the voice of the european services industry in international trade...

INTERNATIONAL SERVICES TRADE & INVESTMENT

The voice of the European Services Industry in international trade negotiations

Local and exportable services drive EU growth

• 150 million EU jobs and 68% of all employment • €9 trillion in GDP and 75% of EU GDP

The EU is the world’s largest exporter in services

• 32% of global services exports worth €579 bn in 2011 (excludes intra-EU)

• Intra-EU services exports worth €729 bn in 2011• €109bntradesurplusinservicesin2011(againstadeficitingoods)

The EU is the world’s largest investor and recipient ofForeign Direct Investment

• €3.0 trillion FDI stocks held inside the EU2 - 64% held in Services1

• €4.2 trillion FDI outward stocks held by EU2 - 61% held in Services1

1 20092 2010

01

CONTENTS

4 Facts & Figures: Services

6 Facts & Figures: Services and Investment

8 Services Trade and Barriers

10 InternationalTradeNegotiations

Summer 2012 SERVICES & INVESTMENT

2 About ESF

02

SERVICES & INVESTMENT

About ESF

The European Services Forum is an organisation representing the interests of European services industries in bilateral trade agreements and the WTO.

TheESFMembership(insideback-cover)comprisesinternationalservicescompaniesandEuropeantradefederationsfromallEUmemberstatesandcoveringawiderangeofserviceindustries.ESFhasbeenaregisteredNGOandofficialmemberoftheEUdelegationatallWTOMinisterialConferencessinceitsinceptionin1999.ESFactivelycontributestoservicesnegotiations through thepromotionandprioritisationof itsmemberships’ interests to the tradenegotiatorsandotherstakeholders.ThisisachievedthroughexcellentrelationshipswithkeyinterlocutorsandclosemonitoringofdevelopmentswithintheEU’sportfolioofbilateral,regionalandmultilateraltradenegotiations.

• ESF represents the vast majority of European services industries that have a direct interest in services markets within the EU and throughout the world.

• ESFcompanymembersemploymorethan3millionworkersinmorethan200countries,generatingconsolidatedan-nual revenues of more than €500 bn.

• ESFhas28Europeantradefederationsrepresentingtheinterestsofmorethan500nationaltradeassociationsandnationalprofessionalinstitutes,membersofwhichemploymorethan90millionworkersandprofessionalsandpro-vide services to hundreds of millions of consumers and clients in Europe and around the world.

1.1 WHAT IS ESF

The European Services Leaders Group (ESLG)consistsofESFcompanymembers’ChairmenandCEOs.Thegroup’smissionistomeettheEUTradeCommissioner,EUTradeMinistersandotherhighlevelinterlocutorsinchargeoftradepolicytoraisetheprofileofservicestradeandinvestmentliberalisation.

The ESF Policy CommitteecomprisesonerepresentativefromeachESFmember. Itadoptspolicypapersandhorizontalpositionpapers.Theapprovalprocedureworksbyconsensus,withoptingoutapossibilityformemberswhodonotsupportaspecificposition.ItmeetseverythreemonthswithdebriefingsfromEUtradeofficialsandactstoreinforcethetraditionofregularcontactbetweentheservice’sindustryandofficials.ThisCommitteealsomeetsregularlywithEUMemberStateofficialsandforWTOdelegationsinGeneva.ESFpolicypapersarepublishedontheESFwebsite:www.esf.be

ESFstronglysupportspoliciesaimedatremovingunjustifiablebarrierstotradeandinvestmentwiththeaimofliberalisinginternationalservicesmarkets.ESFacknowledgesthestrongevidencesupportingtheargumentthatamongotherbenefits,liberalisingservicesimprovesinputsintothewidereconomyandimprovescompetitivenessforbothdevelopedanddevel-opingcountries.ESFalsobelievesthatliberalisationneedstobeaccompaniedbyasoundregulatoryinfrastructurewhichencouragestransparency,competitionandfairness.

1.2 ESF STRUCTURE

1.3 ESF POLICY POSITION


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• Accounting• Air Transport• Architecture• Audio Visual • Banking• Construction• Distribution

• Energy• Engineering• Environmental• Express Delivery• Insurance&Intermediation• Investment,Securities,AssetManagement• IT & Computer Related

ESF members represent 20 services sectors

Aidedbytechnologicaldevelopmentsthatimproveservicestradability,servicesaregainingincreasedimportanceinin-ternationaltrade.Despitethis,unjustifiedbarrierstotradeandinvestmentinservicesremaininmanyservicessectors.ESF’smissionistoworktowardsimprovingthissituationforthebenefitofEuropeanservicessuppliers.

FurtherinformationabouttheactivitiesandstructureoftheEuropeanServicesForumandmembershipcanbeobtainedbycontactingthesecretariat:

EUROPEANSERVICESFORUM,AvenuedeCortenbergh168,B-1000BrusselsTel: +32 (0) 2 237 65 60 / Fax: +32 (0) 2 230 61 68 / Email: [email protected]

www.esf.be

About ESF

• Legal services• ManagementConsulting• MaritimeTransport• Postal services• Telecommunications• Tourism


04 Facts & Figures: Services

TheservicessectorisbyfartheEU’slargestGDPcontributor,makingupover70%ofEUvalue-addedasapercentageofGDP.

Globally,theservicessectoraccountsforanincreasingshareofGDP.Middleincomeeconomies,forexample,hadservicessectorscloseto40%ofGDPin1980,todayitis55%;a15%increaseinjustoverageneration.Theincreasingshareofser-vicesintheeconomycreatesopportunitiesfortradeableservicestobeexportedbyEuropeansuppliers.

2.1 SERVICES AND GDP

• Intradableservices,world-wideservicesexportsin2010amountedto€2.8trillion(including€0.7trillioninintra-EUexports) - a 15% increase in value from 2009.

• Extra-EUservicesexportsvalued€579billionin2011,givingtheEUaservicestradesurplusof€109billion.• Figuresdonotincludecrosstrade-forexample-EUcontrolledshippingcompanies’maritimetransportincrosstrade

betweennon-EUcountries,whichcouldbeworth,intheregionof,anadditional€50billion.• TheEUranadeficitof€153billioninGoodstradein2010furtherdistinguishingtheimportanceoftheEU’sservices

trade surplus to the EU economy.

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• Services also drive employment growth.IntheOECD,services account for over 70% of employment.• WithintheEU,servicesaccountedfor56%ofemploymentin1991,by2010thisfigurehadrisento69%.• The ability of European companies to export services internationally impacts job growth in the EU.

Services play a crucial role in the economic structural development of developing and emerging countries with infrastruc-tureservicessuchasTransport,Telecommunications,Finance,LogisticsandPostal&Courierservices,amongstothers,vitalinputsforallsectorsoftheeconomyandkeytointernationalcompetitiveness.

Between 2003 and 2010 the BRICS’ services imports increased by 258%. Emerging countries increasingly need the best servicessuppliersfromaroundtheworld,offeringpotentialnewopportunities,whenmarketsareopen,toEuropeanser-vice suppliers.

Access to emerging and developing mar-kets is of increasing importance as their services sectors grow at increased rates

Facts & Figures: Services

2.2 SERVICES AND JOBS

High Growth

2.3 SERVICES AND GROWTH

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ServicessectorsaretheprimarydestinationsforinwardForeignDirectInvestment(FDI).€5.3Trillion,or64%,ofinwardFDI stocks to the EU went into services.

FDIisvitallyimportantinenablingbusinessestoproduceefficienciesvianewtechnologicaldevelopmentsandknow-howbrought inby investingcompanies. Furthermore,external investment isoftencrucial indevelopingnew infrastructurethatcanrequireconsiderablesumsofinvestmentandexpertise,particularlyimportantfordevelopingcountries,andoftenfound abroad. FDI is also crucial for gaining access to new markets where a commercial presence may be needed. For Eu-ropeancompanies,expansionabroadinthiswaycanhelpEuropeanserviceproviderstosupplymoreconsumers,ultimatelycreatingnewjobsandsupportpositionswithintheEUandbringingnewknow-howtothebusiness.

The graph below illustrates the importance of services for EU outward investment.

Facts & Figures: Services and Investment

3.1 INVESTMENT, SERVICES AND GROWTH

€5.3 Trillion64% of inward

stocks

€5.8 Trillion61% of outward

stocks


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An open, liberalised economy that is well in-tegrated into the global economy through the adoptionofinternationalstandardsandregula-tions is best able to attract FDI;underscoring the value of openness, transparency and inte-gration.

ThefiguresonintraandextraEUservicesexportsbelowfurtherhighlightthebenefitsofpursuingglobalintegrationthroughliberalisationandtransparency.

The chart indicates that the value of intra-EU services exports are approximately 25% greater than extra-EU services ex-ports.ThishighlightsthebenefitsandsuccessesoftheEU’ssinglemarket,italsodemonstratestheconseauencesofbar-riersappliedbytheEU’stradingpartnersthateffectivelyhamperinternationalexports.Moreover,thisdemonstrates the potential value to be found from pursuing an ambitious international trade agenda and by directly supporting the work of the European Services Forum.

Facts & Figures: Services and Investment

3.2 INTEGRATION, TRADE & INVESTMENT

08 Services Trade and Barriers


Despitetheeconomicsupportforservicesliberalisation,servicessupplierscontinuetobenegativelyimpactedbydiscrimi-natory trade regimes in many countries. Barriers to services trade include:

Technological advancement simultaneously acts as an engine on greater services productivity growth and also on the ‘tradability’ of services;forexample,theinternetanddigitalcommunicationsindeliveringadvisoryserviceswithoutthenecessitiesofphysicalproximity.European service suppliers are highly competitive and services should continue to take a more prominent position within international trade negotiations.

Theeconomicbenefitsoftradeliberalisation,ingeneral,arealreadywelldocumentedandstudiesexplicitlyshowthepo-tentialeconomicgainsachievablefromglobalservicestradeliberalisation.OnestudycarriedoutbyexpertsfromtheWorldBankdevelopmentresearchgroupestimates,forexample,thatgrowth rates in countries with fully open telecommunica-tions and financial services sectors (both infrastructure services) are up to 1.5 percentage points higher than those in other countries.

“Servicesareboththebackboneandthegrowthengineofeconomiesinthe21stcentury,developedand developing alike. Services are key to all economic output and are behind more dynamic economic growthpatterns”-Peterson Institute for International Economics, April 2012

4.1 BENEFITS OF SERVICES LIBERALISATION

4.2 PROTECTIONISM & LIBERALISATION

• Barrierstocommercialestablishment(includingforeignownershipcapsandjointventureobligations).• Restrictionsontypesofcommercialpresence (branch/subsidiary)andnumberandtypeofservices thatcanbe

provided.• Discriminatoryregistrationrequirementsandlicensingprocedures.• Nationalityandresidencyrequirements.• Economicneedstestsanddiscriminatorytreatmentadvantagingdomesticcompaniesoverforeigncompanies.• Closed sectoral market access.• Non-TariffBarriers(NTBs)suchastechnicalbarriersandcomplexregulatoryenvironments.

Recenteconomicturmoilhasheightenedtheproblemofprotectionisttrademeasuresinsomecountries.Whilenotspecifi-callyfocusedonservices,theEuropeanCommissionnotedthatin2010,130newtraderestrictivemeasureshadbeenintro-ducedbytheEU’stradingpartners-ariseof30%.Furthermore,only17%ofallprotectionistmeasuresintroducedsincethestartofthe2008economiccrisishadlapsedby2010.Protectionistmeasuresareaconcern,even where they do not apply directly to services, a general protectionist stance could have scope to be applied more broadly.Forthisreason,it is important that the EU secures legally binding commitments from its trading partners.


09Services Trade and Barriers

ThisisparticularlyimportantgiventhattheEUishometosomeofthemostinternationallycompetitiveservicescompaniesintheworld,whichisreflectedintheincreasingsizeofservicestraderelativetoGDP,asshownbelow:

TradeinservicesasapercentageofGDPishigherfortheEUonaveragethanforotherhighincomeeconomies;conse-quently,European services companies have a large stake in securing legally binding services liberalisation commitments internationally.Forthisreason,the primary objective of ESF is the liberalisation of international trade in services and investment with legally binding commitments to match.ESFseekstoadvocateimprovinginternationalmarketopenessduringtradenegotiationsinanumberofways:

• Removeexistingmarketaccessbarriers• Legally bind current levels of openness• Adoptingambitioushorizontalregulatorydisciplines• Adoptingambitioussectorspecificdisciplines• Adoptionofmutualrecognitionagreements• Improveregulatorycooperationbetweenauthorities

European service suppliers need international trade negotiations to help increase trade volumes and provide legal secu-rity to operations.Thisisparticularlytrueinthemarketsofdevelopingandemergingcountrieswherethemediumandlongtermprojectionsindicatesubstantialgrowth,butwheremarketsarerelativelyclosedtoforeigncompanies.

Internationaltradenegotiationsgenerallytakeplaceinoneoftwoways:1. MultilaterallythroughtheWorldTradeOrganisation(WTO),or2. BilaterallythroughPreferential/RegionalTradeAgreements(PTAs&RTAs).

• Open access to public procurement• Commitmenttosecurecross-borderdataflows• Commitmenttostronginvestmentprotection• Improvingadministrationofmovementofqualified

persons

10 International Trade Negotiations


UndertheWTOsystem,servicescanbedeliveredin4modes(cross-border,consumptionabroad,commercialpresenceandtemporarymovementofpersons).Sectorsaredividedintoanumberofcategories,thushelpingtocreateuniversaldefini-tions.TheWTO’sdisputeresolutionmechanismhelpstoresolvetradeissuesthatarise.Thecurrentroundofnegotiations,theDoharound,waslaunchedin2001,thoughServicesnegotiationsstartedin2000.Underthenegotiations,eachcountryhas the right to decide which sectors it wishes to open to foreign companies and to what extent these sectors will be ac-cessible;forthiscountriesproduceinitialandrevisedoffersinreplytogrouprequestsfromothercountries.Inordertogaugeprogressintheservicesnegotiationsa‘SignallingConference’atministeriallevelwasheldinJuly2008withsome30countriesinattendance.Despitethis,theroundhassofarfailedtobeconcludedduetoanumberofdifferencesbetweendevelopedandemergingmembers.Whilethenegotiationshavenotyetprovidednewbindingcommitments,theprocesshasprovidedastartingpointfornewambitiousbilateraltradenegotiations.

WTOfoundermember(1Jan95) WTOsubsequentmember

WTOmembershipOct2011

TheWorldTradeOrganisationcameintobeingin1995,followingtheUruguayRoundoftradenegotiations,asthesucces-sortotheGeneralAgreementonTariffsandTrade(GATT)whichhadbeenestablishedinthewakeoftheSecondWorldWar.TheWTOhasover150membersaccountingforabout95%ofworldtrade.ThecreationoftheGeneralAgreementonTrade in Services (GATS) was one of the landmark achievements of the Uruguay Round and the results entered into force in1995,withallWTOmembersalsomembersoftheGATS.TheGATSwasinspiredbyessentiallythesameobjectivesastheGATT:tocreateacredibleandreliablesystemofinternationaltraderules.TheWTOcanbesaidtohavetwopillars,atraderulespillarandatradeliberalisingnegotiatingpillar.AllmembersoftheWTOhaveadoptedtherulesenshrinedintheGATS.Inaddition,mostofthemembersadoptedascheduleofcommitmentsthatlegallybindopenmarketaccessandnondiscriminatorytreatmenttoallothermembersoftheWTOundertheMostFavouredNation(MFN)clause.Morethan140economieshavenowcommittedsomelevelofservicesliberalisation;althoughwithgreatdivergenceinthescaleofcommitmentsandwithmuchremainingtobeachievedthroughongoingservicesnegotiations.

5.1 MULTILATERAL


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DespitethepoweroftheWTOtopromotetradethrougharulesbasedsystem,multilateralismmustinherentlysatisfymanycountries’interestsandcansufferslowprogress.TheDoharoundhasbeeninprogressfor10yearswithoutconclusionandwhiletheWTOisindispensable,tradeliberalisationmustcontinueandbilateraltradenegotiationsarekeyinstrumentsinachieving this.

TheEUiscurrentlynegotiatingwitharangeofcountriesthatareinterestedingainingpreferentialEUmarketaccessinex-changeforprovidinggreatermarketaccessandnondiscriminatorytreatmenttoEUbusinesses.Eachsetofnegotiationsareatvaryingstagesofdevelopment,including(implemented,concludedbutnotyetimplemented,undernegotiation,scopingstage). Economic Partnership Agreements (EPAs) include some trade provisions also.

EUbilateralnegotiationswithServicescontentOct2011

EU Concluded FTA (9)Implemented FTA (18)

EPAs with ACP (54) FTAundernegotiation(10) Scoping exercise (12)

Modern Comprehensive and Deep Free Trade Agreements seek to cover the following:

• Eliminationoftariffson+/-95%ofgoods

• Non-tariffBarriers• Rules of Origin• Trade in Services• Intellectual Property Rights

• Public Procurement• Competition• Regulatorydisciplinesandcooperation• Disputesettlementmechanism• Sustainability

International Trade Negotiations

5.2 BILATERAL

Customs Union & EEA

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Marketaccessliberalisationinthetradeofservicescanbeseparatedintotwocategories:HorizontalandSectorSpecific.Horizontaltopicsarethosebroadlyaffectingmultiplesectorsandcanthereforeincludeanynumberoffactorsthatimpactupontrade,beittheapproachtonegotiations,investmentregulations,realestaterestrictions,thetemporarymovementofpersons,orthescopeofrulesandregulations.One of ESF´s primary goals is to ensure horizontal barriers are removed and international best practises are employed for trade negotiations and regulatory cooperation.Thisisparticularlyim-portant as horizontal barriers can apply to all services sectors.Sectorspecifictopicsarethosethatmayapplytoanumberofsectorsbutwhicharetackledonasectorspecificbasissoastoallowdifferentlevelsofcommitmentwithineachsectorand sub-sector. ESF works with its members on the basis of eliminating both without harming necessary regulatory in-frastructure for the proper functioning of health systems, legal systems and public security.

International Trade Negotiations

5.3 EXAMPLE OF KOREA FTA

TheFTAsignedbetweentheEUandKoreaisanexampleofanagreementfollowingtheframeworkofanewgenerationtrade agreement. Studies indicate that the Korea agreement will increase EU services exports to Korea by more than 30% for almost all services sectors. It is estimated that EU-South Korea bilateral trade could increase by up to 82.6%, and it is also estimated that the EU’s bilateral trade balance with South Korea could improve by up to €10.1 bn. Such estimatesunderscorethecompetitivenessofEUserviceprovidersandthescopeofpotentialgainstobefoundinbilateralnegotiations.Crucially, it also demonstrates the importance to EU service suppliers of actively supporting the interests of services in international trade negotiations through the European Services Forum.

Examples of benefits gained by European services companies from the Korea agreement include:• Intelecommunications,Koreawillrelaxforeignownershiprequirements,allowing100%indirectownership,twoyears

afterentryintoforceoftheFTAatthelatest.Inaddition,EUsatelliteoperators(telephoneandTV)willbeabletooper-atedirectlycross-borderintoKorea,avoidinghavingtoliaisewithorgothroughaKoreanoperator.

• Inenvironmentalservices,KoreahascommittedtoallowEUcompaniestotreatnon-industrialwastewaters(sewageservices).

• EUshippingfirmswillhavefullmarketaccessandtherightofestablishmentinKorea,aswellasnon-discriminatorytreatment in the use of port services and infrastructure.

• NewbusinessopportunitiesforEuropeancompanieswillarisewithrespecttoalargenumberofmaritimeauxiliaryservices.

• There will be improvements for auxiliary air transport services such as ground handling.• Koreawillabolishtheobligatorysubcontractingrequirementforconstructionservices.• AllfinancialfirmswillgainsubstantialmarketaccesstoKoreaandwillbeabletotransferdatafreelyfromtheirbranch-

esandaffiliatestoheadquarters.• EUprovidersofinternationalexpressdeliveryserviceswillhaveaccesstotheKoreanmarket.AfterKoreanpostalre-

form,commitmentswillbespreadtofurtherareasoutsidethedefinitionofthereservedpostalmonopoly.• EuropeanlawfirmswillbeallowedtoopenofficesinKoreatoadviseforeigninvestorsorKoreanclientsonnon-Korean

law.LawfirmswillalsobeabletoformpartnershipswithKoreanfirmsandrecruitKoreanlawyerstoprovide‘multijuris-dictional’services.LawyerswillbeallowedtousetheirdomesticjobtitlessuchasSolicitor,etc...

• TheAgreementalsoprovideshorizontallegalcertaintybyincludingprovisionsthatgovernelectroniccommerce.

5.4 MAKING TRADE COMMITMENTS

ESF Members January 2012

1.Architects’CouncilofEurope–ACE | 2. BDO | 3.BritishTelecomPlc

4.BundesverbandderFreienBerufe–BFB

5.BureauInternationaldesProducteursetIntermédiairesd’Assurances–BIPAR

6. BUSINESSEUROPE | 7.BUSINESSEUROPEWTOWorkingGroup

8.ConfédérationFiscaleEuropéennes-CFE

9.CommerzbankAG | 10. Deutsche Bank AG | 11. Deutsche Telekom AG

12.DeutschePostDHL|13.DI–ConfederationofDanishIndustries

14.EK-ConfederationofFinnishIndustries|15. Ernst & Young

16. EuroCommerce | 17.EuropeanAssociationofCooperativeBanks–EACB

18.EuropeanBankingFederation–FBE|19.EuropeanBroadcastingUnion-EBU

20.EuropeanCommunityShipowners’Associations–ECSA

21.EuropeanExpressAssociation–EEA

22.EuropeanFederationofEngineeringandConsultancyAssociations–EFCA

23.EuropeanPublicTelecomNetwork–ETNO

24.EuropeanSavingsBanksGroup–ESBG

25.EuropeanSatelliteOperatorsAssociation-ESOA

26.FédérationdesExpertsComptablesEuropéens–FEE

27.Fédérationdel’IndustrieEuropéennedelaConstruction–FIEC

28.ForeignTradeAssociation-FTA | 29. France Telecom-Orange

30.GoldmanSachsInternational|31.IBMEurope,MiddleEast&Africa

32. Insurance Europe | 33.IrishBusinessandEmployersConfederation | 34. KPMG

35.LawSocietyofEngland&Wales|36.Lloyd’sofLondon

37.MouvementdesentreprisesdeFrance–MEDEF

38.OracleEurope,MiddleEast&Africa| 39. Siemens AG.

40. Standard Chartered Bank

41.SvensktNäringsliv(ConfederationofSwedishEnterprise) | 42. Telefónica SA

43. Telenor Group | 44. TheCityUK | 45. Thomson-Reuters

46. Trägerverein Zenit e.V | 47. TUI A.G. | 48. Veolia Environnement

49. Visa Inc. | 50. Vodafone | 51. Zurich Financial Services

Members are leading services companies with interests in over 200 countries and major Europeantradefederationsrepresentingmorethan500nationaltradeassociations

EUROPEAN SERVICES FORUMAVENUEDECORTENBERGH,168B-1000BRUSSELSTEL: +32 (0) 2 237 65 60 / FAX: +32 (0) 2 230 61 68 / EMAIL: [email protected]

WWW.ESF.BE

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