Liberalisation of Trade in Services (LOTIS) Committee
Minutes of meeting, Friday, 8 December 2019 at The Institute of Chartered Accountants in England and Wales, Chartered Accountants' Hall, Moorgate Place, EC2P 8BJ
Christopher Roberts, Covington and Burling
Neil Jaggers, BI
Alistair Abercrombie, BI
John Cooke, Association of British Insurers
Martin Corry, Department of Trade and Industry
Christopher Crozier, Morgan Stanley Dean Witter
Elaine Drage, Department of Trade and Industry
Alastair Evans, Lloyd's
Matthew Goodman, Goldman Sachs International
Mark Hatcher, PricewaterhouseCoopers
Nick Lowe, International Underwriting Association
Henry Manisty, Reuters Holdings plc
Martin Manuzi, Institute of Chartered Accountants
Pete Maydon, HM Treasury
Julie Patterson, AUTIF
Tim Reardon, Chamber of Shipping
John Sloan, Financial Services Authority
John Thirlwell, British Bankers Association
Graham Bartlett (Department of Trade and Industry), Anthony Belchambers (The Futures & Options Association), Rhian Browning (London Stock Exchange), Mark Brownrigg (Chamber of Shipping), Roger Davis (PricewaterhouseCoopers), Robin Griffith (Clifford Chance), Tim Kidd (Bank of England), Malcolm McKinnon (Department of Trade and Industry), Philip Marsden (Linklaters), June O'Keeffe (Law Society), Lisa Rabbe (Goldman Sachs International), Sir Adam Ridley (LIBA), Gavin Robert (Linklaters), Robert Tsang, (Arthur Andersen), Dr Ian Williams (Prudential), David Wood (Confederation of British Industries).
1. Preliminaries. The Chairman thanked the ICA and Martin Manuzi for providing the venue for the meeting.
2. The Minutes of the meeting of 22 September were approved. There were no Matters Arising
3. Reports from Geneva and Brussels. Martin Corry referred to the DTI note which had been put on the table. Atmospherics at the meetings earlier in the week had been better than before. There was now general agreement for negotiating guidelines to be drafted with a view to adoption at the March 2001 stocktake.
3.1 The Chairman asked whether the improved atmospherics resulted from more serious engagement by developing countries. Martin Corry said this was so as evidenced by their work on negotiating guidelines and a paper on tourism.
3.2 Pete Maydon said that one item of contention in Geneva had been over the possible involvement of the international standards setting bodies like IOSCO and IAIS. The balance of opinion had been in favour of getting whatever information was available from these bodies about WTO members’ adherence to the standards. Replying to questions, he said that part of the debate had been over whether a country meeting such international standards in a relevant sector would earn a "tick-up" with regard to meeting GATS requirements. The original intention behind the Japanese proposal, however, was to seek information from these bodies that could be used to aid negotiations. Although getting the information was generally deemed to be helpful, what the WTO should do with it was a controversial question yet to be resolved.
4. Report on ESF Conference in Brussels on 27 November.
The Chairman, noting that a number of LOTIS Committee members had attended this conference and might wish to add their comments, said that the ESF organisers had been faced with the problems of success. Considerably more people had attended than expected, 460 from as many as 46 different countries, indicating the high level of interest. Now, a request had come from Pascal Kerneis for the chairs of the working parties (which had all done good work) to provide written accounts of their sessions, with a view to publication. Apart from the obvious criticism that there had been too many speakers and too little time for discussion, the overall result had been very good. He picked out Pascal Lamy’s presentation as being particularly good whereas a gloomy note struck by Peter Carl had not been suited to the occasion. Noteworthy also had been the very direct, forthright and useful attacks on NGO positions made by both Lamy and David Hartridge.
4.1 John Cooke remarked on the numbers attending demonstrating an unusual but welcome interest by business in matters which they would normally view as far off and not important enough. He had also been impressed by hearing Lamy speak about pro-competitive principles. Picking up this point, Henry Manisty drew attention to the recent Lamfalussy report whose final paragraph on how to take things forward had emphasised the importance of competition over regulation as the way to produce efficient markets.
5. Discussion of recent papers
5.1 Movement of Natural Persons
5.1.1 Mark Hatcher reviewed the work done by PricewaterhouseCoopers on the topic. He gave a cautious welcome to the Indian paper which itself had partly been prompted by PWC. The Indian paper was ambitious and widely drawn covering issues like mutual recognition and social security with a broad definition of "professional" people. Its value was in bringing the Indians and other developing world delegations directly into the discussion. David Appia of the French Department for External Economic Relations had been sympathetic to the arguments for temporary movement of professional people raised with him on 7th December by the ESF delegation to Paris. He had thought that the Swedes (about to take over the EU presidency) would be favourable as were the Commission. He had not wanted to be drawn on the Indian paper.
5.2 Electronic Commerce and Financial Services
The Committee discussed the recent paper by the USCSI. The Chairman explained that Bob Vastine had indicated that the US Administration team (Papovitch etc) had found the paper acceptable. It was likely therefore that its views would be represented in an official US paper to go to the WTO by end December. Vastine would welcome European industry views before that. The paper would be discussed in the next Financial Leaders Working Group conference call on 13 December. The "value chain" (or "clusters") concept, i.e. identifying particular sectors sharing similar effects, was an important element in the approach developed in the paper.
5.2.1 Opening the discussion, the Chairman saw no huge problems with the US paper. John Thirlwell agreed that it was useful to have the points laid out although it tended to state the obvious. What it left unresolved were critical issues such as home versus host country jurisdiction and applicable law. John Cooke saw it relating more to the less regulated parts of financial services. He also picked on the absence of treatment of home versus host country regulator treatment of cross border provision of pensions funding. Henry Manisty asked whether the paper was pointing in the direction of acceptance of international standards set by bodies like IOSCO. Pete Maydon said that the discussion in the WTO that he referred to earlier had never been about mutual recognition. The concern there had been about the extent to which the WTO should be involved not just in acquiring information about regulatory systems but in enabling that information to be used as a basis for negotiations on domestic regulation. John Cooke distinguished between a country, for example, saying that their regulatory regimes met some international norm and then claiming because of that that they were exempt from WTO requirements on transparency etc. Pete Maydon said that people must recognise that the standards set by IOSCO, IAIS etc were continually evolving and therefore adherence to them could not be interpreted as a once for all "tick up" mark.
5.2.2 The Chairman thought we should be cautious about signing up to the US paper but suggested that we had no overriding objections to the Americans putting the paper forward. Henry Manisty said the interesting shopping list of barriers in a variety of countries was to be applauded. Matthew Goodman said it was important that the Financial Service sectors should not be left out of the "cluster" approach. In the United States the question had been raised about whether all the issues had been addressed. He wondered therefore if on this side of the Atlantic we decided not to address the paper whether we should produce a paper of our own. John Thirlwell said it would be difficult to do so for the EU given the differences between EU states. The Chairman said this should not be a worry if European industry found itself speaking with a single voice; we could then state that position even if our governments were divided. John Thirlwell and John Cooke said they would look into the question of industry consensus in Europe and report back. John Thirlwell asked for clarification of what the term "value chain" actually meant. Christopher Crozier was anxious to ensure that financial services were not kept apart from other sectors in the matter of Electronic Commerce. Referring to the EU’s paper on Electronic Commerce, Henry Manisty was concerned that it had made no specific mention of financial information. John Cooke’s interpretation was that, because the EU paper covered infrastructural aspects of E-Commerce, it had not detailed the effects on particular sectors. Insurance had not been mentioned either. Elaine Drage, in response to the Chairman’s request, said the DTI would make sure that the concerns raised by Henry Manisty were met.
5.3 Domestic Regulation
John Cooke spoke to the USCSI paper drafted by Chuck Levy on Transparency, the Securities Industry Association paper and annex, a draft model schedule, and his own "work in progress" – all papers which had been circulated in advance or tabled at the meeting. He said that the Levy and SIA papers resulted from much negotiation and discussion with the SEC and other regulatory authorities. They had dealt with Transparency and not with other more contentious issues of Necessity, Proportionality and "Least Trade Burdonsomeness". There was something to be said for pressing ahead with a broadly accepted statement on Transparency. But the financial services industry, including US members of the FLG, would also look for papers covering the other issues. His own draft was a first attempt at meeting that requirement. The section on Transparency had been virtually lifted from Chuck Levy’s paper although John Cooke argued against that being put forward as an attempt to re-write the GATS. He had then developed sections on Necessity, Proportionality etc. In the end the aim was to link these horizontal approaches to the approaches to be applied in different sectors. He asked views from colleagues how far the horizontal approach could be taken beyond Transparency. The Chairman said that the aim was to table John Cooke's paper at the ESF Policy Committee meeting on 7 February. He asked to what extent the same paper could be used for FLWG purposes. John Cooke said this was desirable but it might not be possible to produce identical, linked papers. He was discussing the possibility with US counterparts. John Thirlwell said it was a good draft and going in the right direction. John Sloan said it was of immense interest to the FSA. They would follow it very closely.
5.3.1 Matthew Goodman said the SIA paper was not circumscribed by the SEC but discussed with them in order to get their "buy-in", to ensure it will be acceptable for an airing in the WTO. Beyond the benefits of getting the motherhood and apple pie aspects of the paper accepted, they thought that Transparency by its nature helped with the other issues like Necessity and Proportionality mentioned by John Cooke, at least implicitly. He welcomed John Cooke's paper, which he had not yet read, because it demonstrated that we were all pushing in the same direction, while there might be some difference of view among industry sectors about tactics. As regards negotiability in Geneva, John Cooke said that we had most to offer on Transparency in the West. For the developing world we needed to be more explicit on Necessity etc. Our experience in the negotiations on the WTO Financial Services Agreement in December 1997 demonstrated that it was useful to have a few things up our sleeve. Julie Patterson said that accessibility to the "library" of material on regulations (e.g. state by state in the US) was the issue as much as transparency. The Chairman encouraged Committee members to offer their comments to John Cooke to help him finalise his paper.
6. NGOs’ anti-GATS campaign
The Chairman said we wished to alert people about the campaign being mounted now against the GATS by the World Development Movement and Christian Aid's plans to begin one in February against international trade (sic). There were basic misunderstandings in the WDM campaign. For a start governments did not require the help of the GATS for them to provide their consumers with poor services! Governments did not have to make commitments on particular services or parts of services in the WTO if they chose not to. It was true, however, that once a commitment had been made in the GATS, it could not be withdrawn. Given the MAI experience, when the NGOs had claimed victory, it was important that this anti-GATS campaign was countered. The Global Services Network was beginning to collect information for business to use as "cuff-notes" to respond and he hoped LOTIS members and indeed senior members of companies affected by the campaign, would find ways of responding. We had to be prepared to stand up and put the opposite view. He welcomed ideas from the Committee.
6.1 John Thirlwell sought, and received, confirmation that GATS was the new target. Elaine Drage said the DTI had recently embarked on a lengthy dialogue with the World Development Movement who had been under the misapprehension that the services negotiations were coming to a conclusion. Matthew Goodman asked why sectors like health, education, water and energy were being singled out. Elaine Drage said that it was because they were seen as basic services which people had a right to receive from their governments. The WDM had, usefully for them, been able to point to some examples in the developing world where consumers had been given a bad deal as a result of privatisation. She said that we would be right to take this campaign very seriously. The Chairman asked whether the WDM was open to persuasion. Elaine Drage was doubtful. Mark Hatcher drew attention to a tendentious piece in the New Statesman and Matthew Goodman to one in the Observer. Matthew Goodman asked if LOTIS had undertaken any work on this. The Secretary said that LOTIS had not done anything previously but BI hoped to raise funding for a research project demonstrating the benefits to developing countries of building up infrastructure in financial services, telecommunications, energy, transport, etc with the help of foreign expertise allowed in by opening their markets.
6.2 Matthew Goodman suggested demonstrating receptiveness to legitimate developing country concerns and the value of technical assistance to transfer skills to the developing world. Elaine Drage said that the Executive Summary to DfID's forthcoming White Paper on Development and Globalisation was very much in favour of the benefits of globalisation. John Cooke referred to the recent document produced by a prominent Canadian anti WTO campaigner. There was opportunity he thought for a defence of the GATS because it allowed countries to liberalise progressively rather than in one fell swoop. John Thirlwell said the ICC had recently produced a paper setting out and countering "Myths about globalisation", which he would send to the Secretary and to Elaine Drage.
6.2.1 The Chairman suggested that BI should circulate a line to take to the Committee for comments, related specifically to the GATS.
7. Any Other Business
7.1 The Chairman said that the FLWG would be discussing Data Privacy in its conference call on 13 December. He asked for input. John Thirlwell, who had provided some briefing points, warned that the European Commission was unlikely to move on this for some time since it had been criticised by the European Parliament for pressing ahead on the subject at an earlier stage without having secured the authority to do so.
7.2 Henry Manisty said the third report of the Community's Action Plan on Financial Services had attacked US protectionist policies. He wondered whether it had gone too far in doing this and whether there was anything the LOTIS Committee could do given the constructive relationship that existed in the Committee. Christopher Crozier said it depended on whether the perceived problems lay with the individual states or with the Federal Government. If the issue was with the Federal Government it would be easier to resolve. He drew a parallel with the EU member states and the Commission.
7.3 Alistair Abercrombie asked if the Committee would be content for the paper on Safeguards in the GATS, which it had endorsed in June 2000 for submission to the UK government, could be put out on the Internet by the Global Services Network. He explained that the GSN, which was run out of the USCSI, was a virtual network comprising government negotiators, business, academic and other interests from around the world which BI supported. It was proving to be an effective vehicle for sharing views and information among people committed to promoting the arguments for services liberalisation. The Committee supported this suggestion.
7.4 Elaine Drage said that Michel Servoz was soon to leave the Directorate General Trade in the Commission to go to the Secretariat General. She hoped that a replacement would be appointed promptly. The Chairman endorsed this, voicing the general view that Servoz had acquitted himself well in a role which was of significance to the interests of the work of LOTIS.
7.5. Next Meeting. This will take place on Thursday, 22 February 2019 at 10.30 a.m. Alastair Evans kindly offered the Adam Room at Lloyd's, 1 Lime Street, EC3M 7HA for a return visit by the LOTIS Committee for this meeting.