INTERNATIONAL SERVICE

TRADE (CHINA)

SILVIA MARIA GONZÁLEZ. ( Xiamen University and University of Deusto)

INDEX Trade definition.

Impact of trade on the global economy

Kinds of services

Average growth of business services exports 1995-2005

Concept between trade goods and services

Law: International Trade Services

Control measures

Conclusiones

References

WHAT´S TRADE??

Trade has been a very significant factor of the People´s Republic of China´s economy. In the twenty-five years that followed the founding of the People's Republic of China in 1949, China's trade institutions were built into a partially modern but somewhat inefficient system. The drive to modernize the economy that began in 1978 required a sharp acceleration in commodity flows and greatly improved efficiency in economic transactions. In the ensuing year economic reforms were adopted by the government to develop a "socialist planned commodity economy" that combined central planning with market mechanism . These changes resulted in the decentralization and expansion of domestic and foreign trade institutions, a greatly enlarged role for free markets in the distribution of goods, and a prominent role for foreign trade and investment in the economic development.

WHY SERVICES ARE IMPORTANT FOR THE ECONOMY?

The services activities have a powerful influence on growth. Low cost and high quality telecommunications will generate economy-wide benefits, as the communications network is a transport mechanism for information services and other products that can be digitized. Telecommunications are crucial to the dissemination and diffusion of knowledge—the spread of the Internet and the dynamism that that has lent to economies around the world is telling testimony to the importance of telecommunications services. Similarly, transport services affect the cost of shipping goods and movement of workers within and between countries

Business services such as accounting, engineering, consulting and legal services reduce transaction costs associated with the operation of financial markets and the enforcement of contracts, and are a channel through which business process innovations are transmitted across firms in an industry or across industries. Retail and wholesale distribution services are a vital link between producers and consumers, with the margins that apply in the

provision of such services influencing the competitiveness of firms on both the local and international markets. Health and education services are key inputs into – and determinants of – the stock and growth of human capital.

Francois (1990a) notes that the growth of intermediation services is an important determinant of overall economic growth and development because they allow specialization to occur.

As firm size increases and labor specializes, more activity needs to be devoted to coordinating and organizing the core businesses of companies. This additional activity is partly outsourced to external service providers.

The “producer services” that are demanded and supplied as part of this process are not just differentiated inputs into production. They play an important distinct role in coordinating the production processes needed to generate ever more differentiated goods and to realize scale economies. The associated organizational innovations and expansion of “logistics” (network) services yields productivity gains that in turn should affect economy-wide growth performance

KINDS OF SERVICES TRANSPORTATION

TRAVEL

COMMUNICATION SERVICES

CONSTRUCTION SERVICES

INSURANCE SERVICES

FINANCIAL SERVICES

COMPUTER AND INFORMATION SERVICES

ROYALTIES AND LICENSE FEES

GOVERNMENT SERVICES, N.I.E.

PERSONAL, CULTURAL AND RECREATIONAL SERVICES

AVERAGE GROWTH RATE SERVICE EXPORTS

The business services exports of developing countries have grown nearly four-fold in the last decade. The average annual growth rate of business services exports for Brazil and China during 1995-2005 was 15 percent, for India it was 25 percent. In large part this reflects growth in so-called business process outsourcing (BPO) services. This activity arises from the outsourcing (and out-location through FDI) of non-core business processes throughout the value chains of both manufacturing and services industries

COMBINING CONCEPTS:This concept of international trade in services combines with the concept of international trade in goods, to form international trade in goods and services in The BPM5 current account. But it is not always practical to separate trade in goods from trade in services.

Services differ from goods in a number of ways, most commonly in the immediacy of the relationship between supplier and consumer. Many services are non-transportable, i.e., they require the physical proximity of supplier and customer––for example, the provision of a hotel service requires that the hotel is where the customer wishes to stay, a cleaning service for a business must be provided at the site of the business, and a haircut requires that both hairstylist and client be present.For international trade in such non-transportable services to take place, either the consumer must go the supplier or the supplier must go to the consumer. International trade agreements concerning services, in particular those embodied in GATS, make provision for agreement on suppliers moving to the country of the consumer.

MAKING RULES.... LAWChapter IV International Trade in Service

Article 22 The State promotes the progressive development of the international trade in services. Article 23 With respect to international trade in services, the People's Republic of China , pursuant to the commitments made in international treaties or agreements to which the People's Republic of China is a contracting party or participating party, grants the other contracting parties and participating parties market access and national treatment. Article 24 The State may restrict international trade in services on the basis of any of the following considerations: 1. In order to safeguard the national security or public interest; 2. In order to protect the ecological environment; 3. In order to establish or accelerate the establishment of a particular domestic service industry; 4. In order to maintain the State*s balance of international payments; 5. Other restrictions provided in relevant laws and administrative regulations.

Article 25 The Sate prohibits any international trade in services which: 1. may endanger national security or public interests; 2. is contrary to the international obligations undertaken by the People's Republic of China;

3. is prohibited by relevant laws and administrative regulations.

Article 26 The authority responsible for foreign trade and economic relations under the State Council and relevant authorities under the State Council are responsible for the administration of international trade in services in accordance with this Law and other relevant laws and administrative regulations.

CONTROL MEASURESArticle 24 The People’s Republic of China opens, in accordance with its

commitments made in the international treaties and agreements of international

service trade that it has concluded or acceded to, its market to the other contracting

parties or members and grants them with the national treatment.

Article 25 The foreign trade department of the State Council and other relevant

departments of the State Council may, according to the present Law or any other

relevant law or administrative regulation, administer the trade of international

services.

Article 26 The state may restrict or prohibit the trade of relevant international services if:

1. it is necessary to restrict or prohibit it for the sake of maintaining state security, social public good or public morality;

2. it is necessary to restrict or prohibit it for the purpose of protecting human health or security, protecting the life or health of any animal or plant, or protecting the environment

3. it is necessary to restrict it for the purpose of establishing or accelerating the establishment of a certain domestic service industry;

4. it is necessary to restrict it for the purpose of ensuring the balance of international payments of the state

5. it is necessary to restrict or prohibit it for any other reason as provided for in any law or administrative regulation;

6. it is necessary to restrict or prohibit it for any other reason as provided for in any international treaty or agreement that China has concluded or acceded to.

Article 27 For the military-related trade of international services and the

international service trade of any matter of fission or fusion or any matter that

derives such matter, the state may take any necessary measures to safeguard the

security of the state.

When in war or for keeping international peace and security, the state may take

any necessary measures regarding the international service trade.

Article 28 The foreign trade department of the State Council formulates, adjusts,

and publishes, in collaboration with other relevant departments of the State

Council, market entry catalogues of the international service trade in accordance

with the provisions of Articles 26 and 27 of the present Law and other relevant

laws and administrative regulations.

China´services is still inmature.The China's share of the world services market has grown and only slightly less than India and export portfolio is becoming more diverse …Domestic policies, though more open than before, still impede services trade. Domestic policies, though improving, still restrict foreign .

Regulatory framework still has gaps that prevent full competition.The Regulatory framework still has gaps that prevent full competition than services VAT and excise taxes partial rebates for certain export of – IVA Reduced income tax for firms exporting more than 70% of their production volume, and foreign enterprises. SEZ and other development zones lower income taxes for most FIE in SEZ and for exporting domestic companies.Tariff protection, though lower, creates incentives to invest in domestic market.

CONCLUSIONS:

Potential services exports:-Audio visual:-Super film industry in HK; TV is a opportunity -Weak enforcement of IPR; state control of media;There are many restrictions on openness

Business services:-Product development centers; strong technical skills -Language; IPR; restriction on foreign consulting firms-Engineering and construction.- large scale civil infrastructure . -state ownership low technology, slow adaptation to market conditions; FDI low technology, slow adaptation to market conditions; FDI restrictions;There are many restrictions on information flows. Example: AlibabaRegional trade agreements can help provide access to foreign markets. Regional trade agreements can reduce barriers services exports.

In some cases, RTA disciplines are stronger than WTO disciplines on non-discriminatory quantitative restrictions (ie market access)

Even though China is running a deficit in services trade,it has expanded its share of the global services market but it could probably do even better.Expanding services exports requires supportive domestic policies… and these are arguably more important in stimulating exports than are regional trade Regional trade agreements offer an opportunity to expand services trade, but only ambitious, US-style agreements have led to new liberalization .

In conclusion, expanding services export requires action in two domains• Domestic policy is the primary driver of services exports – Accelerate liberalization consistent with Chinese development strategy - -A review incentive framework for bias in favor of goods and non tradeable activities and against services exports– Review sector specific constraints to sectoral growth • Using trade agreements to access services markets – Agreements w/ strong provisions can lock in openness to foreign markets…(ie, US-style) – In RTAs, liberalization at home is best on an MFN basis - – WTO may hold greater promise for generalized access - Study bilateral agreements for applicability to Chinese trade strategies,including service sectors.

References Concise Chinese law.(2007).Law press China. Manual on statistics of International trade of services. United Nations. http://siteresources.worldbank.org/INTRANETTRADE/Resources/WBI-Train

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18/0,3343,en_2649_34243_1945746_1_1_1_1,00.html#data http://tradeinservices.mofcom.gov.cn/en/b/index.shtml?method=zhfg http://tradeinservices.mofcom.gov.cn/en/b/index.shtml?method=zhfg http://english.mofcom.gov.cn/policyrelease/policyrelease.html http://www.worldbank.org/trade/China-WTO