Pascal Kerneis Managing Director ESF (European Services Forum)

Pascal Kerneis Managing Director ESF (European Services Forum)

90 «The voice of the European Service Industries for World Economy: Percentage of GDP by Sector - 2016 80 70 76.7 73.1 67.2 69.2 68.8 65 60 50 40 30 20 10 0 46.6 43.7 27.4 27.3 25 26.5 22.1 17 18 9.7 5.4 4 4.2 1.81.2 agriculture Industry Services EU USA China Brazil India Australia New Zealand Source: CIA Fact Book 2017

250000 «The voice of the European Service Industries for EU Services Exports and Imports per sectors (2015 - Billion) Exports - Total 811 231 Imports - Total: 660 483 27.5% of Exports 200000 150000 100000 50000 0 2.3% 18927 7922 1.5% 12293 9102 17.8 % 144401 128237 13.9 % 112642 102135 1.7% 13251 5063 10.3% 7.5% 3.4% 83764 27305 14613 41462 61117 104206 12.2% 99305 40427 223087 191743 1% 0.8% 7932 10614 7008 4757 Source: Eurostat 2016 Note: Other business services comprise mainly: research and development, professional and management consulting services, technical, trade-related services.

THE EU IS BY FAR THE WORLD BIGGEST EXPORTER OF TRADE IN SERVICES 2500 2000 1500 2000 2015 If we take intra (1085) and extra EU (915) together, EU export of services represent 42 % of global export of services EU is by very far the biggest exporter of services: 24.9 % of world export of services 1000 500 915 Services Exports in Billion $US 2015 690 Australia : 14 th 1% 285 158155 139108 104 97 76 60 56 51 48 46 40 40 35 35 33 0 EU 27 Extra EU27 US China Japan India Singapore Switzerla Hong-Kong South Canada Thailand Taiwan Russia Australia Turkey Norway Macao - Malaysia Israel Brazil Source: WTO Trade Statistical Review 2016 Figures for 2015

35 30 25 20 15 10 5 0 32.1 21.9 10.2 9.2 9.6 «The voice of the European Service Industries for EU-Australia Trade & Investment (Imports and exports of goods & services & FDI) Trade in Goods ( Bio) 29.6 20.4 31.7 2013 2014 2015 22.1 EU Imports EU Exports Balance 25 20 15 10 5 0 Trade in Services ( Bio) 19.1 18.6 19.8 10.9 10.8 9.5 10.3 8.2 7.8 2013 2014 2015 EU Imports EU Exports Balance 2014 26.4 Foreign Direct Investment ( Bio) 88.9 115.3 0 20 40 60 80 100 120 140 Balance Outward Stocks Inward Stocks

- Why trade in services is important for Investment? A large part of Market Access commitments in BIA are about Mode 3 commitments! 58.6% of EU Outward FDI stocks are invested into Services! (2014) 87.3% of EU Inward FDI stocks are invested into Services! But China continues to invest rather in manufacturing 58.6% 87.3%

EU Exports to Australia BOP 2015 - Bio 38.5% 61.5% Australia Exports to EU BOP 2015 Bio 49.7% 50.3% 19.8 31.7 9.5 9.6 EU Exports of Goods EU Exports of Services Australia Exports of Goods to EU Australia Exports of Services to EU

IMPORTANCE OF TRADE IN SERVICES If we use the trade in value-added (TiVA) indicators EU Exports in BoP 2011 - % EU Exports of Services: 60.5% Share of Domestic & Foreign Services TiVA 2011 - % 26.9 Goods 29.7% 18 83.8% Services 73.1 42.5 Domestic Services Foreign Services Australia Exports in BOP - 2011 -% 18 82 Goods Services Australia Exports in TiVA - 2011 - % 46.1 53.9 Goods Services Australia Exports of Services: 46.1% Share of Domestic & Foreign Services TiVA 2011 - % 12.3% 5.7 Domestic Services 40.4 87.6% Foreign Services

Share of Services value added in EU & Australia Goods Exports Share of Domestic & Foreign Services in Goods Exports - % EU27 = 39.1% Australia = 36.3% 49.1% 19.9 24.5% 8.9 19.2 27.4 50.9% 75.5% Domestic Services Foreign Services Source: World Trade Organization, "Global Value Chains" 2011 Domestic Services Foreign Services

On-Going FTA negotiations: New EU Trade Strategy published on Oct 2015 1. EU-Japan FTA: (Started March 2013 18 rounds Deal in July 2017? 2. Revision of EU-Mexico: 1 st Round: June 2016; 3 rd Round 06/2017, 1/month, Deal: 2017? 3. EU-MERCOSUR FTA (Argentina, Brazil, Uruguay, Paraguay) (Started in 1999 blocked in 2004, resumed in 2008 & in May 2016! 2 nd Round: March 2017 3 rd Round: July 2017 4. EU-China BIA: Started Nov 2013-13 th Round in May 2017 5. EU-Philippines FTA: 1 st Round (23 May 2016); 2 nd Round (Dec 2016) Duterte- Stalled? 6. EU-Indonesia CEPA: Vision Group 2011; Launch: July 16 1 st Round: Sept 2016 7. EU-Malaysia FTA (started in 2010 7 rounds, stalled since 09/2012, elections in 06/2013, 8 th round not scheduled yet, To resume in July 2017) Future Negotiations: 1. Australia & New Zealand DCFTA; Revision of EU-Turkey Custom Union; Revision EU-Chile 2. EU-ASEAN Regional Trade Agreement? 3. Taiwan BIA? Hong-Kong BIA 4. EU-UK DCFTA after Brexit! Stalled Negotiations 1. EU-India (TIA)(started in2006 - elections in 2014 stalled in 2013)(2016?) 2. EU-Thailand (started 03/2013, 3 rd round : 12/2013 Stalled after Military Coup in May 2014) 3. EU-USA TTIP 4. TISA EGA 5. EPA in Africa on Services 6. FTA with Morocco & Tunisia

What should be the content of an EU Australia FTA? A. Market access Pillar (incl. Public procurement in services) B. Regulatory disciplines and cooperation C. Movement of natural persons D. Mutual recognition of qualification

What should be the content of an EU Australia FTA? Deep and Comprehensive FTA Single Undertaking Goods: tariffs cuts (+95%), NTBs, Rules of Origin, Trade in services (Cross border M1, Movement of people M4) Investment (Pre-establishment market access including in services sectors M3, post establishment protection: ISDS?) IPR (copyrights, patents, data flows, etc.) Public Procurement, including for services (central, regions, local, public entities): Australia Sub federal level? Competition, Dispute settlement, Sustainable Development Regulatory disciplines and cooperation TiSA +? ; TPP +?; TTIP ambition?

A. MARKET ACCESS PILLAR (1) Current bidding level for EU & Australia = GATS 1995 Scheduling of Market access & National Treatment commitments using a Negative list : EU industry choice! GATS +; TiSA+; TPP+ More Commitments on Mode 1 (Cross border transactions) Mode 3:Removal of all equity caps, with negotiated exceptions Binding of current practise (i.e. Higher Market access than in existing FTAs), with negotiated exceptions, Standstill and Ratchet Clause (to lock in the autonomous reforms) More on Professional services, telecom services, postal & express services, financial services, maritime Transport, etc.

A. MARKET ACCESS PILLAR (2) Increased public procurement market access in the services sectors: (Construction & related services (architects, engineers, etc.); cleaning and catering services in administrations and all public entities; insurance services; telecom and IT services; security services; environmental services, etc. Australia not GPA member! Australia sub federal level? Difficulties?? State of the art Investment protection chapter (BIT): including Investor-to-State Dispute Settlement (ISDS) with transparency process and the new EU Investment Court System (ICS).. EU ECJ Opinion 2/15 on competences? Australia? MIC?

B. REGULATORY DISCIPLINES AND COOPERATION PILLAR «The voice of the European Service Industries for Adoption of a strong Horizontal Chapter on Disciplines for Domestic Regulation (Look at TiSA): Transparency of the regulation Prior consultation of stakeholders Impact assessment transparency of the licensing requirements and procedures (Proportionate to the goal, Objective, lease burdensome administrative costs as possible, short and predefined delays, right of appeal) Disciplines on cross border data flow, E-Commerce Chapter like in TPP (?) (very sensitive in the EU!) Sector specific disciplines (e.g. on Telecoms, on Postal, on Energy, Environment, maritime and air transport, financial services, etc.) and Sector specific regulatory cooperation (living agreement)(tisa?) Disciplines on State Own Enterprises (SOEs)

C. MOVEMENT OF NATURAL PERSONS «The voice of the European Service Industries for A key priority for EU businesses in EU-Australia FTA Temporary period only, not permanent migration Negotiate faster Business Visa and Work permits delivery procedures: Visa facilitation (Sensitive in EU Competence?) In all Categories of Natural Persons Covered under Mode 4: 1. Intra-Corporate Transfers (ICT) Managers Specialists Graduate Trainees 2. Business Visitors (BV) = kind of APEC Card with EU? 3. Contract Service Suppliers (CSS) Employees of Juridical Persons 4. Independent Professionals (IP)

D. MRAS ON PROFESSIONAL QUALIFICATION The Commission and Canada Federal government have found a way to go forward: They agreed on a Framework Agreement that will be an annex to the CETA. It describes the modalities how MRAs on sector specific professional qualifications, once concluded by the private sector together with the licencing bodies, will finally be transformed into the binding International treaty (FTA). All the competent authorities in the Member States and the Provinces have been involved in this solution. i.e. The Australian States regulatory bodies will have to be involved. Is it possible? The framework agreement is an enabling tool (with Guidelines for the sectors) that ensure legal security to the agreement, if and only if the professional services sectors want to conclude a MRA.

E. CHAPTER ON SUSTAINABLE DEVELOPMENT A chapter on other related issues to investment! Rules on Labour (respect of ILO Core Conventions Core labour standards like no child at work, no prisoners, etc.) Rules on Environment (Respect of multilateral environment agreements, COP 21, etc.) Possible rules on obligations for the companies to respect the basic corporate social responsibilities (CSR), OECD Guidelines for multinationals? etc. Human Rights? Question: should such a chapter be subject to the dispute settlement system of the FTA?

THANK YOU FOR YOUR ATTENTION! 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: esf@esf.be Website: www.esf.be