1

CONFERENCE ON THE IMPLEMENTATION OF THE

EU-SOUTH KOREA FREE TRADE AGREEMENT

Organised in Brussels by European Commission - DG Trade

Conference Centre Albert Borschette, Brussels

Thursday, 27 October 2011

II. Parallel Sessions (1) – 12:00 – 13:00 - Room AB-0D

Services Liberalisation

Mr. Pascal Kerneis, Managing Director, European Services Forum

  • Importance of services sector:
  • in economy (71 % of EU GDP and 67% of EU employment, in international trade (20% of world trade – 25% of EU Trade), in FDI
  • Importance of EU Trade in Services and Investment with Korea (€11.1 billion in 2007, with a benefit for the EU of more than €3.2 billion (9th EU largest). This trade is growing considerably, with an increase of 66% in the last three years.
  • Foreign direct investment in Korea is rather low due to establishment barriers, many of them are going to be removed or reduced. In 2009, the total FDI Stocks by EU companies in Korea = only 25.7 $ Bil. (1,18%) (16th). Total FDI by EU into Korea in 5y (2002-2006) = €12.1 Bil.; includ. 74% in Services = € 8 Bil.
  • Why the European Services Industry was so supportive of the negotiations and the ratification of the agreement?
  • EU-Korea FTA = very important deal for the European services sectors with very ambitious concessions negotiated, that will provide

New business opportunities for most of the services sectors,

Bring legal security for the investments, and

Create new jobs in the European Union in key services sectors.

  • Commitments in Services by Korea are going much further than what it has tabled in the WTO talks,
  • Commitments in Services by Korea also going further than what Korea agreed with the United States in their bilateral agreement signed in 2007 (and finally ratified by US Congress last week).
  • Services companies are also interested by other aspects/chapters and commitmentsthat have been delivered by the Agreement:

More trade in goods means more services around these products (e.g.: maritime transport, express delivery; maintenance and professional services, trade finance and insurance and re-insurance services, etc.

Public procurement (does not concern only goods but also Architects, Engineers, Construction services, Computer related services, Business related services, environmental services, energy related services, etc.)

Intellectual Property Rights (IPR): protection of patents and licenses (ICT), of trade- marks, of copy-rights (recreational services, e.g. audiovisual, sports, etc.)

Regulatory disciplines and cooperation chapter (transparency of the regulation, prior comments before revision/adoption of new regulation)

  • Most of the specific services sectors, will benefit from a full implementation of the agreement. I will not enter into details, but i) my colleagues in the panel will deal more specifically with legal services and with banking, ii) for the other main sectors, I would like to mention:
  1. The FTA ensures full market access and national treatment to our companies, with legal security to their investments, in a large number of services sectors (engineering, Computer related services, many business services, construction services, Tourism, many transport services, etc.)
  2. Korea allows the cross-border services transactions (operations over the internet) in a very large number of sectors, without any restrictions, without any obligation to have a local settlement, which is too often the case in a majority of countries in the world;
  3. In telecommunications services: the FTA

allows EU satellite broadcasters to operate directly cross-border into South Korea, thusavoiding the obligation to liaise with a Korean operator.

allows 100% indirect ownership in the Korean telecommunication sector, thus ensuringeasier operation for EU companies.

  1. InMaritime services, the FTA secures full market access for EU's shipping firms and the right of establishment inSouth Korea, as well as non-discriminatory treatment in the use of port services andinfrastructure.
  2. In Courier services, the FTA enables access for EU providers of international express delivery services to the Koreanmarket.
  3. In Distribution services, some restrictions remain, notably in wholesales and retailing services for used cars and gaseous fuels, that are subject to an economic needs test. Restrictions also on alcoholic beverages and on some pharmaceutical products, but they are well described in the agreement.
  4. Finally, on Environmental services, not only the opening of business to business operations (like in KorUS) but also to open the non-industrial activities after 5 years. It will therefore be possible for EU companies to negotiate public-private partnership agreements with the local authorities in Korea to get a long term concession for waste treatment.

* * *

  • If we want to try to quantify the potential benefit of the FTA with Korea, taking a low base scenario due to the economic crisis (+15% increase per annum), one can estimate that the FTA would increase the benefit:

+5 Bio € net surplus in 5 years, i.e. +190% in 5y (starting 2011)

Net Gain after Five years of FTA Implementation: 2.2 Bio €

Difficult to measure the impact of the FTA on new FDI (establishment of EU Companies in Korea), but we hope that many EU companies will take profit of the new opportunities

  • I will conclude by calling the Commission to do its utmost effort :

to keep the pressure on the Korean government to adopt the remaining regulation that need to be done for the full implementation (legal services, environmental services, banking, etc.

to keep the private sector informed of these development

to provide the private sector with full details in preparation of the institutional groups established in Chapter 13 of the FTA (Domestic Advisory Group; Civil Society Forum) and to allow these groups to be informed of the implementation process of the whole FTA.

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