The voice of the European Service Industries for

« The voice of the European Service Industries for International Trade Negotiations in Services » ESF PERSPECTIVES ON EU-CHINA CAI Pascal Kerneis – Managing Director – European Services Forum

« The voice of the European Service Industries for International Trade Negotiations in Services » WHAT ROLE TRADE IN SERVICES PLAY IN EU & CHINA TRADE ? EU 28 Exports to China BOP – 2018 - €Bio 19. 7% 80. 3% China Exports to EU BOP – 2018 – € Bio [VALU 7. 4% E] 92. 6% 51, 8 211, 3 396 China Exports of Goods to EU EU Exports of Goods EU Exports of Services EU World average for services exports: 32. 6% China Exports of Services to EU China World average for services exports: 9%

« The voice of the European Service Industries for International Trade Negotiations in Services » Evolution of Trade in Services EU 27 -China – 2013 -2018 - €Mio imports de l'UE exports de l'UE China exports = +54% EU exports = +106% EU Exports to China = Only 4. 8% of total EU Services Exports in 2018! 38042 19365 41508 38639 29833 26089 22548 46630 Balance 29972 29777 26578 21589 16658 11731 11464 8806 3183 2013 4500 2014 2015 2016 2017 2018

« The voice of the European Service Industries for International Trade Negotiations in Services » EU 28 Exports of services to China per sectors - €Mio – 2018 14000 22. 6% 22. 3% 11573 21% 10903 12000 [VALUE] 8% 10000 27% 14. 8% 14% 7708 12. 3% 15% 17% 8000 In Green boxes = EU world average 6381 6000 9% 2. 1% 4000 542 2000 1098 254 163 444 526 256 286 te llo ca ice sn ot a & oo ds rv Se d Se r ltu en t. G er Go ve rn m l, P na tio ea cr Re Cu s& es s. S er us in IC T r. B he Ot ty Pr op er al ct u lle In te an cia l. S er vic ns io Pe Fin & es n r Se In su r an ce ct io n st ru an sp r Tr Re & ce Tr av el Co n nt ai M pa i es vic en an rin g. S er tu ac M an uf or t 0

« The voice of the European Service Industries for International Trade Negotiations in Services » Global FDI Stocks 11 000 - 2019 – Mio $US - 10 624 361 9 465 835 8 993 712 9 000 7 721 713 7 000 5 000 3 000 1 867 936 2 075 271 2 099 400 1 526 228 1 949 442 1 769 486 1 794 027 1 350 682 1 652 480 1 037 092 1 000 -1 000 EU 27 United Kingdom Switzerland Outward FDI China Hong Kong SAR Inward FDI USA Canada Source: UNTAD Stat

« The voice of the European Service Industries for International Trade Negotiations in Services » EU 27 Foreign Direct Investment with China (Stocks - € Bio) – 2013 -2018 200000 180000 EU Outward to China = +45% China Outward to EU = +192% 161991 160000 140000 170335 136227 120189 120000 1211 96 114343 100034 175326 171654 123648 113513 116316 100000 80000 58141 60000 20000 46687 40795 40000 20155 59010 21884 0 2013 2014 2015 Inward Stocks 2016 Outward Stocks Balance 2017 2018 Source: Eurostat [bop_fdi 6_pos]

« The voice of the European Service Industries for International Trade Negotiations in Services » Top 10 countries as extra EU-28 partners for FDI stocks (EU-28 - 2012– 2015 - billion EUR) EU Outward FDI to China represents only 2. 4% of total EU EU Inward FDI from China represents only 0. 6% of total EU

« The voice of the European Service Industries for International Trade Negotiations in Services » Extra EU-28 FDI stocks by economic activity (EU-28 - 2014 - billion EUR) Services represent 58% of EU Outward FDI Services represent 87% of EU Inward FDI What would be the shares for China?

« The voice of the European Service Industries for International Trade Negotiations in Services » Share of Services in EU 28 Outward FDI in China – Stocks - € Mio 200000 175429 180000 190001 70000 60789 145776 48467 50000 128015 48739 43875 120000 40164 40000 100000 80% 38110 76822 80000 60000 40000 63039 60000 140000 183889 182922 Share of Services in EU 28 Inward FDI from China – Stocks - € Mio 58718 68289 30000 72119 39. 5% 22820 23357 20000 18941 51709 10000 40% 20000 0 2013 2014 2015 2016 EU Outward Investment In China 2017 2018 Share of Services 6993 28% 0 2013 2014 2015 2016 EU Inward Investment from China 2017 2018 Share of Services Source: Eurostat [bop_fdi 6_pos]

« The voice of the European Service Industries for International Trade Negotiations in Services » ESF views on EU-China relationship ü ESF welcomed the Foreign Investment Law of the People’s Republic of China of March 2019 (entered into force on 1/01/2020): ü Law has many positive elements, such as pre-establishment national treatment, elimination of joint-venture requirements for some sectors, and prohibition of technology transfer. ü The Law uses Negative list : “Special Management Measures for Foreign Investment”) ü The Law expands investment opportunities to the whole territory of Mainland China, beyond the earlier pilot FTZs. But need for much clarifications! and it is non-binding! ü The EU negotiators succeeded in incorporating many elements of this reform into CAI, with accompanying obligations (LPF – Transparency, etc. ) ü In terms of market access, the major aspects of CAI are: 1. Binding & Ratcheting of all autonomous reforms that China undertook since 2001 (GATS ++) 2. Including commitments taken by China with other trading partners, like US Phase One deal; China-Australia FTA; RCEP (poor on services) 3. Plus many new Market access openings, … that will be on MFN basis!

« The voice of the European Service Industries for International Trade Negotiations in Services » Services sectors in which China took commitments : • Financial services. Joint venture requirements and foreign equity caps: removed for banking, trading in securities and insurance (including reinsurance), asset management. • Health services: No more Joint venture requirements for private hospitals in key Chinese cities, including Beijing, Shanghai, Tianjian, Guangzhou and Shenzhen. • ITC Services: China has also agreed to lift the investment ban for cloud services. EU investors up to a 50% equity cap. Binding market access for computer services. • International maritime transport: Investment in land-based auxiliary activities (cargohandling, container depots and stations, maritime agencies, etc. ). • air transport-related services: Computer reservation systems, ground handling and selling and marketing services. • Business services sectors: Elimination of joint venture requirements in real estate services, rental and leasing services, repair and maintenance for transport, advertising, market research, management consulting and translation services, etc. • Environmental services: Removal of joint venture requirements. • Construction services: China will eliminate the project limitations currently reserved in their GATS commitments. • Mode 4: Mobility of business personnel linked to the establishments of investors (ICT: 3 y)

« The voice of the European Service Industries for International Trade Negotiations in Services » CAI beyond market access q China is making commitments to ensure fair treatment for EU companies so they can compete on a better level playing field in China, including Ø in terms of disciplines for state owned enterprises, Ø transparency of subsidies (including for the first time in services sectors) Ø rules against the forced transfer of technologies. q China has also agreed to ambitious provisions on sustainable development, including Ø Commitments on forced labour and the ratification of the relevant ILO fundamental Conventions Ø Commitments on respecting protection of environment and Climate Change Conventions. q Issues related to the enforcement of these commitments, notably those related to human rights (Hong-Kong, Uighurs) , will likely be fiercely discussed by the EU member states and the Members of the European Parliament prior to the ratification of the agreement. q European services firms : Ø Support the ratification of the CAI, as a tool to engage with Chinese authorities on these issues; Ø Support the setting up of relevant internal tools to ensure respect of fundamental rights.

« The voice of the European Service Industries for International Trade Negotiations in Services » Thank you for 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 www. esf. be @EUServices. Forum Website :