LOTIS Minutes

LOTIS
November 12, 2001

The minutes below are from a series of secret meetings between top corporate executives in the Euro-American business world and the UK's primary trade negotiators. Between April 1999 and February 2001 the Liberalization and Trade in Services (LOTIS) committee held a series of private meetings in which the discussed strategy to impose a pro-business agenda on the WTO rules governing services. As can be seen below, among those attending the meeting are the European representatives for such US financial giants as Goldman Sachs, Morgan Stanley Dean Witter and Pricewaterhousecoopers. To get a full view of the implications of these meetings see Greg Palast's The WTO's Hidden Agenda. The documents were discovered by Corporate Europe Observatory and minutes from the other 13 secret gatherings can be found on their website:
http://www.gatswatch.org/LOTIS/LOTISapp1.html

Liberalisation of Trade in Services (LOTIS) Committee

Minutes of meeting held on Thursday, 22 February 2001 at Lloyd's, One Lime Street, London EC3

Present:

Chair
Christopher Roberts, Covington and Burling

Secretary
Neil Jaggers, International Financial Services, London

Alistair Abercrombie, International Financial Services, London
John Cooke, Association of British Insurers
Christopher Crozier, Morgan Stanley DeanWitter
Christopher Ehrke, Linklaters & Alliance
Alastair Evans, Lloyd's
Matthew Goodman, Goldman Sachs International
Mark Hatcher, PricewaterhouseCoopers
Tim Kidd, Bank of England
Nick Lowe, International Underwriting Association
Matthew Lownds, Foreign & Commonwealth Office
Malcolm McKinnon, Department of Trade and Industry
Henry Manisty, Reuters Holdings plc
Pete Maydon, HM Treasury
John Nichols, International Financial Services, London
Julie Patterson, AUTIF
Lisa Rabbe, Goldman Sachs International
Tim Reardon, Chamber of Shipping
John Sloan, Financial Services Authority
Alan Young, Association of British Insurers

Apologies

Graham Bartlett (Department of Trade and Industry), Anthony Belchambers (The Futures & Options Association), Rhian Browning (London Stock Exchange), Mark Brownrigg (Chamber of Shipping), Stephen Conlon (Foreign & Commonwealth Office), Roger Davis (PricewaterhouseCoopers), Elaine Drage (Department of Trade and Industry), RobinGriffith (Clifford Chance), Philip Marsden (Linklaters), June O'Keeffe (Law Society), Sir Adam Ridley (LIBA), Gavin Robert (Linklaters), John Thirlwell (British Bankers Association), Robert Tsang, (Arthur Andersen), Ian Williams (Prudential), David Wood (Confederation of British Industry).

1. Preliminaries. The Chairman thanked Lloyd's and Alastair Evans for providing the venue for the meeting. He welcomed Christopher Ehrke, Matthew Lownds and John Nichols who were attending their first meeting.

2. Launch of International Financial Services, London. John Nichols noted that, following a review carried out by its chairman, Lord Levene, BI had been re-launched on 2 February as International Financial Services, London. Some initial concerns about the new name had been overcome. IFSL also had a new remit, which, however, left the trade policy side of its work unaffected. The changes largely affected IFSL's approach to inward and outward visits. As regards the LOTIS work, John Nichols felt that, in future, more use should be made of IFSL's network of Local Advisory Groups in identifying barriers to services trade. In attempting to raise the profile of the new company, he would be calling on as many members as possible. There was also a need for IFSL to be more proactive about its activities. In that regard, he would welcome any suggestions which LOTIS Committee members cared to make.

3. The Chairman reported the appointment of Lord Brittan as chairman of the High-Level LOTIS Group. A first meeting under his chairmanship was being arranged for 8 May. Shortly thereafter, perhaps in early June, a delegation from the Group could usefully call on the Secretary of State for Trade and Industry to emphasise the importance of the WTO negotiations for the UK services sector.

4. The Minutes of the meeting of 8 December were approved. There were no Matters Arising.

5.1 Reports from Geneva and Brussels. Malcolm McKinnon said that an informal meeting of the Services Council had been held earlier in the week in order to examine a second draft by the WTO Secretariat of the negotiating guidelines needed for the next round of GATS negotiations. Regrettably, the group of 24 leading developing countries had blocked discussion of the new text, arguing that it lacked the development-related emphasis of the original draft. In the meeting itself, they had refused to be drawn on the substance of their objections but, from the UK's contacts, it seemed that their concerns did not amount to terribly much and were probably tactical in nature. He was concerned that, if the developing countries wanted to avoid the services negotiations moving too quickly, they might view conclusion of the negotiating guidelines as something for Ministers to decide on at the Qatar conference in November. The chairman of the Services Council would be conducting consultations but, if he could not make progress on this matter, there would be little left for the stock-taking meeting on 28-30 March. In that event, work in the Council up to the summer break would focus on an examination of the various sectoral negotiating proposals which had been tabled. But there would then be a sizeable gap until the Qatar meeting.

5.2 Malcolm McKinnon noted that the chairmen of the WTO services bodies would change at the end of March. There seemed to be an emerging consensus with regard to the following new line-up: Services Council - Ambassador Amorim (Brazil); Working Party on Domestic Regulation - Scott Gallacher (New Zealand); Working Party on GATS Rules - Hugo Cayrus (Uruguay); Committee on Specific Commitments - Pimchanok ("Nan") Vonkhorporn (Thailand) and; Committee on Trade in Financial Services - Jan-Peter Mout (Netherlands).

5.3 Malcolm McKinnon said that work within the EU was proceeding on a number of position papers, including additional sectoral papers on postal and courier services and energy services. He circulated a draft "communication" on the movement of personnel prepared by the European Commission, on which he would welcome the Committee's views. He believed it offered little to those countries, particularly India, which had been doing some serious groundwork on the subject. In that regard, he felt that it might well be counterproductive for the EU to table such a paper in the WTO at this stage. In the Working Party on GATS Rules, the ASEAN proposals on safeguards were gradually disintegrating. Many developing countries now saw dangers in the proposed approach. Little was happening on government procurement but there was some activity on subsidies. He undertook to circulate to the Committee a paper on subsidies which had been produced by the Commission. On WTO accessions, continuing problems in agriculture were holding up China's accession. The UK Government was still watching the position on insurance carefully. He noted that the Russians had sent the EU a new services offer (already circulated to the Committee). Action Committee Members

5.4 On the question of the negotiating guidelines, the Chairman said that it was not unusual for the developing countries to flex their muscles from time to time. But the situation would be serious if the guidelines failed to be agreed at the end-March stock-taking session. He understood that the Commission intended maintaining momentum on services by proposing a series of half-day sectoral discussions. Malcolm McKinnon agreed that this would be helpful. Matthew Lownds believed that the stalling by the developing countries was connected with their wider goals in the WTO, for example with regard to the implementation of Uruguay Round results. There were across-the-board problems about the handling of special and differential treatment. Countries needed to think more imaginatively about what to do. In response to a question from John Cooke, Malcolm McKinnon felt that the private sector could best make a contribution by helping the Government with its preparation of requests lists and commenting on the negotiating proposals which had been tabled in Geneva. Pete Maydon noted that the Treasury hoped soon to be seeking industry views on a number of country-specific proposals.

6. European Services Forum. The Chairman gave a brief report of the 7 February meeting of the ESF Policy Committee. A written report has been circulated to Committee members.

7.1 Domestic Regulation. John Cooke said that, in discussion in the ESF, one main question had arisen: the extent to which the horizontal application of regulatory disciplines was desirable. On the one hand, those sectors in which the EU has major offensive interests want disciplines to be applied horizontally as far as possible, to reinforce them with some sector-specific disciplines and to make them applicable regardless of whether WTO members have made commitments in the sectors concerned. On the other hand, such an approach is not supported by those parts of the European services industry which are generally more protectionist and those, such as the audiovisual sector, which have to meet public policy objectives as regards cultural diversity. Another factor was the tide of NGO opinion. He noted that the Commission was also divided but that DG Trade wanted to table a paper in Geneva relatively soon. They therefore wanted the ESF's views quickly. In circulating the Commission's current draft to the Committee, Malcolm McKinnon said that one point to bear in mind was the extent to which horizontal disciplines should bite on public services. Matthew Goodman asked whether there had been any discussion within the ESF of the view held by some members of the Financial Leaders Working Group that some aspects of the subject of domestic regulation were too ambitious for the WTO? John Cooke said that this had not been the case.

7.2 John Cooke went on to say that, given the differences within the ESF, he was thinking of drafting a paper setting out the different sets of priorities for the different sectors. It was not for the private sector to attempt to resolve the differing views. Henry Manisty agreed but hoped that the paper would recognise that the balance of opinion within the ESF was for the EU to adopt a liberalising approach. The Chairman asked IFSL to consider whether statistics could be produced which would demonstrate the relative importance of the sectors concerned for the EU economy. (Action taken.)

7.3 John Cooke said that the Financial Leaders Working Group had made slow progress on the subject. Overall, the US industry's approach was to focus on transparency. The US Securities Industry Association had produced its own paper which it had negotiated with the SEC and other regulators, including the Financial Services Authority in the UK. That put the SIA in a difficult position. There was a serious difficulty in getting over a message about the progress that the financial services industry would like to see being made. He noted that the US insurance sector wanted to go beyond transparency, even if this meant having to have sector-specific disciplines.

8.1 Movement of Natural Persons. Mark Hatcher said that it was clear that the temporary mobility of key business personnel presented difficulties for the Commission. The EU sectoral papers tabled in the WTO in December alluded to facilitating discussion on mode 4 issues. The new Commission paper looked thin and disappointing in terms of analysing the issues which arose in this area. In particular, there was no reference to finding ways to facilitate procedures, for example by the introduction of GATS visas.

8.2 Reporting on PricewaterhouseCoopers' staff's recent visit to Geneva, Mark Hatcher explained that the main purpose had been to meet some key developing countries and to talk about PwC's draft model schedule. The Indian Ambassador had given them a warm reception, as had the Pakistani Ambassador. There had also been meetings with Singapore, Egypt, Canada, Chile, Argentina, Australia, the US and the EU. They had got a very positive reaction from Australia. The US Government was supportive behind the scenes. The meeting with the EU Ambassador, however, had been disappointing, with no support even in private. Within the EU, there had been support for PwC's efforts only from the UK, France and Ireland. The question now was how best to follow up the visit. It seemed that one course was to try to prompt a favourable reaction to elements of the Indian paper which had been tabled last year. More generally, more effort should be made by the private sector in spreading the word about what it wanted from the negotiations in this area. Action Committee Members

9.1 Anti-GATS Counter-measures. Alistair Abercrombie introduced IFSL's paper about the "civil society" NGOs campaign against the GATS and what might be done by the UK private sector to challenge the criticisms which were being made about the Agreement. It was hoped that the question and answer part of the paper could be agreed quite quickly so that the material could be posted on IFSL's website. It was proposed that, at its meeting on 8 May, the High-Level LOTIS Group should discuss private sector strategy, particularly the identification of opportunities for business leaders to engage in the exercise.

9.2 Matthew Lownds welcomed the private sector's help in countering the anti-GATS arguments. He noted that the campaign by the World Development Movement in particular was leading to a broadening of concerns. If business was to help convince the public, a case was needed based on the development-related benefits which the GATS can bring. He also pointed to the need to coordinate business responses to the NGOs allegations. Malcolm McKinnon said that the pro-GATS case was vulnerable when the NGOs asked for proof of where the economic benefits of liberalisation lay. Christopher Ehrke said that his firm was very willing to be involved in the exercise. He felt that some of the points made in the IFSL paper needed to be more punchy and floated the idea of creating a sub-group to take the work forward. Matthew Goodman said that the exercise should be taken forward in close consultation with the WTO Secretariat, which had already produced some useful material on the matter. Pete Maydon undertook to circulate a recent Finnish paper about the economic benefits of liberalisation, on which the LOTIS paper could draw. He felt that developing countries should be encouraged to refute the arguments put forward by the NGOs. In particular, if every member of the WTO could sign up to the counter-arguments produced by the Secretariat, this would have the broadest impact. Action Pete Maydon

9.3 Henry Manisty wondered how business views could best be communicated to the media. In that respect, his company would be most willing to give them publicity. Perhaps Lord Brittan could be involved in his capacity of Chairman of the High-Level LOTIS Group? John Cooke considered that the Committee needed to think further as to whether business wanted to coordinate a proactive approach to the exercise.

9.4 The Chairman said that the IFSL material could be developed as the exercise proceeded. He invited Committee members to send their initial drafting comments to Alistair Abercrombie by 2March. He proposed that, once IFSL had produced a re-draft of the paper, it should then be sent to the WTO Secretariat for comment. IFSL would produce a paper for the meeting of the High-Level LOTIS Group in May focussing chiefly on private sector strategy. In the meantime, if Committee members had views as to strategy, they should send them to either the Chairman or the Secretary. Action Committee Members and IFSL

10.1 Possible IFSL Research Project. Neil Jaggers referred to the outline which he had circulated with regard to the possibility of commissioning a research project exploring the economic benefits for developing countries of services liberalisation. This would be used partly to counter the NGOs anti-GATS campaign and partly to convince developing countries to open their markets. IFSL was seeking the Committee's support for the project in principle. IFSL would welcome comments on the outline. He envisaged that the resulting material would incorporate a summary of studies done thus far in this area and a series of specific case studies. Depending on the number and nature of the case studies, the cost of the project would likely be between £50,000 and £70,000. It might be appropriate to set a ceiling. How would the project be financed? Since it believed that such a project would be of potential benefit to its overall membership, IFSL would be prepared to invest £10,000. The remainder would have to come from sponsorship, ideally from the private sector. IFSL would welcome indications from Committee members as to whether this was viewed as a worthwhile project and about possible sponsorship

10.2 John Cooke said that the case studies would have to be convincing. Success stories in individual countries could no doubt be found but they might well throw up problems in identifying the controlling influences. Lisa Rabbe said that it was important for business to make the case for liberalisation and that her company was ready to support such a project. But it would need to be structured properly. A number of similar studies had been done in conjunction with the 1997 WTO financial services negotiations. She undertook to send copies to IFSL. John Sloan noted that academic work on the subject had been done in North America. There was no need to reinvent the wheel, so the project should concentrate on case studies. Action Lisa Rabbe

10.3 The Chairman asked Committee members to think about sponsorship and to communicate any interest to IFSL. If the project went ahead, a meeting would be organised involving the sponsors and the academic concerned, Professor John Dunning of the Economists Advisory Group. Action Committee Members and IFSL

11. Third Country Barriers. Alistair Abercrombie said that the Financial Leaders Working Group had been discussing how to go about producing a common list of third country barriers to trade in financial services. It seemed that different parts of the industry in both Europe and the US had been updating the barriers material compiled by the FLWG during the 1997 WTO financial services negotiations. It seemed sensible to pool that material, provided the organisations doing that work could agree that it should be shared with the other members of the FLWG. IFSL would propose such an approach during the next FLWG conference call on 1 March. Lisa Rabbe confirmed that the US Securities Industry Association was working on an updated barriers list.

12. Other Business. The Chairman referred to IFSL's paper on the production of a manual of services statistics, which had been circulated for information. He noted that progress of work in this area seemed to be in the right direction. Christopher Ehrke referred to his firm's involvement in a trade and competition conference to be held in Brussels on 2 March.

13. Next Meeting. 2.00pm on Friday 8 June at the Association of British Insurers.

14. Farewell to Neil Jaggers. This being Neil Jaggers' final meeting before his retirement from IFSL, the Chairman thanked him for the sterling work which he had carried out as Secretary of the LOTIS Committee. Committee members joined the Chairman in wishing Neil a long and happy retirement.