1.         
Workshop: 25th April 2013
“Servicification – Why free trade in services matter to manufacturing “
“Why Manufacturing companies should care about trade in services negotiations?”
Pascal Kerneis
ESF Managing Director

2. Size of global trade – Export of goods and services
(21%)

3. But if we use the trade in value-added (TiVA) indicators, the share of services is 45% of the total world trade ! (more than 50% in the EU countries)
Source: OECD-WTO TiVA database

4. World Economy: Percentage of GDP by Sector - 2011

5. Services Exports in Millions $US
The importance of the EU in global services trade
Services Exports in Millions $US
If we take intra and extra EU together, EU export of services represent 42% of global export of services
EU is by very far the biggest exporter of services: 24% of world export of services

6. EU Services Exports and Imports per sectors (2010 - € 1 000 million)
40%

7. High increase of Business services

8. EU = Biggest investor in the world

9. Services sectors = Biggest investors
Table 3: Extra EU-27 FDI stocks by economic activity, EU-27, end 2009
(EUR million) Source: Eurostat
Outward
Inward
Total
3662,1
2658,1
Agriculture, hunting and fishing
3,0
2,2
Mining and quarrying
233,6
59,2
Manufacturing (22%)
821,5
537,5
Food products, beverages and tobacco products
113,8
71,8
Textiles and wood activities
30,4
16,3
Petroleum, chemical, pharmaceutical products
319,8
216,2
Metal and machinery products
224,6
175,9
Vehicles and other transport equipment
58,0
18,4
Electricity, gas, steam and air conditioning
56,0
17,1
Water supply; sewerage, waste management
4,4
2,5
Construction
16,7
8,9
Services (57%)
2087,15
1672,1
Trade; repairs of motor vehicles and motorcycles
133,7
123,4
Transportation and storage
49,1
30,9
Accomodation and food service activities
22,2
13,1
Information and communication
108,7
76,7
Financial and insurance activities
1387,8
1054,8
Real estate activities
40,0
43,9
Professional, scientific and technical activities
295,4
243,0
Other services
50,2
86,3
Activities not allocated
409,1
329,0
Other
30,6
29,6

10. EU Trade policy & Servicification!
In all Trade negotiations that the EU is running, the services and investment negotiations represent an important part:
Multilateral: DDA GATS Negotiations (30 countries – collapsed in July 2008 despite good progress at the “Signalling Conference”.
Plurilateral: « Trade in Services Agreement- TISA » - 1st Round : March 2013:
Australia, Canada, Chile, Colombia, Costa Rica, European Union (27), Hong Kong, Israel, Japan, Mexico, New Zealand, Norway, Panama, Pakistan, Paraguay, Peru, South Korea, Switzerland, Taiwan, Turkey, and United States.

11. On-Going FTA negotiations:
EU- Canada Comprehensive Economic Trade Agreement (CETA) (started in 2008) (2013?)
EU-India (TIA)(started in elections in ???)
EU-Malaysia FTA (started in elections in May 2013)
EU-Vietnam FTA (started in2012 – Third round: April 2013)
EU-MERCOSUR FTA (Argentina, Brazil, Uruguay, Paraguay) (blocked)
EU-Japan (Summit: 25 March 2013 – 1st round: April 2013)
EU-Thailand (official launch on 06/03/2013 – 1st Round: 27 May 2013)
+ EU EPAs with ACP countries (+/- 60 pays)
+ EU with EuroMed : Egypt, Israel, Jordan, Morocco, Tunisia.
+ EU with Eastern Partnership: Armenia, Georgia, Moldavia
+ To come soon:
UE-US TTIP (mandate: 14 June 2013? – 1st round : July 2013?)
Philippines? Indonesia? Taiwan?...

12. EU Bilateral Trade Policy = “Deep and Comprehensive FTA” – Single Undertaking
Goods: tariffs cuts (+95%), NTBs, Rules of Origin,
Trade in services (Cross border, Movement of people)
Investment (Pre-establishment market access, post establishment protection)
IPR (copyrights, patents, data flows, etc.)
Public Procurement (central, regions, local, public entities)
Competition, dispute settlement
Regulatory disciplines and cooperation
 ”Servicification” of the economy!

13. Impact of trade in services negotiations: Example: EU Trade Policy and Express Delivery Services:  Need to look beyond the close definition of the sector

14. GATS & Postal and Express Services
 Is it only about Section 2 A & B of CPC?

15. GATS & Express Delivery Services

17. Impact of EU Services Trade Policy on Manufacturing Industry
Manufacturing industries consume/buy/outsource a lot of services
=> Embodied Services: In recent years, the application of enabling services such as telecommunications and IT has driven deeper segmentation of goods supply chains into production units which can be dispersed geographically, and yet be connected
Embodied services are involved throughout the processing and manufacturing steps in the goods supply chain
all traded goods embody services, on average around 25%
embodied services represent a higher share (50% +) of value-add of high tech goods
Manufacturing industries sell more & more services, as integral part of their activities
=> Embedded Services

18. Embodied services  Essential components of the supply chain of trade in goods

19. Embedded Services in the products Essential elements of creation of value added and benefits

20. Impact of EU Services Trade Policy on Manufacturing Industry
In all manufacturing sectors, the companies consume and provide many services that improve the competitiveness of their daily activities
In many instances, the services provided around the products are a major element to sell the products (part of the innovation)
In many instances, the services provided around the products are generating an important part of the benefits of the companies (long term maintenance contract).
 However, very few companies do look at the trade in services negotiations that are in fact vital for their companies !!!

21.  The European Services Forum can help!
Conclusion:
It is time for Manufacturing companies to closely monitor the trade in services negotiations, …
 The European Services Forum can help!

22. THANK YOU FOR YOUR ATTENTION !
Pascal KERNEIS
Managing Director
European Services Forum – ESF
168, Avenue de Cortenbergh
B – 1000 – BRUSSELS
Tel:
Fax:
Website: