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					              « The voice of the European Service
                Industries for International Trade
                   Negotiations in Services »
        International Service Forum
     Taipei, 28 October 2008 (1:00-5:30)
Taiwan International Convention & Conference, Room 102

Organised by: The General Chamber of Commence of ROC
         & Taiwan Coalition of Service Industries

 "The trend of International Services
       Trade & Investment"
          (Focus on Asia)

                  Pascal Kerneis
                Managing Director
          ESF (European Services Forum)
               « The voice of the European Service Industries for
               International Trade Negotiations in Services »

                                     • Postal & Express Delivery
ESF = 20 services sectors:
                                       services
• Insurance
                                     • Audio-visual services,
• Banking
                                     • Energy related services,
• Business services ( IT &
  Computer; consulting,              • Environmental services
  advertising, after-sales services,
  etc.)                              • Telecommunication services
• Professional services (legal       • Tourism
  services, accountants, architects, • Air Transport
  engineers,etc.)
• Construction services              • Maritime Transport
• Distribution services              But no members in Education
• Publishing services (incl.           services and in Health
  Music)                               services
             For more information, see www.esf.be
                     « The voice of the European Service Industries
                    for International Trade Negotiations in Services»

                   ESF MEMBERS INCLUDE:
•   BARCLAYS BANK              •   LLOYD’S
•   BT (British Telecom)       •   ROYAL AHOLD NV
•   CLIFFORD CHANCE            •   SIEMENS AG
•   COMMERZBANK                •   STANDARD
•   DEUTSCHE BANK                  CHARTERED BANK
•   DHL                        •   TELEFONICA
•   FRANCE TELECOM             •   TNT
•   GOLDMAN SACHS              •   TUI
•   IBM EUROPE                 •   VEOLIA ENVIRONMENT

          For more information, see www.esf.be
             World Economy:
     Percentage of GDP by Sector, 2006
80                                                    77,6
                                                              71,1
70                                              65

60
                                      51,2           50
50                                                                   Developed
                                                                     Developing
40                          32                               34
                                 30      27,5                        EU
30                                                                   China
          20                      20,4
20                                                                   Taiwan
                   14,8
10    3               1,4
               2
0
      Agriculture            Industry            Services
     « The voice of the European Service industries in international trade in services negotiations »

International Trade in Services: what does it include?
• Services exports in the balance of payment include
  commercial transactions that involve the crossing of borders.
• It comprise the cross-border services (mode 1) like
  electronic commerce transactions, architectural plans sent by
  fax, legal consultancy provided by e-mail,
• Payment of a tourism package (all inclusive trip), payment
  of yearly university fees (mode 2), payment of licence or
  franchise fees (royalties), payment of transport fees
  (shipping, air cargo & express), etc.
• The repatriation of profits of affiliates (mode 3);
• The payment of the contract between the companies who
  agreed to get an accountant (natural person) moving to the
  customer to make an audit for six weeks (mode 4), etc.
            « The voice of the European Service industries for the International
                              trade in services negotiations »
EU-27 International Trade in Services with non-EU Countries 2006, EUR bn
Rank       Country           Trade         Exports       Imports       Balance
                            Volume
    1 USA                     256.731       134.664        122.067       12.597
    2 Switzerland              90.468        52.712         37.756       14.955
    3 Japan                    31.874        18.939         12.935        6.005
    4 Norway                   26.881        16.403         10.478        5.925
    5 Russia                   24.995        14.221         10.774        3.448
    6 China                    24.084        12.750         11.334        1.416
    7 Canada                   18.360        10.172           8.188       1.985
    8 Singapore                17.179        10.883           6.296       4.587
    9 Turkey                   16.688          5.730        10.958       -5.228
   10 Australia                15.191          9.033          6.158       2.875
EU-27 International Trade in Services with non-EU Countries in 2006 (EUR bn)
Rank           Country   Trade Volume   Exports      Imports      Balance
 11    Hong Kong               13.584       6.896        6.688        0.207
 12    India                   12.526       6.978        5.548        1.430
 13    Korea                   10.367       6.339        4.028        2.341
 14    Brazil                   9.777       5.162        4.615        0.548
 15    South Africa             9.662       5.305        4.357        0.948
 16    Egypt                    7.320       2.294        5.026       -2.732
 17    Croatia                  7.045       2.283        4.762       -2.478
 18    Mexico                   6.778       4.091        2.687        1.403
 19    Thailand                 6.517       1.999        4.518       -2.519
 20    Israel                   5.501      33.112        2.389        0.723
 21    Morocco                  5.172       1.672        3.500       -1.828
 22    Taiwan                  5.116        3.066        2.050       1.016
 23    Argentina                4.049       2.395        1.654        0.741
 24    Malaysia                 3.888       2.078        1.810        0.268
 25    New Zealand              3.138       1.809        1.329        0.480
 26    Indonesia                2,483       1.412        1.071        0.341
Trends of the EU International Trade in Services
  EU International trade in Services
    (Trends in volume – Bio €)
450                                     441,6
                             402,9
400             368,1                         373,1
    333,3                        350
350                   321,7
          296,3
300
250
200
150
100                                             68,5
            37          46,4       52,9
 50
  0
      2003         2004        2005       2006

               Export   Import    Net
  ASIA Countries are already big exporters of services




Singapore, Thailand and Malaysia together represent 5,5% of world
trade in services, ranking n°4, before China (4,7%). They exported 12,8
Bn € to the EU in 2006 - ASEAN 10 likely is n°3 before Japan (6,2%) –
 Trends in World Trade in Services
450
400
350
300
250
200
150
100
 50
  0
      EU




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                 2003          2004         2005          2006
International Trade in Services




28,7%
                   « The voice of the European Service
                   Industries for the GATS negotiations »
What ITS does not include?
• The activities of the foreign affiliates within the country in
  which they are established are not taken into consideration
  (= part of local GDP), nor the self financed investments
  through benefits (reinvested earnings/income) (also local).
• The flow of capital involved in mode 3 operations, i.e. the
  financing of the establishment of a new commercial
  presence in a foreign country; This is included in the
  Foreign Direct Investment (FDI) accounts, not in the
  balance of payment, hence not considered as services
  exports.
• More than 65% of global FDI flows are invested in services
  sectors (see hereafter).
ASEAN attracted only 3,6% of EU outward FDI in 2005


                                                 15%




                                                 1,7%



                                                 3,6%




 Eurostat : EU FDI Yearbook 2007
       What does FDI include?
  • FDI Capital Flows
  • FDI income
  • FDI stocks in a
    country at the end
    of the year
2500

2000
                            Total Extra EU
1500                        outward flows
                            Total Extra EU
1000                        FDI Income
                            Total Extra EU
 500                        Assets


  0
       2003   2004   2005
The return on investment in ASIA Countries is high!
ASIA countries reduced their investments in the EU in 2005
Services contribute to the largest share of FDI (1)
444,1 Bn € were invested in Services sectors by the EU in 4 years
(63,6 % of total 697,5 Bn €) (extra EU)
Services contribute to the largest share of FDI (2)




  But Far East Asia has not benefited much, with only average 15%:
                  (65% of 15% (104,6Bn €) = 68 Bn
86% of the investment coming to the EU are
        done in the Services sectors;
But we have seen that many Asian countries
 are reducing their investments in the EU!
              « The voice of the European Service industries
            for the International trade in services negotiations »


• It seems therefore that there are many
  opportunities that are not exploited
  between the EU and the ASIA.
• Why? Many trade barriers impede trade
  between the two regions
• Can the Trade policy between the two
  blocks contribute to improve this
  situation? Yes.
                « The voice of the European Service industries
              for the International trade in services negotiations »


• The EU services markets are largely
  open, but Asian countries’ private sector
  is likely not sufficiently aware and hence
  does not take business opportunities.
• There is a clear need to further explain
  how to understand the European Union
  Single market mechanism
                             « The voice of the European Service
                         Industries for the International Negotiations »
1. d) Architectural services
4 - Distribution Services
                          « The voice of the European Service industries
                        for the International trade in services negotiations »
• The European Union has adopted in December 2006 a directive on
  services in the internal market to improve the single market
  (implementation in 2010)
• It is automatically extended to all foreign owned company incorporated in
  one of the 27 EU countries
• The Directive 2005/36/EC, adopted on 7 September 2005, consolidates
  and modernises the rules currently regulating the recognition of
  professional qualifications.
  On 20 October 2007, at the end of the transposition period, this Directive
  has replaced fifteen existing Directives in the field of the recognition of
  professional qualifications.
• But the directive does not apply to non EU Professionals. They must sign
  either with each of the 27 EU Member States, or with the EC, a mutual
  recognition agreement (MRA), according to Article VII GATS.
• The EC has mandate to negotiate MRA for architects on a pilot phase.
  Private sectors associations agreement is a pre-condition to engage in
  negotiations. The purpose would then be to transform this private sector
  agreement into binding agreement. The profession has first to agree on
  the terms of equivalence of the diplomas and qualifications (+ 6 months
  study to learn local legislation, etc. + training period)
               « The voice of the European Service industries
             for the International trade in services negotiations »


• On the other hand, access to ASIA
  Services markets remain difficult in
  many instances, with a large number of
  trade barriers, either for cross border
  exports (mode 1, 2 & 4) or for
  investment (mode 3)
• And most of the ASIA countries have
  not engage seriously in the DDA GATS
  Negotiations.
                      « The voice of the European Service Sectors
                   for International trade Negotiations in Services »
       Participation of ASEAN countries to services
             negotiations in the Uruguay Round
Development Level         Average of GATS Commitments
                          by Services Sub Sectors
Least Developed Countries               24
Developing Countries                                42
China, Japan, Hong Kong,                           101
Korea, Taiwan,
ASEAN                                   56 (44 = ASEAN 7)
Developed Countries                                106
 Note: Maximum possible: 162 (W/120 classification)
                       ASEAN Specific Commitments in the U. R. (or upon accession)
Sectors         1 2                      3     4 5         6
                                                           7  8   9 10 11 Total
Max Poss.      46 26                     5     5 5        23 4
                                                           4      4 5 35 162
Brunei          7 6                                        5            1 19
Cambodia (LDC) 24 16                     5     5 3 4 15 1         3 1 11 88
Indonesia      14 17                     4                15      2     2 54
Laos (LDC)                                      Not yet a WTO Member
Malaysia                 24 11           5                23 1    2 2 2 65
Myanmar (LDC)                                                     2     1  3
Philippines                  7                            23      2    15 47
Singapore                20 15 5 ?                        16      2     2 60
Thailand                 21      6       3     1 3 4 13           3 1 11 66
Vietnam                  26 22           5     4 4         3      21        2       2       2     16 107
 1: Business Services; 2: Communication Services; 3: Construction & Related Engineering Services; 4:
 Distribution Services; 5: Education Services; 6: Environmental Services; 7: Financial Services; 8: Health
 Services, etc.; 9: Tourism, etc.; 10: Recreational Services, etc.; 11: Transport Services; 12: Other Services
                      ASIA Specific Commitments in the U. R. (or upon accession)
                                 + Conditional Initial or Revised offer (2)
Sectors                   1      2       3     4 5         6       7        8       9      10 11         Total

Max Poss.                46 26           5     5 5         4      23        4       4       5     35 162
China                    27 15           0     5 5         4      12        0       2       1     16      87
Chinese Taipei           38 20           5     4 4         4      15        3       3       2     18 116
Hong Kong                28 17           2     2 0         4      14        2       2       2      7      80
Macau                     1      0       0     0 0         0      16        0       2       0      0      19
Japan                    34 20           5     4 5         4      23        1       3       4     18 121
Korea                    37 18           5     4 2         3      14        0       3       1     16 103

Note: The number of commitments does not prejudge of their value!
 1: Business Services; 2: Communication Services; 3: Construction & Related Engineering Services; 4:
 Distribution Services; 5: Education Services; 6: Environmental Services; 7: Financial Services; 8: Health
 Services, etc.; 9: Tourism, etc.; 10: Recreational Services, etc.; 11: Transport Services; 12: Other Services
           Sector-by-Sector Analysis of Indonesia’s Initial Offer
•   1) Professional Services
     – Legal Services: New very weak offer
     – Accounting, Auditing and Bookkeeping Services: No offer – no UR commitments
     – Taxation Services: No offer – no UR commitments
     – Architectural Services: Very weak offer
     – Engineering Services: Very weak offer
     – Integrated Engineering Services & Urban Planning Services: Very weak offer
     – Computer and Related Services: No offer – weak commitments
     – R & D Services: No offer – weak commitments
     – Real Estate Services: No offer – no UR commitments
     – Rental and Leasing Services without Operators No offer – no UR commitments
     – Other business services – No offer
     – For the vast majority of the sectors, including advertising, market research, management
         consulting and services incidental to agriculture and fisheries, Indonesia has no commitments and
         makes no new offer. Project management, technical testing, services incidental to manufacturing
         and maintenance and repair of equipment are committed but very restricted and no offer has been
         made.
•   2) Communication Services
     – Postal and courier Services: No offer – no UR commitments
     – Telecommunications: No offer – weak UR commitments
•   3) Construction: New limited offer – more needed
•   4) Distribution Services: No offer – no UR commitments
•   5) Educational Services: New offer
•   6) Environmental Services: No offer – no UR commitments
•   7) Financial Services: Very weak offer – weak UR commitments
•   8) Health Related and Social Services: New Offer
•   9) Tourism and Travel-related Services: Weak and disappointing offer
•   10) Transport Services: Very weak offer, weak commitments
•   11) Energy Services: New Limited Offer
                         « The voice of the European Service
                         Industries for the GATS negotiations »
Main barriers to Financial Services liberalisation :
• Obligation to enter the market through joint venture
• Limitations on capital ownership
• Limitations on licences allotted to foreign companies
• Restrictions on branching, or on the legal form
• Lack of National Treatment in many services sectors
• Local employment requirements
• Long and burdensome administrative procedures
• Restrictions on real estate access
• Lack of transparency in domestic regulation (economic
  needs tests, etc.)
• Lack of independent regulator (Telecom, post, energy, etc.
                              « The voice of the European Service
                          Industries for the International Negotiations »
Concrete examples of restrictions in Financial Services in
  ASIAN Countries:
• China: Capital requirement 10X higher that international
  standard
• Hong Kong: Residency requirement of the CEO
• Indonesia: Geographical limitation: Foreign Banks & JV only
  in 11 cities (incl. +4 in DDA)
• Philippines: 70% of resources or assets in Banking system held
  by domestic bank;
• Malaysia: Banking: 30% foreign equity cap;
• Singapore: Insurance: 49% equity cap
• Thailand: Life & non-life insurance: 25% foreign equity cap
• Thailand: - existing foreign banks: only two additional
  branches allowed - 25% equity cap in locally incorporated
  banks
• Taiwan: Restriction on Offshore banking of branches
                         « The voice of the European Service
                     Industries for the International Negotiations »
The European Services Companies would like
  therefore that :
• ASIA Countries substantially improve their offers in the
  current DDA round;
• They accept to bind their existing practice, i.e. that they
  consolidate under the WTO rules all their autonomous
  domestic reforms that they have undertaken since the
  end of the UR FS in 1997;
• They create new business opportunities by allowing at
  least foreign equity majority ownership (51%);
• They consider doing in regional EU-ASEAN RTA or in
  bilateral negotiations with the EU what they believe is
  not doable in the WTO.
         « The voice of the European Service
         Industries for the GATS negotiations »

Pascal KERNEIS
Managing Director
European Services Forum – ESF
168, Avenue de Cortenbergh
B – 1000 – BRUSSELS
Tel: + 32 2 230 75 14
Fax: + 32 2 320 61 68
Email: esf@esf.be.

Internet Web site: www.esf.be

				
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