1. International Service Forum Taipei, 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 Kerneis Managing Director ESF (European Services Forum) « The voice of the European Service Industries for International Trade Negotiations in Services »

2. 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

3. « 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

4. World Economy: Percentage of GDP by Sector, 2006

5. « 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.

6. RankCountryTrade Volume ExportsImportsBalance 1USA256.731134.664122.06712.597 2Switzerland90.46852.71237.75614.955 3Japan31.87418.93912.9356.005 4Norway26.88116.40310.4785.925 5Russia24.99514.22110.7743.448 6China24.08412.75011.3341.416 7Canada18.36010.1728.1881.985 8Singapore17.17910.8836.2964.587 9Turkey16.6885.73010.958-5.228 10Australia15.1919.0336.1582.875 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 »

7. EU-27 International Trade in Services with non-EU Countries in 2006 (EUR bn) RankCountryTrade VolumeExportsImportsBalance 11Hong Kong13.5846.8966.6880.207 12India12.5266.9785.5481.430 13Korea10.3676.3394.0282.341 14Brazil9.7775.1624.6150.548 15South Africa9.6625.3054.3570.948 16Egypt7.3202.2945.026-2.732 17Croatia7.0452.2834.762-2.478 18Mexico6.7784.0912.6871.403 19Thailand6.5171.9994.518-2.519 20Israel5.50133.1122.3890.723 21Morocco5.1721.6723.500-1.828 22Taiwan5.1163.0662.0501.016 23Argentina4.0492.3951.6540.741 24Malaysia3.8882.0781.8100.268 25New Zealand3.1381.8091.3290.480 26Indonesia2,4831.4121.0710.341

8. Trends of the EU International Trade in Services

9. EU International trade in Services (Trends in volume – Bio €)

10. 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%) –

11. Trends in World Trade in Services

12. International Trade in Services 28,7%

13. « 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).

14. Eurostat : EU FDI Yearbook 2007 ASEAN attracted only 3,6% of EU outward FDI in 2005 1,7% 15% 3,6%

15. What does FDI include? FDI Capital Flows FDI income FDI stocks in a country at the end of the year

16. The return on investment in ASIA Countries is high!

17. ASIA countries reduced their investments in the EU in 2005

18. 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)

19. 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

20. 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!

21. « 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.

22. « 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

23. « The voice of the European Service Industries for the International Negotiations » 1. d) Architectural services

25. 4 - Distribution Services

26. « 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)

27. « 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.

28. « 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 LevelAverage of GATS Commitments by Services Sub Sectors Least Developed Countries24 Developing Countries42 China, Japan, Hong Kong, Korea, Taiwan, 101 ASEAN56 (44 = ASEAN 7) Developed Countries106 Note: Maximum possible: 162 (W/120 classification)

29. ASEAN Specific Commitments in the U. R. (or upon accession) Sectors 1234567891011 Total Max Poss. 462655542344535162 Brunei 765119 Cambodia (LDC) 24165534151311188 Indonesia 14174152254 Laos (LDC) Not yet a WTO Member Malaysia 2411523122265 Myanmar (LDC) 213 Philippines 72321547 Singapore 20155 ?5 ? 162260 Thailand 216313413311166 Vietnam 262254432122216107 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

30. ASIA Specific Commitments in the U. R. (or upon accession) + Conditional Initial or Revised offer (2) Sectors 1234567891011 Total Max Poss. 462655542344535162 China 27150554120211687 Chinese Taipei 382054441533218116 Hong Kong 2817220414222780 Macau 10000016020019 Japan 342054542313418121 Korea 371854231403116103 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!

31. 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

32. « 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.

33. « 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

34. « 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.

35. 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. Internet Web site: www.esf.be « The voice of the European Service Industries for the GATS negotiations »