High-Level LOTIS Group

Minutes of meeting, Monday 15 November 2019, at Barclays Bank PLC, 54 Lombard Street

Present:

Chair
Andrew Buxton Barclays Bank

Charles Allen-Jones Linklaters & Alliance
Sir Nicholas Bayne BI
Colin Budd FCO
Alastair Clark Bank of England
Keith Clark Clifford Chance
Andrew Dalton Mercury Asset Management
Michael Foot FSA
Tony Hutton DTI
Sir John Kemp-Welch London Stock Exchange
Steve Robson H M Treasury
David Shaw HSBC
Max Taylor Lloyd’s

Secretary
Neil Jaggers BI

In attendance
Alistair Abercrombie BI

Apologies
Tim Carroll (IUA), Sir Peter Davis (Prudential Corporation), Robert Mendelsohn (Royal & Sun Alliance), Sir Christopher Morgan (Chamber of Shipping), Philip Randall (Arthur Andersen), Peter Smith (PricewaterhouseCoopers), Peter Sutherland (Goldman Sachs International), David Ure (Reuters), Sir David Walker (Morgan Stanley Dean Witter).

1. Minutes of meeting of 12 April 2019 approved. No matters arising.

2. Recent Events

2.1 The Chairman began the meeting with an account of recent events. The World Services Congress in Atlanta (1-3 November) had demonstrated the strength of private sector services groups developing around the world. The Americans continued to have the largest and most active "coalition", but in addition to ourselves and the European Services Forum (formerly Network), Hong Kong, Australia and others already had similar organisations, the Japanese had just formed their Services Network and Canada was about to do so. The WSC had demonstrated how these groups were coming more closely together and talking to each other at industry level.

The WSC had provided the opportunity for other organisations to meet, for example, the Global Services Network, a virtual organisation using the internet for exchange of information. Although run by the Americans, the European members had been striving to keep its structure as informal as possible.

Notable in Atlanta had been the strong Japanese contingent, MITI having been instrumental in pressurising the Japanese private sector into getting involved.

2.2 At the same time, the Transatlantic Business Dialogue had met in Berlin, with the European side led by Gerard Moine (France Telecom).

2.3 The European Services Forum had now submitted nine papers on horizontal WTO matters to the Commission. Five of the nine papers had come from British organisations. The Chairman said that the Commission now wanted the ESF to work on sectoral issues but he was resistant to that, preferring to leave that work to the individual trade associations. Fifteen ESF members had had a good meeting with Pascal Lamy (the Trade Commissioner) and the view, endorsed by Keith Clark was that Lamy had made a very good impression. Colin Budd said that he had a high opinion of Lamy - having worked alongside him in the Commission – and both he and Tony Hutton said later that they thought relations with the Americans would be better under Lamy than they had been under Sir Leon Brittan.

2.4 The Chairman concluded this introduction by saying that he was going to Geneva on 16 November for a meeting with Mike Moore (the WTO Director General) and that the following week there would be a meeting in Brussels with the Finnish chairman of the ministerial group going to Seattle.

3. Prospects for WTO negotiations

3.1 Tony Hutton warned that the prospects for the WTO round were not encouraging outside of services. There was a risk that if Seattle failed to produce a satisfactory agenda for a full round, a bad result on other issues could play back onto services. Nevertheless it was good to get services positions onto the agenda in the next six months; Moore would find this very helpful. Audio visual was a small problem but Lamy was showing no signs of making it a special case. The Chairman noted that the two ESF representatives at the Lamy meeting had been at odds with each other. The ESF team had also discussed with Lamy the inter-action of agriculture and services and the imbalance in the EU position. Tony Hutton listed the problems as follows:

- Agriculture and the stand-off with the Cairns Group;
- Scope of the WTO agenda;
- How to deal with wider issues: competition, investment, environment;
- Trade and labour.

He thought it did not matter if at the moment services issues were stated broadly rather than in detail.

Lamy would have to scale the EU position down to something more simple anyway and the UK/EU position on services was safe as it was.

3.2 The Chairman said the message for developing countries was that improved services would bring improved investment and employment. Taking Africa as an example, he said, only in Nigeria did manufacturing/extraction contribute a greater share of GDP than services.

4. Preparations for Seattle

4.1 Nicholas Bayne said that the Minister for Trade, Richard Caborn, was to brief NGOs on 16 November about what would be happening in Seattle.

4.2 Charles Allen-Jones did not see much scope for "City" issues at Seattle. Tony Hutton said that Seattle would be more about settling the major issues he had listed earlier. Even if there was failure to agree on those, there was still the commitment to negotiate on services and agriculture as part of the in-built agenda. However in the absence of agreement on the major issues, a services round would probably have to wait for the next ministerial meeting (i.e. not until 2001) because the Americans would wish to wait until after the Presidential election.

4.3 The Chairman’s attitude to Seattle was that, despite the activities of the NGO demonstrators, we needed to go there and take every opportunity to make our case – especially for financial services. It was also necessary to look in our own back yard and air the differences that existed in Europe.

4.4 Nicholas Bayne said that representatives of the High Level Group would be calling on Richard Caborn, Minister for Trade, on 23 November, to highlight the issues we wanted to see covered in Seattle. The Chairman said he hoped the point about removing barriers within Europe could be put to the Minister in that meeting. In addition, the Group agreed that the Chairman should write to the Secretary of State.

4.5 Nicholas Bayne then introduced the four issues papers, prepared by the working level LOTIS Committee, for the High Level Group’s approval.

4.5.1 (a) Financial Services . The general objectives were the reduction of barriers to cross border trade, lowering restrictions on commercial presence, "pro-competitive" regulation allowing market access and no discrimination, and good regulation for E-commerce. The paper highlighted insurance and asset management as requiring special attention. On insurance, the Chairman said that he had spoken to the President of the Chubb Corporation, Dean O’Hare, as to whether we could ally ourselves with the major US insurers who had their own problems with state regulations. O’Hare had advised against openly doing this. Max Taylor also advised caution. Most of our insurance companies had a major subsidiary licensed in the USA. With the process going on related to the dismantling of Glass-Steagall, he thought that the problem of state regulations would solve itself in time. It was more important, on behalf of our insurers, to tackle specific areas where restrictions applied, e.g. on surplus lines and reinsurance. Charles Allen-Jones said that the US insurers enjoyed some protection from the state regulators themselves and would not necessarily prove helpful allies.

Michael Foot commented on the term "pro-competitive". He saw what the private sector was getting at but it was not a helpful term. While innovation and market entry were to be supported, "pro-competitive" gave the wrong impression of how the FSA for one should conduct its role. Steve Robson suggested using a code on the lines of "transparent, fair and effective". The Chairman welcomed this suggestion. He noted that he had chaired a good discussion in Atlanta on competitive issues across a number of service sectors and it was clear that different sectors (e.g. telecommunications and express parcel deliveries required a different approach from financial services). Nicholas Bayne said that we would be able to use Steve Robson’s formulation in place of "pro-competitive" in the paper as long as the concept was not lost. This was agreed. Alastair Clark referred to recent discussions in the Fund and the World Bank about the importance of sequencing the process of adjustment for developing countries and he wondered how this fitted into the WTO context. Nicholas Bayne said that the WTO agreements allowed developing countries to liberalise by stages. This was acceptable as long as the stages were defined on a clear timetable. The offer made by China in its accession negotiations provided a good model.

Concerning Asset Management, Andrew Dalton said taxation was the main problem. The performance of a mutual fund was treated in widely differing ways as to capital growth and income in for example the USA, the UK and Luxembourg. Would it not be possible to agree a taxation code which equalised tax treatment by different jurisdictions? This would be a way of getting practical improvement for international operators. Nicholas Bayne said that taxation issues had not been addressed in the paper. The Chairman wondered whether we should look at this question in more detail. Tony Hutton said that we should avoid bringing the WTO into the field of taxation. However, he said, if taxation provisions discriminated against foreigners, that would be a matter for the WTO and could be subject to the WTO’s dispute settlement procedures. Andrew Dalton said it would be useful to think of ways in which agreed taxation structures would help in the provision of financial instruments cross border.

On the target list of countries at the back of the paper, Michael Foot wondered whether it was wise to point the finger explicitly at the Italians. The Chairman said that we were keen to air EU barriers and the Italian restrictions were in the public domain. On a more general concern about the paper, Michael Foot sought assurance that it was not envisaged that the WTO should become a regulator. Both the Chairman and Tony Hutton said this was certainly not the case. Tony Hutton added that in financial services, the term "pro-competitive regulatory principles" was not the right term whereas in other sectors, such as telecoms (e.g. in Japan), the terminology was apposite and helpful to employ.

4.5.2 (b) Professional Services. Nicholas Bayne said that this paper highlighted that more needed to be done to open markets, to achieve internationally agreed guidelines and acceptance qualifications and to facilitate the movement of personnel. Keith Clark said the paper was well drawn. It was extraordinary how few commitments there were among WTO members on the issues the paper covered. The Chairman said we could bring this out more strongly in the paper.

4.5.3 (c) Maritime Services. Nicholas Bayne said that following failure to agree in the Uruguay Round, there was keenness on the part of British and European ship owners to try to engage the Americans on this occasion. The approach was to concentrate on limited objectives and achieve a firm agreement on those.

4.5.4 (d) Electronic Commerce. Nicholas Bayne said that since this paper’s production in July, he had fed it into the Financial Leaders’ Group and it had been accepted by the FLG in Atlanta. The paper avoided entering into the argument about whether some E-commerce products should be treated as goods or services. It emphasised the case for technological neutrality and avoidance of measures which would restrict ease of cross-border business via E-commerce. It argued that regulation should be market driven, adaptable and based on home country regulation. Michael Foot accepted that the private sector had to say what it wanted to say, but that the FSA disagreed with the home country regulation point. The Chairman confirmed that this paper expressed the industry point of view. It was understood that it presented difficulties for the regulators but it was impossible for providers to attempt to supply cross-border services electronically tailored to the requirements of different jurisdictions around the world. Michael Foot said that the FSA supported the argument for technological neutrality; favouring E-commerce with home – (as against host) – country regulation ran counter to that.

Max Taylor asked whether E-commerce was being taken up as a subject by itself in the WTO. The Chairman said that it was not being treated as a separate sector in WTO terms but that the issues raised would be subject to much discussion in Seattle and later. The paper expressed a unified UK, EU and US industry view.

Keith Clark wondered about selling these ideas to the developing world, especially in the light of the Asian financial markets crisis. He thought that the liberalisation measures emphasised by the papers should help attract and retain investment. Nicholas Bayne said we could bring that out more strongly. The Chairman said that a good example was that if you brought electricity to a village, it brought jobs to the local community. Andrew Dalton said that if a bankruptcy law had been in place in Thailand it would have helped at the time of the Asian crisis. It was important to make progress on simple things.

5. Footnote on Seattle. Tony Hutton said that the DTI would invite three representatives, from the CBI, TUC and (collectively) the NGOs, to join the official team. In addition, the DTI would give daily briefings to business and other NGOs present. He reiterated that there were serious risks of failure and underlined the problems facing the government negotiators at the meeting.

  • Commissioner Lamy would have to face a time when he would have to be firm in support of the EU position and put the issues clearly on the table.
  • Answers had to be found for those who were saying that it was not worth doing anything in the WTO at this time.
  • A breakdown in Seattle would have a serious negative effect on US attitudes in Congress.
  • The press would be looking for very negative pieces fed by the NGOs demonstrating against the WTO.

The Chairman responded by saying that the private sector representatives would be trying to support the government line to underline the benefits of agreement on a full agenda for an effective negotiating round.

6. In the absence of Any Other Business the meeting closed at 5.15 pm.

ACTION TAKEN

 

Following the discussion, the papers on Financial Services, Professional Services, Maritime Services and Electronic Commerce (revised where agreed) were forwarded to government officials in advance of the WTO Ministerial Meeting.