Oct 24, 2013 - Rapid advances in information and communications technology (ICT) have brought tremendous .... 7 Internet
October 24, 2013
DIGITALEUROPE’S SUPPORT FOR TRADE IN SERVICES AGREEMENT
Introduction DIGITALEUROPE strongly supports the negotiation of an ambitious Trade in Services Agreement (TISA). As the world’s largest exporter of services, the EU has much to gain from a strong agreement that is focused on this vital sector of the economy. However, the EU also has much to lose – from the rising threat of “digital protectionism” – if the TISA does not establish rules to enable the global digital economy. Rapid advances in information and communications technology (ICT) have brought tremendous change to the services sector, enabling the electronic delivery of many services to markets around the world and creating opportunities for innovative services and new business models. The dynamic European services sector has benefited greatly from these developments by leveraging its strengths in many high-value, knowledge-based services, including financial, insurance, business, professional, technical, information and entertainment services, that can be delivered efficiently and conveniently over global communication networks. But the same technologies that have created opportunities for growth in services trade also present the risk of new trade barriers in the form of restrictions on cross-border data flows or requirements to process and store data locally. The TISA provides a timely opportunity to address this threat to the European services sector. Therefore, DIGITALEUROPE urges the European Commission to ensure that the TISA will establish strong rules to promote the continued growth of the global digital economy and prevent the spread of digital trade barriers.
The Opportunity for Digital Trade Cross-border data flows are the fastest growing component of international trade.1 The easiest way to understand the potential for digital trade and how the services sector has changed is to look at the amazing growth in the number of Internet users over the last two decades. In 1995, the year that the General Agreement on Trade in Services (GATS) went into effect, there were only about 16 million Internet users worldwide. 2 Now there are over 2.7 billion Internet users around the world, creating an enormous potential market for European service providers.3 Clearly, a lot has changed since the GATS established the rules under which services trade is conducted today, and it is time to update those rules to address issues for the digital economy.
1 Data, Trade and Growth, Michael Mandel, Progressive Policy Institute, May 2013 2 Internet World Stats (http://www.internetworldstats.com/emarketing.htm) 3 The World in 2013: ICT Facts and Figures, ITU, (http://www.itu.int/en/ITUD/Statistics/Documents/facts/ICTFactsFigures2013.pdf) DIGITALEUROPE Rue de la Science, 14 >> B-1040 Brussels [Belgium] T. +32 2 609 53 10 >> F. +32 2 609 53 39 www.digitaleurope.org Transparency register member for the Commission: 64270747023-20 >> 1 of 6
Today, on average across OECD countries, 70 percent of households have access to the Internet at home and more than 30% of people in the OECD already buy goods or services over the Internet.4 World’s stock of data is now doubling every 20 months; the number of Internet-connected devices has reached 12 billion.5 The number of people engaging in online commerce will undoubtedly grow. Many different types of businesses recognize the opportunity presented by the Internet, so digital trade is not just an issue for the ICT sector and pure Internet companies. Rather, in light of the wide range of services that can be delivered electronically, it is clear that crossborder data and digital trade are important issues for a large part of the business community. Service providers from many sectors, and all businesses with global operations, rely on ICT infrastructure and cross-border data flows to operate, so these issues are critical for the economy as a whole. Two statistics help to highlight this point. In two-thirds of OECD countries, more than 95 percent of companies already use the Internet6, and a study by the McKinsey Global Institute calculated that 75 percent of the economic benefits from using the Internet accrue to traditional industries that are not Internet pure-play companies.7 So, many companies have a stake in ensuring open markets for electronically delivered services, whether as a provider or a user of those services, or both.
The Need for Digital Trade Rules Cross-border market access and national treatment commitments imply, for the delivery of covered services, the ability to transfer, access, process, store and manage data across national borders, since GATS commitments are “technology neutral,” in that they do not typically specify what technology can be used to deliver services across borders. A crossborder services commitment, therefore, is a commitment to allow delivery of the service via the Internet or any other means. However, given the growing importance of the Internet as a delivery mechanism for trade in services, the right to move data related to covered services must be made explicit. New digital trade rules would provide greater clarity and certainty regarding coverage and would complement cross-border market access and national treatment commitments. Unless new trade rules are developed that clearly recognize the right of service providers to transfer data across borders, there is a growing risk of digital protectionism that could undermine the value of cross-border services commitments. We are already seeing countries implement or consider digital trade barriers. For example, last year Vietnam proposed a draft IT services decree that would have required the location in Vietnam of equipment for providing web search portals, data centers and cloud computing services to customers in Vietnam. Vietnam proposed this decree despite the fact that it had made full cross-border 4 The Future of the Internet Economy: A Statistical Profile, OECD, June 2011 (http://www.oecd.org/internet/interneteconomy/48255770.pdf) 5 Ten IT-enabled business trends for the decade ahead , McKinsey Global Institute, http://www.mckinsey.com/insights/high_tech_telecoms_internet/ten_itenabled_business_trends_for_the_decade_ahead 6 OECD Internet Economy Outlook 2012, (http://www.oecd.org/sti/interneteconomy/ieoutlook.htm) 7 Internet Matters: The Net’s Sweeping Impact on Growth, Jobs, and Prosperity, McKinsey Global Institute, May 2011 (http://www.mckinsey.com/insights/mgi/research/technology_and_innovation/internet_matters)
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market access and national treatment commitments in computer and related services when it joined the WTO in 2007. Market Access and National Treatment Commitments in a Broad Range of Services DIGITALEUROPE seeks full market access and national treatment commitments in computer and related services and telecommunication services, which provide the infrastructure that supports the global digital economy. DIGITALEUROPE also strongly supports the efforts to liberalize services in our customers’ sectors, including financial, insurance, retail and wholesale distribution, express delivery, information, advertising, media and entertainment, and energy and environmental services, among others. Many of these services can take advantage of communication networks to reach global markets. DIGITALEUROPE’s members will benefit from improved market access in all of these sectors as they provide ICT solutions to support the growth of their customers around the world.
Computer and Related Services According to the OECD, computer and information services is the fastest-growing sector for trade in services.8 This is not surprising, given recent advances in IT services, including cloud computing, Web-based applications, software as a service and online storage services, as well as growth in IT outsourcing and data center services. DIGITALEUROPE seeks commitments in the TISA that will enable the continuing high growth of trade in IT services. While trade in IT services has grown rapidly, not all TISA countries have made full market access and national treatment commitments in computer and related services. It is important that all parties to the TISA make full commitments in this sector to provide greater legal certainty for service providers and to enable access to these services by all users in these countries. Rapid advances in information and communications technology create special challenges in scheduling trade commitments in computer and related services, since technological innovation moves much faster than trade negotiations. Trade commitments in computer and related services must provide certainty in coverage for evolving; network-enabled IT services and must not become obsolete as technology for delivery of these services advances. The issue of coverage for evolving IT services was discussed extensively in the “Friends of Computer Services” group during the Doha Round negotiations. Some very useful work came out of this group, including scheduling commitments at the two-digit level (CPC 84), as captured in the Understanding on Computer and Related Services and in the Plurilateral Request on Computer and Related Services, which were endorsed by many TISA participants. The TISA negotiators could build upon and update this work to ensure that evolving IT services are covered and that the commitments will not become obsolete due to technological advances. 8 The Future of the Internet Economy: A Statistical Profile, OECD, June 2011 (http://www.oecd.org/internet/interneteconomy/48255770.pdf)
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Enabling Cross-Border Data Flows in Support of Service Delivery The global economy is transferring into digital thus, the free flows of data are critical to sustain its growth and bring social benefits in both established and developing markets. Therefore TISA should have a clear objective to facilitate the free flow of data by encouraging public policy regimes that promote innovation, global competition, the use of international standards as well as minimizing regulatory burdens. The TISA should establish an explicit right of service providers to transfer, process, store, access or manage data across borders in support of the provision of covered services through any mode of delivery. In addition, the TISA should prohibit requirements to store or process data in local servers as a condition of providing the service. Any exceptions to these obligations for measures that are necessary to meet legitimate public policy goals must not be applied in a manner which would constitute a means of arbitrary or unjustifiable discrimination between countries where like conditions prevail, or a disguised restriction on trade in services. These new trade rules for the digital economy are certainly important for enabling online trade with current TISA parties, but perhaps more importantly, they will set the rules that will apply to other countries as they join the TISA in the future, and they will establish a model for other trade agreements. Given the ultimate goal of multilateralising the TISA in the World Trade Organization, it is important that the TISA include strong and effective digital trade rules.
Establishment of a commercial presence and the temporary movement of natural persons for business purposes Growth of European ICT companies is hampered by limitations on the participation of foreign capital in terms of maximum percentage limit on foreign shareholding or the total value of individual or aggregate foreign investment. Those barriers exist among TISA negotiating parties. Other obstacles that should be tackled in the scope of the negotiations are residency requirements for senior management or board of directors, difficulties in obtaining a license or authorization, treatment by state-owned enterprises. Restrictions of temporary movement of natural persons for business purposes are also complicating trade in ICT services. European digital technology companies point at difficulties in obtaining work permits and visas, as well as requirement to hire or train local workers. For instance, restrictions of travel of foreign nationals to the US was mentioned as problematic.9 H1-B visas are capped at 65,000 per fiscal year and this visa category is often oversubscribed within the first week of the fiscal year. L1 visas are not capped in the same way but an employee must have worked for the company for 12 months prior to entry to the
9 Domestic suppliers are subject to the same limitations should they wish to bring in foreign nationals.
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US. Secondly, companies are obliged to hire and train locally workers in telecommunication sector in the US. Off shoring is also a matter of concern. The provision of telecomm services for US networks from outside the US is a complex, multi-faceted issue that crosses commercial, social and political arenas. The restrictions on off shoring are not particularly arduous and include inter alia personnel screening, a lot of log keeping, notifications, mandatory approval unless off shoring to an OECD country or India.
Conclusion DIGITALEUROPE fully supports the European Commission’s undertaking to negotiate an ambitions Trade in Services Agreement with key EU trading partners. We see the TISA as an important opportunity to establish trade rules to enable and promote the growth of the global digital economy, which will be a tremendous boon for European service providers and citizens. We look forward to working with the Commission to achieve this important goal.
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ABOUT DIGITALEUROPE DIGITALEUROPE represents the digital technology industry in Europe. Our members include some of the world’s largest IT, telecoms and consumer electronics companies and national associations from every part of Europe. DIGITALEUROPE wants European businesses and citizens to benefit from digital technologies and for Europe to grow, attract and sustain the world's best digital technology companies. DIGITALEUROPE ensures industry participation in the development and implementation of EU policies. DIGITALEUROPE’s members include 57 global corporations and 34 national trade associations from across Europe. In total, 10,000 companies employing two million citizens and generating €1 trillion in revenues. Our website provides further information on our recent news and activities: http://www.digitaleurope.org
THE MEMBERSHIP OF DIGITALEUROPE COMPANY MEMBERS: Acer, Alcatel-Lucent, AMD, APC by Schneider Electric, Apple, Bang & Olufsen, BenQ Europa BV, Bose, Brother, Canon, Cassidian, Cisco, Dell, Epson, Ericsson, Fujitsu, Hitachi, HP, Huawei, IBM, Ingram Micro, Intel, JVC Kenwood Group, Kyora Document Solutions, Kodak, Konica Minolta, Kyocera Mita, Lexmark, LG, Loewe, Microsoft, Mitsubishi Electric, Motorola Mobility, Motorola Solutions, NEC, Nokia, Nokia Siemens Networks, Océ, Oki, Oracle, Panasonic, Philips, Pioneer, Qualcomm, Research In Motion, Ricoh International, Samsung, SAP, Sharp, Siemens, Sony, Swatch Group, Technicolor, TP Vision Texas Instruments, Toshiba, Xerox, ZTE Corporation. NATIONAL TRADE ASSOCIATIONS: Belgium: AGORIA; Bulgaria: BAIT; Cyprus: CITEA; Denmark: DI ITEK, IT-BRANCHEN; Estonia: ITL; Finland: FFTI; France: Force Numerique, SIMAVELEC; Germany: BITKOM, ZVEI; Greece: SEPE; Hungary: IVSZ; Ireland: ICT IRELAND; Italy: ANITEC; Lithuania: INFOBALT; Netherlands: ICT OFFICE, FIAR; Poland: KIGEIT, PIIT; Portugal: AGEFE; Romania: APDETIC; Slovakia: ITAS; Slovenia: GZS; Spain: AMETIC, Sweden: IT&Telekomföretagen; United Kingdom: INTELLECT Belarus: INFOPARK; Norway: IKT NORGE; Switzerland: SWICO; Turkey: ECID, TESID, TÜBISAD; Ukraine: IT UKRAINE.
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