4 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
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| Department | Business, Innovation and Skills
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| Basis of consideration | Minister's letters of 25 June 2007, 13 March 2009 and 23 March 2010
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| Previous Committee Report | HC 41-xxi (2006-07), chapter 12 (9 May 2007)
HC 19-xi (2008-09), chapter 7 (18 March 2009)
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| To be discussed in Council | See below
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| Committee's assessment | Legally important
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| Committee's decision | Cleared (decision reported on 9 May 2007)
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Background
4.1 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
4.2 The enlargements of the Community to 15, and then 25,
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.
4.3 We noted in our Report of 9 May 2007 that this was the
first time that the GATS Article XXI process had been used, and
the Community's approach in this case therefore set 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.
4.4 However, the Government also drew attention
to the fact that the Commission had cited Articles 133(1) and
(5)EC 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)EC 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.
4.5 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) 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 know how this question of competence
was resolved.
4.6 We subsequently received from the Government
a letter of 25 June 2007, indicating that Articles 71 and 80(2)EC,
together with Article 300(3)EC, 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.
4.7 This was followed by a letter of 13 March
2009 saying that the Council had 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 had yet
to proceed beyond COREPER.
4.8 We were also told that the Commission had
challenged the Council's action, and had asked the Court of Justice
for a ruling. That was now awaited, but, in the meantime, the
UK had intervened in support of the Council. In noting this further
information in our Report of 18 March 2009, we said we
would be interested to hear in due course the outcome of the Court's
consideration.
Minister's letter of 23 March 2010
4.9 We have now received a letter of 23 March
2010 from the Minister for Trade, Investment and Small Business
at the Department for Business, Innovation and Skills (Lord Davies
of Abersoch). He says that the Court issued its Opinion on 30
November 2010, the day before the Treaty of Lisbon entered into
force, noting that it had been asked to consider whether, under
the terms of the (existing) Treaty, the Commission could enter
into the EC-25 Agreements alone or whether Member States should
also be parties in their own right. He says, that, in its Opinion,
the Court agreed with the Council and the Member States
- that the EC-25 Agreements were
international agreements within the scope of Article 300 of the
EC Treaty;
- that practical considerations were not relevant
to the question of Community competence;
- that Agreements must be concluded jointly by
the Community and the Member States if they contain provisions
that fall within the specific sectors set out in Article 133(6)
— it is not necessary for the agreement wholly or predominantly
to deal with those sectors;
- that the final paragraph of Article 133(6) acts
as an exception to Article 133(5) and provides that agreements
relating to trade in transport services do not form part of the
Common Commercial Policy;
- that the EC-25 Agreements contain substantive
provisions relating to the sensitive service sectors listed in
Article 133(6) and transport services; and
- that, for these reasons, the EC-25 Agreements
could not be concluded by the Community alone and needed to be
concluded jointly with the Member States.
The Minister also points out, since the Treaty of
Lisbon, which has made significant changes to the scope of the
Common Commercial Policy, entered into force the day after the
Court delivered its Opinion, the outcome has in some respects
already been overtaken. He adds that the Commission is currently
considering how to proceed in light of these changes, and that
the Government will keep us updated on developments.
Conclusion
4.10 We are grateful to the Minister for this
further information, and we have noted the latest position, which
does not of course affect our earlier clearance of the proposal.
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