international service forum taipei, 28 october 2008 (1:00-5:30) taiwan international convention...
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International Service ForumTaipei, 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 KerneisManaging Director
ESF (European Services Forum)
« The voice of the European Service Industries for International Trade
Negotiations in Services »
« The voice of the European Service Industries for International Trade Negotiations in Services »
ESF = 20 services sectors:• Insurance• Banking• Business services ( IT &
Computer; consulting, advertising, after-sales services, etc.)
• Professional services (legal services, accountants, architects, engineers,etc.)
• Construction services• Distribution services• Publishing services (incl.
Music)
• Postal & Express Delivery services
• Audio-visual services,
• Energy related services,
• Environmental services
• Telecommunication services
• Tourism
• Air Transport
• Maritime Transport
But no members in Education services and in Health services
For more information, see www.esf.be
« The voice of the European Service Industries for International Trade Negotiations in Services»
• BARCLAYS BANK• BT (British Telecom)• CLIFFORD CHANCE• COMMERZBANK• DEUTSCHE BANK• DHL• FRANCE TELECOM• GOLDMAN SACHS• IBM EUROPE
• LLOYD’S• ROYAL AHOLD NV• SIEMENS AG• STANDARD
CHARTERED BANK• TELEFONICA• TNT • TUI• VEOLIA ENVIRONMENT
ESF MEMBERS INCLUDE:
For more information, see www.esf.be
3
20
2
14,8
1,4
3230
20,4
51,2
27,5
65
50
77,6
34
71,1
0
10
20
30
40
50
60
70
80
Agriculture Industry Services
DevelopedDevelopingEUChinaTaiwan
World Economy:Percentage of GDP by Sector, 2006
« 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.
Rank Country Trade Volume
Exports Imports Balance
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 2006, EUR bn
« The voice of the European Service industries for the International trade in services negotiations »
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 €)
333,3
296,3
37
368,1
321,7
46,4
402,9
350
52,9
441,6
373,1
68,5
0
50
100
150
200
250
300
350
400
450
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
050
100150200250300350400450
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).
Eurostat : EU FDI Yearbook 2007
ASEAN attracted only 3,6% of EU outward FDI in 2005
1,7%
15%
3,6%
What does FDI include?
• FDI Capital Flows• FDI income• FDI stocks in a
country at the end of the year
0
500
1000
1500
2000
2500
2003 2004 2005
Total Extra EUoutward flowsTotal Extra EUFDI IncomeTotal Extra EUAssets
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, Korea, Taiwan,
101
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 4 23 4 4 5 35 162Brunei 7 6 5 1 19Cambodia (LDC) 24 16 5 5 3 4 15 1 3 1 11 88Indonesia 14 17 4 15 2 2 54Laos (LDC) Not yet a WTO MemberMalaysia 24 11 5 23 1 2 2 2 65Myanmar (LDC) 2 1 3Philippines 7 23 2 15 47Singapore 20 15 5 ? 16 2 2 60Thailand 21 6 3 1 3 4 13 3 1 11 66Vietnam 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
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
Note: The number of commitments does not prejudge of their value!
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.
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: [email protected].
Internet Web site: www.esf.be
« The voice of the European Service Industries for the GATS negotiations »