The
Committee consisted of the following
Members:
Chairman:
Sir
John Butterfill
Armstrong,
Hilary
(North-West Durham)
(Lab)
Blackman,
Liz
(Erewash) (Lab)
Field,
Mr. Mark
(Cities of London and Westminster)
(Con)
Foster,
Michael Jabez
(Hastings and Rye)
(Lab)
Howell,
John
(Henley) (Con)
James,
Mrs. Siân C.
(Swansea, East)
(Lab)
Moore,
Mr. Michael
(Berwickshire, Roxburgh and Selkirk)
(LD)
Penrose,
John
(Weston-super-Mare)
(Con)
Prentice,
Mr. Gordon
(Pendle)
(Lab)
Soulsby,
Sir Peter
(Leicester, South)
(Lab)
Stunell,
Andrew
(Hazel Grove)
(LD)
Thomas,
Mr. Gareth
(Minister of State, Department for
International
Development)
Viggers,
Sir Peter
(Gosport)
(Con)
Ward,
Claire
(Vice-Chamberlain of Her Majesty's
Household)
Wilson,
Phil
(Sedgefield)
(Lab)
Wright,
Jeremy
(Rugby and Kenilworth)
(Con)
Mick Hillyard, Committee
Clerk
attended the
Committee
Second
Delegated Legislation
Committee
Monday 26
January
2009
[Sir
John Butterfill in the
Chair]
Draft European Communities (Definition of Treaties) (Agreements concluded under Article XXI GATS) Order 2008
4.30
pm
The
Minister of State, Department for International Development
(Mr. Gareth Thomas): I beg to move,
That the
Committee has considered the draft European Communities (Definition of
Treaties) (Agreements concluded under Article XXI GATS) Order
2008.
It
is a pleasure to serve under your chairmanship, Sir John. I
look to you to protect me from any aggressive questioning from my own
side and the Opposition. The order is intended to give effect under
domestic law to a total of 17 agreements reached with other members of
the World Trade Organisation. It is a piece of routine WTO
business and is in no way connected to the ongoing Doha development
agenda round of trade negotiations.
The agreements
have been necessary because of the successive enlargement of the
European Union, first from 12 to 15 member states in 1995, and then to
some 25 member states in 2004. In acceding to the European Union, in
order to ensure that they are compliant with EU law, those new member
states have had to withdraw some of their existing commitments in trade
in services, under the WTO general agreement on trade in services, or
GATS. Under WTO rules, when countries withdraw commitments, they must
offer comparable commitments in other areas, hence the negotiation that
has taken place with the 17 other WTO members that considered
themselves affected by the withdrawn commitments.
There are 17
substantively identical agreements, each setting out the same
withdrawals of commitments by the new member states and the same
compensatory adjustments agreed. The agreements are consistent with the
WTO principle that commitments that are offered to one member should be
offered to all. The 17 agreements were published in Command Paper Cm
7430, in July last year.
All member
states have made some compensatory commitments. For the original 12
member states covered by the ECs GATS schedule at the end of
the Uruguay round, including the UK, those are very minor. Most
compensatory commitments are made by the acceding member
states.
The UK has
agreed to take on three commitments. First, in line with current
legislation, no area of the telecommunications services or computer and
related services sector covered by our GATS commitments is reserved to
the public sector. Secondly, we have brought forward from the
EUs current GATS offer in the Doha round the specific offer in
telecommunications services, which would cover all affected member
states and contains fewer reserved areas. Thirdly, we will bring
forward from our current GATS offer in the Doha round the
removal of the cover of an economic needs test in one further
sub-sectorintegrated engineering servicesof the
temporary movement of highly skilled professionals. The first two
commitments are taken by all member states; the third is taken by the
UK. Other member states have also made specific, albeit different,
commitments.
4.33
pm
John
Penrose (Weston-super-Mare) (Con): It is always good to
see you in the Chair and looking after us in Committee proceedings, Sir
John. Since this is my first time in this particular role, may I start
by saying how much I am looking forward to debating the various issues
surrounding this portfolio with the Minister? While I am sure that we
will not agree on everything, I hope that we will have a respectful and
constructive debate whenever disagreements occur.
This is
exactly the sort of occasion when there will not be any great
disagreement because this is a largely consensual piece of secondary
legislation, to which my party has no fundamental objections. As the
Minister ably explained, this is a largely routine piece of legislation
that flows from the WTO discussions and negotiations. While it covers
most of the new EU member states, I understand that it does not yet
cover Romania or Bulgaria. Therefore, like London buses, another
measure will probably come along in due course to cover the equivalent
set of arrangements and organisations for those countries
international obligations.
I have no
particular objections to anything that has been announced today, but I
will be grateful if the Minister can clarify one substantive question.
In paragraph 10 of the explanatory memorandum, it
states:
The
agreements will not lead to any new regulatory measures, so there is no
impact on business, charities or voluntary bodies.
It goes on to
say:
For
the same reason, there is no impact on the public sector. An Impact
Assessment has not been prepared for this
instrument.
Given
that some 17 non-EU countries that are members of the World Trade
Organisation are affected by this measurethe list includes some
very large trading partners of Britain, such as China, the US,
Australia and Canadawill the Minister explain how we can be
certain that there will be no impact, particularly on
businesses?
Let me give
the Minister a theoretical example to illustrate what I mean. Let us
say that a British company working in a particular market sector was
successfully exporting to the US, but then suddenly had to compete with
another company, also a very effective and strong competitor in the
same market sector, which was based in a new EU member country. It
would find that the company in the new EU member country would have
better access to the market in the US as a result of this measure. Does
that not mean that the UK company would find that it had a stronger
competitor potentially taking some of its business and therefore some
of its export revenue in the
US?
Mr.
Thomas: To help answer the hon. Gentlemans
question, perhaps I should be clear about what agreements in the WTO
are increasingly looking like. I am sad to say that most agreements
that are achieved through the WTO are about effectively
locking in decisions that have already been taken
domestically by country Governments. We have effectively
confirmed that in our
telecommunications industry, to which I alluded, we are reserving no
area for the public sector. Therefore, we are simply confirming what is
already the reality in that sector in the UK. There is no impact as
such on UK business because it is already working to that
scenario.
John
Penrose: I thank the Minister for that explanation.
It does not necessarily address the precise example about which I was
talking, which was export revenues earned by British companies in
markets such as the US. I think the Ministers exampleif
I have understood it correctlyrelated to the impact on the UK
economy and access to the UK market. Perhaps he will put me right if I
have misunderstood him. When he winds up, will he answer my question
about export revenues earned by British companies in some of the 17
countries listed in this statutory
instrument?
That
was the only substantive issue that I wished to raise. I am sure that
the Minister will come up with a cogent explanation in due course.
Other than that, I have no further objections or concerns relating to
this piece of
legislation.
4.39
pm
Andrew
Stunell (Hazel Grove) (LD): I am pleased to be serving
under you on this Committee, Sir John. I think that this is the first
time I have done so in my career so
far.
This
is a short but important document. I want to make it clear from the
beginning that, as the hon. Member for Weston-super-Mare said, we
support in principle the idea of liberalised, non-discriminatory trade
in both services and goods. Therefore, in principle, we have no
objection to this document and its contents. However, I have a number
of questions to which I hope the Minister will respond.
In his
introduction, the Minister made the point that this measure was not
connected to wider issues. However, I know that he takes these matters
to heart and he will be well aware that there are many NGO concerns
about the way that WTO and the GATS agreement are rolling forward. I
would like the Minister to spell out some of the advantages and
disadvantages that there might be and the balance of power that exists
between the developed nations, such as the United Kingdom, and the
developing nations.
I notice that
among the list here are countries such as India, Ecuador, Colombia,
Cuba and even Argentina. It could be that the balance of advantage is
tiltingparticularly when the Minister says that, in practice,
it will make no difference whatever to the United Kingdom, strongly
suggesting that we are offering them new lamps for old. Perhaps he
could respond to that point.
In preparing
for this debate, I had a look at the Departments
Q&A, which made the point that some developing
countries were short of capacity to participate effectively in these
negotiationssomething which NGOs are also focused on. I was
therefore disappointed to read the Ministers answer in the
Q&A, which says
that
the
UK...is funding a project...to provide a person in Geneva to
work closely with developing countries to provide help where it is most
needed.
Perhaps the Minister
could let us know how that works and whether, in his judgment, one
person being contributed to this process will be enough.
Does the
Minister believe that there are any lessons to be learned from the
financial turbulence of the past 18 months at international level? Is
the liberalisation model still one that the United Kingdom Government
want to go hell for leather on? To what extent does he believe that
where, for instance, private contractors take on public
servicesparticularly in developing countries, such as those I
have already mentionedthere is always a benefit to recipients
of those services? Even in my own area of the north-west of England,
which is far from being a developing country, we have a utility
provider which has just had its knuckles severely rapped by the
regulator for the charging system that it has been applying to
non-commercial customers over the past year.
I have one or
two questions to ask about the agreement, some of which the Minister
has hinted at. I was going to ask him what new services we would put on
the table and I get the strong impression that the answer is,
None at all. Perhaps he could say whether I have
interpreted him correctly. These are concessions that we were going to
include in the next round of negotiations but they have been brought
forward, as the explanatory notes state. That being the case, does that
mean that further items will now be added to the United
Kingdoms negotiating brief for the next round, or does it mean
that we have gone that far and no
further?
I
have a question about the economic needs test, which is the provision
to allow highly specialist and qualified people entry to the country.
It will be interesting to hear the Minister say how he expects that to
work as well, and whether he thinks that will make any difference to UK
approaches to the granting of visas and job permits to people from
these countries.
In summary,
the Liberal Democrats believe that generally, liberalised and free
trade is beneficial to the nations that produce and supply, and consume
and buy, the services. However, there are some important qualifications
and real limits to that general presumption, particularly when there is
a likelihood that multinational and global producers will use it to
exploit nations and communities that are essentially powerless and
where it might hinder even the United Kingdoms capacity to
develop its own social policy and patterns of service delivery. I look
to the Minister to satisfy the Committee that the questions and
concerns that I have articulated are resolved in the proposals he has
brought
forward.
4.44
pm
Mr.
Thomas: I am grateful to the Opposition for their
questions. I shall try to pick up some of the broad questions that the
hon. Member for Hazel Grove raised, before coming back to some of the
more specific
ones.
On
the question of the balance of power between developing and developed
countries, I recognise the concern voiced by NGOs. In
defence of the World Trade Organisation, in a sense it is where
developing countries have most power, by comparison with trade
negotiations of a more bilateral nature. Any WTO agreement must be
agreed by everyone. In essence, one developing country has the same
power as one developed countryEcuador or Zambia could veto an
agreement in the same way as the US or the EU could. The WTO
is a democratic
institution. Increasingly, we see blocs of countries coming together to
increase their leverage in trade negotiations. For example, a group of
least developed countries is operating collectively in Geneva in the
current Doha round of world trade negotiations, significantly
increasing their leverage. A number of emerging nations operated
collectively in the run-up to the July Geneva ministerial last year,
increasing their leverage in those
discussions.
If
the hon. Gentleman will forgive me, I shall happily write to him with
more details of the support that the Governmentthrough the
Department for International Developmenthave provided down the
years to developing countries to help build up their capacity in
international trade negotiations. The specific
answerQ&Ato which the hon.
Gentleman referred relates more specifically to the current set of
negotiations, but since 1988 there has been a whole stream of work to
help developing countries build up their ability to negotiate. We fund:
people who attend negotiations, on occasion; research work for
different groups of developing countries; and NGOs and think-tanks that
do specific work on trade negotiations. So, yes, there has been one
person assigned, but there has been a much broader stream of work and I
shall try to give him, by letter, some more
detail.
The
hon. Gentleman made a point about lessons from the financial crisis.
There is often a misunderstanding about the nature of the GATS process
and about the WTO. The GATS does not prevent us from taking regulatory
decisions about our financial services. There is a specific exemption
in the financial services annexe to the GATS, which allows WTO members
to take measures for prudential reasonsto protect investors or
to ensure the integrity and stability of the financial systemso
I do not think that there is a specific lesson from the financial
crisis for the WTO or the GATS process as such. The debate about the
financial crisis is a much broader one and not specific to our
discussion.
Andrew
Stunell: The Minister is giving us a lot of information,
but I am sure he will be aware that there is a linkage at the
international level between the WTO agreements and what the World Bank
and the International Monetary Fund often impose as conditionality. Is
the Minister satisfied that developing countries, and other countries
for that matter, that have subscribed to WTO agreements in broad
principle will not findwill be protected from
findingthat their discretion in such matters is overridden by
those international institutions, which are linked to the
WTO?
Mr.
Thomas: If the hon. Gentleman will forgive me, I would
argue that liberalisation, if paced carefully and sequenced sensibly to
help developing countries adjust in their own time, is in general terms
a good thing. Generally, all the academic research suggests that
liberalisation helps to grow trade and to boost the private sector in
developing countries. The key is to ensure that it is paced to allow
developing countries time to adjust their markets. That is certainly
the nature of the bilateral trade negotiations taking place at the
momentthe discussions about the economic partnership
agreements.
The
hon. Gentleman referred to the World Bank and the International
Monetary Fund. He will recognise that there has been a substantial
reduction in the economic
conditionality attached to World Bank and IMF grants and loans since the
1990s, when the structural adjustment programmes were at their height.
Both institutions have moved on dramatically, and usually the specific
requirements for liberalisation or the economic changes are agreed with
the Governments. In that sense, they do not relate directly to the
agreement that we have
here.
The
hon. Gentleman specifically asked about public services and the extent
to which GATS constrains our ability to operate. Again, it is worth
while for me to make it clear that the GATS explicitly excludes
services that
are
supplied
in exercise of governmental
authority,
which
is defined
as
any
service which is supplied neither on a commercial basis, nor in
competition with one or more service
suppliers.
So,
our commitments on education are limited to the private education
market, not to the education market in general, and similarly, on
health care, just to the private health care market, not to health care
generally.
The
reason that the hon. Gentleman may have had the sense that the
agreements do not amount to a huge change is because, in practice, they
do not. The requirements on the member states that acceded to the
European Union, in terms of changes that were required to allow them to
comply with EU law, were not huge in nature. However, in order to
accede, they have to comply with EU law and had to give up some
commitments offered under the GATS agreement, and as a result there
have to be compensatory adjustments. So, we have had to offer up some
compensatory measures. As I said, increasingly in the WTO we are seeing
countries that have taken decisions for domestic reasons agreeing for
those decisions to be bound in international law. That, essentially, is
what we are talking about in general terms. I hope that has answered
the hon. Gentlemans
concerns.
The
hon. Member for Weston-super-Mare will have to forgive me, because I
have entirely forgotten his specific question. If he wants to ask it of
me again, I am happy to try and answer it, or happy to have a longer
discussion informally. I am in the hon. Gentlemans
hands.
John
Penrose: I shall not detain everyone for much longer and
shall try to be brief. If it is going to take too long, we can have a
longer discussion
afterwards.
The
case I was trying to get at was that of a British company exporting to
one of the 17 countries whose trade arrangements are altered
by the statutory instrumentlet us say, to America. The British
company is exporting successfully to America, but a competitor company,
based in one of the new EU states, is also exporting successfully to
the same market in America and, as a result of the changes in the
statutory instrument, is able to export more successfully. The
instrument will create more competition for the British company and
therefore may have an impact on the British companys export
revenues. Therefore, the statutory instrument may have some impact on
businesses in the UK. Why do the Government, in paragraph 10 of the
explanatory memorandum, assert that there is no
impact?
Mr.
Thomas: Essentially, the statutory instrument covers
commitments that the UK has had to make domestically, not in terms of
what is going to happen in
an export market. That is why there is no substantial impact for British
business. Of course, British business will face competition overseas,
and as countries economies and private sectors develop,
inevitably there is more competition for British business. That is a
fact of commercial
life.
The
lack of a need for an impact assessment is because the changes that are
being implemented as a
result of the agreement are not huge by any definition. I gave as an
example telecommunications. We are simply binding into the WTO GATS
agreement what has already been law in the UK for a substantial period
of
time.
Question
put and agreed
to.
4.55
pm
Committee
rose.