High Level LOTIS Group

Minutes of meeting, Thursday 20 July 2019, at Barclays Bank PLC, 54 Lombard Street

Present:

Chair
Andrew Buxton, Barclays Bank

 

Keith Clark, Clifford Chance
Harold Freeman, FCO (for Colin Budd)
Joseph Halligan, HM Treasury (for Robin Fellgett)
Malcolm McKinnon, DTI (for Tony Hutton)
Robert Mendelsohn, Royal & SunAlliance
Gavin Robert, Linklaters & Alliance (for Charles Allen-Jones)
Christopher Roberts, Covington & Burling
David Shaw, HSBC
Max Taylor, Lloyd’s
David Ure, Reuters

Secretary
Neil Jaggers, BI

In attendance

Alistair Abercrombie, BI

Guest

John Cooke, Association of British Insurers

Apologies

Tim Carroll (IUA), Alastair Clark (Bank of England), Andrew Dalton (Mercury Asset Management), Michael Foot (FSA), Sir Christopher Morgan (Chamber of Shipping), Philip Randall (Arthur Andersen), Peter Smith (PricewaterhouseCoopers), Peter Sutherland (Goldman Sachs International), Sir David Walker (Morgan Stanley Dean Witter).

1.

Minutes of Meeting of 15 November 2019 approved. No matters arising.

2

Recent Developments

2.1

Referring to his note circulated before the meeting Malcolm McKinnon said that it was proving difficult for services negotiations to move forward independently of agriculture. The meetings in Geneva from 5-14 July had been very sluggish. On the positive side, the Roadmap had been agreed in May and a paper on tourism was being produced. The EC’s draft negotiating guidelines had been reasonably well received. A point of contention had arisen, however, between the European Commission and the UK and other liberal member states on a new Commission attitude on how and when to put detailed requests to other WTO members. The implication was to delay the starting date for bilateral market access negotiations.

2.2

The second contentious issue in Geneva had been the tabling by the US at the end of the meeting – and so not for discussion until October – of an overly ambitious set of proposals for the negotiating framework. The most unrealistic of these was a deadline of December 2002 for completion of the services negotiations. The Commission’s instinct had been to dismiss the US proposals as over-ambitious and, by proposing the 2002 end-date, calling into question the idea of a broader, comprehensive trade round. The UK and other liberal member states had argued against dismissing the US proposal out of hand because it at least showed a willingness on the part of the US to engage positively in the process.

2.3

Malcolm McKinnon concluded by saying there were grounds to be gloomy about the prospects for negotiations at the moment. Christopher Roberts thought that it was too early to despair, drawing on experience from previous negotiating rounds; however it did depend on agreement to start a new round next year. On the two contentious issues, he suggested that we should certainly push the Commission back into effective negotiations on requests and, on the US paper, that it would be right to take the good and positive points rather than dismiss it all. Max Taylor said that our aim should be to keep aside from the politics and press for making things happen to achieve the desired result. The Chairman agreed that the US paper should not be rubbished. He remarked that the US paper pressed for market access. We should pick up on that and demand the same from the US market too.

2.4

The Chairman asked to what extent the EU position was being affected by the French. Malcolm McKinnon said it was clear that France was badly prepared on services, not having consulted the industry, and in contrast was well prepared on agriculture. The Chairman said we had been grateful that Richard Caborn had written to Pascal Lamy. He proposed taking an ESF mission to Paris (with strong French national participation) to lobby the French government on services. It was ridiculous, he said, that agriculture weighed so heavily politically in the EU. Max Taylor and David Ure asked how strongly involved the Germans and French were in the ESF. The Chairman said that the Germans were beginning to realise they had a services industry and their equivalent to the CBI had recently become active in the ESF. A number of leading French personalities and companies (like de la Martiniere of AXA) were active too.

2.5

Summing up this part of the discussion, the Chairman responded to the two questions raised by Malcolm McKinnon as follows. On the US proposal, it was advisable to pick up the positive parts (even though we did not agree with the paper as a whole) and to try to put pressure on the Americans themselves on market access. On Europe, he thought we could go along with the European Commission’s approach because the important thing was to keep the process moving. How long the negotiations took was secondary. While receiving this message, Malcolm McKinnon warned that some loss would be incurred by drawing back from arguing for the earliest possible bilateral negotiations.

2.6

Turning to other recent developments, the Chairman said that having recently taken an ESF mission to Geneva it had become clear to him that WTO officials and country delegations welcomed visits by people with particular points or sectoral issues to discuss. This was worth taking advantage of in the future. John Cooke said that the recent Financial Leaders’ Working Group visit to Geneva had been the largest of its kind (with strong US participation) since the end of the financial services negotiations in December 1997. The Chairman added that he was about to go to Washington to sound out the political scene and then to New York. He would take opportunities to raise matters like insurance.

3.

Cross-Sectoral Issues

3.1

(a) Electronic Commerce . Christopher Roberts said that the General Council of the WTO had agreed in Geneva on 17 July to resume the study of E-Commerce issues in the three WTO Councils (Goods, Services and Intellectual Property). There were questions about how the WTO’s own rules should apply linked with the question of how those rules should relate to domestic regulation. E-Commerce should also provide opportunities for developing countries but some were reluctant to accept the case for pressing ahead with WTO work in this area, seeing it as primarily a developed country interest. On classification, the unresolved question was whether E-Commerce should be treated as a good, a service or something else. The European Commission thought that all electronic deliverables were services (to support inter alia the interests of the European audio-visual lobby), but this classification presented problems for other providers (eg of books and software). The WTO secretariat said that E-Commerce should be seen as a system of delivery and not classified either as a good or a service. The LOTIS interest, he suggested, was to find a way which presented the least barriers to trade.

3.2

 

 

 

 

Action Point

Malcolm McKinnon said there was a narrow grey area between treating e-commerce deliveries as goods or services. Where material could be downloaded electronically it could be deemed to be a physical or a non-physical good. This was a political as well as a technical debate. Max Taylor asked whether home state control was very much an issue. David Ure thought UK industry was in agreement on that. The Chairman said it was necessary to ensure that E-Commerce was not made into a separate regime. Turning to developing country interests, he asked the Group to see what arguments could be gathered together demonstrating the benefits developing countries could derive from building up their e-commerce expertise. He drew attention to the group of four leading emerging market countries – Brazil, Egypt, India and South Africa – which were working together on ideas to help the developing world. Harold Freeman said that the FCO strongly supported the gathering of arguments which set out opportunities, not only in e-commerce, available to developing countries to boost their trading potential.

3.3

(b) Movement of Personnel . The Chairman said that the European Commission would be reluctant to put this topic on the agenda unless the private sector pushed the business case for movement of personnel hard with their governments. Christopher Roberts , drawing on the work of PricewaterhouseCoopers in the European Services Forum, reported on the need for improved opportunities for key managers to be able to move abroad with less hindrance and that developing countries themselves wanted similar opportunities for their skilled workers as well as those typically manual labourers in construction projects abroad. He said that opposition from EU member states came mainly from Employment Ministries and the immigration authorities. PwC were gathering information with a view to a more detailed analysis. When the evidence became available the arguments could be put more forcibly to the politicians. The emphasis had to be on facilitating temporary movement of personnel.

3.4

The Chairman said that, given the fact that most companies represented in this Group had these problems, how much noise should we make? From his direct experience, Indian companies in the software industry were trying to get their government to distinguish between business personnel and others. Malcolm McKinnon said the Commission would only act if a strong message came from all the member states. We could see both sides in the UK. We had strong offensive interests to push on behalf of our own business people and our immigration authorities recognised this; it was not so much a trade union problem in the UK as it was with other EU members. Bob Mendelsohn said it was not an issue we should let go. It was very easy to de-link it from immigration because the sponsoring company would be responsible and would be required to give an undertaking to get the person out of the country at the end of their time. The Chairman said we did not intend to drop the case, but we looked to countries like India to put the de-linking into effect.

3.5

(c) Domestic Regulation. John Cooke reported that services suffered more than goods from regulatory barriers to trade. For real liberalisation to take place in the next round a further easing of regulatory practices was needed. The aim for regulation to be objective, fair, neutral and transparent was embedded in the GATS articles. The question was how to ensure that regulators saw this so as to allow for liberalisation. The WTO’s Working Party on Domestic Regulation now needed to broaden its task, for example to look at the relationship between the WTO and international regulatory bodies like the IAIS in insurance. Work was proceeding on this in private sector groupings like the European Services Forum and the Financial Leaders Working Group. International bodies including the IMF and the OECD were also working on it. Where next, now that there was agreement on the key issues?

3.6

It was now necessary to get international agreement on the way forward. There was consensus on the desirability of domestic regulators acting in a transparent and equitable manner. The difficult area arose from decisions about necessity and proportionality of regulations country by country. How could that be measured?

3.7

A recent visit led by Robert Madelin of the Trade Directorate General of the Commission to meet the Basle Committee and the IAIS, which John Cooke had joined, had been useful. The Chairman said he was keen to involve the regulators in the WTO process. Therefore the Commission’s meeting with the banking and insurance supervisors had been welcome. What was called for were ways to get the message across to domestic regulators.

4.

Sectoral Reports

4.1

(a) Insurance. Max Taylor said the UK insurance industry had a well co-ordinated approach to barriers to establishment and cross-border trade. Their main concerns were over reinsurance, legal form (especially for Lloyd’s), intermediation/broker services and investment of premium income. An EC paper on barriers to insurance services targeted Japan, Korea and the USA together with leading emerging markets including the four countries mentioned earlier which were collaborating on developing country issues. He had nothing to add to the points covered by John Cooke on regulation.

4.2

With regard to the US, their principal concern was about reinsurance; earlier difficulties over surplus lines had been resolved. They had had to learn to live with sub-Federal state regulations dealing with problems state by state. The difficulty over reinsurance was the requirement to provide gross reserves irrespective of any reinsurance that was placed.

4.3

He welcomed recent openings agreed with China.

4.4

Bob Mendelsohn said that although there had been helpful developments at the senior level with the Chinese, the message had not filtered down to local regulators who continued to be very difficult to deal with. On the US, he said that everyone had found ways round the 50 state problem, but that did not diminish the fact that it presented a barrier to trade.

4.5

The Chairman asked about Japan, because he could raise issues in a meeting in New York the following week. Max Taylor said they preferred a low key approach; from a selfish point of view, he said, Lloyd’s was all right. Bob Mendelsohn said that nevertheless there were still huge regulatory barriers in Japan which had to be tackled.

4.6

(b) Legal Services . Keith Clark said that the large UK law firms were already major exporters of their services. They had perceived signs of change in Asia, with some countries, like Singapore, no longer protecting their own law firms. In the negotiations with China, the EC had achieved better terms for law firms than had the US negotiators. Progress in Japan, however, was extremely limited with strong resistance to allowing foreign expertise in. India and Korea remained adamant about protecting domestic firms. He commended the good work being done by the Law Society. The UK’s own stance was very liberal; we therefore looked for reciprocity from abroad. There was a long way to go.

4.7

Malcolm McKinnon warned that one line of thinking among EU member states was that, in areas where they maintained restrictions, it was not possible for the EU to ask more from third countries than the EU itself was prepared to offer. The UK continued to resist that attitude. The Chairman agreed. He said that that only gave strength to his view that we still had more to do in our own EU back yard.

4.8

(c) Asset Management . The Secretary reported, drawing on some very helpful input from AUTIF. Fund managers experienced barriers in the USA, within the EC and generally elsewhere. Some useful talks between the European Industry and the US authorities a couple of years previously had been stymied by the US industry although there had been some slight movement since. AUTIF’s hopes lay in the positive effects of structural changes such as the dismantling of Glass-Steagall, industry consolidation and the effect of the internet leading to US investors wanting wider choices. This could put increasing pressure on the protectionist stance of the US industry. Barriers within the EU were caused by different tax regimes, different marketing requirements, differing interpretations of UCITS and plain obstructive bureaucracy. In the rest of the world there were the usual problems over prohibitive, obscure and contradictory regulations affecting both cross border trade and establishment.

4.9

The Secretary suggested that the next step should be to seek from the UK fund management industry a prioritisation of the most serious barriers they were facing and the key markets in which such barriers presented obstacles to the expansion of their business. The Chairman noted that the Group had agreed that Asset Management was one of the priority sectors within financial services where the UK looked for significant market opening around the world. It was another sector experiencing serious shortcomings within the EU itself.

5.

Any Other Business

5.1

 

 

 

 

 

Capacity Building. The Secretary said that he required considerably more private sector input than he had received so far on what was being done in providing technical assistance and training to the developing world to help them strengthen not only their capacity to cope with WTO matters, but more basically to build their domestic infrastructure and professional skills. The Chairman (with confirmation from Malcolm McKinnon) said that Minister Caborn was still keen to hear what the UK private sector was doing. A similar exercise was being conducted in the ESF. It was not an area where statistics could meaningfully be gathered. It was more a matter of compiling a file of examples of what companies were doing. The Secretary said he would contact individual companies to see what information they could provide.

5.2

There being no other business, the meeting closed at 12:40pm.

 

NOTE: The next meeting of the High Level LOTIS Group will be on Wednesday 29 November at 4pm.