ADB BRIEFSNO. 237DECEMBER 2022ISBN 978-92-9269-944-4 (print)ISBN 978-92-9269-945-1 (electronic) ISSN 2071-7202 (print)ISSN 2218-2675 (electronic)Publication Stock No. BRF220573-2DOI: http://dx.doi.org/10.22617/BRF220573-2Liberalizing Services Trade in the Regional Comprehensive Economic Partnership: Status and Ways ForwardKEY POINTS• Deeper services trade liberalization under the Regional Comprehensive Economic Partnership (RCEP) is observed, on average, but disparities in the extent and depth of commitments across member countries, services sectors, and modes of supply may cause the potential gains to be unevenly distributed.• Lifting restrictions on cross-border movement of independent professionals and contractual service providers could not only boost Mode 4 services trade but also trade in goods and other services through spillover effects.• Foreign equity restrictions under Mode 3 remain a challenge in enhancing foreign direct investments.• Coupled with investments in digital infrastructure and human capital, deeper liberalization under Mode 1 is crucial to foster digital services trade and economic development. • Technical assistance is needed to support developing countries’ negotiators and regulators in adopting a negative list approach toward greater services trade liberalization, regulatory coherence, and transparency.Pramila A. CrivelliEconomistEconomic Research and Regional Cooperation DepartmentAsian Development Bank (ADB)Jeremy MarandEconomic Research AnalystADB ConsultantGerald Y. PascuaEconomic Research AnalystADB ConsultantINTRODUCTION More than 2 decades after the landmark entry into force of the 1995 General Agreement on Trade in Services (GATS), and amid the economic uncertainties and overlapping challenges arising from trade tensions and the global pandemic experience, revitalizing services trade liberalization has taken two new strides in the Asia and Pacific region.1First, the ASEAN Trade in Services Agreement (ATISA) was signed in Manila in October 2020 and entered into force in April 2021, building upon the outcomes of the 10 rounds of progressive services liberalization packages implemented by the Association of Southeast Asian Nations (ASEAN) member states from 1997 to 2018 under the ASEAN Framework Agreement on Services (AFAS). ATISA also comes with sector annexes on financial services, telecommunication services, and transport ancillary services (ASEAN 2020). Second, signed 1 month after ATISA, the Regional Comprehensive Economic Partnership (RCEP) entered into force in January 2022. The RCEP is expected to further boost trade in services by providing better market access and improving the predictability and transparency of regulations (ASEAN 2021). Chapter 8 on trade in services also contains sector annexes on financial services, telecommunications services, and professional services. 1 The authors would like to thank the members of the Regional Cooperation and Integration Thematic Group (SDTC-RCI) for the valuable comments provided. The authors are also grateful to Paulo Rodelio Halili for his comments and production support. ADB BRIEFS NO. 2372A key development under ATISA and the RCEP is the transition mechanism from a positive list to a negative list approach to services trade liberalization. Such a transition could be challenging for negotiators and regulators in developing member countries. It will require considerable technical skill and expert understanding of the practical implications of services trade liberalization given the domestic regulatory landscape, economic and social structures, competitiveness, and resources. This brief is an initial attempt to quantify the depth of the RCEP services liberalization commitments. The Asian Development Bank (ADB) and the Economic Research Institute for ASEAN and East Asia (ERIA) developed a method to compute the RCEP Services Trade Liberalization rates.2 This brief reports the results and discusses them in the broader context of the recent services trade expansion in the region. While the RCEP offers deeper liberalization than GATS, significant disparities in liberalization rates were observed among countries and modes of supply, which could impact trade flows, productivity,3 and ultimately economic growth.4 The RCEP region, for example, notably exhibits a low average liberalization rate for services traded by individuals of one member through their presence in the territory of another (Mode 4). Given the positive spillover effects of Mode 4 on merchandise trade and services trade delivered under Modes 1 and 3 (Jansen and Piermartini 2004), the limited degree of Mode 4 liberalization can hurt prospects of services trade growth in the region. This brief also shows specific types of existing restrictions and documents the services liberalization rate gaps between the RCEP countries and modes of delivery. It concludes with preliminary insights and implications in the current contexts of digital transformation and pos