment of GATS with the innovative reciprocal MFN treatment clause in the African Continental Free Trade Area Agreement, pointing out the differences between them, and suggesting that the word "reciprocity" should be clearly defined to better implement such clauses.
(2) Jurisprudence of MFN treatment in GATS disputes
Similar to MFN treatment in GATT, the MFN obligation stipulated in Article 2 of GATS aims to ensure equal opportunities for all WTO Members in service provision. The ruling of "European Communities-Regime for the Importation, Sale and Distribution of Bananas" pointed out that Article 2 of GATS does not explicitly stipulate that it includes de facto discrimination, but Article 1 of GATT "MFN treatment" instead of Article 17 "National treatment" should be referred to when the meaning of "MFN treatment" in Article 2 is interpreted. In fact, MFN treatment in GATS includes de facto and de jure discrimination. The European Community, the defendant in this case, held that if Article 2 of GATS includes de facto discrimination, it should be explicitly stipulated. However, this view was not accepted by the Appellate Body. If a measure explicitly discriminates against services or service suppliers from different sources, it is de jure discrimination. Even if a measure does not give different treatment based on sources, it may still constitute de facto discrimination once the de facto services provided to WTO Members or the treatment to service suppliers are more preferential.
In terms of the judgment standard of MFN treatment stipulated by GATS, the Appellate Body pointed out in the ruling of the "Canada-Certain Measures Affecting the Automotive Industry" (WT/DS139, WT/DS142) that the wording used in Paragraph 1, Article 2 of GATS indicates that whether a measure conforms to this obligation depends on three factors: first, whether the measure involved falls within the application scope of Paragraph 1, Article 2 of GATS; second, whether the related services or service suppliers are like services or service suppliers; third, whether the service or service suppliers have been given the treatment equal to or better than that of similar services or service suppliers in China.
2. Domestic regulation disciplines of service industry in GATS
(1) Basic disciplines of domestic regulation in Article 6 of GATS
One of the remarkable characteristics of service trade is the great differences among different departments of service industry and the different regulatory requirements, so this kind of trade is mainly regulated by a lot of domestic laws and regulations and administrative rules. Laws and regulations, as well as administrative rules concerning qualification requirements, qualification procedures, licensing requirements, licensing procedures and technical standards that are not in the scope of service trade market access and national treatment are collectively referred to as "domestic regulation" by the WTO. To ensure that the domestic laws and regulations of WTO Members will not hinder the realization of the goal of liberalization of trade in services, Members shall ensure that all generally applicable laws, regulations and measures related to trade in services are implemented in a reasonable, objective and fair manner in the areas where they make specific commitments according to Article 6 of GATS. When judging whether a Member complies with the above-mentioned disciplines, WTO shall take the international standards of the relevant international organizations applicable to that Member into consideration.
It can be seen from the above that, on the one hand, GATS gives its Members the power to formulate various new laws and regulations so as to meet their domestic policy objectives. Actually, such laws and regulations have become the most popular and effective means to regulate and manage trade in services. On the other hand, GATS requires its Members to undertake their corresponding obligations to avoid unnecessary trade barriers and obstacles to normal international trade in services, especially in terms of the procedures of applying for licenses and accreditation.
(2) Continued negotiations on domestic regulation of service industry
Paragraph 4, Article 6 of GATS mandates the continuation of negotiations on domestic regulation disciplines, which is also one of the built-in negotiation agendas of GATS. For this reason, the Council for Trade in Services established the Working Group on Domestic Regulation (hereinafter referred to as “WGDR”) on April 26, 1999, which presided over the formulation of universally applicable multilateral guidelines or sector-specific rules to ensure that Members' measures related to qualification requirements and procedures, licensing requirements and procedures and technical standards would not constitute unnecessary barriers to trade in services.
On the one hand, WTO recognizes Members' right to formulate domestic regulations and manage domestic service industries in line with these regulations. On the other hand, too strong multilateral disciplines will damage Members' regulatory power over their service industries. Therefore, the goal of domestic regulation negotiation is to achieve a balance between regulating Members' domestic regulation and ensuring Members' regulatory power. Because of the complexity and sensitivity of the service industry, the negotiation process on domestic regulation is slow. In 1998, WTO Members completed the Decision on Disciplines Relating to the Accounting Sector. After that, WTO Members decided to negotiate on the domestic regulation disciplines applicable to all service industries. In April, 2011, the Chairman of WGDR issued a progress report to Members on the discussion of the March 2009 text (draft). After that, because the Doha Round reflected the decline of the overall negotiation function of WTO, the negotiations on domestic regulation of service industry also entered a stagnant period. It did not enter the plurilateral negotiation mode until December 2017 (refer to the relevant content in Part 3 below).
3. General exception and security exception
Article 14 and Article 14 bis of GATS stipulate general exception and security exception. According to Article 14 of GATS, Members can take measures deviating from GATS obligations to maintain public morality or public order and protect the life or health of human beings, animals or plants. The "security exception" clause in Article 14 bis of GATS allows Members to exclude their obligations of service trade involving military and national security. However, due to the generalized invocation of national security by the United States in recent years, many potential conflicts arise in this respect.
The "United States-Measures Affecting the Cross-Border Supply of Gambling and Betting Services" is the first case involving exceptions to trade in services, where the United States tried to invoke the "public morals" exception in Article 14 of GATS to justify its inconsistent measures. From the ruling of the panel and the Appellate Body in this case, the interpretation of the exception clause of service trade by the WTO Dispute Settlement Body drew lessons from the jurisprudence of Article 20 of GATT, that is, the two-tier analysis needs to be followed when invoking exception measures: firstly, the defendant's measures should comply with one of the exceptions stipulated in Article 14 of GATS, including strict necessity test steps; secondly, the ways in which the defendant takes measures shall meet the requirements of the preface of Article 14 of GATS. Therefore, just as few successful precedents could be invoked in the field of GATT, the Appellate Body found that although the American measures met the requirements of protecting its public morals in the "United States-Measures Affecting the Cross-Border Supply of Gambling and Betting Services", the ways and means of its implementation failed to meet the conditions in the preface. As a result, the exception could not be invoked.
(Ⅳ) Specific obligations and disciplines of WTO Members
The third part of GATS (Articles 16 through 18) stipulates the specific obligations of Members, mainly including two aspects, namely, market access and national treatment. Apart from that, additional commitments are also included. Market access and national treatment are the foundation and core of service industry which opens up to the outside world, determining whether and how a country's service industry opens up to the outside world.
1. Market access
Opening up the service markets of countries is a major trend to meet the needs of the development of international economy and trade as well as the liberalization of service trade. Despite the fact that market access is one of the core issues in international service trade, Members have the obligation to open their markets only when they have made specific commitments under the framework of GATS. Article 16 of GATS requires Members to undertake specific obligations on market access of service trade, and regulate it from the following two aspects: First, as for the market access of four provision modes defined in Article 1 of GATS, the services provided to any other Member or the treatment to service suppliers by any Member shall be equal according to the conditions agreed in the obligation arrangement committed by itself. Second, in the service sectors or sub-sectors that have made market access obligations, apart from the ones listed in the specific commitment schedules, any Member shall not adopt discriminatory restrictive measures, such as quantitative quota restrictions, total service restrictions, employment restrictions, service monopoly, franchise, restrictions on the proportion of foreign capital investment and capital exit restrictions. The scope of service trade includes investment in services (especially in the form of commercial presence), and investment in services must be accompanied by capital movements. If a country does not allow capital movement, its promised open service trade is meaningless. Because the establishment of commercial presence is essentially equivalent to investment behavior, capital movement must be involved in the establishment of commercial institutions. If a Member does not allow the capital which is used to set up a commercial institution to be remitted into its country, the actual effect is equivalent to denying this form of service provision, and GATS does not allow this restriction. This is a typical example of GATS connecting trade and investment.
One of the focal issues in the "United States-Measures Affecting the Cross-Border Supply of Gambling and Betting Services" (DS285) is whether the United States violates its market access obligations by prohibiting service suppliers in Antigua from providing gaming services to American consumers remotely. In this case, there are several steps of legal analyses of the substantive issues of Article 16 of GATS by WTO Dispute Settlement Body: first, since the market access obligation is a specific obligation, it is necessary to review the specific commitment schedule of the defendant, the United States, to judge whether it has made specific commitments to the market access of the disputed services. Second, if the United States makes a specific commitment, whether the commitment schedule lists the restrictions needs to be determined. If there is no restriction, it is full market access commitment. Third, whether the United States has implemented or maintained measures to limit the number and type of services should be examined if it has made a full market access commitment. If such measures are exposed, the United States will violate its committed market access obligations. Fourth, if the United States violates its market access obligations, can relevant exception clauses, including general exception clauses, be invoked.
The panel and the Appellate Body, using the treaty interpretation method stipulated in articles 31 and 32 of the Vienna Convention on the Law of Treaties, found that gambling services were "other recreational services" and not "sporting" in subsector 10.D, thus thinking that "other recreational services (except sports)" in subsector 10.D of the United States Specific Commitments Schedule included specific commitments for gambling services. Because the United States stated "none" on the market access of the cross-border provision mode of "other recreational services" in its specific commitment schedule, both the panel and the Appellate Body determined that the United States made a full commitment to the market access of the cross-border provision of gambling services. For this reason, the panel and the Appellate Body needed to examine whether the United States violated the market access obligation set forth in Article 16 of GATS.
In this case, the United States did not promulgate and implement relevant laws, regulations or executive orders, nor directly restricted or prohibited the total amount of services or the number of foreign gambling service suppliers who delivered cross-border gambling services to the United States through the Internet. Instead, under the effect of federal laws and related state laws such as the Wired Communication Act, the Tourism Act and the Prohibition of Illegal Gambling Transactions Act, gambling services to the United States, delivered by foreign gambling service suppliers through the Internet, was restricted or prohibited. Was this a prohibited measure listed in Paragraph 2, Article 16 of GATS? As for this question, the Appellate Body upheld the conclusions of the panel, believing that a measure prohibiting the provision of services for which specific commitments have been made represents the quantity quota restriction of Paragraph 2, Article 16 hereof. This measure completely prevented service operation or output through one, more or all of the modes of service provision included in Mode 1 of service provision (cross-border provision). As a result, the quantity limit of gambling services was zero. The panel and the Appellate Body in this case creatively introduced the concept of "zero quota", skillfully linking a measure with prohibitive effect with the quantitative quota in Article 16 of GATS.
2. National treatment
The principle of national treatment stipulated in Article 17 of GATS requires that the treatment given to foreign services and service suppliers by any Member shall be equal to that given to its domestic equivalents, so as to ensure that domestic and foreign services and service suppliers can compete on an equal footing and that market opening commitments made by Members will not be undermined by domestic discriminatory laws and regulations. The principle of national treatment plays an important role in ensuring and promoting the liberalization of service trade, but it is a specific obligation of Members rather than a universal obligation under the framework of GATS. According to Article 17 of GATS, the services provided to any other Member or the treatment to service suppliers by any Member shall be equal to or better than that of its own country in terms of any conditions, qualifications and all measures affecting the service provision in the service sector or sub-sector under the obligation of national treatment. This kind of treatment can be the same or different in its forms. However, if the formally identical or different treatment alters the conditions of competition to favor services or service suppliers of that Member rather than like services or service suppliers of any other Member, such treatment shall be regarded as constituting discriminatory treatment against other Members.
For example, in the "Canada-Certain Measures Affecting the Automotive Industry", as for the measure of local value-added requirements, the panel first examined whether Canada had made specific commitments and what restrictions it imposed on the national treatment. After the review, the panel concluded that the restrictions imposed by Canada on national treatment did not include local value-added requirements. Since this requirement was not included in the local services, it could not be applied to services provided by foreign suppliers. For this reason, the panel concluded that Canada's local value-added requirements violated its national treatment obligations.
National treatment clauses of GATS apply to like services and service suppliers of other Members. However, due to the complexity, diversity and intangibility of the services, it may be more difficult to determine like services or service suppliers than like products. Meanwhile, because GATS includes the establishment of commercial institutions and other forms of service investment into the scope of service trade, service investors must be included in the application scope of national treatment.
3. Schedule of specific commitments
According to Article 20 of GATS, each Member shall formulate a specific commitment schedule for its specific obligations in the service field, detailing the scope, conditions, restrictions and effective dates of market access and national treatment. These contents are closely related to the modes of service trade and the classification of service sectors, which constitute a complex commitment schedule system. The specific commitment schedule of each Member is attached to GATS as an integral part of it. The function of the specific commitment schedule of service trade is similar to that of a binding tariff. In other words, the commitment schedule directly determines the specific obligations undertaken by Members according to GATS.
Contrary to the "negative list mode" of exceptions (or "negative list") of the MFN obligations, specific commitments take a "positive-list-mode" (or "positive-list") approach, whereby Members only undertake obligations concerning the matters and scope of specific commitments. In terms of the content, four modes of service provision are taken as the basic elements of the specific commitment schedule, which consists of two parts, namely, the horizontal commitment and the sectoral commitment. Each part includes four aspects: "sector or sub-sector", "market access restriction", "national treatment restriction" and "additional commitment". From the names of "market access restrictions" and "national treatment restrictions", it can be seen that the specific commitments of Members are expressed in restrictions, and there are three expressions: unbound, listed and none.
In the dispute settlement of service trade, the interpretation of the commitment schedule is an essential and important link for it directly determines the obligation scope of the defendant. According to the interpretation rule contained in Article 31 of the Vienna Convention on the Law of Treaties, the interpretation of the treaty clauses shall start with the analysis of its provisions, that is, "a treaty shall be interpreted in good faith according to the ordinary meaning given to its terms in the context and in the light of its object and purpose". In the interpretation of the specific commitment schedule, it is emphasized that the interpretation of the treaty shall be based on the "common intention" of the contracting states. In the "United States-Measures Affecting the Cross-Border Supply of Gambling and Betting Services" (DS285), the first important issue was the interpretation of the specific commitment schedule of the United States, that is, whether the United States made commitments for gaming services under Mode 1 (cross-border provision). According to the analysis of the Appellate Body, several points should be paid attention to in interpreting the specific commitment schedule. First, when determining the "ordinary meaning" of the clauses and entries in the specific commitment schedule, the definition of relevant wording in the dictionary can be quoted and referred to, which is not the only method. Second, other texts should not be used to interpret the provisions of the commitment table if a specific commitment schedule is marked as "only valid in certain words". Third, the legal status of the two reference documents (the guide of the specific commitment schedule and the document W/120) frequently invoked in interpreting the specific commitment schedule and the United Nations Central Product Classification (CPC) related to the documents serves as the "supplementary means" rather than "context".
II. Analysis of WTO service trade cases involving China
By now, among the 30 WTO service trade cases, 6 cases were filed by WTO Members against China, including 4 disputes, namely, the "China-Integrated Circuit Value-added Tax " (2004, DS309), "China-Publications and Audio-Visual Services " (2007, DS363) and "China-Electronic Payment Service " (2010, DS413) filed by the United States and the "China-Financial Information Provision " (2008, DS372, 373, 378) filed by the United States, the European Union and Canada. China and the United States reached settlements in the "China-Integrated Circuit Value-added Tax " and the "China-Financial Information Provision ", both of which did not enter the panel procedures. The "China-Electronic Payment Service " was settled through panel procedures while the "China- Publications and Audio-Visual Servcies" went through two procedures: panel and appeal.
(Ⅰ) China - Publications and Audio-Visual Services (WT/DS363)
On January 19, 2010, the WTO Dispute Settlement Body passed the appellate body report and the revised panel report of "China-Measures Affecting Trade Rights and Distribution Services of Publications" (hereinafter referred to as "Publications Case" or "This Case"), deciding that restricting foreign publications and audio-visual entertainment products from entering the Chinese market violated GATS obligations and China's WTO commitments on opening up trade rights. Besides, it failed to invoke the exception of "public morals" in Subparagraph 20 (a) of GATT to justify its measures.
1. Brief introduction of the case
On April 10, 2007, the United States requested consultations with China on the specific measures to restrict the trade rights in terms of films displayed in cinemas, home audio-visual products, sound recording and the import of books, and the specific measures to discriminate against foreign suppliers in providing book distribution services and home audio-visual products and services. The two sides failed to settle the dispute through consultation, and the United States requested the establishment of a panel on October 10, 2007. The panel issued a report on August 12, 2009, and generally believed that China's measures involved violated the trade rights commitments in the Protocol on China's Accession to the WTO and the Report of the Working Party on the Accession of China, and the market access commitments on audio-visual services in China's GATS service commitment schedule. Later, both sides lodged appeals. On December 21, 2009, the Appellate Body issued the report. This case involved both trade in goods and trade in services. The issues related to the distribution service of sound recording were analyzed and reviewed in this section.
2. Core Issue: Does the sound recording distribution services include the distribution in the electronic form?
In this case, the measures involved in China including the Notice on Issues Related to the Implementation of the Interim Provisions on the Administration of Internet Culture and Several Opinions on the Development and Management of Online Music to prohibit foreign-invested enterprises from engaging in business activities such as the distribution of online music products. Therefore, one of the controversies in this case is whether "prohibiting foreign-invested enterprises from engaging in the electronic distribution of sound recording" violates China's national treatment commitment under Article 17 of GATS. To put it another way, does the "sound recording distribution services" in China's service commitment schedule include the distribution in the electronic form?
In China's commitment schedule, "sound recording distribution services" are included in 2.D "audio-visual Services", which contains "video distribution services (including entertainment software distribution) and cinema services" in addition to "sound recording distribution services". According to the report of the panel, "sound recording distribution services" in 2.D "audio-visual services" extend the sound recording distribution to that in non-physical forms, including distribution in the electronic form. China's measures involved prohibited foreign-invested enterprises from engaging in the electronic distribution of sound recordings, but did not prohibit the domestic service suppliers from engaging in these businesses, thereby violating the national treatment obligations. In the appeal, China argued that the panel was wrong to interpret "sound recording distribution services" as the distribution containing that in the electronic form. Having analyzed the issue through the provisions on treaty interpretation in Articles 31 and 32 of the Vienna Convention on the Law of Treaties, the Appellate Body supported the view of the panel.
In the appeal, China argued that the online distribution of sound recording in the electronic form had not yet become an industry in China when China joined the WTO in 2001, so the background of China's relevant commitments at that time should be taken into account in the interpretation of the distribution service of sound recording. The Appellate Body thought that an evolutionary interpretation method should be adopted in the interpretation of Members' commitment schedule, that is, it should be interpreted according to the meanings of terms when settling disputes instead of the meanings of terms when concluding treaties. Otherwise, the predictability, stability and clarity of specific commitments of GATS would be hindered. Although the regulatory framework of electronic distribution between the international community and China was not established when China joined WTO, it did not prevent China from making commitments on electronic distribution services. Therefore, in terms of the meaning and scope of "sound recording distribution services", the Appellate Body upheld the decision of the panel that "sound recording distribution services" were included in 2.D of China' service commitment schedule and extended sound recording distribution services to that in non-physical forms, especially in the electronic form. China's measures prohibiting foreign investors from engaging in sound recording distribution services in the electronic form were inconsistent with the national treatment obligations of Article 17 of GATS.
3. The comments on the case
The interpretation of China's service commitment schedule in the "Publications Case" is not only related to the opening up of the service industry, but also has an important influence on the fulfillment of service trade commitments of WTO Members, and meanwhile profoundly affects the fulfillment of GATS obligations under the background of technological changes. In this case, the Appellate Body interpreted the relevant provisions of China's commitment schedule from general meaning, context, object and purpose of the treaty according to Article 31 of the Convention on the Law of Treaties, holding that the terms "product" and "distribution" were words of the same kind, and their meanings would be interpreted differently over time. This interpretation is called the "contemporary meaning interpretation method". If the ordinary meaning only represents the meaning of terms when formulating the commitment schedule, commitments with similar or identical wording will be given different meanings, contents and application scopes depending on the date of the adoption of the commitment schedule or the date of the Member's accession to WTO, which will undermine the predictability, security and clarity of the commitment schedule made through rounds of negotiations.
Some scholars questioned the rationality of the Appellate Body's adoption of the "contemporary meaning interpretation" in this case, and recognized that contemporary meaning interpretation may be unpredictable, may violate the relevant provisions of the preface of GATS and affect the actions of WTO Members related to commitments. Besides, it may lack a sufficient basis. However, this interpretation by the Appellate Body was consistent with the interpretation of the United States commitment schedule by the Dispute Settlement Body in the "United States-Measures Affecting the Cross-Border Supply of Gambling and Betting Services", and also reflected the claims such as technology neutrality in terms of service provision. In addition, according to the contemporary meaning interpretation, the meanings of terms based on the new technology shall prevail. Once the commitment schedule identifies the sectors with open services, the application scope of this entry will expand over time. Commitments are automatically recognized as covering services provided through new technologies even if unpredictable new technologies emerge. For this reason, even if GATS adopts the positive-list commitment mode, the contemporary meaning interpretation method may lead to the effect of negative-list commitments for the promised services. When new technologies emerge, WTO Members may lose time for regulatory adjustment of trade in services and cannot make necessary improvements to domestic regulatory measures, which in turn requires special attention.
(Ⅱ) China-Electronic Payment Service (WT/DS413)
On July 16, 2012, the panel in WTO Dispute Settlement Body issued a panel report on the case of the United States v. China's electronic payment WTO dispute (WT/DS413), ruling that China made a commitment to "Electronic Payment Services" based on GATS. China required "UnionPay" to handle RMB clearing business in Hong Kong and Macao, which constituted a market access restriction and violated market access obligations. China put UnionPay in a more favorable position in the issuing, terminals and acquiring of bank cards, which violated the national treatment obligation. However, the panel also rejected the accusation of the United States that the measures involved made "UnionPay" the only service supplier, and held that China did not prohibit foreign service suppliers from entering the Chinese market. In addition, the panel rejected the American claim that foreign service suppliers could provide electronic payment services in China through "cross-border delivery", and ruled that the establishment of "commercial presence" by foreign service suppliers in China must meet the establishment requirements of China's GATS specific commitment schedule. Neither China nor the United States appealed the panel's report. The ruling exerted a certain impact on the opening of China's financial industry, especially the market supervision of electronic payment services.
1. Summary of the case
Since the 1980s, China's financial industry, including the bank card business, has undergone a rapid development. In March 2002, with the approval of the State Council and the People's Bank of China, China UnionPay Co., Ltd. was established in Shanghai. China has promulgated a series of regulations and normative documents, such as the Measures for the Administration of Bank Card Business, to standardize the payment market of bank cards. Although American bank card issuers such as VISA, Mastercard and AMEX have gone into the Chinese market for many years, they can only provide payment services by jointly issuing double-standard cards with the "UnionPay" mark with China UnionPay, and must settle accounts through Union Pay channels. On September 15, 2010, the United States formally resorted to the WTO Dispute Settlement Body on the bank card management and related measures adopted by China, accusing the measures involved of preventing foreign electronic payment service suppliers from entering the Chinese market and competing on an equal footing with UnionPay, specifically including:
(1) "Card issuers' requirements " refer to China's requirements that all RMB bank cards issued by commercial banks in China for domestic inter-bank RMB transactions should be marked with Yin Lian/UnionPay on the front of the cards, and that bank cards issued in China should comply with unified business specifications and technical standards. (2) "Terminal requirements" refer to China's requirements that the bank card terminals (including ATM, merchant processing equipment and POS machine terminals) in the Chinese mainland must be able to accept bank cards marked with Yin Lian/UnionPay. (3) "Acquirers' requirements" refer to China's requirements that the acquirers of bank cards (card-receiving merchants, etc.) should be forced to post the logo of Yin Lian/UnionPay. (4) "Hong Kong/Macao requirements" refer to the requirements where the Chinese government stipulates that only China UnionPay can handle the clearing services of specific RMB bank card transactions involved in "RMB bank cards issued in China and used in Hong Kong or Macao" and "bank cards issued in Hong Kong or Macao and used in RMB transactions in China". (5) "Sole supplier's requirements" and "off-site/inter-bank bans" refer to China's requirements that China UnionPay must be used or established as the sole supplier of electronic payment services for all RMB bank card transactions.
2. Procedures and rulings of the panel
In February 2011, the United States asked the WTO to set up an expert group. A total of 24 applications were filed in "requesting the establishment of an expert group" by the United States. The expert group ruled and underpinned 11 applications from the United States. The main conclusions of the expert group's ruling include: (1) The US claim is supported in the classification of the services involved, and electronic payment services belong to Item (d) of Section 2 of Part 7.B of the WTO Specific Commitment Schedule for Trade in Services after China's accession. (2) The US claim is rejected that China UnionPay is the "sole supplier" of electronic payment services in China and that China prohibits cross-regional and cross-bank non-UnionPay card transactions. Besides, the US allegations of market access and national treatment on this basis are rejected. (3) In terms of market access for electronic payment services, the panel rules that China only made commitments under Mode 3 (commercial presence) and rejected the US allegations based on Mode 1 (cross-border delivery). According to Mode 3, the "card issuers' requirements", "terminal requirements" and "acquirers' requirements" proposed by the US do not constitute quantitative restrictions on market access, and the US claim is rejected. However, the panel considered that the relevant "Hong Kong/Macao requirements" constitute market access restrictions and violate Item (a) of Article 16.2 of GATS. (4) In terms of national treatment, "card issuers' requirements", "terminal requirements" and "acquirers' requirements" fall within China's commitment scope under Article 17 of GATS, and China's measures involved violate its national treatment obligations.
3. The core issue in this case
(1) Definition of "electronic payment services"
The primary issue in this case is what kind of "services" do VISA or UnionPay provide under the GATS framework? The United States summarized it as an "electronic payment services", and held that the services were under Item (d) of the sub-sector of "banking and other financial services (excluding insurance and securities)" in Part B of Category 7 (financial services) in China's performance commitment schedule. The content was about "all payment and remittance services, including credit cards, charge cards, debit cards, traveler's cheques and bank drafts (including import and export settlement)". China made market access and national treatment commitments for Item (d) of the sub-sector. China believed that this case involved "clearing and settlement services", which should be included in Item xiv of Article 5 (a) of GATS Annex on Financial Services, specifically including "clearing and settlement services of financial assets, such as securities, derivatives and other negotiable instruments", under which China did not make commitments. Starting with Item (d) of the commitment schedule, the expert group explained the content from the perspectives of general meaning, context, object and purpose, and thought that Item (d) of the sub-sector of China's service commitment schedule included the services involved.
(2) Market access issues
The United States claimed that since China made commitments on electronic payment services in Mode 1 (cross-border delivery) and Mode 3 (commercial presence), a monopoly market structure on the measures involved in electronic payment services was established, making UnionPay an exclusive supplier of all RMB bank card transactions in China, which violated China's obligations under Item (a) of Articles 16.1 and 16.2. China held that the US failed to prove that China made market access commitments under Mode 1 and Mode 3 of Item (d), and the measures the US alleged led to restrictions on the number of service suppliers through monopolistic or exclusive means.
The expert group thought that as far as Mode 1 is concerned, WTO Members often use the "exception" phrase of "unbound exception for" when making the service trade commitment schedule. This case is featured by the uniformity of the two services under "exception" in text expression between the sub-sector (k) and sub-sector (l) of specific commitments that China has made. Therefore, the "exception" provision here actually indicates that China has made full commitments in sub-sectors (k) and (l), but has not made commitments in sub-sectors (a) through (f). For this reason, the panel concluded that, in term of services of sub-sectors (a) through (f) in 7.B, including the services in Item (d) involved in this case, China hasn't made market access commitments under Mode 1. However, in the case of Mode 3, the panel examined the context, the relevant interpretations in the dictionaries and the industry data of China's service commitment schedule, and concluded that "foreign financial institutions" include any organization, company or entity providing services of Items (a) through (f) of Part 7.B of the schedule, which indicates that China has made commitments in market access for services of Item (d).
On the issue of whether the measures involved violated market access obligations, the panel concluded that China had not made commitments in Mode 1 of Item (d) of Part 7.B of the commitment schedule, so there was no issue of the violation of Article 16. As for the issue of whether China violated its market access commitments under Mode 3, the panel examined the specific scope and content of the provisions of Item (a) of Article 16.2 and the consistency of the "card issuers' requirements", "terminal requirements" and "acquirers' requirements" with the provisions of Item (a) of Article 16.2, believing that the three restrictions on the electronic payment services were not quantitative restrictions in nature, so Item (a) of Article 16.2 was not violated. However, the "Hong Kong/Macau Requirements" restricted the entry of other foreign electronic payment service suppliers in a quantitative way, which violated Item (a) of Article 16.2.
(3) National treatment issues
According to the existing GATS jurisprudence, three elements must be proved before proving the violation of the national treatment obligations in Article 17 of GATS: First, the defendant has made national treatment commitments in terms of relevant service sectors and service provision modes. Second, the defendant has taken "measures affecting service provision". Third, the services provided to any other Member or the treatments to service suppliers in these measures are less favorable than those provided to like services or service suppliers in China. Through the detailed analysis, the panel in this case held that China made commitments to national treatment in terms of relevant service sectors and service provision modes, and "measures affecting service provision" were taken. Later, the panel focused on analyzing whether China gave unfavorable treatment to foreign like service suppliers in three types of measures, namely, "card issuers' requirements", "terminal requirements" and "acquirers' requirements". The panel concluded that China violated its national treatment obligations under Article 17 of GATS.
4. Analysis of this case
In this case, UnionPay's "monopoly position" in China's bank card market was challenged by the US who called the services involved independent and overall "electronic payment services" rather than a simple superposition of multiple services. In addition, the two core obligations of "market access" and "national treatment" were challenged by the US. From the ruling of the panel, some allegations of the US were supported, including the classification of "electronic payment services" under GATS, the violation of market access obligations by "Hong Kong/Macao requirements", and the violation of national treatment obligations by "card issuers' requirements", "terminal requirements" and "acquirers' requirements". China needs to revise relevant regulations and policy documents.
In response to the US allegations, China focused on a deeper problem of market access conditions, that is, China had not set physical conditions or obstacles in market access. The panel realized that the fact that China UnionPay was the only bank card service supplier in China could not prove that there were market access barriers for electronic payment services in China. According to the actual effects, the US was not supported by the panel on its claim of the core market access issue. If VISA wants to enter China, it must meet the relevant establishment requirements of China's service trade commitment schedule by means of commercial presence (Mode 3). China has the right to restrict electronic payment services through cross-border supply (Mode 1).
The relationship between market access commitment and national treatment commitment in GATS has been controversial. In this case, China made commitments of "none" under the national treatment of its commitment schedule, but marked "unbound" in the market access column. To resolve the conflict between the two, the panel invoked Article 20.2 of GATS, and held that the conditions or qualifications listed by WTO Members under the market access column automatically constitute the conditions or qualifications under the national treatment. This is the first time that the WTO panel has interpreted the legal relationship between GATS market access commitment and national treatment commitment, which deserves attention.
The ruling of this case showed the complexity of interpreting the service commitment schedules of WTO Members. Given the rapid development of information technology in the financial sector, the provision of various financial services through Mode 1 (cross-border supply) has become the norm. For this reason, the ruling of this case gives our government sufficient authority and policy space to supervise cross-border delivery of financial services. Furthermore, China has stepped up the opening up of the financial industry to the outside world and relaxed the restrictions on foreign investment access in recent years. After the ruling of "China: Electronic Payment Service Case", China has revised relevant regulations and normative documents, and cancelled the requirements of uniformly affixing the "UnionPay" logo. To comply with the development of reform and opening up, China has advanced the reform and opening process of financial markets on the premise of ensuring financial security, and MasterCard has been approved to enter the bank card clearing market. Since the new round of expanding and opening up comprehensive pilot projects in the service industry in Beijing, the financial sector has been further opened, and Beijing has become the first choice for foreign-funded financial institutions in China. Even during the Covid-19 pandemic in 2020, the trend of foreign-funded financial institutions entering China's service market showed no signs of slowing down. Financial policies accounted for a quarter of Beijing's "Two Zones" construction plan approved by the Chinese government. To facilitate the entry and exit of capitals, Beijing will explore the capital pool pilot of multinational corporations' local and foreign currency integration to facilitate the global capital arrangements of multinational corporations. The pilot work of integrating local and foreign currencies in the bank account system will be carried out to realize the integration of RMB bank settlement accounts and foreign exchange accounts. These measures will improve the quality and competitiveness of China's payment services and financial services, and will be more conducive to consumers and the stability of the financial system in the long run.
III. Service trade rules in recent international economic and trade agreements and China's participation in the negotiation
In recent years, the further opening of service trade rules and markets is mainly reflected in many regional trade agreements. Apart from GATS, China has signed about 20 FTAs on service trade liberalization. In this part, attention was first paid to the negotiation of service trade rules under the framework of WTO, and then the service trade rules in two large-scale economic and trade agreements were discussed, namely, Regional Comprehensive Economic Partnership Agreement (RCEP) and Comprehensive and Progressive Trans-Pacific Partnership Agreement (CPTPP).
(Ⅰ) WTO multilateral negotiations and plurilateral negotiations on e-commerce
When China formally joined the World Trade Organization (WTO) on December 11, 2001, Annex 9 of the Protocol of Accession submitted by China was the specific commitment schedule of service trade, which promised a high-level market opening obligation compared with the development level of China's service industry at that time, and was considered to represent the most ambitious service industry reform plan. The Doha Development Round (DDA), the first round of negotiations since the WTO was set up, was launched in November 2001. However, the Doha Round was not completed due to various factors, which reflected the grave decline of the multilateral negotiation function of WTO. In addition, substantive results were not achieved in negotiations on service trade. At the 12th Ministerial Meeting held in December 2017, some Members started to explore new negotiation methods, and started plurilateral negotiations on investment facilitation, e-commerce and domestic regulation of the service industry by issuing the Joint Statement Initiative (hereinafter referred to as “JSI”). This part discussed the domestic regulation of the service industry and JSI negotiations of e-commerce.
1. Domestic regulation negotiations of service industry
As mentioned above, domestic regulation negotiations of the service industry began in the early days of WTO, but it lacked substantive process. It developed slowly especially from 2012 to 2015. In 2016, some Members submitted proposals one after another and hoped that substantial progress could be made before the 11th Ministerial Meeting in 2017. But actually, they didn't get what they wanted. The main reason was that negotiators worried that too many disciplines on domestic regulations would erode the regulatory power and policy space of Members, especially those of Members of developing countries.
The Joint Statement Initiative (JSI) plurilateral approach became an attempted approach among various options that Members seek to restore and revive the negotiating function of WTO. In December 2017, a total of 59 WTO Members, including China, launched the first Joint Statement Initiative (JSI) on Services Domestic Regulation at the 11th Ministerial Meeting, confirming the importance of good regulatory practices of service trade and deciding to speed up negotiations on relevant disciplines. JSI negotiations on domestic regulation of service industry carried out in an open process were open to all WTO Members with an interest to join. In May 2019, a total of 60 negotiating parties adopted the second joint ministerial statement to conclude the progress and set the negotiation objective of achieving results before the 12th WTO Ministerial Meeting. In March 2021, a total of 63 negotiators discussed the negotiation text of December 18, 2020 and the domestic regulation disciplines of the service industry in some regional trade agreements (such as RCEP), and efforts were made to end the negotiations before the 12th Ministerial Meeting held in November 2021 due to the Covid-19 pandemic. China is actively participating in the JSI negotiations of domestic regulation at present.
2. JSI negotiations of e-commerce/digital trade
The current WTO rules were mainly formed in the late 1980s and early 1990s, when the development of e-commerce was still in its early stage. The GATS refers to important agreements concerning e-commerce, the four service provision modes defined by which are all related to e-commerce, especially Mode 1 (cross-border supply). The existing WTO cases show that GATS does not distinguish the technical means of service delivery. If there is no explicit exclusion, the specific commitments made by Members extend to services provided in the electronic form, as exemplified by the rulings of the "United States-Measures Affecting the Cross-Border Supply of Gambling and Betting Services" and the "China-Publications and Audio-Visual Products Case". Therefore, trade through e-commerce and digital means is subject to WTO rules. However, because of the stage limitation of technical development during negotiation, the current framework of WTO apparently lags in the e-commerce regulation. Besides, there are deficiencies in many aspects, such as products classification, market access, data flow and trade facilitation. This situation cannot meet the needs of digital economy development, and it is urgent to form new rules through negotiations among Members.
E-commerce is not a new topic under the framework of WTO. In 1998, the 2nd WTO Ministerial Meeting passed the Declaration on Global Electronic Commerce, which delayed the tariff on electronic transmission, or called moratorium on electronic transmission. In September 1998, the General Council of WTO passed the Work Program on Electronic Commerce, which further listed the issues that Members needed to discuss in different councils. However, owing to the overall lack of progress in the Doha Development Round, which was the first round of multilateral negotiations since the establishment of WTO, the multilateral discussions on e-commerce issues have not yielded practical results. Compared with the lack of progress in multilateral discussions, Members have begun to attach importance to and strengthen the rule-making of e-commerce/digital commerce in Regional Trade Agreements (RTAs) in recent years. Apart from many RTAs containing special chapters on "e-commerce", the special chapter on "digital trade" was first written in the U.S.-Mexico-Canada Agreement (2018) as an upgraded version of the North American Free Trade Agreement (NAFTA).
In December 2017, a total of 71 Members issued the Joint Statement on Electronic Commerce at the 11th WTO Ministerial Meeting, starting the negotiation and exploration of "trade-related e-commerce issues" under the framework of WTO. On January 25, 2019, a total of 76 WTO Members, including China, the US and European countries, accounting for 90% of world trade, signed the Joint Statement on Electronic Commerce, starting the plurilateral negotiations on e-commerce in WTO. Since the negotiations were officially launched in March 2019, WTO Members have submitted more than 60 documents that cover the traditional issues of e-commerce and the new rules of digital commerce, in which quite a few Members put forward specific suggestions on provisions.
As of June 30, 2021, a total of 86 WTO Members have participated in JSI negotiations on e-commerce. These Members sped up negotiations based on the consolidated text of December 2020, with the purpose of achieving important results before the 12th Ministerial Meeting. JSI plurilateral negotiations are different from the traditional multilateral negotiations with the consensus of all Members. Some like-minded WTO Members negotiate to reach an agreement in a certain field first, and form new rules by gradually opening to other Members. However, this kind of negotiation may cause the fragmentation of the WTO system and worries about the loss of multilateral negotiation function. The status of the outcomes of the JSI negotiations under the WTO legal framework is also controversial among Members, especially those oppositions from India and South Africa. Some scholars advocate exploring the open plurilateral negotiation mode, which can be first applied in e-commerce and other fields to form the coexistence of multilateral mode and plurilateral mode under the framework of WTO, and promote WTO to return to multilateral mode through a critical mass of open plurilateral modes. However, in the long-term lack of progress in WTO multilateral negotiations, the success of JSI plurilateral negotiations shows that WTO Members can use the traditional multilateral negotiation method based on the consensus of all Members to formulate new rules after years of stagnation, which is an important attempt to restore the negotiation function of WTO. In the statement issued by G7 trade ministers on May 28, 2021, the JSI negotiation mode was positively evaluated.
(Ⅱ) RCEP service trade rules
China signed RCEP with 10 ASEAN countries, Japan, the Republic of Korea, Australia and New Zealand on November 15, 2020, and built the largest free trade zone in the world thus far. RCEP is not only large in scale, which involves the largest population, but also a comprehensive, modern, high-quality and mutually beneficial trade agreement in content.
1. A glance at RCEP agreement and its service trade rules
The total population, economy and total trade volume of the existing 15 contracting parties of RCEP account for about 30% of the global total, indicating that about one-third of the world's economies form an integrated market. RCEP Members include developed countries, developing countries and even some least developed countries. There are great differences among Members in the economic system, development level, scale and volume. The RCEP Agreement takes the demands of all parties into consideration to the maximum extent, and a balance of interests in the areas of market access and rules such as goods, services and investments is achieved.
RCEP service trade rules are mainly covered in Chapter 8 (Cross-border service trade), with a total of 25 articles, including the MFN treatment, market access commitment schedules, national treatment, local presence, domestic regulations. RCEP inherits GATS's quartering of service trade modes, namely, cross-border supply, consumption abroad, commercial presence and movement of natural persons. GATS adopts positive-list commitments for market access and national treatment obligations, while RCEP adopts both positive and negative lists, but Members adopting positive lists need to convert the positive-list mode into the negative-list mode within 6 years. Apart from the text, Chapter 8 of RCEP also involves three annexes: financial services, telecommunications services and professional services.
2. China's service commitments under RCEP
Under RCEP, a total of 7 Members, including Japan, the Republic of Korea, Australia, Singapore, Brunei, Malaysia and Indonesia, made commitments in the form of negative lists, while the remaining 8 Members, including China, made commitments on national treatment, market access, additional commitments and time limit for implementing commitments in the form of positive lists.
On this basis, China's RCEP commitment schedule and GATS commitment schedule are consistent in the forms. China has made detailed commitments on the service provision modes of specific sectors, reaching the highest level of the free trade agreements signed by China by far. Based on about 100 sectors promised by China after China's accession to the WTO, a total of 22 new sectors are about to be established, and the commitment levels of finance, law, construction, shipping and other sectors are improved. Therefore, RCEP not only brings opportunities to the development of China's service industry and market opening, but also proposes new requirements for improving China's service trade level. For this reason, China's business environment should be further improved, the overall level of service industry should be upgraded, laws and regulations in key areas such as intellectual property rights and finance should be improved, the optimization of industrial structure should be promoted as a whole, and the strength of the disadvantaged service sectors should be enhanced, thereby providing a solid foundation and conditions for turning the positive list of RCEP into a negative list.
(Ⅲ) CPTPP service trade rules
Service trade liberalization and related rules are considered as one of the main achievements of CPTPP. In the 30 chapters of the agreement, more than one-third are related to service trade. The key obligations of the Parties in the field of service trade are scattered in some chapters of the Agreement, the most important of which include Chapter 9 "Investment", Chapter 10 "Cross-border trade in services", Chapter 11 "Financial services", Chapter 12 "Temporary entry of business personnel" and Chapter 13 "Telecommunications services". Meanwhile, some new rules covered in CPTPP, such as state-owned enterprises, government procurement and competition policies, also help to improve the market access level of parties in the field of service trade. This part focuses on analyzing the main rules of Chapter 10 "Cross-border trade in services" and Chapter 13 "Telecommunication services", noting the disciplines and obligations that China needs to emphasize when joining in CPTPP negotiations. Besides, suggestions for adjusting or revising relevant laws are put forward.
1. Cross-border trade in services
Cross-border trade in services, especially the cross-border provision mode, is the main means for small and medium-sized enterprises to participate in the global value chain division, and it is also an important supplement for multinational enterprises to provide services through establishing the commercial presence. Chapter 10 of CPTPP stipulates cross-border trade in services, which is one of the most significant chapters of service trade. The cross-border trade in services stipulated in this chapter covers three of the four GATS service provision modes, namely Mode 1 (cross-border provision), Mode 2 (consumption abroad) and Mode 4 (movement of natural persons), but does not include Mode 3 (commercial presence, which is stipulated and adjusted by Chapter 9 "Investment" of the Agreement).
(1) Summary of Chapter 10
Chapter 10 includes 13 articles and 3 annexes, namely, 10-A (professional services), 10-B (express services) and 10-C (constraint mechanism of non-conforming measures, only applicable to Vietnam). The core obligations of Parties under this chapter include non-discriminatory treatment (including Article 10.3 national treatment and Article 10.4 MFN treatment), market access (Article 10.5) and the requirements of prohibiting local presence (Article 10.6). Compared with GATS, the local presence prohibition is a new obligation. With the rapid development of modern information and communication technology, e-commerce and digital trade, "prohibition of local presence" plays an important role in ensuring the liberalization of cross-border trade in services. CPTPP Parties accept the above four core obligations based on negative lists, implying that the service market of Parties is in principle open to services and service suppliers of other Parties except for those excluded by means of a list of non-conforming measures (also referred to as a negative list) in the annex to the Agreement.
As for domestic regulation, CPTPP generally follows the basic framework of GATS domestic regulation and makes some further adjustments, which is mainly reflected in the promotion of regulatory transparency and the streamlining administrative procedures. Firstly, CPTPP subdivides and strengthens the requirements of procedures and transparency obligations, but it does not make similar requirements for GATS to establish judicial, arbitration or administrative mechanisms to review measures affecting the service trade. Secondly, CPTPP inherits the definition of GATS on domestic regulation of service trade, but it does not adopt the "necessity test" of GATS domestic regulation in regulatory standards. Article 10.8 requires parties to "strive to ensure" that their regulatory measures are based on objective and transparent criteria, but the requirements don't include the one that "measures should be necessary to achieve legitimate objectives". This conforms to the basic trend of service regulation in Regional Trade Agreements (RTAs) in recent years.
In terms of transparency, CPTPP requires parties to ensure the transparency of cross-border trade in services, and requires Members to provide notice and the opportunity to reflect opinions in advance before passing or adopting relevant laws and regulations. In addition, a reasonable period is necessary between the promulgation and entry into force of regulations, thus allowing enterprises to adjust and prepare. What's more, the article seeks to make the procedures for authorization (licensing) of service suppliers from other Parties more transparent and streamlined by requiring Parties to establish an indicative framework for such application procedures in feasible scope and notifying applicants of their application status. If applications are rejected, reasons or justifications should be provided.
(2) The suggestions on the chapter "cross-border trade in services" in the negotiation of China's accession to CPTPP
The service trade rules established by CPTPP serve to promote the opening of more service industries and reduce restrictive measures in service trade. CPTPP Parties have achieved a much higher level of openness than GATS through commitment schedules. In the 4th Plenary Session of the 19th CPC Central Committee, "promoting the institutional opening of rules, regulations, management and standards" was put forward. The characteristics and requirements of CPTPP service trade rules ask for higher requirements and standards for China to improve domestic regulation of the service industry and promote the institutional opening. There are no substantive obstacles for China to accept CPTPP's service trade rules on the whole, but it is necessary to further improve the opening level of China's service market, focus on the high-level institutional opening, and make and adjust relevant domestic laws.
First, the formulation of Regulations on the Promotion of Cross-border Trade in Services should be taken into consideration. With the continuous development of new technologies and the substantial increase of international exchanges and personnel mobility, cross-border service trade will play an increasingly important role in the international service trade. The provisions on international service trade in China's Foreign Trade Law are too principled, leading to the lack of legal basis and foundation for the development of cross-border trade in services in China for a long time. Service trade usually covers multiple administrative departments. In addition, technologies accelerate the emergence of new formats and new modes and problems such as vague departmental authority and many-headed management often exist in China's current management system, which cannot facilitate the development of China's cross-border trade in services, the promotion of service industry competitiveness and the further opening of the service market. According to the overall situation of domestic rule of law and foreign-related rule of law, China's regulations on cross-border service trade promotion are formulated on the basis of the domestic pilot free trade zones by virtue of the opportunity of participating in CPTPP negotiations. In the supervision of cross-border service trade, the overall management and the information exchange and cooperation between regulatory authorities of cross-border service trade can be strengthened through the inter-ministerial joint conference system of service trade development or the joint conference of service trade development in free trade zones in the legislation. Second, prohibiting local presence requirements are drastically reduced, cross-border service trade supervision capabilities are improved, and international cooperation is strengthened. The "prohibition of local presence " or "non-establishment right" means that a country may not make the establishment or maintenance of commercial presence or residence of foreign service suppliers in the local area a prerequisite for allowing them to provide services through cross-border supply. The "prohibition of local presence " is applicable to three modes of cross-border service trade, namely, cross-border supply, consumption abroad and movement of natural persons. Under the background of the rapid development of network information technology, this rule reduces the fixed cost of service suppliers (especially for small and medium-sized enterprises) to provide services through cross-border supply such as Internet, which is of great importance for promoting the development of e-commerce and digital trade and the liberalization of cross-border service trade.
Apart from prohibiting local presence, "prohibition of residence requirement" is another part of "prohibition of local presence". According to the interpretation of WTO Committee on Trade in Services, " prohibition of residence requirement" refers to the removal of residence requirements for foreign service suppliers, such as the residence requirements imposed on the practitioners of specific services, the residence requirements imposed on specific personnel including executives, board Members, professional and technical personnel responsible for local presence, and the management of enterprises providing specific services by local residents. "Prohibition of residence requirement" also increases the cost of foreign service suppliers. Article 3 of the annotation to Annex 1 of CPTPP stipulates that the local presence requirement and the national treatment clause are two different disciplines, and there is no need to make reservations to the national treatment clause if measures are only inconsistent with the local presence clause.
At present, China has stipulated the local presence requirements in the sales and marketing of telecommunications and air transport services. For instance, in the GATS commitment schedule, "see Mode 3" for China's commitments to basic telecommunications, value-added telecommunications, mobile voice and data services, and Mode 1 of domestic services (cross-border-supply). The commitments to Mode 1 are shown in Mode 3, which actually requires service suppliers to establish the commercial presence in China if they provide telecommunications services to Chinese consumers through cross-border provision mode. This is one of the typical local presence requirements.
Third, in the negotiation of joining CPTPP, the laws, regulations and departmental rules related to local presence requirements should be first sorted out in detail, and the applicable fields and scope of local presence requirements should be greatly reduced. Efforts should be made to render a few local presence requirements that really need to be retained be listed on the negative list through negotiations with other Parties. In addition, the "presence prohibition rules" pose new challenges to the regulatory capacity of China's service industry, so the regulatory capacity building of China's cross-border service trade should be strengthened and international regulatory cooperation should be promoted. Regulatory means such as credit commitment, filing system and case approval can be introduced to cross-border service trade by learning from the investment promotion and facilitation measures that China has taken for foreign investors in foreign investment to reduce the compliance burden of foreign service suppliers.
Fourth, attention should be paid to the list of non-conforming measures from the legal and technical aspects, truly reflecting the opening level and attention of China. From the list, CPTPP adopts a relatively thorough negative-list mode. Besides Comprehensive Agreement on Investment between China and EU (CAI), China has not adopted a comprehensive negative-list mode for investment and service trade in economic and trade treaties signed by foreign investors at present. However, CAI only involves Mode 3 of service trade, that is, commercial presence, and does not involve non-conforming measures in cross-border service trade. For this reason, China still lacks experience in international treaty negotiations on the negative list of cross-border service trade. A list of China's list items in content should be made during the negotiation. Meanwhile, attention should be paid to the technical challenges brought about by the negative-list mode, and the lists of other parties should be referred to so as to truly and accurately reflect the actual opening level of commitments of China's lists.
2. Telecommunications services (Chapter 13)
(1) Main contents of the chapter on telecommunications services in the CPTPP
Telecommunications services are closely related to the development of information technology, and have developed rapidly in recent years. Chapter 13 of CPTPP is a special chapter on telecommunications services, including 26 clauses, which mainly establishes the guarantee obligations of the contracting governments in the supervision of telecommunications services, especially to ensure that there are fair and competitive telecommunication services markets in China and telecommunication enterprises of other contracting parties provide services in the domestic telecommunication service markets.
The chapter on telecommunications services in the CPTPP makes up for the lag of GATS to a certain extent, and its disciplines cover some new services in the telecommunications field thanks to technological development. Article 13.1 defines the important concepts in telecommunications services, including basic facilities, interconnection and major operators. Article 13.2 clarifies the government measures applicable to the access to and use of public telecommunications services, the government measures applicable to the obligations of public telecommunications suppliers and other government measures related to telecommunications services in this chapter. Articles 13.3 through 13.26 stipulate the supervision mode, access to and use of public telecommunications services, obligations of public telecommunication service suppliers, international mobile roaming, treatment of public telecommunications services granted by major operators, competition guarantees, resale, unbundling of network elements of major suppliers, independent regulatory agencies and government ownership, universal services, licensing procedures, allocation and use of scarce resources, telecommunication dispute resolutions, transparency, etc.
(2) The suggestions on the chapter of telecommunications services in the negotiation of China's accession to CPTPP
China needs to understand the constraints of regulatory independence, transparency, market access and other obligations in telecommunications services, and adjust relevant domestic laws during the negotiation.
First, the independence of telecommunications regulatory agencies is strengthened. Article 13.16 of CPTPP stipulates that each Contracting Party shall ensure that its telecommunications regulatory authority is separate from and not responsible for any public telecommunications service supplier. There is still a gap between China's telecommunications industry, especially the opening of basic telecommunications services and the telecommunications supervision system, and the requirements of CPTPP. According to CPTPP requirements, to ensure the independence and fairness of the telecommunications regulatory agencies, any Contracting Party shall ensure that its telecommunications regulatory agency does not have financial interests in, or participate in the operation or management of, any public telecommunication service supplier. Meanwhile, given the existence of the supervisory agency--Telecommunications Commission, there may be CPTPP regulatory agencies to supervise China's telecommunications regulatory agencies. Objectively speaking, since the government owns and controls the three basic telecommunication service operators in China and plays a major role in the management of the industry structure, other parties may raise questions about the independence and fairness of China's telecommunication regulators in CPTPP negotiations.
Second, the transparency disciplines in telecommunications services should be followed. The transparency provisions of CPTPP telecommunication service trade require parties to meet the general requirements of transparency in the agreement, namely, the obligation to publish relevant laws and regulations in a timely manner. Generally speaking, the legal hierarchy of China's telecommunications regulations is relatively low which is mainly based on administrative regulations and normative documents. This may cause some obstacles for foreign capital's entering China's telecommunications market. Foreign telecommunications service suppliers may complain that it is difficult to clearly understand China's telecommunications legislative framework, and there is a gap between the transparency of telecommunication legislation and CPTPP requirements. Attention should be paid to this issue and appropriate adjustments should be made for the CPTPP negotiations.
Third, market access for telecommunications services should be improved. As for the requirements of state-owned holding ratio of telecommunication companies, Article 10.5 of CPTPP on market access (cross-border trade in services, but the obligations in this article cover the investment) requires any party not to adopt or maintain restrictions in its region or territory, or requires service suppliers to provide services through specific types of legal entities or joint ventures. According to Item 16 of Special Administrative Measures for Foreign Investment Access (Negative List) (2020) issued by the National Development and Reform Commission and the Ministry of Commerce, telecommunications companies are limited to the telecommunications services that China has promised to open after its entry into WTO. The proportion of foreign shares in value-added telecommunications services shall not exceed 50% (except e-commerce, domestic multi-party communication, store-and-forward and call centers), and basic telecommunications services shall be controlled by the Chinese party. It can be seen that there are still strict equity proportion restrictions on the market access of foreign capital in the telecommunications industry, and branches and representative offices of foreign enterprises are prohibited from engaging in telecommunications services. China's negative list on foreign investment access, Article 6 of the Regulations on the Administration of Foreign-invested Telecommunications Enterprises (revised in 2016) and Article 10 of the Telecommunications Regulations of the People's Republic of China (revised in 2016) conflict with the provisions on market access in CPTPP. Although China can try to list the market access restrictions on telecommunications services on the negative list during the negotiations, extremely strict restrictions may encounter resistance from other parties. In addition, China's regulations on the resale of telecommunications services are strictly bound with the basic telecommunications business license. Even if the discriminatory treatment is not constituted, whether these requirements are reasonable restrictions or whether they constitute substantive prohibitions needs attention in the negotiations.
In general, the chapter of telecommunications services in the CPTPP sets higher standards and more specific obligations than GATS, with the purpose of ensuring the key obligations concerning access to and use of telecommunications services, competitive guarantees, telecommunications network interconnection, telecommunication regulatory agencies, domestic telecommunication dispute resolutions and transparency, which sets new requirements for China's telecommunication service rules both in depth and breadth. There is still a gap between China's laws and regulations of telecommunication service trade in key aspects such as market access, regulatory independence and telecommunication legislation and CPTPP's requirements for the liberalization of telecommunications services, which needs to be adjusted in the CPTPP negotiation.
IV. Development of China's service industry and further opening up for service market
(Ⅰ) Development and status quo of China's service trade
Service trade is one of the important criteria to measure the level of economic modernization and internationalization of a country. China attaches great importance to the development of service trade, and regards the development of the service industry and service trade as an important link in China's economic transformation and the construction of an open economic system by taking measures to promote the development of service trade in recent years. At present, China's economy has entered an era with the service industry as the main body. The rapid development of service trade has become a highlight of China's foreign trade. China is traditionally a big country in goods trade, but there has been a huge deficit in service trade for many years, which does not match the status of a trading power. Although the total import and export volume of China's service trade ranks 2nd in the world, second only to the United States, the gap between China and the US reaches USD 526 billion.
From 2014 to 2019, China's service trade volume grew at an average annual rate of 7.8%, which was 2.2 times the growth rate of goods trade. Meanwhile, the proportion of China's service trade in the total global service trade increased from 6.3% to 6.6%, making it the biggest contributor to the growth of global service imports. The traditional advantages of China's service trade lie in tourism, transportation services and other commercial services. Tourism and transportation services are two major areas of China's service trade import and export, accounting for 36% and 19% respectively in 2019. Other commercial services belong to China's main service export areas, accounting for 26%. Tourism made up about half of China's total service imports. In addition, telecommunications, computers and information services have moved towards the high end of the value chain in recent years, and the export of intellectual property royalties has been increasing, indicating that China's service trade structure has been constantly optimized. Furthermore, the share of China's total service exports in the world total increased from 3% in 2005 to 6% in 2020. The imports even grew faster from 3.3% of the world total in 2005 to 8% in 2020. In 2019, the US was still a major exporter of the global service trade, its service trade surplus reaching USD 288.9 billion. China's service trade deficit was USD 215.3 billion.
In 2020, due to the influences of various factors such as the COVID-19, China's total export-import volume of services reached CHY 4,564.27 billion, indicating a decrease of 15.7% year-on-year. In 2020, China's service exports fell by 1.1% while imports dropped by 24%, leading to a sharp decrease of 53.9% in the service trade deficit. In 2020, China witnessed the proportion increase of its knowledge-intensive service trade, its import and export increasing by 8.3% from the previous year, accounting for 44.5% of the total export-import volume of services. The areas with the rapid export growth were intellectual property royalties, telecom computers and information services, and insurance services while the areas with the rapid import growth were financial services, telecom computers and information services. In 2020, China's import and export of travel services decreased by 48.3%, which was the main factor for the decline of service trade. In general, China's service trade deficit decreased and the proportion of knowledge-intensive service trade increased in 2020.
(Ⅱ) Recent development of China's service industry and the key path of further opening up
China is in a critical period of economic transformation and upgrading, and its demand for service trade is obviously increasing. Promoting the high-quality development of service trade cannot be separated from the support of a higher level of open environment. With the increasing maturity of manufacturing opening to the outside world, the service industry has become the focus of China's opening to the outside world in a wider scope, in a wider field and at a deeper level. The 5th Plenary Session of the 19th CPC Central Committee made important arrangements for expanding the opening up of the service industry. The Ministry of Commerce issued the Overall Pilot Program of Comprehensively Deepening the Innovation and Development of Service Trade, and was committed to promoting the cancellation or relaxation of restrictions on service trade. With the development of the "Two Zones", Beijing has taken the lead in many aspects of foreign investment access under the background of implementing the national version and the free trade zone version of the negative list of foreign investment access. For instance, in the financial field, foreign-funded investment institutions are supported to participate in overseas investment pilots of qualified domestic limited partners, and wholly foreign-owned enterprises are supported to apply to become private equity fund managers. In the information services field, domestic Internet virtual private network is open to foreign capital, and the ratio of foreign shares does not exceed 50%. The restrictions on the ratio of foreign shares are cancelled in the information service business of application stores in specific areas. In the business services field, priority is given to allowing multinational companies to set up wholly foreign-owned financial companies in Beijing. In the education field, examination institutions and international teaching materials for science and engineering disciplines are explored and introduced. In general, China should continue to improve the level of opening to the outside world on the good basis of the recent development and opening up of the service industry, and inject new impetus into the high-quality economic development.
1. Accelerate economic transformation and upgrading and promote high-quality development of service industry
At present, China is in a critical period of economic transformation and upgrading. First of all, the industry is transforming and upgrading from its industry-led structure to the service-led structure in the late stage of industrialization. Second of all, China has entered a new era of consumption, and the consumption structure is transforming and upgrading from material consumption to service consumption. Third of all, the new round of scientific and technological revolution and industrial transformation is reshaping the development format of service trade. With the continuous breakthrough and the wide application of the new generation of information technology, the digital economy has witnessed a rapid development. Economic transformation and upgrading have greatly expanded the demand for service trade. On the one hand, the upgrading of consumption structure has apparently increased the demand for service trade. On the other hand, the upgrading of the industrial structure has obviously increased the demand for service trade. In the digital economy, China's industrial upgrading will be deeply integrated with the service trade development. Digitalization of service industry and servitization of digital industry will facilitate the development of service trade to the high end of the value chain. China has successively held the "China International Fair for Trade in Services" since 2012, so this platform should be made better use of to promote the development of China's service industry and market opening.
2. Relax the market access of service industry and promote reform with institutional opening
In recent years, the process of opening up in China's service industry market has shown a general accelerating trend, which not only deepens the degree of opening up, but also achieves major breakthroughs of opening up in key fields. Market access in service industries should be further relaxed and service imports should be expanded. The opening up process of the service industry is accelerated, and the foreign investment service system is basically improved according to the relevant provisions of the Foreign Investment Law. It is suggested to clean up and drastically reduce the barriers within the border in the service sector to achieve mutual recognition of qualifications. The negative list of cross-border service trade is comprehensively promoted, overseas enterprises outside the negative list are allowed to provide related services in China, and international integration is gradually achieved in the fields of personnel mobility, mutual recognition of qualifications and market supervision.
In addition, institutional reform should be promoted by institutional opening. The basic position of competition policy in the service industry should be strengthened. Industrial policies that hinder fair competition in the service sector are comprehensively cleaned up, the direct allocation of market resources by administrative forces is reduced, and industrial policies are strictly limited to areas with significant spillover effects or key core technologies. The fair competition in the market is maintained, the fair competition review in the service sector is strengthened, and the fair competition review in factor acquisition, access permit, operation, government procurement and bidding is especially stressed. Attention is paid to promoting the docking of internal and external standards in the service industry. It is necessary to accelerate the mutual recognition of professional qualifications with developed countries in related service fields, gradually establish a management standard system of the service industry that complies with international standards, and promote regulatory changes that are compatible with the opening of the service industry market.
3. Benchmark international standards and further enhance service trade liberalization
Generally speaking, promoting the high-quality development of service trade cannot be separated from the support of a higher level of open environment. We should not only focus on building a new highland of institutional opening that emphasizes service trade, but also promote the process of regional free trade that focuses on service trade. Specific suggestions are as follows.
First, the world's highest open standards should be benchmarked, and the experiment of policies and systems are promoted in the field of service trade in China's domestic free trade zones/ports. To give full play to the leading role of the opening of China's service industry, the Beijing government has been building a comprehensive demonstration zone for expanding and opening up the national service industry, setting up a free trade pilot zone featuring scientific and technological innovation, service industry opening and digital economy, building a high-level open platform for the coordinated development of Beijing-Tianjin-Hebei, and driving the formation of a new pattern of reform and opening up at a higher level in recent years. The advanced management methods, management methods and institutional arrangements of international free trade ports should be fully drawn on to construct the Hainan Free Trade Port and the liberalization and facilitation of trade and investment should be focused on, thus establishing a policy system suitable for high-level free trade ports. It is suggested to benchmark the world's highest level of economic and trade rules, learn from and take the lead in implementing the relevant provisions of the latest international investment and trade agreements, and carry out pilot projects in some key areas as soon as possible. In the domestic pilot free trade zones (such as Beijing) or Hainan Free Trade Port, the greater opening-up policies in the education, medical care and health, culture and sports should be accelerated, early harvest in the industrial development of the free trade ports should be achieved, and the investment restrictions in the following service industries should be cancelled with an attempt or in some pilots.
Specifically, in terms of health services, it is recommended to cancel the joint venture requirements for private hospitals, allow the establishment of wholly foreign-owned private hospitals, or open these hospitals first in major cities such as Beijing, Shanghai, Tianjin, Guangzhou and Shenzhen. In terms of cloud services in telecommunications, it is suggested to cancel the investment restrictions on cloud services and allow the establishment of joint ventures with no more than 50% of the foreign share capital. When it comes to computers and related software services, it is suggested to allow the establishment of wholly-owned software service companies. In terms of cinema services, the upper limit of no more than 49% of foreign capital in joint venture construction or renovation of cinemas is extended to allowing foreign capital holding. In terms of international shipping auxiliary services, it is allowed to set up wholly foreign-owned enterprises in service fields such as cargo handling, container yards and shipping agency. In terms of aircraft maintenance services, foreign service suppliers may be allowed to set up wholly-owned aircraft maintenance enterprises in China.
In terms of commercial services, consideration could be given to eliminating joint venture requirements for services such as real estate services, rental services, transport repair and maintenance, advertising, market research, management consulting and translation. In terms of environmental protection services, it is suggested to cancel the joint venture requirement of environmental services and allow the establishment of wholly foreign-owned environmental protection enterprises. In terms of construction services, when China joined WTO, only the following four types of construction projects are allowed to be undertaken by wholly foreign-owned enterprises, including construction projects funded entirely by foreign investment and/or grants or construction projects funded by international financial institutions and awarded through international bidding according to loan terms, Sino-foreign joint construction projects where foreign investment equals or exceeds 50% of the total, Sino-foreign joint construction projects with less than 50% foreign investment which cannot be independently implemented by Chinese construction enterprises due to technical difficulties, and construction projects invested by China, which can hardly be independently implemented by Chinese construction enterprises, to be jointly contracted by Chinese and foreign construction enterprises with the approval of the provincial government. It is suggested in this report that the above restrictions on foreign construction projects should be lifted in due time.
Second, the process of regional free trade focusing on service trade should be further promoted. New breakthroughs in the development of service trade between China, Japan and the Republic of Korea (or South Korea) should be achieved as soon as possible. With the goal of jointly safeguarding the security and stability of the supply chain, the formation of a new work division and cooperation mechanism with complementary advantages is promoted in service trade between China, Japan and the Republic of Korea. On the one hand, it is suggested to take the lead in building an upgraded version of China-South Korea Free Trade Area focusing on service trade. In this process, it is necessary to further reduce tariffs on goods trade, and gradually promote the docking of bilateral service standards and the integration of service markets. On the other hand, we should take the lead in implementing the free trade policy under the service industry to achieve the "early harvest" of the service trade development between China, Japan and the Republic of Korea, adapt to the general trend of industrial transformation led by the digital economy, and carry out in-depth cooperation in the intelligent manufacturing industry.
Nowadays, the world is undergoing great changes that have never taken place in a hundred years. The global pandemic of COVID-19 has accelerated the great changes. Economic globalization has encountered counter currents, protectionism and unilateralism have risen, the world has experienced an economic downturn and international trade and investment have declined sharply, bringing unprecedented challenges and tests to human production and life. At the same time, a new round of scientific and technological revolution and industrial transformation has sprung up in recent years, which has driven the strong rise of digital technology, promoted the deep integration of industries and led the vigorous development of the service economy. Due to the unique characteristics of light assets and soft factors, the service industry needs an open, transparent, inclusive and non-discriminatory industry development environment, and countries need to make efforts to reduce the "post-border" investment and trade barriers that restrict the flow of factors and promote cross-border interconnection. China should continue to vigorously promote the development of service trade, on the one hand, to meet the domestic service-oriented consumption demand, on the other hand, to better facilitate China's high-level and institutional opening up. At the international level, China should base on the actual needs of domestic service trade development, promote the coordination of service rules at multilateral, plurilateral and regional levels, constantly improve the global governance of service economy, and promote the inclusive growth of the world trade.
Brief Introduction to the Author
Shi Jingxia | Professor, School of Law, Renmin University of China (RUC). Prof. Shi is also an Arbitrator at Beijing Arbitration Commission / Beijing International Arbitration Center.