Trade in Services

Unlike trade in goods, where benefits are based on tariff savings, trade in services focuses on the trading environment. FTAs seek to safeguard market access and ensure conducive conditions where service suppliers can thrive.

FTAs support Trade in Services in 3 main ways:

Preferential Treatment
Enjoy preferential trade commitments from our FTA partners as a Singapore service provider.

Predictable Operating Environment
Work within an established set of trade rules that lock in favourable conditions for you as a service provider. Get assurance that trading partners will not make changes to become more restrictive, even when political regimes change.

Recourse
Seek aid if a trading partner breaches their previously agreed-upon obligations.

Market Access
FTA partners are obliged to remove/reduce market access restrictions on:

1. Number of service suppliers
   Example: Quotas are imposed on the number of service suppliers employed.
2. Value of service transactions or assets
   Example: Bank subsidiaries are limited to 30% of total domestic assets of all banks.
3. Number of service operations/output
   Example: A company is only allowed to undertake a fixed number of projects.
4. Number of persons that may be employed
   Example: Only 5 Singaporeans are allowed for each establishment of a firm.
5. Type of legal entity or joint venture required
   Example: Commercial presence in a particular sector may only be in the form of a representative office.
6. Foreign capital participation
   Example: Singapore companies can only hold up to 49% of equity in a foreign country.

National Treatment
FTA partners are obliged to accord treatment to services and service suppliers in a manner that is no less favourable than that accorded to their own nationals.

• Nationality or residency requirements for directors of financial institutions
• Discriminatory licensing, qualification and registration requirements
• Eligibility for subsidies reserved to nationals
• Technology transfer, requirement to recruit and develop more local human resources
• Local content requirements
• Operational limits on foreign companies (e.g. limitations on location of branches)

Domestic Regulation
FTA partners are obliged to ensure that general measures affecting trade in services are administered in a reasonable, objective and impartial manner.

Domestic Regulation disciplines apply to Qualification Requirements and Procedures, Technical Standards and Licensing Requirements. These measures should be based on objective and transparent criteria, should not be overly burdensome and should not in themselves restrict trade in services.
Example: Application procedures for licenses, qualification requirements for professionals.

Most Favoured Nation Treatment
FTA partners are obliged to grant each other treatment no less favourable than what they grant to any other trading partner.

Local Presence
FTA partners are obliged to not require a service supplier of other FTA partners to establish or maintain a representative office or any form of enterprise, or to be resident, in its territory as a condition for the cross-border supply of a service.

Transparency
FTA partners are obliged to make known all relevant measures affecting trade in services to each other within a reasonable period of time; through prompt publication, maintenance of enquiry points, and fair judicial review.

Mode 1: Cross-border supply
This is when consumers and service providers remain in different countries. Only the service crosses the border.
Example: A Singaporean doctor provides medical advice to a patient in a foreign country via e-mail or telephone

Mode 2: Consumption abroad
This is when consumers make use of a service in another country, or when there is a movement of the consumer’s property.
Example: A foreign patient enters Singapore and receives treatment at a hospital in Singapore; or sending medical equipment abroad for repair.

Mode 3: Commercial Presence
This is when subsidiaries or branches are set up in another country to provide services.
Example: Singapore Medical Group sets up a hospital in a foreign country.

Mode 4: Movement of Natural Persons
This is when individuals travel from their own country to supply services in another country on a temporary basis.
Example: A Singaporean doctor travels to a foreign country to provide medical services to patients in that country.

There are 12 main categories and 160 sub-sectors under the World Trade Organisation Services Sectoral Classification List.

• Business and Professional
• Communications
• Construction
• Distribution
• Education
• Environment
• Finance and Insurance
• Health and Social
• Tourism
• Recreation, Culture, Sports
• Transport
• Others

Corresponding number of Central Product Classification (CPC)
CPC is a tool; Members may describe sectors using other definitions.

Parties define the scope of commitments (i.e. sectors they apply to, limitations to commitments) in schedules.

Commitments and their meanings are as follows:

Positive List

Negative List

Schedule of Commitments

OR Schedule of Reservations