Viewing cable 07BEIJING609, CHINA'S FIRST FTA SERVICES AGREEMENT

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UNCLAS SECTION 01 OF 02 BEIJING 000609 
 
SIPDIS 
 
SENSITIVE 
 
SIPDIS 
 
USDOC FOR DAS KASOFF 
USDOC FOR ITA/MAC/AP/MCQUEEN 
 
STATE PASS USTR STRATFORD, WINTER, ALTBACH 
 
GENEVA PASS USTR 
 
E.O. 12958: N/A 
TAGS: ETRD WTRO ECON EINV CH XC AS NZ
SUBJECT: CHINA'S FIRST FTA SERVICES AGREEMENT 
 
REF: A) 06 BEIJING 09501 B) BEIJING 0571 C) Manila 0179 
 
BEIJING 00000609 001.2 OF 002 
 
 
¶1. (SBU) Summary: China signed its first Free Trade 
Agreement (FTA) in Services with the ten countries of ASEAN 
in January, 2007 during the 12th Annual ASEAN Summit in 
Cebu, the Philippines. While initially opening a limited 
set of services, the agreement brings China and ASEAN 
closer to realizing their goal of a comprehensive FTA by 
¶2010. Follow-on packages to expand services sectors are 
expected over the next several years. According to a 
Chinese Ministry of Commerce (MOFCOM) trade official, China 
will submit the FTA in Services to the WTO Notification 
Committee after consultation with ASEAN countries. End 
Summary. 
 
China Signs Its First Trade in Services Agreement 
--------------------------------------------- ---- 
 
¶2. (SBU) In January 2007, at the 12th ASEAN Summit held in 
Cebu, the Philippines, China and the 10 ASEAN countries 
signed China's first Free Trade Agreement in Services. The 
FTA in Services will enter into force in July 2007. Under 
the terms of this first package, China will open up 5 
service sectors (which include construction, environmental 
protection, transportation, sports and commerce) and 26 
sub-sectors. ASEAN agreed to open a total of 60 sub- 
sectors covering finance, telecommunications, education, 
tourism, construction and medical treatment. Negotiations 
on a second package expanding the service sectors covered 
are ongoing, and more packages are expected over the next 
several years, according to the MOFCOM FTA negotiator. 
 
¶3. (U) The Free Trade Agreement in Services marks the 
second phase of China-ASEAN trade negotiations. In 2004 a 
Trade in Goods Agreement was completed covering 7,000 
products. The Agreement was implemented in 2005 and aims to 
eliminate tariffs on over 90 percent of products. In Cebu, 
the parties agreed to expedite consultations on the third 
phase of the FTA which would involve an agreement on 
investment, a Chinese Foreign Ministry official 
coordinating the ASEAN meeting said. Further discussions, 
including expanding the investment agreement to include the 
ROK and Japan, is expected at the November ASEAN summit in 
Singapore, according to this Foreign Ministry official 
(reftel B). Full FTA integration is expected by 2010. 
 
China and ASEAN Flexible 
------------------------ 
 
¶4. (SBU) During the negotiations, China offered five 
services sectors and 26 sub-sectors to all ten ASEAN 
countries on an equal access basis. Each ASEAN country 
tailored its own offerings of services market opening. For 
example, Thailand agreed to only four sectors while 
Singapore agreed to seven. (See para seven for website 
information on the complete agreement.) The MOFCOM FTA 
negotiator ruefully compared ASEAN's flexibility with the 
more challenging "comprehensive package deal" approach 
 
BEIJING 00000609 002.2 OF 002 
 
 
insisted upon by the Australians and New Zealanders in 
their respective FTA negotiations with China. 
 
China-ASEAN Trade Continues Double-Digit Growth 
--------------------------------------------- -- 
 
¶5. (U) China-ASEAN trade from January to November, 2006 
totaled USD 145 billion, up 24 percent year-on-year, 
according to China Customs statistics. China's exports 
rose 29 percent to USD 64 billion. Chinese imports grew 20 
percent to USD 81 billion. ASEAN was China's fifth largest 
export market and the fourth largest source of imports from 
January to November, 2006. 
 
¶6. (U) Chinese enterprises invested USD 210 million in 
ASEAN countries from January to September, 2006, according 
to China Ministry of Commerce statistics. ASEAN countries 
had actualized investments of USD 2 billion in China 
totaling 1,610 projects over the same time period. 
 
Filing Expected Pursuant to WTO Obligations 
------------------------------------------- 
 
¶7. (SBU) China and ASEAN have yet to agree on how to 
proceed with the filing of the Free Trade Agreement in 
Services with the WTO Notification Committee. The MOFCOM 
FTA negotiator said that in the past the China-ASEAN FTA on 
Goods was filed and passed review by the WTO. Her office 
fielded several questions on the Trade in Goods Agreement 
from the United States and European Union, she noted. In 
the spirit of transparency and increasing efficiency, 
MOFCOM is making available the text of the Free Trade 
Agreements on their English language website, she added. 
(Note: the complete text of the China-ASEAN Services FTA 
and related country-by-country annexes can be found at: 
http://gjs.mofcom.gov.cn/aarticle/af/ah/20070 1/ 
20070104261073.html 
 
Sedney