PERU—CHINA FTA：A COMPREHENSIVE ANALYSIS IN ITS SERVICES CHAPTER

Fiorella　Jesus　Becerra　Lavini

【Abstract】The following document is a comprehensive paper of the Free Trade Agreement between Peru and China， which came into force on 1st March 2010， with a specific focus on trade in services.Through this paper， the intention is to demonstrate how the negotiation of the FTA and later its implementation have generated favorable results in the trade of services for Peru and China， establishing clear rules of international trade between the two countries， and fomenting trade by reducing most barriers to market access and services.

【Key words】FTA；Peru；China；Trade in Services

1.Introduction

Trade in services is becoming increasingly important for both， developed countries and developing countries. According to the World Trade Organization （WTO），although services account for over 60 percent of global output and employment，do not represent more than 20 percent of total trade.However，this percentage， that seems small， is systematically increasing due to technological advances in the communications sector， which allow a better international mobility.

Despite its importance，in poor countries there is a perception that will be losers from global liberalization of trade in services because their service industries are inefficient and uncompetitive. This perception is not consistent with the fact that many services today are used with an intermediate input for production，and with the fact that potential earnings from services liberalization are significant because it generates efficiency and a reduction of production costs through cheaper inputs.Also，since developing countries are labor intensive，it is assumed that these countries should have a comparative advantage in the provision of these labors.

Peru does not escape the global trend， as services account for 65% of its GDP and 75% of its EAP. In addition， their development is vital to the national goal of Peru for hub positioning. Therefore， unlike the Free Trade Agreement between Chile and China， the agreement between Peru and China regard did include the service sector.

2.Peru-China FTA： Trade in Services

The entry into force of the Free Trade Agreement with China consolidates the current opening that Peru offers in trade of services， as well as the preferential access of services and Peruvian suppliers in the Chinese market. This statement creates an environment of greater certainty and predictability for bilateral provision of services， both across borders and under commercial presence.

The FTA was negotiated under the approach known as “bottom-up”， under which each country only registers the services pretended to be liberalized，and protects the rest of sectors.7"This approach，based on the notion of "progression"，emerged in the Uruguay Round，as an instrument for which it was intended not to affect the sensitivity of many developing countries and has specific commitments as elements core "8.It was a wise choice for Peru，taking into account the structural advantages of China's trade international services.In the FTA negotiated with the U.S.and Chile，Peru recognized the approach of "top-down"，while in the services agreement between Chile and China applied，the approach of"bottom-up” was applied.Therefore，it is China that favors the negotiation approach.

The Services chapter of the Peru-China FTA explicitly stated that it does not apply to procurement， air services， financial services and subsidies and grants provided by one Party，including any kind of loans， guarantees， and insurances given as aid from any of the two governments. It does not apply either to services supplied in the exercise of governmental authority n the territory of a Party.

While these are expectations on the principle of universal coverage that usually are provided in international negotiations services， they seem to cover the interests of the Chinese negotiators， more than the Peruvian side， as they are consistent with the significant participation of the Chinese economy in its economy， facing the marked deregulation of markets prevailing in Peru. The same exceptions are present in the services sectors in the FTA between Chile and China.

The agreement includes the so-called "horizontal commitments"， which are those commitments equally applied to all service sectors involved in the negotiations，as well as the list of"specific commitments"， in which each country makes clear the degree or level of commitment for undertaking certain types of commitments in the various modes of supply of services under the General Agreement on Trade in Services（GATS）in the WTO.

In the Horizontal Commitments of the Peru-China FTA，in Mode 3 of the supply of services，in the section of limits of access to markets extended to national treatment，China defines the modalities of commercial presence that allows.Within the definition of foreign investment enterprises（FIEs）China includes both wholly foreign owned enterprises as well as joint venture enterprises.It also notes their restrictions on land use and specifies that it is state property and that its use by companies or individuals is limited to a period of between 40 and 70 years.

In both， market access and national treatment， Peru does not put restrictions on the type of legal personality of Chinese enterprises，but notes that a company wholly or partly foreign owned，directly or indirectly， can not own a mine， field， forest， water， fuel，or power sources located within 50 km.of the country's border limit. However， Peru has shown great flexibility in the application of this restriction. It also reserves the right to adopt or maintain any measure consistent with rights or preferences to socially or economically dispossessed minorities and ethnic groups. Similar reservation is made with regard to certain social services （social security， public education and training， health， childcare， etc.）.

In the section of limits of access to markets as in the section of national treatment，China does not establish any commitment in Mode 4 （Unbound）.This means it does not grant special treatment to Peruvian workers，except as noted in Chapter 9 of the FTA（Temporary Entry Business Persons）On the other side，Peru does not establish any commitment in Mode 4，except as noted in the aforementioned Chapter 9， and has recorded this restriction on the market access section，thereby extending it to national treatment.However，in this section of horizontal commitments，Peru expands on the requirements for entry and temporary stay of individuals，similar to those contained in the Act for hiring foreign workers，issued under President Fujimori.Instead，China has not made accuracies，reserving the discretion to authorize Peruvian workers to enter its territory.

In the section of horizontal commitments for Temporary Entry of Business Persons， Peru shows greater flexibility. China stated explicitly what it means by "intra transfer Corporate "and limited to senior employees of a company （managers， executives and specialists）， in contrast， Peru does not go in details.

While China allows entry of workers for an initial period of up to three years， Peru only allows Chinese workers for up to one year， renewable for consecutive periods， the number of times as requested， or until when conditions are maintained under this concession.

Regarding the ”specific commitments”， each country signed in ten categories or service sectors：businessservices，communication， construction， distribution services，education，environmental services，financial services， health and socialservices，tourism， recreation and sports，and transportation.Both countries excluded from its schedules of commitments Sector 8： Health and Social Services， and agreed to enroll in their Schedules of Commitments 41 subsectors. However， this coincidence is explained by the mutual involvement in environmental services，because while China inscribed on its list seven subsectors， Peru registered only two subsectors （wastewater services and solid waste disposal services）11.In the recreational， cultural and sporting service sectors， Peru enrolled five subsectors， and China one. In the tourism service sectors and related travel， Peru enrolled three subsectors， and China two.

A thorough and systematic analysis of the advantages and disadvantages of services trade agreement between Peru and China should consider also the number of subheadings that are enrolled within each subsector. In this line of ideas， it is showed that Peru has liberalized more than China.

After the establishment of the FTA， Peru consolidated an opening in trade in services， gaining preferential access of services and Peruvian suppliers in the Chinese market， which created a context of greater certainty and predictability for bilateral provision of services， both across borders and under commercial presence. On trade in services， China granted Peru Plus WTO commitments regarding travel services provided by travel agencies （eliminating restricted access to its domestic market）， a franchising（granting national treatment and full market access）and services provided by translators and interpreters（reducing them the requirement of 3 years previous experience to just 1）.

Furthermore， the agreement facilitated technological transfer from China. Peru obtained the first of six sites offered by China to Latin America for creating a technological research institute in agriculture， which will be focused on the investigation of Andean grains.

3.CONCLUSION

China seeks a more active presence in Latin America， demonstrating their willingness to become a world power. With presence beyond the Asian region， China not only needs of Peru as a supplier of raw materials， but also sees Peru as a strategic partner in the region， both for its economic stability and its geographical location.

Peru is the gateway to China throughout the South American region， which supports Perus goal of becoming the hub of South America.

Trade with China has helped improve the performance of the Peruvian economy and has risen the levels and standards of trade in services.

The FTA with China is a beneficial agreement to the country， because it drives the national production to higher levels while it protects and provides tools to defend themselves against bad business practices originating in China. [科]