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2015/SOM3/CONF/007

A Call to Action

Submitted by: International Trade Centre

Regional Conference of Services CoalitionsCebu, Philippines7 September 2015

A call to action

Regional Conference of Services Coalitions APEC SOM 3

Cebu, 7 September, 2015

Jane Drake-Brockman Services Programme

International Trade Centre

What is ITC? •  ITC is a technical assistance agency, based in Geneva,

under the joint auspices of the United Nations and the World Trade Organisation (WTO)

•  with a niche mandate to work with the private sector, and especially with SMEs, to build international competitiveness

•  During Indonesia’s chairmanship in 2013, China’s chairmanship in 2014 and intensively under Philippines’ chairmanship in 2015, ITC has worked hand-in-hand with ABAC and with PECC to mobilize regional services stakeholders, large and small, to give them voice in public/private dialogue with APEC Senior Officials and to call APEC to action

Why? •  Because, as a development agency, ITC shares the Philippines’

determination to achieve more inclusive growth •  For SMEs and microSMEs (services is the most SME sector of them all) •  For women and youth employment and entrepreneurship (the services sector

employs more women and youth than any other sector) •  For local communities (which can more readily share the benefits of participating

in services value-chains) •  For remote destinations (for which digital trade in services reduces isolation)

•  Because ITC recognises the extra-ordinary development dividends that result from increased services value-added throughout our economies and the way in which efficient services can rescue competitiveness in agriculture, forestry, mining, manufacturing.

•  Because ITC acknowledges the now overwhelming global evidence on the power of increased two-way trade and investment in services, to boost the growth prospects of the very poorest economies seeking to bypass traditional industrialization by leapfrogging direct to services, as well as for stronger economies seeking to boost productivity to avoid the middle-income trap.

A quick reminder on job creation Services are human resource and skills intensive and deeply inter-

relational Services were traditionally thought of as low value-added and largely

non-traded, even if contributing significantly to employment and income

Today services are recognised as high value, knowledge-intensive activities contributing big productivity gains across all of our economies.

Services are also now recognised as highly traded – in fact contributing nearly 50% of global exports.

During this transition, services activities have retained their human resource intensity and continue to generate the bulk of job growth in most of our economies

At the end of 2014, the Chinese Ministry of Commerce released the final report of the 3-year interagency study on the value-added measurement of China’s foreign trade.

The study reveals that in 2012, every $1million of services exports generated 104.8 jobs, while the equivalent value of goods exports generated 59.

Why? •  Because ITC understands the importance of regional cooperation

at a whole-of-government level, in facilitating trade and investment in services, and is willing to support it, in all parts of the world

•  What do we mean by whole-of-government? We mean we have to get out of our policy silos and take a holistic look at the sector as a whole

•  Because ITC has witnessed the special influence of APEC; the world’s largest regional integration effort, in sharing best practices and finding pathways forward, which have impact all over the world including in the WTO

•  APEC Business Travel Card •  Environmental Goods Agreement •  Trade Facilitation Agreement

•  Because ITC considers that trade in services should have much more consistent, much higher priority attention, as the sector with the highest levels of government intervention and the sector most in need of regulatory best practice benchmarking

•  Because it is the sector, if we get our regulatory houses in order, most capable of boosting productivity and sustaining economy-wide growth, development and poverty reduction

•  And APEC, with all its valuable diversity, is uniquely placed to find the way

Along with ABAC and PECC, and with other international partners, the ITC expects to continue to work closely with Peru, as the APEC chair in 2016, to help provide some of the tools for mainstreaming services across the APEC fora and in particular for services competitiveness road-mapping.

Aspects of services competitiveness 1  Facilitating services connectivity at regional level

(reducing trade costs by jointly addressing chokepoints in cross-border activity so business is as seamless as possible)

2  Ensuring an enabling business environment for services competitiveness at domestic level (boosting productivity by eliminating unnecessary red tape and reducing compliance costs)

3  Innovating & upgrading at SME level (very affected by the domestic business environment)

4  Nurturing clusters/hubs of services excellence at sub-sectoral industry level

5   whole-of-services development strategies

Drivers of services competitiveness (largely policy driven)

1.Human Capital (access to talent, education, skills, ideas, customer focus) For services firms, human capital costs can be 70-80 % of total costs- everything to do with recruiting, training and deploying people is critical

2.Investment in Intangible Assets (corporate IP including business methodologies) & supportive environment for collaborative services Innovation

3.(Two way) Access to Digital and other knowledge-economy Infrastructure 4.Quality of Institutions (complexity, rigidity, independence) & Efficiency of

Domestic Regulation (reduce compliance burdens & allow firms flexibility to adapt to change)

5.Global and Regional Connectivity with the market (trade & investment reform, ability to move people, ideas and data, standards, technical inter-operability, mutual recognition, seamlessness of regulation, export promotion)

6.Deliberate Policy Focus (statistics, inter-agency coordination, national services strategies and services competitiveness roadmaps)

7.Organised Services Business Advocacy and Public-Private Stakeholder Consultation (services providers, services consumers, ngos and academics)

Services sector is SME intensive •  Despite significant levels of concentration in services industries with

high historical levels of government ownership, the bulk of the services sector is, everywhere, chiefly made up of SMEs.

•  Increasingly it is SMEs in the services sector which are most engaged in global and regional value chains and business-to-business B2B activities.

•  Globally since 1997, more services SMEs have been involved in international alliances than manufacturing SMEs.

•  OECD data shows that in 2000, there were nearly 4 times as many services SMEs engaged in international alliances than manufacturing SMEs.

•  Firm size and production scale tend to matter less in services markets than “nimbleness” and project by project flexibility, presenting particular opportunities to smaller firms

•  Smaller firms also face big challenges, especially bearing the burden of trade costs and navigating the regulatory labrynths at both domestic and regional level

SMEs need to cluster in coalitions for concerted advocacy to boost both their own & economy-wide

services competitiveness •  Skills – What intervention would you need to increase the availability and expertise of your

services skills to ensure you are positioned to take advantage of regional and global business opportunities.

•  Costs - Are you experiencing undue regulatory compliance costs, human resource costs, broadband internet costs?

•  Value-Chain analysis – is there potential for upgrading: where are the blockages?

•  R&D/Innovation – What could be done to boost the ability of the local services sector to increasingly improve productivity through innovation? Do you need a higher level of collaboration between the private sector, academia and governments?

•  Policy and Regulatory Focus and Attention; Do you need to achieve a higher level of support from the policy and regulatory institutions to help improve your access to global or regional opportunities?

•  Promoting and facilitating local services capability globally and regionally – is there anything you - or other agencies/institutions can do to improve your “branding” either domestically or internationally? Is trade finance readily available and if not, what needs to be done?

Building services centres of excellence

•  Development of human capital, training •  Inward direct investment including in Special Economic Zones •  Regulatory reforms; one stop shops •  Connectedness with the international market (openness to

imports) •  Connectivity of standards •  Trade finance •  Export promotion •  Provision of digital infrastructure •  Facilitating collaboration for innovation •  Mechanisms for services stakeholder consultation, especially

SMEs •  Inter-agency government coordination

Services Competitiveness •  5 years ago we didn’t have all the tools, but now

we have a pretty good tool kit •  ABAC, PECC, World Bank, OECD, ITC, ADB,

ERIA have all contributed •  there is a big item still missing, which APEC is perhaps well

placed to help with, namely a set of generic principles for services regulatory best practice

•  So now its over to APEC economies to use the new tools, to develop an APEC Services Competitiveness Roadmap •  In consultation with services stakeholders

•  who will themselves meet this afternoon to commence their own process of getting on with it.

Bringing services champions together

•  So this is the real reason ITC is here •  we are glad to have been able, through ITC’s

Global Services Network, to offer ABAC some help in mobilizing the stakeholders and bringing them to Cebu

•  we congratulate ABAC on this achievement •  ITC stands ready to assist an iterative

process of building a regional grouping of services sector representatives •  to support ABAC in its ongoing call to action on

services