Business Perspective / Ambitions The EU views

Transcription

1 «The voice of the European Service Industries for International Trade Negotiations» ESA-EAC WORKSHOP TRADE IN SERVICES & INVESTMENT IN THE EPA NEGOTIATIONS Kampala, Uganda May 2008 Business Perspective / Ambitions The EU views Pascal Kerneis, Managing Director ESF (European Services Forum)

2 «The voice of the European Service Sectors for International trade Negotiations in Services» WHO ESF DOES REPRESENT? 32 European services companies, most of them major multinational companies (represented at CEO or Chairman level in the European Services Leaders Group ESLG) 3 European trade federations of various services sectors (e.g. banking, insurance, telecommunications, express, architects, engineers, accountants, shipping, tourism, etc.)

3 «The voice of the European Service Industries for International Trade Negotiations in Services» ESF covers most services sectors, including: Insurance Banking Business services: IT & Computer; consulting, advertising, after-sales services Professional services: legal services, accountants, architects, engineers 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 or Health services For more information, see

4 «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

5 «The voice of the European Service Sectors for International trade Negotiations in Services» WHAT DOES ESF DO? 1. It represents the interests of European services companies that export (or wish to export) their services and that do (or wish to do) business outside the EU. 2. As an important and well recognised Forum in its scope of activity, ESF is an appropriate interlocutor for the briefings done by services negotiators from Brussels (DG Trade) and from Geneva (WTO), reaching a large panel of the interested sectors in one place. 3. It informs its members on the GATS negotiations and regional and bilateral trade negotiations, on the offensives and/or defensives positions of the other trading parties.

6 «The voice of the European Service Industries for International Trade Negotiations in Services» Services Share of World Trade Services 24% Services share of total employment in the EU Agriculture 4,2 28,6 Agriculture & Industry 76% Services Share of FDI 67,2 Services Industry Agric. & Industry 40% Services 60% The Services sector generates 90% of new jobs in the EU1

7 World Economy: Percentage of GDP by Sector, ,6 6 9, 1,2 16,7 0 4,2 23,8 30, , ,4 14,8 3 2 Agriculture Industry Services Developed Developing EU China Kenya Uganda

8 «The voice of the European Service Industries for International Trade Negotiations in Services» The importance of private Foreign Direct Investment in Developing Countries ODA FDI Incl. FDI to DC Workers Remittances Bio US $/Year - Source: UNCTAD FDI Report & World Bank

9 ACP countries export already services in the EU EU-2 International Trade in Services with non-eu Countries 2004, EUR bn Rank Country Trade Volume Exports Imports Balance 1 USA 221, ,284 10,110 11,173 2 Switzerland 77,016 43,934 33,082 9,921 3 Japan 29,2 18,927 10,328 3,798 4 Norway 22,12 12,961 9,164 2,78 China 16,00 8,786 7,264 1,22 6 Canada 1,287 8,062 7,22 8,37 7 Russia 14,872 8,222 6,60 1,72 12 South Africa 7,11 3,2 3,99-48 All ACP Countries 30,722 1,79 14,

10 Participation of ACP countries in DDA GATS negotiations 14 ACP countries have tabled an initial offer = Barbados; Dominica; Gabon; Grenada; Guyana; Fiji, Jamaica; Kenya; Mauritius; St. Chris & Nevis; St. Lucia; St Vincent & Grenadine; Senegal; Trinidad & Tobago African Countries; 9 Caribbean Countries; 1 Pacific Region; 2 ESA Region; 0 SADC (1: S.A.) ACP 8,6 % pays de l'omc % des offres déposées

11 State of play of the GATS Negotiations Initial requests (EU= 109 in 2002, 103 Revised in 200) 69 Initial offers as of March Improved Offers in July 2006 Missed deadlines a) Revised Offers = 31July 2006 b) Draft Final Offers = 31October 2006 But Suspension of the negotiations on 24 July! Soft revival of the negotiations in Geneva on 16 November Formal «Full Fledge» negotiations on 27 January 2007 after Davos WEF Chairmen s Texts proposals on Ag, NAMA, & Services: 02/2008 DDA Conclusion:??? - US TPA deadline was on 30 June WTO Ministerial meeting in June/July 2008?

12 WHAT NEXT for the EU? Bilateral Free Trade Agreements (FTA)? (RTA)? EU/GCC (Gulf Cooperation Council) (2008?) EU/Mercosur (negotiations since 1999)(?) EU/ACP (6 Economic Partnership Agreements = 1 full EPA with Caribbean = 12/2007) other Full EPAs with services package =12/2008? EU/Mediterranean countries (EuroMed)(2008)? EU/Central America EU/Andean Countries EU/South Korea EU/ASEAN EU/India ? EU/China EU/Ukraine

13 WHAT THE EUROPEAN SERVICES SECTOR WANTS FROM TRADE NEGOTIATIONS To be able to operate in foreign countries in an non discriminatory environment. To negotiate the removal of all obstacles that prevent companies to access the market of a largest possible number of countries in a non discriminatory manner, or that prevent them to expand their business operations where they are already established.

14 WHAT THE EUROPEAN SERVICES SECTOR WANTS FROM THE GATS NEGOTIATIONS, or from any other trade negotiations Improved market access via Commercial Presence Abroad Mode 3 of the GATS i.e. joint ventures; subsidiaries; branching: Removal of equity cap to allow 100% ownership of FDI Commitments for Cross-Border Supply via Mode 1 of the GATS, i.e. e-commerce, internet, sending electronic data to call centers, back offices, etc. Movement of Natural Persons via Mode 4 of the GATS, i.e. moving skilled business personnel within a company (intra-corporate transferees) and to a company s clients on a temporary basis

15 Hierarchy of European Interests in Trade Negotiations What EU companies want: 1. WTO DDA 2. Regional Trade Agreements (with Integrated Markets) 3. Bilateral Agreements 4. Autonomous Liberalisation BUT =>What is happening in the reality: 1. Autonomous Liberalisation 2. FTAs 3. RTAs 4. WTO??!!!

16 «The voice of the European Service Sectors for International trade Negotiations in Services» IMPORTANCE OF SERVICES IN A SUSTAINABLE DEVELOPMENT Attract FDI in Infrastructure services: Telecoms, Express Courier Logistics (transports, distribution, etc.), Energy distribution network, Water and Waste management, Financial services System, etc. Experience shows that foreign service suppliers that invest in a country do it for a long period. Attract transfers of expertise and of know-how of foreign service suppliers, which in turn initiate: Local jobs creations staff vocational training, etc. Better quality of the services, Cheaper services, More choice for the consumers Reduction of the cost of doing business for local SMEs.

17 «The voice of the European Service Sectors for International trade Negotiations in Services» Privatisation and liberalisation The development of the services sectors play a key role for the sustainable development of the economy and the fight for the poverty eradication (economic, social, cultural, education and training) Many Developing countries and LDCs have already undertaken privatisation and liberalisation policies, so as to improve the efficiency and the internal competitiveness, as well as to attract FDI. But this is not sufficient!

18 «The voice of the European Service Sectors for International trade Negotiations in Services» A good regulation is a necessity A good regulation and a regulatory and control authority in the various services sectors is an absolute necessity for the a proper functioning of the services. These regulations must ensure that a good balance between on one side, the role of the government to protect public interest and the access for all (universal services) and on the other side, the need to attract foreign direct investment in good conditions, without putting into danger the local SMEs. The Authority must be competent and independent (not linked to the government or to the incumbent operator); The Legislation must be effectively into force and implemented in a non discriminatory manner But this is not enough to attract FDI!

19 «The voice of the European Service Sectors for International trade Negotiations in Services» So what is missing? Legal security for all investment is missing. This can be achieved through the binding of the domestic/autonomous legislation in the framework of a multilateral trade agreement (WTO) or a Regional (EPA or Bilateral trade agreement. This legal security is a crucial element for the services companies, but too often ignored by the governments. Foreign companies are reluctant or hesitant to invest time and money if the conditions of establishment or of doing business can be changed without notice (change of government, corruption, military coup, etc.).

20 «The voice of the European Service Sectors for International trade Negotiations in Services» List of criteria that a CEO looks at when taking a decision to invest in a developing countries: Potential market (size, income per capita, follow the demand, i.e. corporate customers) Existing competition, special treatment for local players Benefits prospects at short, medium and long terms Good governance (level of corruption, transparency of the legislation, etc.) State of the regulation (existing barriers at all levels, independent regulatory authority, implementation of the regulations, i.e. Regulatory Certainty) FDI incentives (special zones, tax incentives, corporate tax, etc.) Business Environment (incl. availability of human capital, level of education) Country Risk Assessment: political stability, GATS/Trade agreement sector specific binding commitments, i.e. the GATS/EPA are only additional criterion for companies to tick. But they can often make the difference. For the Developing countries, it is an additional opportunity to seize as to attract FDI.

21 Type of limitations imposed by developing countries as pre-conditions to the establishment of commercial presence (Mode 3) (1) As to reach the country development objectives, on the basis of GATS Art IV, some basic criteria economic needs tests, necessity to strengthen the capacity of the local providers, etc, are imposed by the hosting country. Furthermore, the following conditions are often required: 1. The commercial presence will be authorised only through a joint venture with national partners of the hosting country. 2. The foreign provider can only own less that half of the capital of the JV. 3. A specific number of the members of the board of the company have to be national citizens or resident in the hosting country.

22 Type of limitations imposed by developing countries as pre-conditions to the establishment of commercial presence (Mode 3) (2) 4. The foreign provider must use the most advanced technology, and the most evolved management expertise.. The foreign provider must train local employees and transfer the technology for the benefit of the local staff. 6. When possible, The foreign provider must use local outsourcing. 7. Imposition of local content, requiring that the foreign provider must give preference to local services for its own need. 8. The foreign provider must provide regular reports on its operations, including on technological, accounting, economic and administrative data.

23 «The voice of the European Service Sectors for International trade Negotiations in Services» What is the impact of these pre-conditions? All these limitations are as many dissuasive arguments for the foreign services suppliers. They are often motivated by laudable objectives (rhythm of development, policy space), but are in reality extremely counter productive. Foreign companies see their potential scope of activities substantially reduced and are doubtful on the reasons put forward by the regulatory authorities (while their are present in many other countries and implement higher international standards). Therefore they decide not to invest So, what to do?

24 «The voice of the European Service Industries for International Trade Negotiations» WHICH ARE THE COUNTRIES CONCERNED, EU: Austria, Belgium, Bulgaria, Czech Republic, Cyprus, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, Netherlands, Poland, Portugal, Romania, Slovenia, Slovakia, Spain, Sweden, United Kingdom EAC: Kenya, Uganda, Tanzania, Burundi, Rwanda * An interim EAC EPA was initialed by EC and all five countries. EAC is a customs union operational since 200 and has the ambition of a common market (2009) and later political union. ESA initial configuration: Burundi, Comoros, Djibouti, Eritrea, Ethiopia, Kenya, Malawi, Madagascar, Mauritius, Rwanda, Seychelles, Sudan, Uganda, Zambia, Zimbabwe * An Interim ESA EPA was initialed by the EC and Comoros, Madagascar, Mauritius, Seychelles, Zimbabwe and Zambia. * Least developed countries (LDC) underlined, Tanzania is not member of ESA, but of SADC

25 Importance of the Services Sector in the Eastern and Southern Africa Region* Burundi services: 34.1% (2006 est.) (EAC) Comoros services: 6% (2001 est.) Djibouti services: 9.6% (2003 est.) Eritrea services: 64.6% (2006 est.) Ethiopia services: 40.4% (2006 est.) Kenya services: 6% (2004 est.) (EAC) Malawi services: 47% (2006 est.) Mauritius services: 69.7% (2006 est.) Madagascar services: 27.2% (2006 est.) Rwanda services: 37.3% (2006 est.) (EAC) Seychelles services: 66.7% (2006 est.) Sudan services: 39.7% (2006 est.) Tanzania services: 38,7% (2007 est.) (EAC) Uganda services: 48.% (2006 est.) (EAC) Zambia Zimbabwe services: 1.2% (2006 est.) services: 9.4% (2006 est.) * except Tanzania = EAC + SADC Source: CIA The World Fact book

26 «The voice of the European Service Sectors for International trade Negotiations in Services» Participation of ACP countries to services negotiations in the Uruguay Round Development Level Least Developed Countries Developing Countries South Africa Developed Countries Average of GATS Commitments by Services Sub Sectors Note: Maximum possible: 162 (W/120 classification)

27 EAC Specific Commitments in the U. R. Sectors Total Max Poss Burundi (LDC & LLDC) Kenya Rwanda (LDC & LLDC) Uganda (LDC & LLDC) (?) 2 7 Tanzania 1 1 LDC= Least Developed Country; LLDC: Landlocked Developing Country; SIDS = Small Island Developing State 1: Business Services; 2: Communication Services; 3: Construction & Related Engineering Services; 4: Distribution Services; : 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 (Kenya: 1 commitment)

28 ESA (- EAC) Specific Commitments in the U. R. Sectors Max Poss Total 162 Comoros Not a WTO Member LDC & SIDS Djibouti (LDC) 8 (?) Eritrea Not a WTO Member LDC Ethiopia Not a WTO Member - WTO Observer (Accession) - LDC & LLDC Kenya Madagascar (LDC) 2 2 Malawi (LDC & LLDC) 12? Mauritius Seychelles Sudan Not a WTO Member - WTO Observer Not a WTO Member - WTO Observer - LDC Zambia (LDC & LLDC) Zimbabwe 10? : Business Services; 2: Communication Services; 3: Construction & Related Engineering Services; 4: Distribution Services; : 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

29 Interests of European Services Sectors in EPA with ESA - EAC countries (1) Stronger Regional Integration : To improve the efficiency of services and of investments & to create economies of scale in the Region A larger market is a more attractive market. Investment in Infrastructure services: Construction, Telecommunications, Financial Services, Express courier, maritime transport, IT, Environmental Services, etc.

30 Interests of European Services Sectors in EPA with ESA- EAC Region s countries (2) ESA EAC Region s countries should participate more actively to the services negotiations of the WTO (To table initial offers opening market access to key services sectors for the countries and giving national treatment. ESA EAC Region s countries should open services negotiations with the EU in the EPA framework, with the aim to reach a «GATS +» agreement, in accordance with GATS Article ; The impact of this would be: Sending a strong signal to foreign investors (legal security of investments) Contribution to the integration of the region in the world economy. To increase the cooperation with European services companies: Joint-ventures, subsidiaries, branches, back offices, transfers of skills in both ways, etc.

31 Sectors Interests of European Services Sectors in EPA with ESA EAC Region s countries (3) What countries have agreed to commit in the services sectors in the Full EU-CARIFORUM EPA initialled in December 2007? Max Poss. 1 countries* *= Antigua & Barbuda; Barbados; Belize; Dominica; Dominican Republic; Grenada; Guyana; Jamaica; Saint Christopher & Nevis; Saint Lucia; Saint Vincent & the Grenadines; Suriname; Trinidad & Tobago NB: Total represent commitments by at least one country, not all Cariforum members have taken the same commitments; many have maintained limitations, or decided to open with a transitional period. + = more detailed commitments than the CPC Description Total

32 Interests of European Services Sectors in EPA with ESA EAC Region s countries (4) What countries have agreed to do in Interim SADC EPA initialled in December 2007? (Art 67) To liberalise 1 services sector (out of 12) by each of the participating countries, To agree on a standstill clause for all services sectors (as in Art. V.1.b (ii) of GATS) To agree to negotiate progressive liberalisation with substantive sectoral coverage within a period of 3 years following the conclusion of a full EPA. Is this really going to fulfil European service providers ambitions? Is this really a big political price to pay by the SADC countries? Is this really a difficult challenge to achieve?

33 ESA-EAC REGION s Services Providers are Welcome in the EU The EU s Services Market is remarkably open World s largest market for services, valued at US$7.8 trillion in 2004 Population of EU 27 = 493 millions GDP per capita of US$2,700 The more the market is open, the more it attracts FDI, the more it remains competitive. Services providers of the region might find opportunities, notably to serve the exporters of the region.

34 ESA EAC Region's Services Providers are Welcome in the EU (2) Modes of supply: 1) Cross-border supply 2) Consumption abroad 3) Commercial presence 4) Presence of natural persons Sector or subsector Limitations on Market Access Limitations on National Treatment Additional Commitments F. Other Business Services c) Management consulting services (CPC 864) 9. TOURISM AND TRAVEL RELATED SERVICES B. Travel Agencies and Tour Operators Services (including tour managers) (CPC 7471) 1) None 2) None 3) None 4) Unbound except as indicated in the horizontal section 1) None 2) None 3) Belgium: Authorization for non-ec incorporated companies to act as travel agencies is possible only if the company has a permanent base in Belgium (siège d'opérations permanent) and if the person directing the daily operations P: Requirement of constitution of a commercial company having its corporate base in Portugal. 4) Unbound except as indicated in the horizontal section and subject to the following specific limitations. 1), 2), 3) None 4) All Member States except FIN: Unbound except as indicated in the horizontal section FIN: Unbound 1) None 2) None 3) None 4) Unbound except as indicated in the horizontal section and subject to the following specific limitations

35 «The voice of the European Service Industries for International Trade Negotiations in Services» Pascal KERNEIS Managing Director European Services Forum ESF 168, Avenue de Cortenbergh B 1000 BRUSSELS Tel: Fax: esf@esf.be Website: