EUKoreaFTA

The EU-Korea Free Trade Agreement

Services

EUKoreaFTA

Structure of the presentation

1. Main principles of the Services Chapter 2. Introduction to the Modes of Supply 3. Introduction to the Korean list of

commitments 4. A closer look at the Korean commitments 5. Legal services – Phasing in of commitments

EUKoreaFTA

1. Main principles of the Services Chapter

EUKoreaFTA

Market access

Sectors listed in the Korean list of commitments are subject to limitations therein

4 modes of supply Deals with existing and possible future quantitative limitations

- the number of service suppliers - The value of service transactions or assets - the number of operations or quantity of output - the number of natural persons supplying a service - the type of legal entity or joint venture - the participation of foreign capital

No backtracking Main idea – Legal certainty

EUKoreaFTA

National treatment

Same treatment as to own like services and service suppliers

Sectors listed in the Korean list of commitments subject to limitations therein

EUKoreaFTA

Most favoured nation (MFN) principle

Each party may maintain limited measures listed in and meeting the conditions of the Annex on MFN Exemptions.

The EU and Korea have to accord immediately to services and service

suppliers of each other treatment no less favourable than that it accords to like

services and service suppliers of any othercountry

EUKoreaFTA

2. Introduction to the Modes of supply

EUKoreaFTA

Mode 1: Cross-border supply

receives servicein territory of any

other country

ServiceSupplier Service

Consumersupplies servicefrom territory of

one country

supplies servicefrom territory of

one countryreceives servicein territory of any

other country

EUKoreaFTA

Examples of cross-border trade in services

E-commerce in the narrow sense - whatever the delivery method: retail over internet, teleshops, mail-order

E-services and e-commerce in wider sense: e-banking, distance training etc, advice over media, delivery over media, cloud-services

EUKoreaFTA

Examples of cross-border trade in services

Outsourcing for serviceswhere presence is not necessary: back-office, programming, phone answering services, research and testing etc

International transport New services: e-health

including robot surgery, satellite monitoring, cross-border audio/digital guides

EUKoreaFTA

Examples of barriers for cross-border trade in services

To industry:• Prohibition to provide cross-border services• Requirement to establish• Authorisation requirements• Recognition of service providers or service outcome• Language and info requirements

To consumers: • Obligations to use locally established providers• Restrictions to payments• Restrictions to delivery• Restrictions to tax deductibility

EUKoreaFTA

Mode 2: Consumption abroad

receivesservice in the territory of supplier

ServiceSupplier

Service Consumer or property of

the consumer

Service Consumer

receivesservice in the territory of supplier

EUKoreaFTA

Examples of consumption abroad

Physical presence in the second country: • Tourism and service consumption while travelling• Medical tourism• Students abroad• Border-shopping

Does not cover limitations to consumers of other Members, only own consumers

Does not include downloading – mode 1

EUKoreaFTA

Examples of barriers for consumption abroad of services

To industry:• Prohibition/restrictions to provide services to

non-resident consumers

To consumers: • Obligations to use locally established providers• Restrictions to payments• Restrictions to delivery• Restrictions to tax deductibility

EUKoreaFTA

Mode 3: Commercial presence

ServiceSupplier

Service Consumer

establishes a commercial presence in the territory of another country

ServiceSupplier

EUKoreaFTA

Examples of commercial presence

Investment- Establishing a new company- Establishing a subsidiary - Establishing a direct branch,- Establishing a representative office- Acquisitions of existing companies- Joint-ventures and other cooperative projects

with presence

EUKoreaFTA

Examples of barriers to foreign invested companies

Activity (sectoral) restrictions Ownership restrictions Capital limitations Geographical restrictions Restrictions on profit usability Limitations for management and staff Technology transfer requirements Authorisation requirements

EUKoreaFTA

Mode 4: Movement of natural persons

Service Consumer

Service supplied through temporary presence

of posted natural persons of one country in the

territory of another country based on services contract

EUKoreaFTA

Mode 4 categories

Does not cover immigration and labour movement(GATS annex on mode 4)

Established company

Self-employedIndependant professionals

Business service sellers

Contractual service suppliers

Business visitors

Intracorporate transferees

Graduate trainees

Contractual relationship for service provision with

local persons

Subsidiary, branch or representative office

EUKoreaFTA

Examples of barriers Mode 4

Restrictions to service providers• Establishment requirements, local representative requirements• Nationality and residence requirements• Economic needs tests, labour market tests• Minimum wage etc related requirements• Qualification requirements, licensing, registration and

documentation requirements• Entry restrictions (visa, work permit)

Restrictions to consumers• Prohibitions/restrictions to use non-established service

providers• Tax related barriers

EUKoreaFTA

Right to regulate

Domestic regulation vs measures subject to trade liberalization

Right to regulate - introduce non-discriminatory regulation to enforce domestic policy objectives

Examples of public policy objectives:• Equitable access, regardless of income or location, to a service • Consumer protection, safety • Job creation in disadvantaged regions or labour market integration of

disadvantaged persons • Reduction of environmental impacts and other externalities • Macroeconomic stability • Avoidance of market dominance and anti-competitive conduct • Avoidance of tax evasion, fraud, etc.

EUKoreaFTA

3. Introduction to the Korean list of commitments

EUKoreaFTA

List of specific commitments

Principle of positive listing Horizontal and sectoral limitations Sets out conditions and degree of market

access and national treatment (limitations) -gradual and partial liberalisation possible

EUKoreaFTA

Some service sectors with scheduled commitments by Korea

Legal

Accounting

TaxationEngineering

Architect.

VeterinaryComputer

R&D

Real estate ConsultingMarketing

Testing

Publishing Security

Courier

Satellite

Environment

Insurance

Education

Hotel

Travel

NewsFinancialShipping

Rail

EUKoreaFTA

Level of commitments

Full commitment “None”, i.e. no limitations except those in the horizontal limitations

Partial commitment

“None, except…”, i.e. exact limitation on what is NOT allowed. All else is allowed

“Unbound, except…” – i.e. what IS allowed.

“Unbound for…” – i.e. exact limitation on what is NOT allowed. All else is allowed

No commitmentSector not listed

“Unbound” – no binding

EUKoreaFTA

4. A closer look at the Korean commitments

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A closer look at the Korean commitments

The most ambitious services FTA ever concluded by the EU

Will significantly improve Korea’s current WTO-GATS commitments and its DDA offer in the ongoing negotiations.

Additionally covers the liberalisation of investment, both in most of the services and most of the non-services sectors.

The scope of the FTA includes diverse services sectors as transport, telecommunications, finance, legal services, environmental services and construction.

Audiovisual services are excluded from the chapter.

EUKoreaFTA

A closer look at the Korean commitments

Telecommunications• Ownership restrictions• Satellite services

Environmental services• Non-industrial waste waters

Shipping firms• Right of establishment• Access to facilities

EUKoreaFTA

A closer look at the Korean commitments

Construction services

Financial services

International express delivery services

Auxiliary air transport services

Law services

EUKoreaFTA

5. Legal services – Phasing in of commitments

EUKoreaFTA

Legal services – phasing in of commitments

Phase 1: entry into force

Law firms of the EU can establish representative offices (Foreign Legal Consultant offices or FLC offices) in Korea

Lawyers licensed in the Member States of the EU can provide legal advisory services regarding

i) the jurisdiction in which they are licensed and ii) public international law

EUKoreaFTA

Legal services – phasing in of commitments

Phase 2: two years after entry into force

Korea will have to allow cooperative agreements with Korean law firms in order to

(i) be able to jointly deal with cases in which domestic and foreign legal issues are mixed and (ii) to share profits derived from such cases.

EUKoreaFTA

Legal services – phasing in of commitments

Phase 3: five years after entry into force

Korea will allow law firms of the EU to establish joint venture firms with Korean law firms.

*Korea may impose restrictions on the proportion of voting shares or equity interests of

the joint venture firms.