Arellano University School of Law International Trade Law

LIBERALIZATION OF TRADE IN SERVICES

The Philippine Setting

Submitted to: Atty. Ever Huigit

Submitted by: Uriah S. Valencia 2011-0292

TABLE OF CONTENTS

Contents Introduction Highlights Discussion General Trade in Services ASEAN Framework on Trade in Services Trade in Services in the Philippines Liberalization of Trade in Services Liberalization of Trade in Services in the Philippines Conclusion Recommendation

Page 3 3 4 4 5 9 13 15 17 18

INTRODUCTION 2

Of the many sectors involved in international trade, services industry is one of the fastest rising sectors. It has rapidly increased over the past few years. In the Philippines, the services industry has evolved to become a great factor in the country's economic growth and development. It has taken over several sectors to become of one Philippines' most vital industry in its economy. The services industry has contributed significantly to the country's GDP (Gross Domestic Product). It also had its multiplier effect on exports. The rapid growth of services industry has also brought a huge number of local as well as foreign investors. And, because of the investment opportunities brought about by the services sectors, employment opportunities in the country also significantly increased. Despite the emergence of services industry in the Philippines however, not all people clearly understand the impact and the importance of such industry in the country's economic growth. There is thus a need to study the services industry in each and every aspect of it. An in depth study of the services industry will enable the people as well as the government cultivate such industry to be more competitive and be developed to become the country's top industry when it comes to trading with the international market. A thorough study of trade in services will also enable the government to think of strategies that will bring about an effective trade in services. The growth of services industry also sees the need to further liberalize such industry so as to cater the needs of people as well as a government's economy. This paper thus intends to show the impact of the services industry in the Philippine economy and the ways undertaken to further liberalize trade in services. This paper attempts to answer the following objectives: 1. Present the basis for the international trade in services 2. Analyze the impact on trade in services in the country's economic growth 3. Recommend measures to the liberalization of trade in services The basis for the international trade in services was discussed through a review of the concept of liberalization, the role of the General Agreement on Trade in Services (GATS) and the ASEAN Framework Agreement in view of trade in services liberalization. This paper will also show the situation of trade in services in the Philippines for the past few years. The country's GDP, its exports, the local and foreign investments and the employment opportunities brought by the services industry will also be presented. HIGHLIGHTS Trade in services applies to different sectors that were provided for in the GATS. For the purposes of this study, trade in services will focus on trade in services in the Philippines in compliance with the various agreements and liberalization being undertaken. DISCUSSION

Philippine economy is more often than not associated with the agricultural industry. There is this connotation that the agricultural products of the Philippines are the biggest factors which contribute to the growth of the economy. In the recent years however, the services industry has had overtaken the agricultural industry as being the key for the country's economic growth. General Agreement on Trade in Services The General Agreement on Trade in Services (GATS) is the first multilateral agreement to cover trade in services. It came into effect in January 1995 as a result of the Uruguay Round of negotiations. All members of the World Trade Organization (WTO) are signatories to the GATS and will have to assume the resulting obligations. The objective of GATS is to contribute to trade expansion under conditions of transparency and progressive liberalization and as a means of promoting the economic growth of all trading partners and the development of developing countries.1 The GATS provided for the services covered by the agreement. It provided for 12 service sectors.2 The Philippines, being one of the signatories of GATS are thus bound to comply with all the rules and regulations embodied in the agreement. Philippines have listed its commitments as well as its corresponding exemptions under the GATS. Modes of Supply of Services There are four modes of supply for the delivery of services under GATS. These are Cross Border Trade, Consumption Abroad, Commercial Presence and Movement of Natural Persons. Mode 1: Cross-border supply: Services are supplied from the territory of one party to the territory of another party through telecommunications, mail, and other means. Mode 2: Consumption abroad: This is the purchase by foreigners of services in the territory of another country. Mode 3: Commercial presence: Service providers are allowed to conduct business in another country through the establishment of offices, branches, agencies, joint ventures, and other forms of equity participation. Mode 4: Movement of natural persons: Professionals from one territory are employed as service providers in other countries. Basic Obligations

GATS Training Module: Basic Purpose and Concepts: http://www.wto.org/english/tratop_e/serv_e/cbt_course_e/c1s2p1_e.htm 2 12 Service Sectors: 1. Business, 2. Communication, 3. Construction, 4. Distribution, 5. Education, 6. Energy, 7. Environment, 8. Financial, 9. Health, 10. Tourism, 11. Transport, 12. Movement of Natural Persons

Countries which are signatories of GATS are bound to follow the provisions of the agreement. However, the said agreement recognizes the rights of the government of the countries' right to regulate and introduce new regulation to meet the national policy of such country. The basic obligations of the GATS signatories are the following: Most Favored Nation Treatment (MFN): Countries shall extend all concessions to all signatories of the agreement. That is, a benefit given to services and services providers of one member country shall be accorded to services and services providers of other member countries. Transparency: This obligation requires all GATS members to publish all measures regarding the conduct of trade in services in member countries. GATS also provided the specific commitments to be applied in specifically designated sectors namely national treatment and market access. GATS provided that limitation may be attached in order to reserve the right to operate measures inconsistent with national treatment and market access. National Treatment: The service or service providers of member countries operating in another member country shall be given the same treatment as the citizens of the host member country in the conduct of their commercial operations. Market Access: This is a commitment undertaken by each member countries in specific sectors after negotiations. ASEAN Framework on Trade in Services3 Because of the slow process of negotiations towards liberalizing trade in services under the GATS, certain countries have opted to speed up their process of liberalization. These enabled the Philippines and other ASEAN4 member countries to enter into an agreement more liberal than the GATS without extending the same concessions to all GATS members. The importance of the services sector in the ASEAN region and the global trend towards increasing liberalization of trade in services persuaded member countries to enact cooperation in trade in services in ASEAN. The agreement was formally institutionalized through the signing of ASEAN Framework Agreement on Services (AFAS) during the 5th ASEAN Summit.5 AFAS adopted the structure and approach of GATS.
3

Portions of this section are derived from the paper of Fernando T. Aldaba and Rafaelita M. Aldaba entitled Economic Community 2015: Capacity-building Imperatives for Services Liberalization, Discussion Paper Series No. 2013-06, January 2013, posted in the Philippine Institute for Development Studies website. 4 Association of Southeast Asian Nation or ASEAN is an organization of ten countries located in Southeast Asia, which was formed on August 8, 1967 by Indonesia, Malaysia, the Philippines, Singapore and Thailand. Its membership has expanded to include Brunei, Myanmar, Cambodia, Laos, and Vietnam. The objectives of ASEAN includes accelerating economic growth, social progress, cultural development among its members, protection of regional peace and stability, and opportunities for member countries to discuss differences peacefully. Bangkok, December 15, 1995
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Bangkok, December 15, 1995

The objectives of AFAS includes to enhance cooperation in services among Member States in order to improve the efficiency and competitiveness, diversify production capacity and supply and distribution of services of their service suppliers within and outside ASEAN; to eliminate substantially restrictions to trade in services among Member States; and to liberalize trade in services by expanding the depth and scope of liberalization beyond those undertaken by Member States under the GATS with the aim to realizing a free trade area in services.6 The main goal of AFAS is basically to eliminate trade restrictions in services among member countries and promote efficiency and competitiveness of ASEAN service suppliers. Since AFAS adopted the structure of GATS, aside from the main obligations of market access and national treatment, it also establishes general guidelines for mutual recognition, denial of benefits, dispute settlement, institutional mechanism and other areas of cooperation in the services sector. Like the GATS, the AFAS adopts a positive list or bottom-up approach in service trade liberalization such that only those sectors which they are ready to liberalize are listed by Member Countries. For each sector or sub-sector on the positive list, commitments are made for market access and national treatment across each of the 4 modes of supply. Trade in services liberalization under AFAS is directed towards achieving commitments beyond Member Countries commitments under GATS. Table 1: Philippines AFAS Commitments AFAS Package Sectors Covered First Package (1997) Business Services Tourism Second Package (1998) Air Transport Business Services Construction Financial Services Maritime Transport Services Telecommunications Tourism Third Package (2001) Transport Services Fourth Package (2004) Transport Services Fifth Package (2006) Business Services Communication Services Construction and Engineering Related Services Distribution Services Environmental Services Healthcare Services Tourism and Travel Related Services Recreational, Cultural and Sporting Services Transport Services Sixth Package (2007) Business Services Communication Services
6

ASEAN Framework Agreement on Services: http://www.asean.org/communities/asean-economiccommunity/item/asean-framework-agreement-on-services

Seventh Package (2009)

Eight Package (2012)

Construction and Engineering Related Services Distribution Services Environmental Services Health Related and Social Services Tourism and Travel Related Services Recreational, Cultural and Sporting Services Transport Services Business Services Communication Services Construction and Engineering Related Services Distribution Services Environmental Services Health Related and Social Services Tourism and Travel Related Services Recreational, Cultural and Sporting Services Transport Services Business Services Communication Services Construction and Engineering Related Services Distribution Services Environmental Services Health Related and Social Services Tourism and Travel Related Services Recreational, Cultural and Sporting Services Transport Services

Source: ASEAN Secretariat Website Table 1 shows the various sectors to which Philippines gave its commitments with AFAS. Philippines has listed its commitments from the first package in 1997 up to the eighth package in 2012. The table shows that Philippines have expanded the number of sectors to which it gave its specific commitments. From business and tourism sectors in the first package, the second package shows that Philippines has committed to more sectors particularly air transport sector, construction, financial services, maritime transport and tourism sector. In the third and fourth packages however, Philippines only committed to transport services. The succeeding packages showed that Philippines has committed to more sectors. In the fifth package, Philippines no longer covered the air transport sector. Philippines meanwhile committed then again to business services, communication, construction, distribution, environmental, healthcare, tourism, recreational and transport services. For the sixth, seventh and eighth packages, there was the same sectors covered as that of fifth package. However, there are sub- sectors added in these packages that gradually increases in each and every package signed. A close examination of these commitments would show that there are limitations on market access and national treatment for many of the sub-sectors. Mutual Recognition Agreements7
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Mutual Recognition Agreements: www.asean.org

Mutual Recognition Agreements (MRA) is defined as an agreement of mutual recognition of certain products between two or more countries to facilitate trade activity. Philippines have signed seven Mutual Recognition Agreements (MRA) in the following professional services under the business sector. These are: Engineering services (December 9, 2005) Nursing Services (December 9, 2006) Architecture (November 19, 2007) Land Surveying (November 19, 2007) Medical Practice (February 26, 2009) Dental Practice (February 26, 2009) Accountancy (February 26, 2009) Despite the passage of the Mutual Recognition Agreements, various professional organizations still feel reluctant implementing the MRAs as many are unfamiliar as regards such agreements. Constitutional provisions and some laws also delimit the implementation of MRAs. Thus, laws and regulations are also needed to be passed, updated and will have to be aligned to support specific MRAs. Because of these, there are professional organizations that have undertaken and commenced bilateral negotiations with their counterpart bodies, taking into account the various conditions surrounding them. Comparing the Philippine commitments under the GATS and AFAS, the coverage and depth of the two frameworks is substantially similar, since AFAS was patterned with GATS. AFAS however is focused with ASEAN regions. Trade in Services in the Philippines8 Growth of Trade in Services Services sector has played an important role when it comes to Philippines' economic growth and development. Table 2 shows that the growth rate of services sector has particularly increased over the past years. As compared to other industries to which growth has particularly declined or otherwise remained stagnant, the growth rate of the services sectors skyrocketed as brought about by the growth in it specific sub- sectors. From 3.4% in 2009, it rose up to 7.6% in 2012. The growth in the services sector of the country may be brought about by the Philippines' membership with the WTO particularly being a signatory of the GATS. Trading in services of the Philippines has also increased since the Philippines also is one of the signatories of AFAS. The export, foreign investments and employments generated by these particular sectors help the growth of services industry in the Philippines. The growth rate of services sector brings about added growth to the country's Gross Domestic Product9 that has a great overall impact in a country's economy. Table 2: Growth Rates by Industrial Origin INDUSTRY 2009
8 9

2010

2011

2012

Id. at 3 What is GDP and why is it so important? http://www.investopedia.com/ask/answers/199.asp

1. AGRI., HUNTING, FORESTRY AND FISHING 2. INDUSTRY SECTOR a. Mining & Quarrying b. Manufacturing c. Construction d. Electricity, Gas and Water Supply 3. SERVICE SECTOR a. Transport, Storage & Communication b. Trade and Repair of Motor Vehicles, Motorcycles, Personal and Household Goods c. Financial Intermediation d. R. Estate, Renting & Business Activities e. Public Administration & Defense; Compulsory Social Security f. Other Services GROSS DOMESTIC PRODUCT

-0.7 -1.9 16.1 -4.8 6.8 -0.9 3.4 -0.1 1.4 5.5 4.1 6.1 6.5 1.1

-0.2 11.6 11.4 11.2 14.3 9.9 7.2 1.0 8.4 10.1 7.5 5.8 8.4 7.6

2.6 1.8 7.0 4.7 -9.8 0.6 4.9 4.3 3.3 5.2 8.4 1.9 5.6 3.6

2.8 6.8 2.2 5.4 15.7 5.1 7.6 8.1 7.5 8.2 7.5 6.1 7.7 6.8

GROSS NATIONAL INCOME 6.1 -2.0 2.8 6.5 Source: National Accounts of the Philippines and National Statistical Coordination Board Philippines' Export of Services Exports have been a huge factor in a country's economy. In fact, the World Bank10 has ranked the Philippines among the best performers in the services exports. The services industry has overtaken the growth of the export of goods and other commodities over the past years. A close examination of Tables 3 and 4 will show the disparity between the growth in export of goods and the growth in export of service. The export of service industry has increased rapidly. Growth of export of service has had a big margin over export of goods. This goes to show that the services produced by the Philippines are well appreciated and are in demand in various neighboring countries as well as other countries. With the exports attaining the positive percentages, it shows that the country's GDP remains to be positive and that the effect of such to the economy is also affirmative. The services' industry export growth can be attributed to the growth of its sub- sectors particularly the travel or tourism, overseas contract workers and business sector brought about by
10

Growth in the Philippines: http://www.worldbank.org/en/country/philippines

BPOs and other computer and IT related industries. Export in travel or tourism is brought by a number of Filipinos who visit other countries for recreation and for other purposes. The growth in the number of overseas contract workers is due to the fact that Filipinos are naturally caring and are well mannered. The fact that Filipinos are known to be hard- working also caused the huge demands for Filipino workers abroad. The growth of the business sector is brought about by BPOs and other computer and IT related industries. BPO industry increased by a huge number due to the fact that countries which needs such services need English speaking individuals and that Filipinos are known to be well versed in English language. In a report, World Bank senior trade economist Sebastian Saez said that the services sector depends on human capital, the quality of the telecommunications network, and the quality of institutions. He said that the experience of exporting outsourced business services in the Philippines shows that by creating an enabling environment where the private sector can deploy its creativity, developing countries can reap the benefits that services exports opportunities are opening. The World Bank report also highlights the importance of developing the tourism sector. It however urged further reforms in the travel and tourism sector if the country intends to sustain growth moving forward.11 Table 3: Growth of Export of Goods in the Philippines INDUSTRY 2011- 2012 2012- 2013 Q1 Total Exports of Goods Principal Exports of Goods Electronic Components Principal Agricultural Products Principal Fishery Products Articles of Apparel Basketworks Cathodes Ignition Wiring Sets Metal Components Petroleum Products 9.9 8.0 8.8 7.2 -4.6 -0.8 16.2 -27.5 8.2 34.4 -28.9 Q2 12.7 -2.2 -5.5 15.5 10.4 0.6 2.4 -97.7 115.6 199.6 -66.6 Q3 7.0 -3.4 -9.1 -2.6 4.2 -37.6 -48.3 -75.1 33.7 465.4 -43.9 Q4 11.9 7.7 8.1 -20.3 44.7 -30.2 28.6 35.5 13.4 99.3 79.3 Q1 -8.9 -21.4 -28.4 108.9 21.5 -24.5 46.9 -39.7 25.2 146.4 51.9 -2.9 11.2 201.4 Q2 -8.7 -0.4 -3.6 37.0 124.4 -21.9 104.7

Others 14.6 37.4 46.4 24.3 19.7 -18.4 Source: National Accounts of the Philippines and National Statistical Coordination Board Table 4: of Export of Services in the Philippines INDUSTRY 2011- 2012
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2012- 2013

Ted P. Torres, The Philippine Star, June 7, 2011

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Q1 Total Exports of Services Transportation Insurance Travel Government 9.1 -2.9 -4.7 47.9 -5.7

Q2 2.7 15.6 15.3 21.2 3.7

Q3 2.8 3.0 30.2 -2.0 3.9

Q4 -0.6 -11.3 820.1 19.1 5.5

Q1 -3.2 -6.7 -35.9 6.2 -7.5

Q2 4.0 -3.7 -32.0 11.7 -4.0

Miscellaneous Services 3.7 -1.8 3.6 -2.7 -5.1 3.0 Source: National Accounts of the Philippines and National Statistical Coordination Board Local and Foreign Investments in Services Industry The growth of services industry has brought a great impact in the Philippines' economic development. An examination of Table 5 will show that the sectors under the services industry have brought a significant number of foreign and domestic investors in the country. Over the years, approved investments have increased tremendously. These investments bring more employment opportunities and additional income in the country as well as more dynamics in the economy. Foreign and domestic investment in services proves that the service industry in country is reliable. Growth in investments also shows that investors indeed trust the Philippine economy and that they know that they will generate much income from the sectors to which they invested. According to the Department of Trade in Industry, Philippines is "the place to be for investments" due to generally liberalized services industry, cost-efficient in terms of wages over labor standard expectations ratio and low operational costs, strategic logistics access point in ASEAN, natural pool of talents and culturally adaptable human resources that foreign investments look, strong remittances that build gross international reserves to comfortable levels above international benchmark levels, which thus buoy up surplus on balance of payments; and committed and supportive governance.12 Table 5: Total Approved Investments of Foreign and Filipino Nationals by Industry Industry 2007 2008 2009 Agriculture Communication Construction Electricity Finance and Real Estate Gas Manufacturing Mining
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1,856.1 14,221.8 14,089.7 139,078.3 54,927.0 561.0 94,676.7 13,775.6

2,498.0 2,186.0 215.9 131,922.6 114,088.2 75,517.6 48,269.1

2,873.5 5.7 179.5 32,296.1 89,111.1 16.8 106,299.6 2,018.9

Department of Trade in Industry, http://www.dti.gov.ph/dti/index.php?p=3

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Services Storage Trade Transportation Water

37,631.3 1,340.5 779.9 10,328.8 2,537.0

71,416.9 1,059.4 531.3 16,515.8 464,220.8

29,352.7 2,155.4 3,829.7 45,974.8 314,113.8

Total 385,803.7 Source: Department of Trade and Industry Employment in Services Industry

As regards the impact of the trade in services in employment in the Philippines, table 6 shows that majority of employment opportunities in the Philippines came from the services industry. The growth of persons employed in the services industry can be attributed to the various sub-sectors in the said industry. A concrete example of the increase in employment in the services industry is the increase in the employment under the computer or IT related services which is a sub- sector of the business services. In fact, Philippines is one of the countries that successfully developed a BPO export industry. It has outperformed most countries in industry growth emerging as the largest BPO center in the developing world after India and appears poised to become a major exporter of IT services as well. IT services and BPO combined a huge export revenue and employment opportunities13. In January 2013, workers in the services sector comprised more than one-half (54.1%) of the total employed population. Three in every ten (30.4%) were in the agriculture sector and 15.5 percent were in the industry sector. Classified according to sub-sector of major industry groups, workers in agriculture, hunting and forestry sub-sector comprised the biggest percentage (26.9%) of the total employed. Those in the wholesale and retail trade, repair of motor vehicles and motorcycles came next registering 18.8 percent of the total employed. Table 6: Percentage Distribution of Employed Persons by Industry Industry 2009 2010 2011 2012 Agriculture Industry (Mining, Manufacturing, etc. Services Source: National Statistics Office
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January 2013 30.4 15.5 54.1

34.3 14.5 51.1

33.2 15.0 51.8

33.0 14.9 52.2

32.2 15.3 52.6

Raja Mikael Mitra, "Leveraging Service Sector Growth in the Philippines", September 2013, http://www.adb.org/sites/default/files/pub/2013/ewp-366.pdf

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Liberalization of Trade in Services Trade liberalization is the removal or reduction of restrictions or barriers on the free exchange of goods and services between nations. This includes the removal or reduction of both tariff (duties and surcharges) and non-tariff obstacles (like licensing rules, quotas and other requirements). The eradication of these restrictions is often referred to as promoting "free trade".14 Services trade liberalization can also target the following specific barriers to market access, as delimited in the General Agreement on Trade in Services (GATS) under the World Trade Organization (WTO)15: Limitations on the number of services suppliers, such as through explicit quotas, nationality requirements (a form of implicit quota), the granting of monopoly rights, the granting of rights to exclusive supply, or the requirements of an economic needs test; Limitations on the total value of services transactions or assets, such as in the form of numerical quotas, economic needs tests, or market share requirements; Limitations on the total number of services operations or on the total quantity of service output, again through numerical quotas or economic needs tests; Limitations on the total number of employees, either through quotas (in either absolute of percentage terms) or needs tests; Limitations or restrictions regarding the type of legal entity (eg subsidiaries, branches, representative offices) or joint venture; and Limitations on foreign equity participation (maximum percentage limit on foreign shareholding in either individual or aggregate terms). Such limitations on market access can affect any or all of the modes of services delivery, and all potentially can be the target of services trade liberalization. The progress in the economy has been attributed to the services industry. As compared to trade in goods however, liberalization of trade in services has been modest. To open up the domestic market to international competition barriers to the free flow of goods and services across borders and the adjustments of domestic industries should be removed. These hindrances are caused mainly by market differences and constitutional and legal barriers. There are other obstacles to services liberalization which includes the high cost of doing business, lack of infrastructure, and government issues which affects the competitiveness of industries; inefficient coordination among government agencies involved in trade in services. The low level of
14

Trade Liberalization, http://www.investopedia.com/terms/t/trade-liberalization.asp

15

Does AFAS have Bite? Comparing Commitments with Actual Practice, Dr. Philippa Dee, January 2013, https://crawford.anu.edu.au/pdf/staff/phillippa_dee/2013/does-afas-have-bite.pdf

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awareness among key stakeholders of the benefits from services reforms, lack of a comprehensive strategy on services liberalization and lack of capable staff members in key government agencies are also obstacles to the liberalization of trade in services16. As a consequence of opening up to global trade, foreign products and services are allowed to enter the domestic market easily and to compete with local industries. The purpose of liberalization, therefore, is to push various sectors of the economy towards a more efficient use of its resources. The results of this process are lower costs of production and improved quality and increased quantity of products and services available to the domestic market. These objectives are attained through sectoral competition, institutional reforms, and structural changes where domestic industries are able to adjust towards a more efficient production level and to approximate the production technology and costs of foreign competitors. . Liberalization of Trade in Services in the Philippines In the late 1980s, Philippines has pursued unilateral services liberalization. With its participation in the GATS as well as the AFAS however, it has started to liberalize various sectors. In order to take advantage of the impact in the economy brought about by services industry, Philippines needs to further liberalize trade in services. Philippines should allow local producers to take advantage of preferential tariffs and provide better access to markets of partner economies. Philippines should also be able to have global and regional integration with its partner economies. The global and regional integration is very important to increase market access. The government thus needs to pursue market access through effective bilateral, multilateral and regional engagements and representation, and to maximize opportunities offered by existing trade agreements. The government also needs to commit to engage all possible stakeholders in order to proactively participate in international engagements geared at keeping the country in the radar screen of international business. The government shall need to pursue programs to complement with its international trade strategies and provide more opportunities for market access. The development of a competitive services sector would entail, among other necessary conditions, the removal of policy barriers. GATS and AFAS commitments to services liberalization in the future round of negotiations could serve as an external pressure that could facilitate the implementation of necessary reforms to strengthen the sector. To achieve all these, Philippines should be able to come up with a wide range of trade strategies. The various services sectors shall also need be well defined and that coordination with government agencies and other sectors shall be emphasized. In an article17, an official of the Geneva-based World Trade Organization (WTO) has cautioned the Philippines against focusing too much on intraregional trade agreements as its main trading partners are still the United States, Japan and China.
16

The Liberalization of Professional Services, Tereso Tullao,Jr. Ph.D., Series 1999-03 Business Mirror: PHL seen to gain more from multilateral trade dealsWTO by Estrella Torres, June 27, 2013

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WTO Spokesman Keith Rockwell said the country would benefit more if it would campaign hard for the success of multilateral trade deals. He said that it would benefit the Philippines more if it actively pursues multilateral trading at the WTO considering its top three trading partners are huge players in the WTO, namely the US, Japan and China. He raised concerns on the plethora of regional trade agreements being entered into by the Philippines, along with other members of the ASEAN. He added that Philippines should continue to engage in ASEAN, but needs stronger global rules and that ASEAN members like the Philippines should trade beyond their boundaries. While he suggests that agreements with the ASEAN are good, he encourages the Philippines to deal more with countries outside the ASEAN boundaries so as build global relations.

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Conclusion Liberalization is the removal or reduction of restrictions or barriers on the free exchange of goods and services between nations. These series of reforms are intended to increase the openness of the domestic economy to the global market. Efficiency in the use of the various resources is the main objective of the process. The results of this process are lower costs of production and improved quality and increased quantity of products and services available to the domestic market. These objectives are attained through sectoral competition, institutional reforms, and structural changes where domestic industries are able to adjust towards a more efficient production level and to approximate the production technology and costs of foreign competitors. The driving force in the liberalization of trade in services is several factors including its rapid growth which bring about additional GDPs, exports, investments and employment opportunities. However, the growth of the services industry is delimited and is not fully realized because of some reasons and problems that are encountered by such an industry. The liberalization of trade in services has been established in global agreements like the GATS under the WTO and regional arrangements like AFAS under the ASEAN. Differences may however arise as regards the process of liberalization of trade in services. Problems occur as regards constitutional and some other legal issues. The capability of the sub- sectors under the specific services sector is a cause of concern as whether they can comply with the rules and regulations the liberalization of trade in service might bring. Despite some difficulties encountered with the liberalization of trade in services however, Philippines must make the necessary steps and measures in catering the need of improving the services industry. Said industry has dramatically contributed to the Philippines' rapid economic growth that is why Philippines should take advantage of it. Services industry brought a substantial growth in exports thereby adding a significant contribution in the country's GDP. The industry has also brought in investments that in turn gave employment opportunities in the country. Because of the impact of trade in services in Philippine economy, it is imperative for the country to give its focus on the industry. Philippines should be able to come up with a trade strategy that is efficient and will help improve and make known the services industry. The Philippines should also come up with suggestions in the succeeding rounds of negotiations on how to effectively and efficiently liberalize trade in services. Philippines should be able to make adjustments to cater the positives and the negatives brought by services industry without compromising the country's laws and regulations. Philippines should also have the urge to continue to engage not only in ASEAN, but rather, beyond their boundaries

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Recommendations In the light of the implications of trade in services in a global as well as the local perspective, and the need to further liberalize trade in services, the courses of action that could be taken are summarized as follows: Conduct a Wide- Ranged Information Dissemination on Liberalization: Because of the great impact of the liberalization of trade in services on economic growth and development, there is a need for information dissemination on liberalization for people to be aware of its implications. Philippines, as well as other countrys commitments in GATS and AFAS shall also be communicated. Suggest Measures that are to be taken to Further Liberalized Trade in Services: Philippines has seen and experienced the impact brought by the growth of services industry. In the next rounds of negotiations therefore, it is imperative that the Philippines should make suggestions as to what can help further liberalize trade in services without causing any disadvantage to the country. Involve Government Agencies and other related organizations: It is important that the government, particularly the designated agencies to take an active role so that their views and suggestions in the formulation of new agreements be considered. The input government agencies and other related organizations will play an important factor in defining any new agreements that may be achieved. Government agencies and related organizations are important as they know best about the strategies employed by the government as well as the rules and regulations attached to them. Come up with Additional Commitments: The Philippines should come up with additional commitments related to the services industry. Despite the fact that there is still a need for the further liberalization of trade in services, Philippines should continue to come up with commitments in relation to FATS and AFAS. Improve Competency of the Services Industry: Philippines is aware of how huge the services industry has been in terms of its contribution in the economic development. It is thus important for the government as well as the specific sectors involved to come up with measures that will enable the services industry to be competitive enough to be able to compete with the industries of other countries. There should be adequate seminars and trainings to members of each sector to able to be more effective and efficient.

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