Christopher Findlay University of Adelaide. Hussain G. Rammal University of South Australia

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1 Australia-EU trade in Services: the case of Australian architecture firms Christopher Findlay University of Adelaide Hussain G. Rammal University of South Australia The study is funded as part of the research project Australia & the European Union: a study of a changing trade and business relationship (LP ), supported by the Australian Research Council, as well as the European Australia Business Council, the European Commission, the Department of Foreign Affairs and Trade, the Department of Agriculture, Fisheries and Forestry and the Department of Industry and Innovation. The organisers gratefully acknowledge support from AUSTRADE. Services Sector Accounts for 68 percent of Global GDP and approximately 61 percent of employment in the world (PECC, 2011). The internationalization of service firms remains under-researched. 1

2 Sectoral Distribution of FDI Projects Source: UNCTAD 2012, World Investment Report Year Value (Billions of $) Share in % Primary Manufacturing Services Primary Manufacturing Services Average Australia s Trade in Services Trade in services in 2011 was worth A$109 billion; accounting for 17.9 percent of Australia s total trade in goods and services (DFAT, 2012). US (14.7%), UK (8 percent) and China (6.8%) are the largest two-way trade partners (DFAT, 2012). Exports in the Architectural, engineering and other technical services sector were worth A$1.9 billion in 2011, of which the architecture services were worth A$69 million (DFAT, 2012). 2

3 Australia-EU trade in services Two-way trade in totaled A$21.5 billion. Exports to EU worth A$8.3 billion and imports worth A$13.3 billion (DFAT, 2013). Major exports included personal travel, and professional, technical and other business services. Major imports included personal travel and transportation services. Services Sector in the Europe The architectural services sector in Europe is estimated to be worth 17 billion, with 155,000 architectural practices operating in the region (Architects Council of Europe, 2010). The Services Directive was adopted by the European Parliament in December,

4 Methodology Case Study of three Australian architecture firms in the EU. Interviews with key informants from three companies; professional body representing architecture firms in Australia and Europe, and government trade bodies. Used the Uppsala model (Johanson & Vahlne, 1977; 2009). Company A Company B Company C Year of Establishment Year of Internationalization International Office Network London, Manchester, Jakarta Bangkok, Kuala Lumpur, Hong Kong, London, Los Angeles, New York, San Francisco, Beijing, Shanghai, Abu Dhabi, Dubai Hong Kong, China (multiple locations), Thailand, Singapore, London, Cardiff International Experience China, Japan, EU (UK, Italy, Poland), Indonesia, Singapore, Middle East, Russia, Barbados, Antigua, Trinidad and Tobago, Vietnam Thailand, Malaysia, Hong Kong, China, EU (Spain, UK, Cyprus), Middle East, USA, Turkey, Russia Middle East (Oman, Qatar, Saudi Arabia), India, EU (UK, Greece), Switzerland, China, Thailand, Singapore, Hong Kong Informants Director of Administration Managing Director of Australian Operations Head of Architects 4

5 Findings Nature of Work in the EU Building new versus refurbishment Use of competitions to allocate work. Movement of Professionals Previous educational qualification and experience of Australian architects may not be sufficient Findings Importance of EU market Large market potential, especially in the emerging economies. Acts as a central point for business opportunities in the Middle East and Russia. Learning opportunities (absorptive capacity of firms). 5

6 Findings London as the entry point in the EU. Familiarity of rules/regulations (low psychic distance) (Rafferty & Ham, 2004). Australian firms tend to first enter the markets in Asia (low geographic distance). However, they tend to enter markets with institutional familiarity (former Commonwealth countries) Key Issues Regulations relating to mutual recognition and movement of professionals seen as a barrier. Networks are seen to be the key (move to overcome liability of outsidership). 6

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