“Thank you for your service(s)”

“Thank you for your service(s)”: Reflections of the outgoing ESF Chairman!?

To be asked to take the helm of any vessel is unquestionably an honour and a privilege! Peers are signalling confidence and trust in you to navigate the passage and, implicitly, obligations and responsibilities exist. December 31st saw my term as Chairman of the European Services Forum come to an end and I passed the wheel to a new Chair after fifty busy, eventful, exhausting and at times thrilling months. After a short decompression period, I have penned some reflections, though certainly not a magnum opus, on the more significant developments that occurred during my time ‘on the bridge’ with polyvalent ESF Managing Director (aka Chief Engineer, Stoker, Navigator and ever-alert Watch Officer), one Pascal Kerneis!?

When I took on the chairmanship of the organisation in 2017, my thirty years of professional experience had been almost exclusively gleaned from the world of professional services: both as a provider and public policy specialist. Those years had shaped my views on the importance to the modern economy of liberalising trade-in-services, cross-border investment, cross-border data flows, worker mobility and of generally facilitating greater SME involvement in trade! My desire was to bring that experience to bear in the world of trade policy and to effectively advocate for the liberalisation of trade (and investment) in services: all too often the Cinderella theme of the byzantine world of trade policy! So, on Friday the 13th of October 2017 (one wouldn’t want to be superstitious!), the late Sir Thomas Harris’[1] ended his term as Chairman and the other members of the ESF tasked me with the ESF helm. I was and remain hugely honoured by, that display of faith in both myself and BDO by the other members.

The journey since has of course been shaped by some totally unforeseen events: not least the global Covid19 pandemic which from early 2020 hit global trade hard, but most notably affected trade in services. Some of the more significant and often choppy waters the ESF has had to sail during my tenure, are recalled below, not all of them with great affection!

US policy changes: Donald Trump

On his first day in office in January 2017, U.S. President Donald Trump announced American withdrawal from the Trans-Pacific Partnership (TPP) negotiations. This seismic decision, well signalled by himself in advance, turned conventional trade policy thought on its head; and has had lasting trade and geopolitical consequences. Soon after, testy renegotiations of NAFTA[2] (now titled USMCA) were commenced with Canada and Mexico. Following through on his “America First” electoral promise, he also took aim at China commencing a ‘trade war’: in July 2018[3] introducing tariff hikes which remain. He pointedly refused to agree to appointments to the WTO Appellate Body[4] : thus bringing the WTO’s dispute resolution system to a standstill and further undermining that embattled organisation which is widely regarded as the de facto world trade regulator. Despite being an ‘ally’, the European Union and its Members States, did not escape his ire as new tariffs were imposed on EU steel, aluminium and whiskey (ok, whisky if you are Scottish!). [Aside: Was it Mark Twain who said, ‘never trust a man who only knows one way to spell a word’?!] The next four years of the Trump Presidency were a whirlwind in so many ways that no short article could capture all the significant trade-related events that arose.

EU?

In response, the EU formulated proposals for a more assertive trade policy even permitting retaliatory measures to respond to coercive actions by third countries on EU (or any of its member states’) policy choices. This revamped trade policy, rather cruelly dubbed ‘self-centred multilateralism’ by one Brussels media outlet, now includes a new-ish and ill-defined concept, namely: ‘Open Strategic Autonomy’; whilst seeking to promote EU values through trade policy. Examples include: its environmental and global climate objectives as evidenced by the EU’s proposed CBAM regulation[5] ; and imminent mandatory due diligence on supply chains for companies accessing the EU Single Market.

EU Asia

Encouragingly, during my time as ESF Chair, three EU FTA[6] s came into force with Asian countries which increasingly have included chapters for services and/or SMEs, viz. those with Japan, Singapore and Vietnam. Trade negotiations resumed with services giant, India, and I was very pleased to sign a Memorandum of Understanding for the ESF with the National Committee on Services of the Confederation of Indian Industry at the WTO in 2018! Further encouraging signs can also be found in the ongoing CEPA negotiations with Indonesia (ASEAN’s largest economy, the current G20 chair and 2023 Chair of ASEAN, as well as being the world’s fourth most populous state).

Like the US before it, the EU and some of its Member States as well as former member, the UK, ‘tilted’ to the Indo-Pacific during my term. The EU is negotiating comprehensive FTAs with Australia and New Zealand both with services chapters and the ESF has contributed extensive position papers to the debate and process. To my delight, the EU-ASEAN bilateral relationship finally became a Strategic Partnership, with more attention now being paid to that region than for many years. One could be forgiven for being optimistic but then there is the stillborn EU’s Comprehensive Agreement on Investment (CAI) with China and the unsettling Chinese ‘Dual Circulation’ policy to consider!

As I quickly learned, the world of trade policy has its own lexicon and an ever-expanding glossary of terms. Getting a basic fluency of this arcane language was one of my personal achievements during those fifty months!

US: Biden’s helm – tacking again?

Since President Biden was inaugurated in the US one year ago, greater EU-US engagement has tacked towards dispute resolution, e.g. becalming of the long-running Airbus-Boeing dispute although the WTO’s Appellate Body remains dormant as the US continues with the Trump policy on appointments of new members. It was a relief to see the US and EU agree to intensify bilateral trade and investment whilst avoiding new technical trade barriers, with the establishment of the TTTC[7] which may further foster global trade in technology standards, supply chains, data governance and investment checks. Nonetheless US ‘decoupling’ of its economy from that of China remains a feature of the trading relationship between these two trading superpowers notwithstanding the so-called Phase 1 trade agreement signed under President Trump.

Positive plurilateral moves

We at ESF were very encouraged when in December 2017 WTO[8] negotiations commenced for an International Facilitation Agreement (IFA) setting rule-based minimum, stable and predictable requirements for country inward investment approvals. Subsequently, negotiations on the vital area of e-commerce[9] were initiated which will prove central to the digital economy and to trade in services. It’s always worth being reminded that globally over the last decade, services trade growth has outstripped goods by 60% although Covid’s calamitous wave has swamped and smashed global growth affecting trade in services significantly more so than trade in goods.

We drew comfort also from the continued extension of the Moratorium on the Application of Customs Duties on Electronic Transmissions that without which there would be catastrophic affects for the data-driven global digital economy.

Finally, in this area, the WTO negotiations on Services Domestic Regulation[10] were recently inked to trim licensing, professional qualification requirements and technical standards around services. This hard-negotiated initiative, concluded after 24 years, had been strongly endorsed by the ESF over the years and is conservatively predicted to reduce global trade costs for services businesses by USD150 billion.

Covid-19 Pandemic Wave

In 2020 goods trade fell by 8%, services exports by 20% and travel services 63%. Supply chains, both domestic and international, were almost completely severed. Who can forget images of armed personnel guarding PPE freight? Countries enforced (repeated) lockdowns, excepting essential personnel, and economies ground to a halt. The Global Trade Alert based in St Gallen, Switzerland recorded over 6,000 restraints of trade introduced by G20 countries in response to the pandemic. That was very disappointing even if some of them have been relaxed since. Of course, ESF representation and advocacy efforts were not spared and essential conferences such as the WTO Forum in 2020 and MC12[11] were cancelled. The WTO Forum 2021 was a scaled-back hybrid event during which I led the ESF delegation and chaired several meetings with WTO Ambassadors and others involving members of the Global Services Coalition, not least an excellent session with the inspiring WTO Director-General, Dr Ngozi.??

Brexit and beyond

What is there to say about this that hasn’t already been said? The UK, Europe’s largest services-driven economy, severed a deeply spliced 47-year political and economic relationship. After much negotiation, brinkmanship and angst, the EU-UK TCA[12] was signed and the UK left the EU ‘with a deal’. Uncertainty remains as to its economic wisdom and early signs are that services industries are struggling to overcome the divorce. It is clear that the level of EU-UK trade is, when isolating the effects of the pandemic, down on the counterfactual trajectory. For services industries, much will hinge on the UK’s future domestic regulatory approach as well as the 2025 European Commission review of its Adequacy Decision on the UK data protection regime. Whither now also the UK financial services industry given its loss of “EU passporting”?

ESF members were and remain extremely active on ‘Brexit’ and future UK-EU trade relations and we engaged at the highest levels both in Brussels and London throughout the years 2017-2021. Pascal and I even popped up in No 10 and the House of Commons!

Of course, since its departure, the UK has signed dozens of bilateral trade agreements. Many initially were simple rollovers of the EU FTA which the UK had already been part of. More recently however, the UK has signed new and more ambitious bilateral agreements of its own: e.g. with Japan and Australia and a digital agreement with Singapore, the Lion City being very much a pioneer of digital economic partnerships. The UK’s application to accede to the CPTPP[13] is also very interesting for its services industries and SMEs and of course all UK eyes are on the horizon for an FTA with the, for now, unwilling if not disinterested US!

Others?

While I was ESF chair, we celebrated 20 years in existence and marked the coming into force of the EU-Canada CETA with several excellent webinars with Trade Minister and Trade Commissioner representation from Canada and the EU respectively. We also saw the former TPP, abandoned by the US but carefully shepherded and nurtured by Japan, morph into the CPTPP. Signed by 11 countries, the signatories now collectively account for about 13% of global GDP, whilst the UK and four other countries including China wait in the wings!

It’s been a fascinating time for Asia-Pacific trade with the RCEP[14] also coming into force. Signed by all ten ASEAN countries plus China, Korea, Japan, Australia and New Zealand, it is the largest trade agreement in the world covering nearly a third of both the globe’s GDP and population. The ASEAN countries themselves concluded ATISA[15] to advance regional services sector liberalisation and set future goals to reduce barriers. A veritable spaghetti bowl of agreements confronts international businesses in the region but in aggregate they are likely to facilitate regional trade and reduce tariff and non-tariff barriers to trade as well as open market access and drive economic growth including in the fast-growing services sectors in the region.

In summary

It’s been a fascinating four and a bit years and ‘interesting times’ to lean on the Chinese proverb! Ever-increasing servicification in the manufacturing sector understandably means that services trade is receiving more attention now than historically. SMEs still find it harder to navigate cross-border service regulatory barriers than larger businesses but that may be changing. I am gratified to see that tireless ESF efforts have contributed to the texts of some more recent trade agreements (regional or otherwise) which increasingly factor in the importance of services trade and are beginning to take account of the cross-border trade challenges faced by midmarket and SME businesses. We will continue to lobby policymakers (and national statistics agencies) to stay on that more enlightened path and to recognise the importance of services sectors to all economies: all the more so as the economy everywhere becomes a digital economy!!

I congratulate my successor, Ms Annette Meijer, Vice President European Affairs & Deputy Head Brussels Corporate Representation at the Deutsche Post DHL Group. Like the WTO’s DG Dr Okonjo-Iweala, whom I had the great pleasure to meet and engage with at the WTO Forum last year, Annette is the first female to take the helm at the ESF and is an excellent choice by the members. I sincerely wish her a safe and enjoyable passage and I will be there to support her in any way I can throughout.??

Lastly, I especially want to thank Pascal Kerneis, John Cooke, Tilman Kupfer, Stuart Harbinson, Pierre Groning, Pat Ivory, Ralph Kamphoner, Jill Craig, Edward Bowles, Justin Brown, Hosuk Lee-Makiyama, Iana Dreyer ?and countless others for helping me navigate fifty months like no other. I cannot forget either WTO DG Dr Ngozi Okonjo-Iweala and her predecessor Roberto Azevedo, WTO Deputy DG Karl Brauner, European Trade Commissioners Cecilia Malmstr?m, Phil Hogan and EVP Valdis Dombrovskis, current and former DG Trade officials Jean Luc Demarty, Helena Konig, Sabine Weyand, Peter Berz and Christoph Kiener along with MEPs Berndt Lange and Marietje Schaake for their support and engagement, as well as Markus Beyrer at Business Europe and Christine Bliss at the Global Services Coalition. And most importantly, the former and current BDO International CEOs, Martin van Roekel and Keith Farlinger, respectively, who supported my efforts throughout as the standing BDO representative on the ESF.

It was an honour to ‘serve services’ and I hope that I have advanced both the cause of trade in services liberalisation and the overall health of the ESF during my fifty months ‘at the helm’!

Noel Clehane

Footnotes:

[1] Then Vice Chairman Asia, Standard Chartered Bank.

[2] NAFTA, being, North American Free Trade Agreement; and USMCA, being, the United States Mexico Canada Agreement.

[3] Resulting in x6 increases on Chinese goods which remain in place.

[4] A judicial dispute settlement organ of and part of the 164 WTO member countries’ global and international trade rule-making and-based organisation.

[5] CBAM, being the EU Council’s and Commission’s proposed Carbon Border Adjustment Mechanism, having the goal of imposing a fee on imported high carbon content third country goods so that the carbon pricing of that carbon quantity in the good is the same as the European carbon price had the good been produced in the EU.

[6] FTA, being Free Trade Agreement.

[7] TTTC, being the Transatlantic Trade and Technology Council.

[8] WTO Ministerial Conference, Buenos Aires, now supported by 111 WTO members.

[9] January 2019 and now 86 WTO member supported.

[10] December 2021 and signed by 67 WTO members.

[11] MC12, is the twelfth WTO Ministerial Conference and was twice postponed (first Nur-Sultan, Kazakhstan, then Geneva) due to Covid-19.

[12] EU-UK Trade and Cooperation Agreement.

[13] CPTPP, being Comprehensive and Progressive Agreement for Trans-Pacific Partnership, whose signatories are Australia, Brunei Darussalam, Canada, Chile, Japan, Malaysia, Mexico, Peru, New Zealand, Singapore and Vietnam.

[14] RCEP, being Regional Comprehensive Economic Partnership, of ASEAN [Association of South East Asian Nations] countries (being Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand and Vietnam) plus China, Japan, South Korea, Australia and New Zealand.?

[15] ATISA, being the ASEAN Trade in Services Agreement.