High-Level LOTIS Group

Minutes of meeting, Monday 12 April 2019, at Barclays Bank PLC, 54 Lombard Street

Present:

Chair
Andrew Buxton Barclays Bank

 

Charles Allen-Jones Linklaters & Paines
Sir Nicholas Bayne BI
Colin Budd FCO
Tim Carroll IUA
Andrew Dalton Mercury Asset Management
Robin Fellgett HM Treasury
Michael Foot FSA
Tony Hutton DTI
Sir John Kemp-Welch London Stock Exchange
Philip Randall Arthur Andersen
David Shaw HSBC
David Ure Reuters

Secretary
Neil Jaggers BI

 

Apologies
Alastair Clark (Bank of England), Keith Clark (Clifford Chance), Sir Peter Davis (Prudential Corporation), Robert Mendelsohn (Royal & Sun Alliance), Sir Christopher Morgan (Chamber of Shipping), John Robins (Guardian Royal Exchange), Peter Smith (PricewaterhouseCoopers), Peter Sutherland (Goldman Sachs International), Max Taylor (Lloyd’s of London), Sir David Walker (Morgan Stanley Dean Witter).

Papers tabled
DTI Consultative Document "Liberalising trade in services"; letter from Max Taylor (Lloyd’s of London) with comments on Agenda and papers; membership lists of High-Level LOTIS and LOTIS Committee.

AGENDA

1. Introduction

(a) The Chairman welcomed members to this first meeting of the Group. He explained that government looked for a unified view of what the City wanted from the WTO negotiations. He saw the Group’s role to set policy and agree priorities. The Group endorsed the Terms of Reference that had been circulated.

(b) The Chairman hoped the Group could form links with the Financial Leaders Group (FLG) and the European Services Network (ESN). The FLG had been formed in 1996 and established a link between business and government leading to the successful agreement on financial services in 1997. The key was constructive advice, not lobbying. The ESN was set up recently, partly because of the success of the FLG. In some service industries the USA will be an ally and in others it will be a barrier. As far as possible we should ally with the USA and try to understand the barriers. The aim again was to educate and partner the EC negotiators.

(c) Nicholas Bayne said the LOTIS Committee had been in existence since the early 1980s providing a partnership between business and government. It had promoted the good result achieved in December 1997. It was closely involved with the FLG and ESN, had arranged two conferences and produced a guide to the financial services agreement. Recent activity had involved preparing for January 2000 and compiling a paper on GATS 2000 Objectives. The LOTIS Committee would take onto its strength the sherpas of the High-Level Group.

The Chairman did not envisage the Group meeting often. Its job was to ensure the priorities were right and to work with the government departments. This led into the next item.

2. Scope and Content of the new round of WTO negotiations

Robin Fellgett introduced the Treasury’s paper by endorsing what had been said about working in partnership. He invited discussion of the paper part of the aim of which was to provoke reactions on priorities. He noted that HMT’s responsibility was limited to financial services whereas the DTI covered the whole range of services negotiations. Looking at the key questions in the introduction to the paper, the Chairman highlighted Electronic Commerce because it was not clear that anyone knew how to deal with it, and Insurance to check whether the Group agreed that it was the main priority sector.

Andrew Dalton said that, for Fund Management, the ongoing battle was to secure business almost anywhere in the world. They were looking at how a distribution network might develop. It was not just a regulation issue, it was to do with cultural change and whether people were willing to operate in an open environment. Charles Allen-Jones supported the importance, from a lawyer’s viewpoint, of ensuring our fund managers could operate globally. The same applied to the pension funds. John Kemp-Welch also saw the importance of fund management activity for the securities market in London. The Chairman said banking faced its own restrictions but not on the same scale as insurance and fund management. Andrew Dalton made the point that performance was top of the list in the culture of London. We could win in Japan because the weight of money being managed there was having a revolutionary effect and changing the culture in Japan from relationships type to performance. Charles Allen-Jones said that while more needed to be done in the WTO for the professions, with the interests of the lawyers similar to those of the accountants, he did not think that was as important as the financial sectors which the lawyers served. The Chairman asked whether the UK priorities

were in mature or developing markets (item (iv) of the Treasury list). Within Europe itself, there were barriers to break down if we hoped to argue our case forcibly for opening markets elsewhere. Michael Foot said the value to be obtained from entry into different types of market needed to be carefully assessed. Robin Fellgett said that, following last year’s financial markets crisis, the question was whether e.g. Malaysia was a more profitable nut to crack than say Japan, Switzerland or the USA. The Japanese agreement in the WTO was illustrative.

Tony Hutton warned against setting priorities prematurely. At this stage it would not be wise to allow a priorities exercise to take anything off the table. The experience of December 1997 was that it was in the latter stages that the priorities really came into play. It would be useful to get the EU to the WTO negotiating table with a liberal starting position across the board; this would feed back to getting the EU to sort out its own internal barriers. The Chairman still thought it useful for our purposes to identify priorities. Tony Hutton thought the usefulness lay in knowing what the targets were within each sector. Nicholas Bayne recalled the way insurance had moved up after starting with low expectations. The Chairman thought this owed much to the pressure from the USA on behalf of AIG. Charles Allen-Jones said that AIG’s colossal interest in China had led to a considerable opening up.

On barriers within Europe, John Kemp-Welch said there was evidence of some differences in regulatory standards, which had emerged in their discussions in connection with the alliance with Deutsche Börse. He feared that lack of transparency in other parts of Europe could lead to regulatory arbitrage. Michael Foot said that while in favour of liberalisation, the FSA would not allow bank branches in from another country where supervision was inadequate. While ready to provide help and advice, the FSA would not want to join the negotiators at Geneva, since this would undermine their ongoing discussions with other

regulators. The draft FSA legislation did contain words indicating a positive attitude to competition.

The Chairman turned to Electronic Commerce. David Ure said it was not obvious where the real forum for discussion was. To be really effective, regulation of E-Commerce should be at the point of creation not reception, but there was difficulty in getting agreement on this in Europe. London had everything to gain from exploiting other markets without getting bogged down in their markets’ regulations. The Chairman was concerned that other groups with more expertise in E-Commerce were already investigating the issues, in which case it might be best if the High-Level LOTIS Group drew off the expertise of other groups rather than getting involved in the detail of E-Commerce issues. David Ure argued that there were important questions about signature and encryption, all of which were getting stuck. He thought it important to clarify these issues in the WTO. Tony Hutton said E-Commerce was not in anyone’s court. The WTO was mired because of the US attitude on duties. There were classification problems; the US wanted to invent a new form called "virtual goods". The WTO was deadlocked. Our aim should be to ensure that it did not descend into regulatory confusion. Robin Fellgett said the financial services interest should concentrate on the mechanisms for delivery and payment. In the WTO round, we must at least avoid any impediments to those channels. The BI paper was a bit optimistic in seeking home country regulation. David Ure said it was crucial to aim for it. Nicholas Bayne favoured aiming high even if we had to scale back later. The LOTIS working level group was planning to look at E-Commerce issues in its meeting on 18 May and he would be asking some of the experts in the field to submit short issues papers before that meeting. The Chairman encouraged the working level group to do this. Andrew Dalton said we should keep constantly aware of US developments in this field otherwise while we were debating it the process would overtake us. Philip Randall agreed, saying that in any work done for LOTIS on E-Commerce, much of it should be in the form of a forward look.

3. Issues and Priorities for the Private Sector

Since these topics had largely been covered in the preceding discussion, just a few more points were made on Barriers within the EU. Andrew Dalton said it was most important to do something about limits to the composition of funds e.g. in Germany. David Ure said we could get more action in Europe on Nigeria, say, than on Portugal. The Chairman said he was encouraging the ESN to look at problems within each sector inside the EU.

4. Forthcoming Events

Nicholas Bayne covered these as follows:-

(a) The BI Conference on 21 September would we hope begin and end with government speakers, with private sector input in the body of the conference. He proposed approaching some members of the High-Level Group to make contributions.

(b) The FLG had usefully met in the margins of the Fund/Bank Annual Meetings and was likely to do so again this year.

(c) BI had close links with the US CSI’s World Services Congress in November in Atlanta. We would encourage strong EU/UK – based involvement.

(d) In Seattle in December there would be opportunities for private sector attendance in the wings of the WTO Ministerial and again UK/EU presence was to be encouraged.

The Chairman said he expected to go both to Atlanta and Seattle and would represent our views. Although he would not expect all Group members to go, they were events to be seriously considered, especially Seattle.

5. Any Other Business

Colin Budd underlined the significance of the changes coming in personnel in the European Commission especially with Sir Leon Brittan relinquishing the Trade Negotiation job. The succession to Brittan and Monti could have a significant impact on the stance of the EC in the WTO negotiations. It was advisable for us to look for opportunities to send messages about the liberalising attitude of the EC on occasions like for example this week when the Prime Minister was meeting Romano Prodi.

There being no other business the Chairman concluded by saying that he would ask the LOTIS working level group to look at:-

  • Priorities - in particular for Insurance and Fund Management.

  • Electronic Commerce.

  • Barriers within Europe.

The meeting closed at 5.45pm.