“The international operations of European service companies are of primary importance for economic development,” stresses former minister Christoffer Taxell, who was elected Chairman of the European Services Forum (ESF) last December.

The ESF, which represents Europe’s service industries, promotes the worldwide liberalisation of the services market in both WTO trade negotiations and through the EU’s regional and bilateral service-market negotiations.

The members of the organisation, which was established in 1999, are companies in the service fields, European industrial central federations and national associations.

“The free trade negotiations create reliability for company operations and improve the predictability of the operating environment,” Taxell says.

“The starting point is to improve market access for foreign providers of services by, for example, removing investment restrictions, and making cross-border trade and casual mobility easier. The aim is to improve the transparency of legislation and its application.”

Excellent prospects

The services market is one of the fastest-growing sectors in world trade. Services account for more than 60 per cent of the world’s gross domestic product. The equivalent figure for Europe is more than 70 per cent.

“The significance of services in terms of citizens’ livelihood, wellbeing and development of the economy is very big,” Taxell points out. “The growth potential is also significant, because at this moment services account for only 20-30 per cent of world trade.”

“With their high level of expertise Europe’s service areas have excellent potential in global competition. In order to ensure the potential, impartial conditions for competition must be guaranteed on markets outside the EU.”

Services on the move

Taxell says that the European services markets are very national: only 20 per cent of the trade between Member States is services.

“Companies face barriers when trying to offer services from one country to another within the EU. The barriers are restricting the development of the service sectors and their productivity, and, therefore, international competitiveness as well.”

The barriers include complicated bureaucracy, protectionist national restrictions and numerous permit procedures. The aim of the EU’s Services Directive, which is at the implementation stage, is to facilitate the movement of services across borders in the EU’s single market.

“Compared with markets outside the EU, however, European services markets are relatively open. Most of the foreign investment coming to Europe is coming to the service sectors, something that is also advancing their development.”

Negotiations dragging on

In Taxell’s opinion, the negotiations concerning the liberalisation of the services market have dragged on too long behind the talks on agriculture and industrial products.

“The member countries of the WTO must now commit themselves to significant results in the service-market negotiations, cooperate in agreeing on a text to support this and make considerable improvements on what they offer in the negotiations.”

Taxell emphasizes how important the EU’s bilateral and regional free trade negotiations are for European business life. Negotiations are going on with many important growth markets.

“For the European service sectors negotiations that have the greatest potential are being held with South Korea, India and some Asean countries. Attempts will also be made to open up talks with Ukraine and Russia in the near future.”

Strong growth in Finland In Finland private services account for almost one half of the gross domestic product and public services about 20 per cent. In the private service sectors, labour productivity rose by an average of 1.7 per cent annually between 1995 and 2004. In many big EU countries the development was much weaker. Three out of four Finnish companies that provide services internationally predict that they will be expanding their international operations in the future. For Finnish business life the main service sectors include maintenance, installation and repair services, IT, construction, telecommunications, distribution and transportation services, financing and trade, and environmental services. On international services markets Finnish companies come up against problems with permit and registration procedures, demands placed on the legal form of a company, national monopolies and restrictions on worker mobility. “Agreement with Russia on the liberalisation of the services market would bring big opportunities. If it were possible to lower the barriers, access to the market by SMEs would be made much easier,” says Christoffer Taxell.

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Service businesses are extending beyond the conventional sector borders.
(Photo: Henriikka Ahtiainen)