Liberalisation of Trade in Services (LOTIS) Committee

Minutes of meeting, Tuesday, 21 March 2019 at the Department of Trade and Industry, Kingsgate House, 66-74 Victoria Street, SW1

Present:

Chair

Sir Nicholas Bayne, KCMG

Christopher Roberts (Chairman designate), Covington and Burling

Secretary

Neil Jaggers, BI

Alistair Abercrombie, BI

Graham Bartlett, Department of Trade and Industry

Charles Bridge, Department of Trade and Industry

John Cooke, Association of British Insurers

Christopher Crozier, Morgan Stanley Dean Witter

Alastair Evans, Lloyd’s

Robin Griffith, Clifford Chance

Mark Hatcher, PricewaterhouseCoopers

Ian Kemsley, HM Treasury

Tim Kidd, Bank of England

Nick Lowe, International Underwriting Association

Martin Manuzi, Institute of Chartered Accountants

Malcolm McKinnon, Department of Trade and Industry

Lisa Rabbe, Goldman Sachs International

John Thirlwell, British Bankers Association

David Wood, Confederation of British Industry

Alan Young, Association of British Insurers

Apologies

Anthony Belchambers (The Futures & Options Association), Rhian Browning (London Stock Exchange), Mark Brownrigg (Chamber of Shipping), Roger Davis (PricewaterhouseCoopers), June O’Keefe (Law Society), Julie Patterson (AUTIF), Victoria Powell (FSA), Sir Adam Ridley (LIBA), Gavin Robert (Linklaters and Alliance), Robert Tsang (Arthur Andersen), Ian Williams (Prudential).

Preliminaries

1. The Chairman thanked the DTI for their hospitality in hosting the meeting. He welcomed new members Martin Manuzi and Christopher Crozier and he welcomed Christopher Roberts, to whom he would hand over the chairmanship at the end of the meeting. Christopher Roberts said how nice it was to come to his first meeting in the familiar surroundings of the BOTB Board Room. He said it would be a hard job to take over from Sir Nicholas but he looked forward very much to taking the work of the Committee forward.

Agenda item 1: Minutes of Meeting of 25 January and Matters Arising

2. The minutes were approved. The Chairman said that because the January meeting had spent most of its time in discussion with the distinguished team from the European Commission it had not been able to discuss its own strategy for GATS 2000. He hoped we would embark on that at this meeting.

Agenda item 2: Reports from Brussels and Geneva

3. Malcolm McKinnon spoke in reference to a note circulated at the meeting (copy attached). In Geneva, the Council for Trade in Services (CTS) had agreed to meet in regular and special (ie negotiating) sessions under the same chair, Sergio Marchi. There was no resolution yet on frequency of meetings or negotiating guidelines. Some members wanted GATS Rules dealt with this year and market access negotiations to start next year; but the EU was keen to make progress on market access issues this year. Positions on the importance of the link with agriculture varied widely. The next services week would begin on 10 April. In Brussels, the Commission was pushing the preparatory work hard and would discuss the "cluster" idea (bringing together sectors in which there was a common interest in certain issues). There was general support for the Commission’s idea of having informal meetings with delegations in Geneva as long as the process did not undermine Sergio Marchi’s own efforts. The Article 133 Committee would look at formula approaches to Mode 4. The timetable for the start of the request and offer process having slipped from June 2000 to the EU’s newly preferred date of end October was not unrealistic but actual tabling of requests would depend upon the negotiating atmosphere in Geneva at the time. Ian Kemsley agreed.

4. David Wood asked how the originally envisaged timetable of three years fitted in with that. Malcolm McKinnon said that nothing had been proposed in the Services Council but we had to expect negotiations to last three years from the start of a comprehensive round. Alistair Abercrombie asked about progress in nominating a chairperson for the Committee on Trade in Financial Services (CTFS). In our recent Financial Leaders Working Group conference calls, the Americans were exploring the scope for carrying forward more substantial work on financial services. What, he said, were the chances of the CTFS improving its performance? Malcolm McKinnon said that it could only improve but that the suggestion of an Egyptian chairman had fallen through. Given that it was not likely that much sectoral work would get done this year, what tasks might the CTFS undertake? John Cooke suggested that in financial services it could validly look at mutual recognition of regulatory authorities such as the International Association of Insurance Supervisors. The Chairman suggested that the LOTIS Committee could consider that and other suggestions for the CTFS at a later meeting.

5. The Chairman asked how the CTS was dealing with E-Commerce. Malcolm McKinnon said that there would be a continuation of the work done prior to Seattle but he expected no independent initiative by the CTS. It would require a push from the General Council.

Agenda Item 3: Safeguards

6. Explaining that earlier in LOTIS we had not seen the need to move from our position of scepticism about introducing an emergency safeguards mechanism (ESM) into the GATS, the Chairman said that pressure now from developing countries showed that we had to be both more open and interrogatory about the matter. He had therefore asked Alistair Abercrombie to prepare the draft paper which had been circulated. Alistair said that it seemed to be increasingly more likely that developing countries would be reluctant to commit to more market opening unless there was an ESM in place. His paper attempted (i) to present a position which might be acceptable to the private sector, (ii) set firm conditions and (iii) stated what was not acceptable.

Lisa Rabbe asked what papers on this subject were in the public domain because it would be useful to see them for comparison with Alistair’s paper. Malcolm McKinnon said that the paper from the ASEAN countries had been tabled formally. It was unlikely that other papers would come forward before that one had been looked at in Geneva. Robin Griffith warned that this was a very important issue for the financial services industry. It could be hit hard. Experience of the equivalent measure in the GATT for goods showed that it could be implemented in a highly discretionary way. The code would have to be drawn up very carefully to protect the interests of the financial services industry. John Cooke supported this view, saying that the EU was competitive in services whereas in goods it was not, therefore the boot would be on the other foot. John Thirlwell was concerned about the vagueness of phrases like "in a satisfactory manner". Robin Griffith asked why "domestic industry" should be broadly defined. Would it not be preferable to define it narrowly? Alistair Abercrombie explained that that was done in order to include foreign firms operating in the domestic market place. John Cooke asked who were the proposed audience for the draft LOTIS paper. It was drawn up in a technical form. As such it did not sound the strong warning note that Robin Griffith had indicated was necessary. Alistair Abercrombie said that he had produced it more as a response to the likely need to address the issue. It did not therefore pick up the kind of point Robin was making. The overall approach of the paper was something for the LOTIS Committee to consider. Malcolm McKinnon said that the Article 133 Committee’s tactics on ESM had not changed. But now the ASEAN text existed and this could inexorably draw the EU into an agreement requiring compromise on the problems EU member states would have with it. Some countries, like Denmark, blocked the Commission’s desire to offer a response to the text. The UK stance was to distance ourselves from making comments so as not to get drawn into negotiations. The tactic was to play it long and into the market access negotiations. It might then be possible to construct, sector by sector, the making of a market access commitment with a safeguard. Therefore we preferred engaging constructively while distancing ourselves from the principle.

7. The Chairman, summing up, said that the intention of the LOTIS paper was to bring out a private sector view, for onward transmission to HMG. We would redraft the paper taking into account the comments made in this discussion, noting that our financial services firms were likely to be among those to stimulate the use of ESM by developing countries. We should look for a way to do it case by case. It was not a subject which would go away. If we were to decide that we could not contemplate ESM in any way this could mean having to accept inferior commitments on market opening from the developing world. He asked for written comments from both public and private sector members of LOTIS.

Christopher Roberts added that views stating the case against ESM would also be welcome. Malcolm McKinnon made the ASEAN paper available.

Capacity Building

8. Neil Jaggers said that responses to his memorandum of 28 February had been very disappointing to date and he urged LOTIS members to offer such information as they felt able to (even nil returns) for this important exercise. David Wood said that it was not only a matter of helping developing country governments to negotiate in Geneva, it was also a matter of building an industrial voice in those countries. The Chairman agreed, saying that many of our allies in emerging markets were the private sector companies themselves. Charles Bridge said that governments had capacity building to the forefront of their minds and were working on it both bilaterally and multilaterally. Neil had captured the sort of area the Minister for Trade had pointed towards, therefore something from the private sector would be helpful.

John Cooke said that while some of the ABI’s member companies might be inhibited for competitive reasons about offering detailed accounts of what they were doing in specific countries, it would not be difficult to respond in a generic way. Neil Jaggers welcomed this statement saying that generalised replies would be helpful if organisations would be more comfortable to offer information in that way. He reminded members of his second deadline and asked for further contributions by 14 April so that he could wrap the exercise up before Easter.

ESF: Updated Papers on Horizontal Issues

9. Referring to his own paper on scheduling, the Chairman pointed out two changes in his updated draft:

(i) Before Seattle the paper had recommended that the private sector should press for more rigorous commitments, i.e. for a regime similar to the one applied for goods in the WTO. Now he had concluded that this was not the time to do that.

(ii) On modes of supply and how they were affected by the ability to do business electronically, he had asked himself whether a consumer initiating the purchase of a service from the USA from his terminal in the UK was operating under mode 1 or mode 2. This was important because very few countries had imposed restrictions on mode 2 while being much more restrictive in mode 1. He had concluded that the supply depended on the physical presence of the purchaser. Was he right? Charles Bridge said yes. Alastair Evans said it depended on where the consumer took the initiative and if the supplier had not chosen to market the service in the country of the consumer. John Thirlwell said that speaking for suppliers, the BBA would support this but we had to be careful that it did not cut across our arguments for home country jurisdiction in another context. Robin Griffith said that there were very important issues to be considered in this matter in the field of intellectual property rights. The Chairman said that in the light of the discussion he would suggest in the ESF that the section was left out of the Scheduling paper and for the issue to be left to the Electronic Commerce paper.

10. Mark Hatcher said that his paper on Movement of Business Personnel was a slightly updated version of the one largely accepted in the Commission last year. LOTIS Committee members would see that the revised paper sought to give an example, from PricewaterhouseCoopers’ direct experience, of the sort of difficulties encountered and he requested further examples from other organisations. He said that the paper did not take up the Commission’s invitation to define "Key Business Personnel". One question he put to colleagues was whether we might change our stance and, given the warmth of reception by the Commission, seek to raise the level of awareness on this subject at member state level. On available examples, Robin Griffith thought Clifford Chance could offer one in regard to Japan and Lisa Rabbe said that Goldman Sachs were experiencing increasing problems which she might be able to draw upon.

11. Malcolm McKinnon said that HMG was conducting an internal review of the work permit scheme. He could give LOTIS members a sight of the introduction to that. Whereas the LOTIS paper adopted solely an offensive stance on the issue, HMG also had to consider both trade policy offensive interests and defensive interests arising from overseas labour policy and immigration policy. Christopher Roberts said that from his past experience at the DTI they had been unsuccessful in getting even the most innocuous process accepted for incoming business persons. He thought we should press an ESF position on the Commission.

The Chairman encouraged members to offer examples for the case studies annex to the paper. So far, the Trade Directorate General were encouraged by what they were getting from the ESF. This help them persuade others in the Commission. We now needed to put the pressure on governments.

Any Other Business

12. The Chairman reported that he had supported Andrew Buxton that morning in giving evidence to the Sub-Committee of the House of Lords European Committee concerning the EU Agenda for the WTO post-Seattle. They had had a sticky start spending time explaining why it was acceptable and right for the private sector to give its views direct to the Commission rather than through member state governments. On other things the discussion had been fruitful. The peers present did not know a great deal about private sector input to WTO matters so he hoped their appearance had served an educative purpose. We could hope to see the transcript in due course on the House of Lords Website.

13. Neil Jaggers said that the Cameron May Conference, supported by BI and ABI, was on track for 12th May. Details would shortly be available on the Cameron May Website and via the next issue of BI’s VISIBILITY newsletter, due out on 10 April.

14. Ian Kemsley asked, outside the WTO context, if any members could offer him ideas for fresh initiatives in the financial field which the Treasury could take up with the USA. He also said that the Treasury would welcome comments from members, in addition to the ABI and BBA, on the effects of the new US Financial Modernisation Law. HMT was concerned that the rules to implement the new law being prepared by the Federal Reserve could cause difficulties for UK financial service providers.

Farewell to Sir Nicholas Bayne

15. John Cooke said he thought the whole Committee would wish to express its appreciation for the way Sir Nicholas had chaired the LOTIS Committee over the last few years and the light touch with which he had guided its work. This sentiment was greeted with a warm round of applause from all present.

Date and Place of Next Meeting

16. The date of the next meeting will be Tuesday, 13th June. PricewaterhouseCoopers have kindly offered to host this at their offices in 1 Embankment Place.