7 Trade in services: compensatory adjustments
under the General Agreement on Trade in Services
| (28546) 8121/07 + ADDs 1-17 COM(07) 154
| Draft Council Decision on the conclusion of the relevant agreements under Article XXI GATS with Argentina, Australia, Brazil, Canada, China, the Separate customs territory of Taiwan, Penghu, Kinmen and Matsu (Chinese Taipei), Columbia, Cuba, Ecuador, Hong Kong China, India, Japan, Korea, New Zealand, the Philippines, Switzerland, and the United States on the necessary compensatory adjustments resulting from the accession of the Czech Republic, the Republic of Estonia, the Republic of Cyprus, the Republic of Latvia, the Republic of Lithuania, the Republic of Hungary, the Republic of Malta, the Republic of Austria, the Republic of Poland, the Republic of Slovenia, the Slovak Republic, the Republic of Finland, the Kingdom of Sweden to the European Union
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| Legal base | See below |
| Department | Business, Enterprise and Regulatory Reform
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| Basis of consideration | Minister's letters of 25 June 2007 and 13 March 2009
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| Previous Committee Report | HC 41-xxi (2006-07), chapter 12 (9 May 2007)
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| To be discussed in Council | See para 7.8 below
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| Committee's assessment | Legally important
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| Committee's decision | Cleared (decision reported on 9 May 2007), but further information requested
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Background
7.1 All Members of the World Trade Organisation (WTO) have entered
into legal commitments under the WTO's General Agreement on Trade
in Services (GATS) to guarantee a level of market access for service
providers from other WTO members in certain specified sectors.
Article XXI of GATS requires those WTO members wishing to vary
or remove commitments to enter into consultations with other members
which consider themselves adversely affected, with a view to offering
appropriate compensation in the form of other commitments in other
services sectors.
The current document
7.2 The enlargements of the Community to 15, 25 and then 27 Members,
and the need to bring the GATS commitments of those new Member
States into line with the Community's existing commitments, meant
that some of the commitments already entered into by those Member
States had to be removed, and negotiations subsequently took place
between the Community and the 17 WTO Members which claimed to
be adversely affected. This draft Decision, which the Commission
put forward in March 2007, seeks the Council's approval to the
outcome of those negotiations.
7.3 As we noted in our Report of 9 May 2007, this
was the first time that the GATS Article XXI process had been
used, and the Community's approach in this case therefore sets
an important precedent. We were told that the UK supported the
Commission's view that the Community should conclude a substantive
package of compensation in order to demonstrate that WTO commitments
cannot be withdrawn lightly, and regarded the outcome of these
negotiations as balanced.
7.4 However, the Government also drew attention to
the fact that the Commission had cited Articles 133(1) and (5)
as the legal base for the draft Decision, and had effectively
argued that it has exclusive competence in all areas covered by
the Agreement, whereas the UK (and other Member States) considered
that, where issues such as education are referred to, Article
133(6) provides that competence is shared, and that the common
accord of Member States is required. It therefore took the view
that, in such cases, Article 133(6) should be cited as an additional
legal base, and that the Decision needed to notify the consent
of the Member States to be bound by the Agreements in areas where
they share (or have exclusive) competence.
7.5 Since the measures proposed did not in themselves
appear to be controversial, we cleared the document, but we commented
that we shared the Government's view that the matters covered
by these measures were not all within the exclusive competence
of the Community, and that accordingly Article 133(6)EC should
also be cited as the legal base. On the assumption that the UK
(along with other Member States) would be raising this issue,
we asked the Government to let us how this question of competence
was resolved.
Minister's letters of 25 June 2007 and 13 March
2009
7.6 We first received from the then Minister for
Trade, Investment and Foreign Affairs a letter of 25 June 2007,
indicating that Articles 71 and 80(2), together with Article 300(3),
should be included in addition to Article 133(6), as some of the
measures in question related to transport. However, as these changes
were being firmly resisted by the Commission, and required unanimity
among Member States, which might not be forthcoming, we decided
to await further developments before reporting to the House.
7.7 We have now received a letter of 13 March 2009
from the Minister for Trade and Consumer affairs at the Department
for Business, Enterprise and Regulatory Reform (Mr Gareth Thomas)
saying that the Council has since agreed unanimously that the
legal base should be extended to include Articles 71, 80(2), 133(6)
and 300(3), but that, as mixed competence agreements such as this
require Member States to complete their own internal procedures
before ratification can take place, the draft Decision has yet
to proceed beyond COREPER. He also reports that the Commission
has challenged the Council's action, and has asked the European
Court of Justice for a ruling. That is now awaited, but, in the
meantime, the UK has intervened in support of the Council.
Conclusion
7.8 We are grateful to the Minister for this further
information, and we have noted the latest position. This does
not of course affect our earlier clearance of the proposal, but
we would be interested to hear in due course the outcome of the
Court's consideration.
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