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European Communities (Definition of Treaties) (Agreements concluded under Article XXI GATS) Order 2009

Volume 707: debated on Tuesday 27 January 2009

Considered in Grand Committee

Moved By

That the Grand Committee do report to the House that it has considered the European Communities (Definition of Treaties) (Agreements concluded under Article XXI GATS) Order 2009.

Relevant document: 2nd report from the Joint Committee on Statutory Instruments.

This order is intended to give effect under domestic law to a series of agreements—17 in total—reached with other members of the World Trade Organisation. This is a piece of routine WTO business. It is not related to the ongoing Doha round development agenda, nor is it part of negotiations on trade liberalisation.

The agreements have been necessary because of successive enlargements of the EU, first from 12 to 15 member states in 1995 and then to 25 in 2004. In acceding to the EU, the new member states, in order to ensure that they are compliant with European Union law, have had to withdraw some of their existing commitments in trade in services under the WTO General Agreement on Trade in Services—the GATS. Under WTO rules, when countries withdraw commitments, they must offer comparable commitments in other areas, hence the negotiation which has taken place with the 17 other WTO members who considered themselves affected by the commitments withdrawn.

There are 17 substantively identical agreements, each setting out the same withdrawals of commitments by the new member states and each setting out the same compensatory adjustments which have been agreed. The agreements are consistent with the WTO principle that commitments which are offered to one member are offered to all: the principle of most favoured nation—or MFN—treatment. These 17 agreements were published in Command Paper 7430 in July 2008.

All member states have made some compensatory commitments, and for the original 12 members covered by the EC’s GATS schedule at the end of the Uruguay round, including the UK, these are very minor. Most compensatory commitments are made by the acceding member states. The UK has agreed to take on three commitments: first, that, 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, that we should bring forward from our current GATS offer in the Doha round the sectoral offer in telecommunications services, which expands and reclassifies the sub-sectors covered; and, thirdly, that we should also bring forward from our current GATS offer in the Doha round the removal of the cover of an economic needs test in the further sub-sector of integrated engineering services for the temporary movement of highly skilled professionals.

The first two commitments are taken by all member states, while the third commitment is taken by the UK. Other member states have also made specific, albeit different, commitments. The agreements themselves are mixed in nature and cover matters falling within both the Community’s and member states’ competence. Such agreements do not take effect automatically in UK law, but the UK is obliged under the EC treaty to give them legal effect. This order is necessary as part of the UK’s domestic approval process of the agreements. It takes advantage of a procedure under Section 1(3) of the European Communities Act 1972 by which such “mixed agreements” can be specified by Order in Council as Community treaties, and thereby given legal effect. These agreements have already been considered in the relevant European scrutiny committees, who have given the proposed Council decision implementing the outcome of the negotiations “conditional” clearance: that is, conditional on the legal base of the decision being changed properly to reflect the content of the commitments withdrawn by the new member states. I commend the order to the Committee and I beg to move.

I thank the Minister for introducing the order. The following questions are key to our understanding of the background to and respective outcomes of this order. First, what assessment has been made of the impact of these new measures on British trade patterns and interests overall? Secondly, has the Minister noted that the agreements and potential disruptions appear to fall on a wide range of what were previously seen as developing countries, and which, given the shift in global economic activity, may now be the cutting-edge countries and major markets of tomorrow? What is the Government’s position on that? Thirdly, given that several of the affected countries are leading members of the Commonwealth, what assessment has been made of the effect of the order on the Commonwealth network? Fourthly, and related to the point I have just made, were Commonwealth members consulted closely and at all stages before Her Majesty’s Government acquiesced to these agreements? Fifthly, what representations were received direct to Her Majesty’s Government about the impact of these agreements or the calculation of compensation from Commonwealth countries?

The Minister will understand that not to have addressed these key questions would be somewhat negligent, risking our longer-term interests and the new trade and investment patterns that are now emerging.

I, too, thank the Minister for his excellent description of this document, which I have struggled with for more than two hours to understand its implications. What surprises me is that, given the urgency sometimes associated with orders, this one has taken 14 years to get right in that the accession of Finland, Austria and some of the other countries mentioned took place in 1995. However, we have only just managed to sort out all the illegal or incorrect ways in which compliance with EU legislation was evaded but which this order now allows. One is tempted to ask, “What happened in the mean time?”. We are now up to EU25 in 2009, but the European Union has already moved on to 27. Can we expect to finally get around to considering Romania and Bulgaria in 2023? I would be interested to know where those negotiations have got to.

As the Minister said, this is a mixed competence area, and perhaps he could confirm that everything that needs to be done on the other side of the channel in Brussels has now been completed, so that when this is, I presume, agreed by all member states—all 25 or 27—it will go through. I would be interested to know when all the ratifications are expected to take place by, to give some idea of the pace of this.

When I first saw this, I thought that it was good to have a document that represents increasing international trade and globalisation at a time when we potentially have history moving back in the other direction. In a way, I was concerned that we seem to be withdrawing rights under the WTO to those 17 nations. Perhaps I should say 17 WTO members, because the order includes, as is described so well:

“The Separate Customs Territory of Taiwan, Penghu, Kinmen and Matsu”,

which we treat as being part of China. It seems to me that there is a move backwards to some degree here.

I would like to understand what is meant in the Explanatory Memorandum by,

“the withdrawal of some commitments on the part of the new Member States”.

I would be interested to know the nature of one or two of those. The Minister gave a description of the areas that had been used in compensation, but not the other side, of what had been withdrawn. I assume that the only nature of the compensation is those agreements and there is no financial compensation in this. Perhaps the Minister could also confirm that.

The Government’s view is that there will be no impact on the UK in effect from bringing these agreements into line. As someone who has suffered in my previous incarnation sitting through the Doha round and the Singapore round—I do not think I made it back to 1947 and the Cuba round, when the first meeting of GATS was in Havana—believe you me if you think we sometimes have difficulties in the British Parliament, trying to get things moving in the WTO makes even our Parliament at its slowest look like a well-oiled machine working at maximum speed.

For member states entering the European Union, there was a period in each case for a number of years prior to that where those states were anxious to meet their obligations to qualify for membership of the European Union. Only then can you turn to the international obligations. Each state would have different obligations, depending on what most-favoured-nation status agreements that they had with other members of the WTO. The WTO is seeking to bring about a liberalisation of trade and a level playing field; I think we all support this. One of the things that makes the WTO so slow is that, effectively, any single member state can veto the rest.

When you have a discussion such as this one, it is not limited to the European Union states and the 17, but other interested states, which would involve Commonwealth states—certainly major Commonwealth states such as India would be part of those discussions. In my experience, nothing happens at the WTO where there is not hawk-like attention on any member state from every member state. So we have a long, drawn-out but fairly thorough process, where the Commission and the Community speak as one. We have got to that point, but in each legal competence, including ours, you have to pass it into law.

I do not have a kind of ratification timetable, as we had with other European agreements; I do not know whether my officials have one. I do not know whether we can give a date. We can confirm the longevity, because it took 19 years to get to where we got to in September 2006. As I said, that was because of the consensus requirement under Article XXI of GATS. Those things are outside our control until everyone agrees. Unfortunately, so is the ratification process, but clearly the Community wants its member states to ratify as quickly as possible. We may have a better record than some in Europe of moving fairly speedily on these issues, so there is no reason why we would hold this up. Our passing this into UK law without there being any practical impact on our industry would be one step towards bringing this into reality.

The noble Lord, Lord De Mauley, asked a series of questions about the Commonwealth as a trading entity. It is not a trading entity; it is a commonwealth that occupies a unique position in our world. Commonwealth nations that are members of the WTO—not every one is, but the vast majority are—develop and press their views in that corner as do other member states. There are alliances in the WTO that are either regional blocks or alliances between nations that are developing quite well, although one would not consider them to be OECD candidates. I am more than happy to look into this and provide answers so far as I can, but, unless anything is given to me that tells me something different, I do not think that there is a Commonwealth flavour—or flag—that we can put on this. A note has been passed to me that Commonwealth countries are also covered by economic partnership agreements, which are negotiated with the European Union and more widely.

If noble Lords have any more points that they wish to raise or which I have not answered, I am happy to write to them. If their points are urgent, I ask them to ask me further.

I would just like to understand whether this process will apply to Bulgaria and Romania, too. That is of some consequence.

The answer is that it is of a continuum with where we are. When those two countries are full members of the European Union, there will be a similar exercise. If that leads to a requirement on their part for greater or lesser relationships than they already have with other WTO members, there will be a similar exercise and similar secondary legislation to put before the House at a later stage. However, we can proceed with these things only state by state and member by member.

Motion agreed.

Committee adjourned at 4.23 pm.