Examination of Witnesses (Questions 360-379)
26 MAY 2004
RT HON
ALISTAIR DARLING
MP, MR JOHN
STEVENS AND
MR MICHAEL
SMETHERS
Q360 Chairman: I know about the theory,
Secretary of State, but I was interested in the practice.
Mr Darling: When you look at a
particular issue—a question may arise as to whether we should
do it or whether it should be a matter for the European Union
or the European Commission—if there is any doubt about it,
the first point of reference are the treaties and the various
jurisprudence made following that. As I said to you earlier, before
you got your tackle in first, my general presumption is that if
we can do it ourselves, that is the best thing; but there are
clearly areas where we do need to co-operate, or there is an interest
where we co-operate. I mentioned aviation, pollution, the Eurovignette.
They are examples where there is clearly a wider interest and,
if we are going to have a single market or we are going to get
the full benefits of a political and economic alliance, then we
ought to use Europe. Obviously, where things are best left to
Member States—for example, the railways—as you know,
there are some European directives but there is an awful lot which
we are looking at which, frankly, are best dealt with here.
Q361 Chairman: Do you think that the
Commission is anti-roads and anti-aviation?
Mr Darling: I have heard it said.
If you look at the plan they produced in 2001, on one view there
was a bias towards railway and I suppose some people said, because
of that, there was a bias against roads. Since that White Paper
was published we and other Member States have pursued a policy—which
is certainly our Government's policy -that you have to have a
measured and a balanced policy: one that recognises the importance
of railways but also recognises that the vast majority of journeys
are by road. I am not aware and do not have any evidence of there
being people sitting in the Commission who spend their time plotting
the downfall of roads. There will undoubtedly be individuals who
take a stronger pro-rail view than others, but that is no different
than you will find in this country.
Q362 Chairman: So you would not say that
there was an enormous divergence between the views of the Department
on transport priorities and responsibilities and the Commission?
Mr Darling: No, I would not say
that there is an enormous divergence. Of course, on the particulars—the
Eurovignette is a case in point where there is a difference of
opinion between us and the Commission, but there is by no means
a unanimous view within the Council of Ministers. The general
thrust of Commission policy ought to be to attend to those things
where you do need some pan-European approach, and then to leave
matters that are properly the province of Member States for them
to get on with.
Chairman: We like conditional tenses
in this Committee, Secretary of State.
Q363 Mr Stevenson: What advantages do
you see in the European Commission negotiating our services agreements—Bermuda
2, for example—and what disadvantages could there be?
Mr Darling: The advantage of the
European Union negotiating is that, in principle—the negotiation
here is in the EU-US context at the moment and I will address
my remarks to that, and I will certainly go on to the other areas
if you would like me to—potentially you are talking about
by far the single biggest aviation market in the world. It is
a question of whether or not you can get more leverage by negotiating
on behalf of the whole of Europe in those negotiations with the
United States. As you know, the issue before us is whether or
not we can negotiate a genuine—and I use that word advisedly—Open
Skies agreement. At the moment, there are a series of bilateral
agreements, including the Bermuda 2 agreement, and the decision
that was taken last year was that a mandate would be given to
the Commission to try and negotiate something. The advantage of
having a Europe-wide position is that there is more on offer,
if you like; but that will only work provided the European Union
takes full advantage of it and plays to the strength of its hand
in negotiating with the United States, which, as you will know,
for many years now has been notoriously unwilling to open up its
markets to entry, never mind from Europe—from anybody else.
The advantages are therefore tremendous, provided we exploit that
advantage to the full. I have made the point that these negotiations
are at an early stage. What has been offered by the United States
so far, in my view, is far from adequate. It is a lopsided deal.
It would not give us access into the American market. My ultimate
objective, the Government's ultimate objective, is that we have
a completely liberalised market in aviation, which we have in
just about every other industry. In my view, it is nonsense that
there are still these restrictions in place.
Q364 Mr Stevenson: I think that those
comments will be very reassuring, but of course, in terms of the
Bermuda 2 bilateral, the real jewel in the crown is Heathrow.
That is particularly important to the UK. How do you see the UK
protecting this, what I call, "jewel in the crown",
Heathrow, and the interests there? That is, in a situation where
by definition the Commission is negotiating, and their tendency
is to look for compromises and then identify what the problems
may be, as distinct from exploiting what is a reasonably strong
position in the first instance and protecting UK interests.
Mr Darling: You are right to emphasise
the importance of Heathrow. From our point of view, 40% of the
EU-US aviation trade is through the United Kingdom; most of that
is through London and most of that is through Heathrow. From the
American point of view, it is Heathrow they want into, because
it is geographically well placed and better connected compared
with some of the other airports. We had a very robust exchange
at the last Council of Ministers in relation to this. It was well
reported at the time. There were some who said, "Let's take
what the Americans have got on offer". My view is that what
the Americans were offering is the standard offer they make to
anybody who goes and asks them for an Open Skies agreement. What
we have to do is to make sure that we remain robust in our negotiations.
The Americans would expect no less.
Q365 Chairman: But you are not doing
the negotiating, Secretary of State.
Mr Darling: No, I am not. As I
said in reply to Mr Stevenson earlier on, a decision was taken—the
advantages to the Americans of getting into the whole of Europe
is that there is a huge market there. So there is arguably a far
greater negotiating power. There are also other issues why we
did it. As you know, prior to all that, the European Court held
that the Member States, when entering into bilateral agreements,
had to designate all European carriers rather than just their
carriers. That would have been very difficult to have negotiated
bilaterally. In relation to the EU, I think the leverage that
is potentially there is very substantial. I was just mentioning
the discussion that we had in March. Happily, quite a large number
of other countries took the same view as we did: that, in any
negotiation, to take what is offered immediately is probably not
going to get you the best deal. It may take time to achieve a
successful outcome, and I do not think that the Americans seriously
expect Europe to have accepted what was on offer at the end of
the first round of negotiations.
Q366 Mr Stevenson: Yes, that is interesting,
Secretary of State. Transport Council decisions are or will be
by qualified majority?
Mr Darling: They are.
Q367 Mr Stevenson: So clearly there is
an issue there for us. There is a lot of talk about red lines
at the moment, in another context. Would it be fair of me to put
to you that the UK Government's position on the bilateral Bermuda
2 is that red lines are: the removal of foreign ownership restrictions
around US airlines; access to the domestic market; access to America's
Civil Reserve Air Fleet policies; and cargo and wet leasing arrangements?
Would it be fair of me to describe those as red lines?
Mr Darling: I think that we have
to be careful here. The red lines, commonly talked about, are
in a rather different context. They are things that we believe
are properly the province of Member States, like tax, social security,
foreign policy, and so on. Let us just be clear about that, therefore.
In relation to the EU-US aviation negotiations, we want to get
the best possible deal we can. You mention access beyond the first
port of call, so that one of our airlines could, for example,
fly to New York and then on to Chicago. That is important to us.
Yes, ownership is equally important. There are a number of other
issues that are important. In a negotiation, obviously there are
some things we will get and some things we will not get. What
I am vehemently against is a situation where you get an Open Skies
agreement that is open skies into Europe but is pretty closed
when you get to the other side of the Atlantic. That is not an
Open Skies agreement. In relation to all the things that might
be discussed, however, some things we might agree now; some things
we might have to work towards. Similarly from the Americans' point
of view, if you look at what they want out of Europe. These are
things that may have to be discussed. What I am pretty clear about
is, if you are going to negotiate an Open Skies agreement, it
has to be an Open Skies agreement; it cannot just be one where
basically they can come here but we cannot go there.
Q368 Mr Stevenson: Nevertheless, those
issues I have identified—
Mr Darling: They are important
issues.
Q369 Mr Stevenson: . . . on which we
have taken evidence before, are vitally important to the UK.
Mr Darling: They are important.
It is just when you use the phrase "red line"—as
I say, that is commonly used in relation to the discussions which
are taking place now in relation to the Treaty discussions. It
is not quite the same thing.
Q370 Mr Stevenson: We have taken evidence
on this, and it has been very clear that the UK Government's position
has been that these are things that must happen in negotiation.
I need to be clear on this. Are you saying—and I will not
use "red lines" again—that there may be elements
of that package which we may compromise on, or not?
Mr Darling: Until there is a package
in front of us, it is very difficult for me to say whether it
will be acceptable to us or not. It could be, for example, that
we look at a whole range of things that are of concern to us—and
just suppose, for the sake of argument, that nine out of ten were
met—we would have to make a judgment as to whether the tenth
one was actually so important. What I am very clear about, however—and
you were right to mention those issues, because they have been
mentioned before by the Department and they are the ones that
we have put in the Transport Council, and so on—is that
they all add up to the same thing: can we get a genuine Open Skies
agreement? Is it a liberalising measure or is it—as was
certainly the first offer which was made to the Commission, and
indeed the same offer that has been made to this country from
time to time—not particularly, as it seemed to me, open
skies? We will continue to take a robust attitude so far as that
is concerned. As to the detail of anything on offer, obviously
at this stage you would be very unwise to say in advance that
you were not prepared to look at any of the detail. Of course
we must look at that. We would expect the Americans to look at
what we are doing. But it has to be a genuine Open Skies agreement.
Q371 Mr Stevenson: Do you believe that
the aviation industry is sufficiently closely involved with the
Commission in these negotiations?
Mr Darling: That depends. The
aviation industry, of course, does not speak with one voice as
far as this is concerned. They have different views, depending
on how they are placed. I think that the aviation industry—put
it this way—is getting more involved than it was at the
outset, because it could have serious implications for them, depending
on where they are. Whilst it is very important that the Commission
does keep in touch with what the industry thinks, we should not
lose sight of the most important people in all of this, and that
is passengers or freight carriers—the customers, in other
words. They are the most important people.
Q372 Chairman: They are not represented
at all in these negotiations, are they? Not in any language.
Mr Darling: No, but Ministers
and Member States are supposed to represent the people that elect
them. That is why we are there. That is the most important thing.
In relation to Open Skies, and why the UK Government will continue
to take a very robust line with our colleagues in the Council
of Ministers and with the Commission, it is because we believe
that what we should be after here is a genuine liberalising measure,
in the same way as the liberalising measures in the 1990s opened
up Europe and allowed the low-cost airlines in. It is the same
giant step we need to take, frankly.
Q373 Mr Stevenson: The notion we should
reach agreement with the US on a European Union basis that does
not satisfactorily resolve these vital issues, when 40% of the
world's aviation market is the United States, seems certainly
to many of us to be bordering on the unacceptable. Finally, do
you think that the European Commission have sufficient expertise
to conduct these negotiations?
Mr Darling: Again, the picture
is mixed, in that they do have some very good, skilled people.
Most of the experience, if you like, of negotiating these things
tends to rest with Member States because they are the ones who
have been doing the negotiating. For example, within my department
we have long experience of negotiating, not just with the United
States but also with other countries. I think that the European
Commission in this case is getting a lot better in these things.
The issue here is not just the individual skill in negotiating,
but actually having the political will on the part of the Commission
to make sure that we get the best possible deal for the people
we are supposed to represent. That is actually the most important
thing. It is a matter of politics, I think, rather than blaming
the civil servants.
Q374 Chairman: Does that exist?
Mr Darling: The will? I certainly
hope it does. Certainly at the discussion we had at the Council
earlier this year, in March, a large number of Member States made
it very clear that they expected to get a better deal than the
one that was being offered. Given that we are at such an early
stage—
Q375 Chairman: Why is there therefore
this very strong view, echoed in a letter which I received from
British Airways this week—and which I am sure has been received
by other members of this Committee—that the Commission are
about to do a deal which will not encompass any of the points
that either Mr Stevenson or you have just made?
Mr Darling: British Airways are
understandably concerned that they should not be disadvantaged
in relation to any—
Q376 Chairman: But they are not alone,
are they, Secretary of State?
Mr Darling: They are not. Indeed,
I can think of occasions when we have been negotiating bilateral
deals when different airlines in this country have feared that
we were going to be doing things. Sometimes they lobbied privately;
sometimes they lobbied publicly. That sort of thing goes on when
you have these negotiations. This was fairly well reported at
the time. Not just us, not just me, but others made it very clear
that, if we were going to do this thing and given the importance
not just for the EU-US, these negotiations would be looked at
by the rest of the world, and the position eventually reached
at the end of these negotiations will be looked at by the rest
of the world as a benchmark as to what might follow—which
is why it is so important that we get these things right. My guess
is that, if we can reach a deal on the EU-US, then other markets
will follow.
Q377 Chairman: Particularly if it is
one that is to the advantage of the people with whom you are negotiating.
I do not think that there is any difficulty. It will be warmly
received as a benchmark.
Mr Darling: If it is a good deal,
it would be.
Chairman: Yes, the definition of a "good
deal" is an interesting one.
Q378 Mrs Ellman: Are you satisfied with
the way the Commission carries out impact assessments of its proposals?
Mr Darling: The answer to that
is we would prefer it to carry out more rigorous assessments and—
Q379 Chairman: "No", in other
words?
Mr Darling: I will answer the
question. If you wish to answer Mrs Ellman's question, then by
all means go ahead!
| 
