Samuel A. Di Piazza, Jr. Vice Chairman, Institutional Clients Group, Citi Chairman, Coalition of Service Industries. and

Transcription

1 Samuel A. Di Piazza, Jr. Vice Chairman, Institutional Clients Group, Citi Chairman, Coalition of Service Industries and Peter Allgeier President, Coalition of Service Industries Tuesday, March 12, 2013 As Prepared Mr. Chairman and members of the Committee, my name is Samuel A. Di Piazza, Jr. I am Vice Chairman of the Institutional Clients Group at Citi and I am proud to also appear before you today in my role as Chairman of the Board of the Coalition of Service Industries. For 36 years prior to joining Citi, I served the accounting profession as a member and partner of PricewaterhouseCoopers, helping clients, both large and small, around the world. I served as the Senior Partner of the U.S. Partnership at the beginning of the last decade and ultimately became the Global Chief Executive Officer of Pricewaterhouse Coopers International for the last eight years of my career. In that role, I led more than 160,000 professionals in 152 countries around the world. Today, among other responsibilities, I also serve on Citi s Senior Strategic Advisory Group and as a member of the Board of the USA Foundation of the World Economic Forum. My testimony today is simply to say that, as a businessman with more than 40 years of experience in international business, and particularly in the services sector, I strongly support the leadership and active participation of the United States in the International Services Agreement. This is an urgently needed effort towards a new international agreement that will improve U.S. competiveness. But the benefits are global. An ambitious International Services Agreement will not only produce jobs and economic growth for the United States, but in the other 20 countries currently participating in the negotiations. Today, I would like to take my time before you to share my personal perspectives. I will leave the finer points of the issues that should be addressed in a new international services agreement to my colleague Peter Allgeier, president of the Coalition of Service Industries, and the written comments filed by the organization VERMONT AVE, NW SUITE 420 WASHINGTON, DC (202) FAX (202)

2 This hearing presages a negotiation that, from my experience in the international services sector, could result in an agreement that not only preserves the basic principles that have guided world economic growth since the 1940 s. But it also will provide us with the tools, common understandings, and framework to secure U.S. competitiveness in the global marketplace of the 21 st Century. This is a win-win opportunity that will create growth, jobs, and mutual alliances. A few weeks ago, I participated in the World Economic Forum in Davos, Switzerland. It was my thirteenth time at this event. And I realized how considerably the economic development dialogue and debate of today differs from what we were talking about at the beginning of this century. The differences were truly amazing. Day-to-day business practices, especially in the areas of services, have changed dramatically in just the past few decades. When one considers that the main rules of international trade were established about 60 years ago, it really should come as no surprise that the rules are out of sync with the drivers of business and need to be modernized. In the initial days of the General Agreement on Tariffs and Trade (GATT), it was all about goods. Today, the economies many aspire to achieve, such as that in the United States, are primarily service economies or manufacturing or agricultural economies enabled by service activities. The majority of the people employed today in the U.S. work in services jobs. These jobs are essential in supporting the people who manufacture goods or produce agricultural products that are consumed both here and around the world. Services are the enabler for all economic activity. Today s jobs, whether one is engaged in consulting, healthcare, application development, mining or energy exploration, auto manufacturing, food production or metal fabrication requires a significant engagement of technology, information, processing, and communication. And every one of these activities, from the largest multinational companies to the small and medium enterprises that drive our employment and growth, have cross border supply chains and customer engagement. All of this requires a robust services industry. The United States is the world s largest and most competitive providers of services. It is no understatement to say that the future of U.S. competitiveness is dependent on the ability to provide services across the world and that is why I believe that the International Services Agreement is so critical. Citi is both America s and the world s global bank. We employ approximately 260,000 people worldwide, including more than 89,000 in the United States. Through the hard work of these people, Citi offers the most efficient and cost-effective financial services to thousands of U.S. companies doing business around the globe. These companies are competitive in the global market because Citi and other enterprises, such as international couriers, media, transportation companies, telecommunications and technology firms, and accounting and insurance groups all provide the value chain support to deliver U.S. goods and services to their customers worldwide. We do this through our U.S. operations but also through our subsidiaries, branches, and affiliates around the world. We must support the ability of these companies to compete fairly and according to economic determinants that are market-based, not government-based. If we do not, we will all lose. It s that simple. And that will mean fewer jobs and less growth in the United States and across the world as well. Page 2 of 7

3 We must recognize the phenomenal global success of the GATT and the World Trade Organization (WTO) principles of liberalized trade and investment that the United States was a leader in developing over 50 years ago. But we also have to recognize that these achievements took leadership, foresight, and enlightened self-interest. Today, these needs are unchanged, but they should adapt to the new paradigm of how wealth is generated and distributed. Technology and innovation has tested economic principles and business models. And it certainly has tested the capacity of the international rules by which economies interact and the means by which governments seek to manage those interactions. The International Services Agreement offers a unique and critically important opportunity to establish a modern and adaptable framework by which free market principles can govern the investment in, and delivery of, services on a transnational scale. The current international rules on services trade and investment the General Agreement on Trade in Services (GATS) were created twenty years ago. While that agreement was being negotiated, the internet was still in its infancy, just in time manufacturing and inventory controls were considered revolutionary, China had a GDP per capita of $341 (today it is over $5,200), and the WTO had yet to be formally established. Business operated more as multi-regional or multinational operations rather than truly globally integrated enterprises. We used overnight mail and fax machines across national networks, not instant document transfers through a global internet. Business today manages across borders and friction creates obstacles and destroys jobs. My point is that the world has changed since the last time we set rules for international services trade and investment. What is so encouraging about the International Services Agreement negotiations is that the 21 countries, who enthusiastically join this effort, represent a broad spectrum of economic development and political systems, developed and emerging, east and west, north and south, and they all agree that growth and jobs and competitiveness are rooted in a dynamic and open services trade and investment regime. The United States is not alone in understanding the need and opportunity here. Many other governments know that there are rising national barriers and burdens placed upon services providers both at the border as well as behind. They know that, notwithstanding G20 commitments, governments are ring-fencing capital, discriminating in favor of national companies in many ways, including licensing and performance requirements, and restricting activities such as cross-border data flow and processing primarily to force localization of these services. Page 3 of 7

4 The countries now poised to undertake negotiation of the International Services Agreement realize that these barriers and restraints do not serve their domestic economic development and eventually lead to inefficiencies, higher costs, and slower growth. It is a much greater benefit for their long-term economic prosperity to join together with other like-minded countries in accepting disciplines that will enhance the flow of services among their countries. Citi has been financing American ingenuity and global competitiveness for over 200 years. From that experience, we know that commercial intercourse, based on market principles and commonly accepted rules on which business can rely is a proven formula for the creation of wealth and its most efficient means of distribution. The International Services Agreement can provide that critically important predictability to business. The International Services Agreement must establish the set of commitments among countries to preserve and enhance the remarkable opportunities that the digital economy, telecommunications, cross-border capital flows, and wide array of services create for people in our country and around the world to live more productive and promising lives. Thank you for the opportunity to testify today. I will be happy to answer any questions you may have following Ambassador Allgeier s remarks. Thank you, Sam. And thank you, panel, for providing this opportunity to present the priorities and objectives of the member companies of the Coalition of Service Industries. Our members are keen to support your efforts to bring the international rules for services trade into line with the realities of today s global marketplace. We have submitted detailed comments on the issues that we recommend be addressed in the International Services Agreement negotiations. Today, I would like to take a few minutes to highlight a number of the barriers that need to be addressed. I will focus on the so-called horizontal issues, that is, those that affect the broad range of our membership. Our written comments also identify the sector-specific issues on which we seek your attention. A successful International Services Agreement requires both new market access commitments and universal rules. Market Access The International Services Agreement should encompass the best features (both market access and rules) of every party s existing GATS commitments and free trade areas (FTAs). In addition, parties initial offers should include market access that currently is available in their economy but not yet bound in any agreement. A request/offer negotiation on market access should proceed beyond these elements. Any exceptions to the market access commitments (non-conforming measures) should be minimal in number and narrow in substance, and in any event should be much fewer and narrower than the party s existing exceptions in its GATS schedule. In particular, market access commitments should respond to the reality of rapidly changing technology and international business practices. Page 4 of 7

5 Technological Innovation Market access commitments should ensure that any new services that become possible to trade as a result of technological innovation in a covered category can be provided without further negotiation. Clustering/Bundling Market access commitments should provide access throughout the supply chain to take account of interrelated services, i.e., services that may fall in different categories but are complimentary to each other in providing an integrated services package to consumers. The clustering concept is especially important for computer and related services, given the rapid advances in information and communication technology. The bundling approach also makes sense in the context of express delivery. In order to allow express delivery service providers to offer customers the full array of services necessary to run a modern logistics supply chain, a bundling or checklist approach should be used in which countries would make commitments in a variety of service-related activities (e.g., trucking, courier, warehousing, freight forwarding, auxiliary transport services, etc.). Universal Rules The International Services Agreement should include universal rules that apply across all sectors. National Treatment All parties should be required to provide national treatment across all categories of services. Any exceptions would have to be identified explicitly, with the narrowest possible application. Equity Limitations All parties should eliminate any remaining equity limitations on foreign service suppliers. Cross-border Data Flows With advances in information and communication technology, more and more services can be delivered electronically, so restrictions on data flows serve as barriers to trade in services generally. Given that services in general, and ICT and ICT-enabled services in particular, are areas of comparative advantage for the United States, creating binding commitments to allow cross-border data flows should be a high priority for the United States There should be a clear obligation to allow cross border data flows and external data storage (including, to the extent not already covered ability to use cloud-based technologies), both within a firm and in its operations with customers. Page 5 of 7

6 State-Owned Enterprises (SOEs) When state-supported and state-owned enterprises (SOEs) are engaged in commercial activity, they should not be granted more favorable treatment (including preferential financing) than competing private service providers. Since the rules contained in the ISA are eventually likely to have much broader geographic application, even multilateral application, it is important that general disciplines on SOEs be articulated, not just fashioned to deal with particular situations among the existing negotiating partners. Regulatory Barriers Parties should modify or eliminate regulations that serve as barriers behind the border. While we recognize the necessity of certain regulations (e.g., for national security, data protection, prudential reasons), there should be parameters and limitations for their application. For example, prudential carve-outs should limit the scope of allowable prudential measures to nondiscriminatory measures that are subject to a rule of least trade and investment distorting (or something along those lines). Similarly, capital requirements should not be used as disguised barriers to entry or competition with domestic suppliers of comparable services (e.g., financial services, insurance). There should be no new regulatory barriers imposed on one category of service that is bundled with another more regulated service in a party s market access commitments The agreement should ensure technological neutrality in establishing regulations (e.g., in telecommunications), along with transparency and opportunity for public comment on proposed standards. Licensing There should be rules to ensure transparency and non-discrimination in the issuance of licenses and certifications. Effective appeals procedures should exist in cases of denial. Business Operations Service providers should be free to choose the legal form (e.g., subsidiary, branch, etc.) and mode of delivery. Parties should be prohibited from requiring service providers to meet nationality requirements for Board members. GATS-Plus No country should be allowed to clarify existing GATS commitments, or introduce new restrictions or exceptions, that derogate from or weaken existing GATS commitments. Page 6 of 7

7 Transparency Regulations should be subject to transparency and advance comment procedures (recognizing certain exceptions, e.g., monetary authorities). Regulation must be transparent. Both suppliers and consumers of services must know what the rules are and have confidence that the rules will be applied consistently and fairly. Standards The ISA should provide that government-mandated requirements and specifications for services products and suppliers are not to be applied in a manner which creates unnecessary barriers to international trade. Technical rules and regulations should treat services and suppliers of other parties on a de jure and de facto basis in a manner no less favorable than that accorded suppliers based in the member s own territory. Dispute Settlement There should be binding dispute settlement procedures. Sector-Specific Objectives As I mentioned at the beginning of my presentation, there also are very important sector-specific objectives in order to achieve a truly open trading system in services. These include the following sectors: Electronic Security Systems Express Delivery Financial Services Insurance Internet and Computer-Related Services Media and Entertainment Services Retail and Distribution Services Telecommunications We would be pleased to discuss those further with you. We most certainly seek their inclusion in the final results of the International Services Agreement. Once again, thank you for the opportunity to present our views on the ISA and what it can achieve for the largest segment of the U.S. economy, The members of the Coalition of Services Industries stand ready to support actively these negotiations. We are now happy to answer any questions you might have. Page 7 of 7