Business, Innovation and Skills Committee
Oral evidence: Transatlantic Trade and Investment Partnership, HC 804-iv
Wednesday 28 January 2015
Ordered by the House of Commons to be published on 28 January 2015.
Witnesses including written evidence where submitted:
Members present: Mr Adrian Bailey (Chair), Mr Brian Binley, Katy Clark, Mike Crockart, Rebecca Harris, Ann McKechin, Mr Robin Walker, Nadhim Zahawi
Questions 331-401
Witnesses: Lord Livingston, Minister of State for Trade and Investment, and Edward Barker, Head of Transatlantic and International Unit, Department for Business, Innovation and Skills, gave evidence.
Q331 Chair: Good morning and welcome. Thank you for agreeing to assist us with our inquiry. Obviously, we know who you are, but if you would just, for voice transcription purposes, introduce yourselves, that would be helpful. Starting with you, Lord Livingston.
Lord Livingston: Ian Livingston, Minister of State for Trade and Investment.
Edward Barker: I am Edward Barker, Head of the Transatlantic and International Unit at the Department for Business, Innovation and Skills.
Q332 Chair: Thanks very much. Can I just start with a fairly broad question to you, Lord Livingston? Could you just outline how exactly the UK Government are involved in the negotiations on TTIP?
Lord Livingston: First of all, the Committee will understand that trade is now very largely in the EU competence, so our role is as members of the EU. While negotiations are carried on by EU officials and, of course, the Commissioner, we take an active role in assisting with that and influencing the discussions, both in the Foreign Affairs Council and in one‑to‑one meetings with the Commissioner and between officials. We talk to the US as well and to my fellow colleagues, who are Trade Ministers. There are a number of routes, both formal and informal, by which we input to the discussions. As you know, the UK has been at the forefront of trade for many years in the EU and we are seen as a very influential member.
Q333 Chair: Do you see the draft text? Do you propose the draft text to go to the EU negotiators? In effect, do you have a defined position, which you then communicate to the negotiators?
Lord Livingston: It tends to work more on a policy level. We start off by agreeing the mandate, which is something we agreed, and the negotiators work within the mandate. There are then regular discussions about particular items. I do not personally review the draft text prior to submission, nor would I expect to.
Q334 Chair: Sorry, can I just check? Did you say you will do the drafting?
Lord Livingston: I do not review draft text, but the negotiators are operating under a mandate. They will review and discuss the status of the negotiations with the Council members, and officials are involved on a very regular basis. Maybe if I can ask my colleague, he will talk about official meetings, as obviously I do not take part in them.
Edward Barker: Certainly. The UK communicates its views in a number of ways, as Lord Livingston said. It is partly through contributing to meetings—
Chair: Can you speak up, please?
Edward Barker: The regular Trade Policy Committee meetings in Brussels tend to begin with the Commission giving an account of the state of the negotiation, and then inviting a discussion with representatives of member states. That is one of the main ways by which we provide quite specific feedback on what is said by the Commission. We also sometimes might write to the Commission. On occasion, we might also provide papers setting out more detailed thoughts, if we felt that was necessary to help shape the Commission’s approach. The texts within the negotiation are generated by the Commission or by the US Government.
Q335 Chair: You say you basically put forward a mandate. How do you arrive at a mandate?
Lord Livingston: It is something that is discussed among the Council members and it is approved by consensus among the 28 member states. It is something that is looked at in some depth. It has, as you know, been published fairly recently and that is something that we welcome. That sets out the key elements of it and that is the process by which it goes through, but it is a discussion over a time period. I think, even prior to the mandate, we inputted various elements to it. We certainly contribute towards the production and our views are very relevant.
Edward Barker: With this particular negotiation, there was also a high‑level working group set up in advance of the definition of the mandate, to do a rather more detailed piece of work between the EU and US looking at what might be included in negotiation, reflecting in part on what has happened previously in negotiations, but also the particular circumstances of the EU‑US relationship.
Q336 Chair: What I am trying to arrive at is how you determine what elements of the mandate is mandated, if you like, by a specific UK Government perspective, and on what evidence that is based.
Lord Livingston: I think the whole mandate is from the whole of the Council. I would say that there are certainly some elements, such as the audiovisual cultural exception in the mandate, that the UK would not have been proposing or putting forward. Clearly, there are some other countries that have stronger views on that. I would think, largely from recollection, that with the exception of that, the mandate very much reflects a UK view on matters, and we input to it, but by the nature of 28 countries, this is a consensus. However, we tend to find, on trade matters, that the UK does have a very influential position, and that actually it is a pretty similar position to a large proportion of member states. So, it is not like some other issues, where the UK perhaps is slightly on a limb compared to some other states. We have a like‑minded group that includes a lot of Scandinavian countries, for example, and we tend to speak with a pretty consistent voice.
Q337 Chair: I appreciate the difficulties of getting a public consensus about every element of policy that you want in a general mandate, but is the British position that contributes to that mandate consistent with Government policy? How do you determine it?
Lord Livingston: The mandate would have been prior to me taking up the role. If there was an element of the mandate we did not agree with—that was inconsistent with Government policy—that would be something we would have to take back to be discussed. As I said, while we would not have put in certain aspects of the mandate as it is, it was not against our policy. It was an addendum that people had particular concerns over—we have a different set of views—but there is nothing in the mandate, I believe, that is in any way contradictory to Government policy, and for the very, very most part, it represents the sort of thing that we believe will be good for the UK. It was not that difficult, though, from the point of view of it being the UK and 27 other nations. There was very large agreement in relation to free trade, the positive aspects and what should be included. We will talk, no doubt, about ISDS later, but there was a good balance and a good understanding. That remains, I have to say, for the very most part among the member states. I find that the Council does not tend to be an area on trade where we have, at that level, big disagreements. Disagreements tend to come in areas like trade defence instruments and things like that, not over free trade agreements, where the UK’s interest tends to be pretty aligned.
Q338 Mr Walker: You mentioned that there are some things in the mandate that you would not necessarily have put there. Is there anything that, from a UK perspective, you feel should be in the mandate but is not in there? Is there anything that we are pushing to get included in the mandate for negotiations?
Lord Livingston: I do not think so, particularly. Whether, of course, we will be able to achieve them in negotiations with the US is another matter, but it is a pretty wide‑ranging mandate, and looking and searching for a very ambitious agreement. It does not explicitly state every single area, but the mandate basically sets out, on one hand, a very ambitious agreement and, on the other, a protection for things like public policy—things that we would be very supportive of. I cannot think of things where we feel, “Well, that’s missing.”
Q339 Mr Walker: There is no particular group within Europe arguing against that protection for areas of public policy, is there?
Lord Livingston: No, I think there is a very commonly held belief on these issues.
Q340 Nadhim Zahawi: Good morning, Lord Livingston. For the purposes of our work, it would be really useful if you could very specifically explain to us what your role is in the TTIP negotiation process. That would be really helpful so we understand that bit, rather than sort of piecemeal.
Lord Livingston: It has to start off with, I stress, remembering where competence lies on this matter. We expect this to be a mixed agreement, but for the very most part competence for trade agreements lies with the EU. That is the position. It also has to be remembered that, assuming it is a mixed agreement, it is something that will need to be ratified with individual Parliaments and the Council of Ministers will have to approve it. It is important for the Commission to make sure they do not leave people and countries behind, and get countries in a position that they cannot approve certain aspects of it. It will make it by nature a compromise.
That being said, there is a consistency among most nations on most things to do with free trade. The EU does believe in free trade, but there may be individual items. Our role is to help influence what decisions are taken, as I said, in the mandate at the beginning, but also ongoing in terms of positioning and in terms of certain decisions. We do that both through the formal route of the Foreign Affairs Council and the trade committee within it, but we also spend a lot of time in discussions between Trade Ministers, meeting the Commissioner and meeting the US.
We are, I guess, at one remove, but very influential, and the Commission is very conscious of the fact that they cannot leave a nation behind, so they will spend a lot of time talking, for instance, about areas such as GIs—geographical indicators—which are not such a big thing for the UK, because we already have lots of protection for our key things, but it is a very, very big issue for Italy and Greece. They will spend time talking about cultural exceptions, a big issue for France. They will spend a lot of time talking about financial services, a big issue for the UK and France. They will go through it, going, “What is our position? What is the trade‑off?”, as well as issues that we are challenging the US on, such as public procurement and areas such as that.
I would call it highly influential, but, particularly with the two Commissioners we have had, really there has been very little where we would say, “We actually disagree with that.” There may be at some future point, but that is certainly not the experience in these trade negotiations. We have had a number of Commissioners for a number of years—many of whom have been UK—who have been all pro‑free trade and very much aligned with the UK position, and the UK keeps on trying to reinforce that.
Q341 Nadhim Zahawi: Would you say that, in terms of the extent to which the responsibility for TTIP negotiations has been delegated from member states to the European Commission, delegation is almost 100%, but the tension back is that the Commission is very much aware that, although they are in the lead on this, they still have to carry the 28 countries? But they are the lead on this.
Lord Livingston: Yes. I think that expresses it well, but I would put one additional point in. The tension has not had to be stretched too much because, actually, there is a consistency in the beliefs there, and we tend to be backing the Commission in this matter. That is not because it is the Commission, but because it is right.
Q342 Chair: Before you go on, can I just intervene at that point? The French managed to get the audiovisual element removed. First, do we, as the UK Government, have the right of vetoing any particular proposals? Secondly, if we have, have we ever exercised it?
Lord Livingston: It goes back to the point that, ultimately, all these agreements have to be agreed by each individual country, assuming it is a mixed agreement. As I said, we are fully expecting an ambitious agreement to be so. If we can work, in the future, things on that basis, we would have a right to veto the agreement, if our Parliament does not approve it.
Chair: You are talking about the end of the process. I am talking about our negotiating position.
Lord Livingston: Because that exists, it is therefore not in the interests—we do not have a vote on every single discussion that goes on, but what is understood is you cannot, as I said, leave a country behind and put them in a position that would be politically impossible to deliver the agreement, or where they have a fundamental disagreement. If we had a fundamental disagreement or even, frankly, a disagreement, we would make that very, very clear. We would use our influence, particularly working in conjunction with other states, because, as I said, for the very most part, we see pretty much eye to eye with the best part of 20 states. In fact, on some things, it is all 28. It is not an official, “You veto at each point,” but there is this tension. The Commission knows it needs to make people go with it and we do contribute. We contribute thought pieces; we contribute in one‑to‑one meetings; we contribute in the Council itself. We tend to do it together with a number of other nations. A number of the Scandinavian nations, the Dutch or, in fact, increasingly, I have to add, Spain and Portugal, are very, very pro‑free trade nations.
Q343 Chair: Have you ever indicated that something is a potential deal breaker?
Lord Livingston: Not in TTIP because nothing has been proposed by the Commission that is a deal breaker. We have absolutely opposed on certain other trade measures. I mentioned trade defence instruments earlier, where we have made it clear that we would not agree to certain changes in the trade defence mechanisms. We have led and rallied a number of other countries and we have opposed the proposals successfully, but that is not a matter in TTIP. We have not had a cause at this point to do so. If there was something that came up, then clearly we would make our views very clear, as we do in other areas.
Q344 Nadhim Zahawi: Can I take you on to the financial benefits? In your joint letter to Mrs Malmström, you state that the TTIP “will add over €100 billion to EU GDP”. Can you share with us what evidence you have to reach such a conclusion for that €100 billion?
Lord Livingston: I think the phrase we would like to try and use is, “An ambitious agreement could be worth up to €100 billion”, or £10 billion for the UK. As I know has been discussed previously, there is the CEPR study on this. I would put a very strong caveat at the beginning of it. We understand it is an economic forecast and an economic study, with all the flaws. I probably swore I would not say this, but I am reminded of the JK Galbraith comment that the only purpose of economic forecasts is to make astrology look respectable.
Mr Walker: That is a very dangerous comment.
Lord Livingston: However, that being said, you do have that as a study. We think it is the least bad of the studies, in terms of review, but you also have other studies that show more and some that show less. You have got Bertelsmann at one end and Tufts at the other. The fundamental question is, “Does one believe that free trade between developed nations is a good thing?”. If one says, “Yes, actually, it is a good thing,” the debate is, “Well, how much of a good thing is it?”. If you look, for instance, at our free trade agreement with South Korea, UK exports doubled after that. There are certainly studies of what the single market did and the benefits that we have seen with that, what the Uruguay Round did, and what the performance of countries that embraced free trade did against those that did not. All the numbers are, by definition, going to be estimates, for which there is a range. Certainly, however, we believe strongly that free trade and the pursuit of it, between two very large trading blocs or between two developed nations, is a positive.
I would say that while some people have accused the CEPR study of being overly ambitious etc, there are a couple of points going the other way. I am only an economics undergraduate and I know we have had professors in here, so give me a bit of breathing room. It does not include dynamic efficiency. It does not see the effect on the ongoing efficiency of the economy from opening up to free trade, to which, as we know, companies adjust, and they become more efficient. Certainly, UKTI research shows that people who export become more efficient. It does not include the benefits of that. It also does not assume that all non‑tariff barriers are wiped away. It is about one third, or a bit less than one third. It assumes about 30% non‑tariff barriers removal. You can say, “Is that optimistic or pessimistic?”, but it is not all the way down the line.
We have to go with a study. We know it is going to be big. We know it is going to be good for the economy. One can debate the exact amounts. I happen to believe that between two developed economies, in the long term in particular, this is going to be extremely good for our economy, as, I believe, the single market was, and as, I believe, the free trade agreement with South Korea was, which is the most recent one we have some evidence for.
Q345 Nadhim Zahawi: Of course, there are also some hard facts. For the automotive sector, in my patch in Warwickshire and the west midlands, there are clear benefits. There are hard numbers. It may be a small part of the €100 billion, but definitely there is some benefit.
Lord Livingston: The automotive sector is one of the ones where we expect to see some of the stronger benefits. Pharmaceuticals is another area mentioned. Certainly, what regulatory coherence as well as removal of some the tariffs could do would be of great benefit. Yes, we have some sectoral analysis. Of course, if you say the total is an estimate with a range, as soon as you start going sectorally, certainly car manufacturers would be pushing very strongly for it.
Nadhim Zahawi: Thank you.
Q346 Chair: You have admitted that there are all sorts of caveats, and in effect these are, up to a point, speculative figures. However, in your letter to Mrs Malmström, you actually said, “We’ll add over €100 billion to EU GDP”. There are no caveats there. There are no ifs or buts, and no acknowledgement that there is a genuine economic debate about it. That is a very definitive statement. Would you not agree that to make such a statement without at least some qualifying elements to it has left the Government open to accusations that it has got its figures wrong, or could have its figures wrong, and undermined the strength of your position on this?
Lord Livingston: I would say it is fair comment to say “there would”, without any caveat. I cannot remember the exact words of the letter. The particular letter was written by 14 states. It refers to an “ambitious agreement”, for instance. The normal phraseology I tend to use is, “An ambitious agreement could add £10 billion to the UK economy,” but I would say, of course, it could be higher and it could be lower. If you ask me, “Is it going to be on the button €100 billion across Europe?”, the answer is that none of us will know or be able ever to prove. Is it going to be very substantial? Could it be higher and could it be a bit lower? Yes, but I do believe, and I will repeat, the potential benefits of an ambitious agreement are very substantial, as, I believe, the previous agreements have been and as, I believe, the single market has been, and as, I believe, this will become.
Q347 Chair: Yes. Unfortunately, that was not in the letter and, as a result of that, the debate has gone on in a way that I do not think fully acknowledges the points that you are making.
Lord Livingston: I do not think that is the only time we have ever mentioned it, however. I think all the other times we have talked about, “An ambitious agreement could yield up to £10 billion”, as often we have done. If that letter makes an unqualified, uncaveated statement about it without putting all the comments about—
Chair: We are going to debate the elements of it in a moment.
Lord Livingston: Probably on reflection, then, I would be better making sure that we had the appropriate caveat to it, but have said on that basis with caveats.
Chair: We can debate the elements of it in one moment and I do not want to stray into those at this particular point.
Q348 Rebecca Harris: I very much like your JK Galbraith quote. What analysis have you and your Department undertaken on the economic benefits? We talked about various other organisations, but what is your analysis? In particular, what is your analysis on the difference, perhaps, that there might be for Britain in particular, as well as the European Union?
Lord Livingston: We did get a CEPR study as well, so we have our own one, which actually, because it used a similar model, came up with a similar scale of benefits. Actually, we did commission it as a Department. When was that done?
Edward Barker: March 2013.
Lord Livingston: In March 2013, we did an analysis. We actually did commission a separate analysis.
Q349 Rebecca Harris: There is a suggestion that Britain might be able to do particularly well out of this deal. Have you had any analysis on that?
Lord Livingston: There are certainly pluses and minuses for the UK. The plus for the UK is that we have one of the biggest trading relationships with the US. There may be other sectors in other countries that might particularly benefit from access to the US market because they do not go to it as much as we already do. We already have a number of companies trading very actively with the US. Certainly, £10 billion out of €100 billion would be roughly 12%-13% of the benefit, which is probably not out of kilter with our GDP as part of Europe, I would think.
Q350 Rebecca Harris: We heard that the Bertelsmann Institute has argued that what they describe as a “deep liberalisation” under TTIP could actually adversely impact on a number of our other export markets. Do you agree with that? Have you any concerns about that?
Lord Livingston: No, I do not largely agree with that. I think there will be some negative effects at the edges. I think the Bertelsmann one included countries like South Korea as being developing markets in this and, for the most part, what we would define those LDCs are not in the same field in terms of the products that are manufactured in Europe and the US in a big way. Actually, I think it is a real opportunity for developing nations. It will create a single market that they can sell into, which I think is going to be a really good thing and, of course, the rising GDP, as I said earlier, will help all of them.
Very important, I think, are a couple of things. First, TTIP is not one of these closed agreements that we do not do. It should form, I think, a gold-standard agreement that we should try to get more countries, over time, contributing to. Secondly, it is not the only type of agreement we are going to do. It is really important that we see this as a multiple track, where we have TTIP and other bilaterals with people like Japan; we have plurilateral agreements, like TISA and trade in green goods; we also have WTO agreements, which are really important and we have been pushing very hard. We did recently conclude EPAs with a lot of countries, particularly in Africa, that effectively give them tariff‑free access for most things to European markets. They are already getting that, so it is not a situation where they are going to be disadvantaged in relative terms because, actually, we are already giving tariff‑free access to these countries.
The other thing that I would point out is that DFID has a very clear policy of providing support to improve trade capability for these countries, and I think it certainly is very important to make sure that these countries become trading nations. That is the best way out of poverty, as other countries have shown.
Q351 Rebecca Harris: Have you actually done any specific analysis on this, though? I would agree that free trade is a good and likely to be a good, but it is not necessarily everyone’s point of view, especially in terms of other markets. Have you done any actual analysis on the impact of this?
Lord Livingston: On LDCs? We have looked, I think, at the analysis that has been done.
Edward Barker: DFID did commission and publish a report that looked at the question of the effect of TTIP on other countries. It concluded that, in the main, it would be not disadvantageous. There are a few countries where there is some competition between those countries and the EU where it might have a negative effect, but in the main it would not have a negative effect. It could have a beneficial effect if it basically creates a larger market that a developing country can sell its products into, so long as it can sell products into that market. That is where the role of DFID’s Aid for Trade funding comes in because that helps to give them the capacity to sell in.
Chair: Can you speak up, please? Some of us of a certain generation may not have hearing as acute as others.
Edward Barker: My apologies. I have a quiet voice and it is amplified, or less amplified, by having a cold today. I shall try and speak up.
Mr Binley: Shout at us.
Lord Livingston: None of us is getting older; it is the acoustics here. I want to be clear.
Q352 Chair: DFID has published an assessment. Has there been a non‑Government body that has done this? With that part of the question, if a note could be passed from your officials and you answer it afterwards that will be quite sufficient. I do not encourage dialogues with the people—
Lord Livingston: If we do not have the answer here, we will get it for you.
Chair: That is fine, if you do.
Q353 Mr Walker: This point of differential impact is very important. Obviously, as you were saying, the UK has very strong links with the US and strong established markets. We have heard two arguments on that. One the one hand, we have got the Bertelsmann Institute study, which shows that the UK stands to gain more in GDP than any other EU country. On the other, we had the British Chambers of Commerce last week raising concerns that opening up the rest of Europe could remove some of the UK’s competitive advantage. Where do you stand on that?
Lord Livingston: I have to say, I read the BCC report and their comments in here, and I thought that was a somewhat odd attitude. One, we are in a single market already and so I am not entirely sure what advantages they were opening up, because the EU has very similar relationships. Also, it is certainly unusual to have a business trade body espousing protectionism as a route forward, so I was a little surprised by it. I am not sure what they really meant by it, to be honest. I am not sure, reading the transcript, that they explained to the Committee what they meant by it.
There are other countries that have less developed relationships with America. Clearly, having a single market would give them an opportunity to sell more into it. There is no question about that. I think you can have the debate as to whether you say that is a bigger advantage than a country that already has strong relationships, and therefore can take a bigger advantage because they have a bigger base, but there is no question: it is not a zero‑sum game and I think there are opportunities for a number of countries to sell more to the US market, and US companies to sell more into Europe.
Q354 Mr Walker: Also on this point of differential impact, you have made a strong case that this need not necessarily be damaging to less developed countries. However, looking again at that Bertelsmann Institute study, they argued that it could have quite a significantly negative impact on sub-Saharan Africa, but also on other Commonwealth countries with which we have strong ties. Australia and Canada were among those most negatively impacted, according to their study. I appreciate that is only one study. How do you think we could address that? How do you think we could make sure that we are not damaging trade with Commonwealth countries?
Lord Livingston: I think it is about pursuing trade agreements as well. Of course, we have just agreed, at a political level, an agreement with Canada, and I think the CETA agreement is an excellent agreement for both Europe and for Canada. I am not quite sure whether it assumes that everything else stays unmoved. Clearly, if you are other countries who have tariffs trying to sell into the EU and then you do an agreement with the US, who sell the same products and do not have tariffs, there will be an impact on these other countries. However, hopefully that will encourage more and more countries to have trade agreements.
We certainly find it a challenge selling certain products into countries like Australia, indeed, where we actually have not yet concluded trade agreements but other people have. For instance, I think on spirits, there are some differential excise duties because we do not have a trade agreement with Australia. I think you could certainly see that. I think that is a different question from whether it will harm the developing nations, who we have given pretty much tariff‑free access already, and who tend not to be operating in the same field. I would probably argue, if we were looking at things that harm developing nations, things like the common agricultural policy might be much, much higher on the list. Hopefully, a successful EU and US both growing their economies is the best driver. We are talking about 40% of the world’s economy or something like that. They would be the best drivers you can think of for exports for nations more generally.
Q355 Mr Walker: It is good to hear you talking about the importance of trade deals with other nations as well. Would you agree that it is one of the jobs of the British Trade Minister sitting around that table to push trade deals with Commonwealth countries?
Lord Livingston: I want trade deals with a number of countries, but the Commonwealth countries absolutely. I was in India two weeks ago; we would like to see the deal with India restart. I would also say I would like to see an agreement with Japan being done. I appreciate it is not Commonwealth, but in the EPAs we recently concluded there were a lot of Commonwealth countries. Of course, we already have in Europe some Commonwealth countries as well. I would like to see free trade spread round the world. I think it would be for everyone’s good, and Commonwealth countries are very high on the list.
Q356 Mr Binley: A previous witness stated that it is “somewhat disingenuous” to present €100 billion as a serious figure, simply because you do not know—it is much more of a marketing statement than it ever is a statement of reality—but he also said that any figure of around that size or around that area would be dependent upon all non‑tariff barriers being removed at once. What is your assessment of the extent that TTIP can remove all non‑tariff barriers and have some hope of achieving your marketing expectation?
Lord Livingston: There are lots of questions in there. Let’s start just at the end, there. No, the €100 billion study does not assume all non‑tariff barriers are removed. It assumes for most sectors 25% and for some other sectors 35%. That is why I used the figure of something less than one third.
Q357 Mr Binley: Can I bring you back to the question? He said that it was “dependent upon”. I am saying, what is your estimate of that statement?
Lord Livingston: I am saying that is not what the study is dependent upon.
Mr Binley: Why are you saying that?
Mr Walker: It was talking about a scenario of deep liberalisation, I think.
Lord Livingston: I am saying that the CEPR study that comes up with €100 billion is based on a something above 25% but below 30% removal of non‑tariff barriers. It is not based on 100% removal. If the answer was 100% then the number would be a lot higher; it obviously would not be achieved. My assessment about the removal of all non‑tariff barriers is that it is not achievable. By the same token, that is not what the €100 billion is dependent upon. I appreciate he may be a university professor at Manchester, which is my alma mater.
Mr Binley: We have established that your view is around 25% and his view is—
Lord Livingston: No, my understanding is that the CEPR study is based on that number. It is not what we will achieve; it is what the CEPR study is based upon.
Q358 Mr Binley: I do get the feeling that that is where you personally see it, around that sort of area.
Lord Livingston: No, sorry, I am trying to state factually that the study is based upon that. I would like to be able to achieve that number, and that has to be our aim. It is what we call an “ambitious agreement”, but that is what the study is based upon. The €100 billion is not based on everything; it is based on that number.
Q359 Chair: Can I just intervene? I have the figures in front of me from the source that you are quoting. He does say that the economic benefits if all tariffs were removed at once would be €121.5 billion at the top for Europe and €48 billion to the US economy. However, if each sector is liberalised in isolation, the figure drops to €30.8 billion and €13.5 billion, which is a huge range. I suppose the issue is, how did you arrive at the €100 billion?
Lord Livingston: The CEPR looks for a gradual liberalisation of, as I said, a bit less than one third and a bit more than one quarter of the non‑tariff barriers between now and 2027. That is what the economic study gives as an answer, accepting the fact it is, of course, an estimate, and that is all it is. We think it is the least bad estimate. I could have quoted the Bertelsmann number, which comes up a much bigger number based on past economic results of trade agreements. He might well, and I think did, quote the Tufts study, which appears to believe that free trade is a bad thing. I believe Tufts have also previously come up with an answer that says that the WTO Trade Facilitation Agreement is also going to be a net negative to the world. I think there are some fundamentals about your belief set and whether you think free trade is a good thing. I am not trying to say that the answer is definitely going to be 27% and it is definitely going to be €100 billion. What I am saying is that is my understanding of how the study links the two things together. It does not require 100% of all non-tariffs to be removed, nor do we expect it to do so.
Q360 Mr Binley: I think, as a businessman, you were perhaps slightly foolish in having a figure of that sort in the first place. I think it rather hinders you rather than helps you, quite frankly, because it has been a point of serious argument and discussion.
Lord Livingston: It is a number from a study. It is not unreasonable to quote it. We do not quote the Bertelsmann number—
Mr Binley: Okay, okay. I think it has been used, but never mind.
Lord Livingston: I think in answer to the question of, “What are the benefits?”, if you say I cannot give you any, we quote the study. I take the point that there is a letter—that we don’t quote it without the caveat—but as a general rule I tend to quote the UK number.
Q361 Mr Binley: Personally, as a businessman, I think it was a bit unhelpful, but can I go on? Non‑tariff barriers are pretty important in this process, and we all accept that. Which sectors do you think are going to be the most problematic, in terms of getting rid of non‑tariff barriers?
Lord Livingston: I think there are going to be challenges in each of the sectors. If I can turn it round slightly, I think the greatest progress will probably be made in areas such as motor vehicles, pharmaceuticals and testing generally. I think we will struggle most probably in chemicals, because I think the US and Europe have such a different view about chemical regulation that we will not be able to get convergence. I think, answering your question, it is probably chemicals that are one of the most difficult.
Q362 Mr Binley: That disappoints you, clearly, because chemicals are pretty important to Britain, are they not?
Lord Livingston: I think there is a recognition of where there is too big a gap. One of the things we have made clear is this is not about lowering standards and it is one of the areas where, in Europe, we have a different view from the US about what standards are, and that does affect the whole. European regulations around chemicals are very different from the US. That is not the same as pharmaceuticals, but bulk chemicals themselves. There are other areas, I should add, where the US has specific rules, such as public procurement and the Jones Act, for instance, on shipping, where there are going to be some big issues, and geographical indicators.
Q363 Chair: Food, and chickens, in particular, spring to mind.
Lord Livingston: I think the answer on food and chickens is pretty straightforward. There will not be chlorine‑washed chicken or hormone-fed beef coming to Europe. It is not the whole of food, though. There are some bits of food. It does not mean that food testing regimes cannot be aligned better etc. I think the EU has been really very, very clear. Despite the EU being really, really clear on it, as with other things, we do find that, of course, people outside keep on claiming it is going to mean hormone‑fed beef and chlorine‑washed chicken are coming into Europe.
Mr Binley: A serious impact on Kentucky Fried Chicken, do you think? Let’s move on. I am concerned about the non‑tariff barriers and their effect upon the economic value of TTIP. There are some serious issues there, as we all know. If they cannot be addressed, how, then, would that impact on the economic benefit that you are hopeful of achieving with TTIP? It is the reverse question, really.
Lord Livingston: I do not think it is going to be a case that none of the non‑tariff barriers can be addressed. In the same way, it is not going to be an absolute that all the non‑tariff barriers can be addressed. What will happen is we will make different rates of progress. Even, indeed, at the point of signing the agreement, I do not expect that to be the final state of the art, because I think there will be mechanisms set up to work out how over time we can get consistency in testing regimes, and things like that. There was a clothing manufacturer recently who said to me that the problem is that he produces something, it is tested to destruction in Europe, then it is tested to destruction in the US again. Testing is a big issue. It is never going to be 100% or 0%.
Of course, it does get to a point where you cannot make any progress, maybe because Europe suddenly says, “We don’t want to make any progress at all,” and we do not change anything; we insist on having exactly the same tests in two nations; we insist on having tough procurement rules, and not opening our markets etc. If all that happens, at some point you say, “Well, actually, we don’t have an agreement.” However, the evidence already is we will make progress on a number of sectors. The more we make, the better we will do. It is not a binary answer. It is going to be somewhere along the line. Some sectors will do a lot better than others; some sectors will be quicker than others. At some point we have to say, “Do we take the gains and sign the agreement or do we carry on?”
Q364 Mr Binley: Let me put some words into your mouth. I enjoy doing that. TTIP should be pursued for itself, and in the absence of non‑tariff barriers, with the hope or the expectation that the non‑tariff barrier discussion will be going on for quite a lot of years and add to the value of TTIP. Is that how you see the whole?
Lord Livingston: No, I think you were putting the wrong words into my mouth.
Mr Binley: I was trying.
Lord Livingston: I would say the regulatory coherence and the non‑tariff barriers are a core part of an ambitious agreement for TTIP that we must progress.
Mr Binley: Thank you.
Lord Livingston: The tariff barriers themselves should not be ignored. While tariffs are reasonably low on average, actually there is some big stuff. I believe we will achieve 96%, 97% or 98% removal of them by the end. Virtually all of them will go, over time. There is a whole load of other issues in dealing between Europe and the US that, if we could remove some non‑tariff barriers, would lead to lower prices in the shops and would lead to small businesses, in particular, being able to do more business. It is absolutely core to what we need to do to pursue them. Without it, it would not be TTIP. It would just be a tariff reduction thing, which is not bad in its own right. Actually, there are lots of things that particularly Europe wants from the US in non‑tariff barriers and I think giving in on tariffs, without making progress on non‑tariffs, would be a bad idea.
Mr Binley: I am grateful. Thank you, Chairman.
Q365 Ann McKechin: If we could turn to ISDS, you will be aware the European Union’s consultation has just completed. It is now going to consult again with you and your colleagues on the Council of Ministers. I wonder what the UK response is likely to be, given the consultation has shown very strong opposition to these clauses being in the agreement.
Lord Livingston: As you said, there were a lot of responses. I think there were 150,000 roughly, 97% of which were standard. We give our congratulations to some bodies for being able to get people to fill out standard answers. I am not entirely sure that represents the totality of everyone’s views in life. However, it is really important that we recognise the concerns about ISDS and the discussion—in my mind, strongly—should be not a case of, “Is ISDS good or bad?”, but, “What should be an ISDS, and what should not be?” The UK, and, in fact, the EU generally, has already, I think, tried to significantly update ISDS clauses. The clauses in CETA, for instance, have issues that are raised, such as secrecy of courts, the choices between domestic and non‑domestic, tightening up the definition of indirect expropriation, and what fair and equitable treatment means, and clarifying the rights of public policy. There are all sorts of good improvements. I think we have made a lot of progress with the CETA wording, and I think what we now have to do is look at what the consultation says, and see what further things we might include in the agreement with the US, in terms of making sure that these concerns are assuaged.
Q366 Ann McKechin: You are aware that politically, as well as the public campaigns, there has been a change in stance, with statements from France and Germany that have been much more negative about the inclusion of these clauses. We have got a new Government in Greece. I would perhaps say to you that politically I would find it difficult to see the new Greek Administration agreeing to this type of clause, taking it away from their domestic courts. What is your analysis?
Lord Livingston: Of course, we already have a lot of ISDS agreements already. It is one of these things that has been presented by some of the bodies as being something new. Europe has 1,400 ISDS agreements already. There are, I think, over 3,000 across the world. A point I make to some people expressing is that I was always quite puzzled as to why ISDS is suddenly this almost very negative phraseology.
Q367 Ann McKechin: I think it is about the scale of the large global corporations that are headquartered in the either the EU or the USA. It makes it of a rather different character from something between two smaller countries that have very few large corporations based in their country.
Lord Livingston: The UK has 94 ISDS agreements and, in that period, which has lasted, in total, in aggregate, for 2,000 years, we have not lost a single case. It is not to say that there are not genuinely some things that could be done to improve ISDS clauses, but what I am saying is they are not new.
Q368 Ann McKechin: One thing that has been a little bit new is the fact that there has been this talk about branching so that the preferred route would be the domestic courts and the ISDS would be a second step. What is the UK’s view about that particular issue?
Lord Livingston: I think there are a number of things we can look at about whether we should change the appellate mechanism, how the judges are appointed and the issue of branching. There are some elements already in CETA about that. You cannot effectively do a double bubble, in going domestic and international. It is something we will look at as to what the mechanism is by which you have to pursue it.
Q369 Ann McKechin: Can I just clarify? At the moment, the UK takes an open view? It is prepared to consider significant variations in terms of the current discussion?
Lord Livingston: What I would say is the UK does indeed take an open view about what is contained within ISDS clauses. We think CETA had a lot of steps forward. We are now looking to see what CETA plus might look like and whether we can create the right standard of a future ISDS agreement. Absolutely, we are looking over a number of areas.
Q370 Ann McKechin: You mentioned that we do not have a bilateral agreement with Australia, but there is an existing one between the US and Australia, and it does not have an ISDS clause. Can I ask whether it is not possible to negotiate TTIP without these clauses?
Lord Livingston: They are currently negotiating TPP, which does have, I believe, an ISDS clause, and Australia would be part of that. Clearly, because the US and Australia did at one point do an agreement, technically it is possible. It has to be remembered that the scale of investment in the EU and US is way larger than as between Europe. Certainly, I understand TPP, which is the Trans‑Pacific Partnership, has ISDS clauses, so it is certainly being included in these agreements and, as I said, we are absolutely looking at what are the concerns about ISDS and what changes there need to be to put that in. How do we make sure it is very clear about the right to regulate, which I believe already is in there, but what changes need to made to the process by which ISDS claims are made, while recognising that there is a genuine concern about protecting investments in the UK as one of the largest investors in the US?
Q371 Ann McKechin: A point I raised at a debate last week was the Phillip Morris case. They did not have a route through the US‑Australian deal, but they re‑registered in Hong Kong and used a bilateral deal that dated back 20 years as a mechanism for, in effect, trying to freeze a debate on public health. Has any analysis been carried out by your Government and your Department about that case, and about the way in which what could be termed as manipulation of dispute settlement process, both at WTO and in ISDS, to try and freeze the debate on a particular public health measure that countries across the world are looking at?
Lord Livingston: Absolutely. You are right; they did go through Hong Kong. They did treaty‑shopping and CETA tries to limit that very point. By the way, I do not think the Phillip Morrises of this world will stop at trying to sue under ISDS clauses. They will also go through every single route and mechanism to try to slow things down. Whether they win, of course, is another matter, but certainly CETA refers to the substantial business being from the country where it is done. Those cases are actually one of the reasons why you would want to have a modern ISDS clause because there are 3,000 of them around. Some of them are not perfect and they need to be upgraded. I think in last year’s numbers, or a couple of years ago, there were something like 60 ISDS cases raised in the year out of 3,000 agreements.
Ann McKechin: Yes, but they are going up.
Lord Livingston: They are going up, but 60 out of 3,000 agreements means an average of once every 50 years. I appreciate that is a bit of the tyranny of averages, but it is not some sudden huge slew. We actually are looking at what have been the cases. What do we try and learn from them, to the extent we can? Sometimes, you have not even yet seen the case that has been made and you have not had the conclusions about how we make sure they provide governments with the protection that they need, whilst also creating a future clause that means that companies can invest in a country knowing that they will not suffer discriminatory treatment, or, if they do, they can get compensation. Of course, there are not many cases of discriminatory treatment that happen, and that is one of the challenges.
Q372 Katy Clark: I can understand the force of some of your arguments, perhaps, in very undeveloped legal systems, where it is simply not possible to rely on domestic jurisdictions. But the reality is that both the United States and Europe have very developed legal systems, so why are these clauses necessary?
Lord Livingston: There are a number of reasons. First of all, of course, the US has 50 states and the EU has 28 nation states. Not all of them have consistently high legal standards. I think you can see that it is not beyond the bounds of possibility that in one of these countries, or indeed one of these states within the US, foreign company rights are not as well respected as local company rights. I do not necessarily throw that completely out as being an issue. Secondly, I think, by creating the right sort of agreements, you can then apply that in other countries. It should be a precedent. I do not particularly fancy the idea of having an agreement with some other countries where we say, “The US legal system was fine. We trusted that, but yours we do not trust”. I think that is another reason: to not have a two‑tier environment. Finally, there already are a lot of ISDS agreements between European countries and the US and some of them are possibly not the best. There are 20-year‑old agreements that need to be updated. I think there is a reason that a number of countries already have ISDS agreements and would like a new one because they would like something new.
Q373 Katy Clark: Is this a red line for the Government in terms of your position? You know that a lot of trade agreements do not have these clauses at all, for example, as I understand it, between the US and Canada. Do you think this is really going to happen? Is this something that the Government is going to insist on or is something that the Government does not feel is essential to the treaty?
Lord Livingston: We think it is important, given that we are a major investor in the US. The US Government, critically, thinks it is important. I think it would be very difficult to see that there would be a comprehensive agreement without it.
Q374 Katy Clark: Would you allow one to go ahead without one?
Lord Livingston: I was thinking that I would probably be asked this question, and I will probably be asked it about a few other things, about whether I would allow it to go ahead.
Katy Clark: Can you answer this particular question?
Lord Livingston: No, no. With financial services or whatever, the answer is I think you have to look at the totality of the agreement.
Q375 Katy Clark: You are not saying you would not allow it go ahead.
Lord Livingston: I think you would have to look at the totality of the agreement. We think, certainly, with the right—and I must stress the word “right”— ISDS clause it will be a much better agreement.
Q376 Katy Clark: You want one, but if you cannot get one, you would be willing to sign the treaty.
Lord Livingston: As I said, what I do not want to do, because I do not know what every other bit of the agreement would be, is to say I would allow or not allow for a particular—
Katy Clark: So you are reserving your position.
Lord Livingston: Absolutely. It is the totality of the agreement.
Q377 Chair: Can I just a follow up with a number of questions? A previous speaker indicated that obviously there are, if you like, two routes by which an investor can take a state to court. One being under domestic legislation that exists already and the other under an ISDS procedure. It was put to the Committee—and I think I have got this right—that a case to Britain’s domestic judicial system would give the courts the right to demand a change in policy by Government, if that investor was challenging a state decision. If it were taken to arbitration under ISDS, the other route, then an ISDS court would be able to demand compensation if it found against the state. I accept that could have an effect on domestic Government policy as well, but it could not directly make that state change its policy. Given the fact that there has been a line of argument running against TTIP that says that ISDS provisions would force Governments to change their policy, how do those facts fit together? Are they a reasonable summary of the legal position?
Lord Livingston: It is certainly a very reasonable summary of ISDS. ISDS is about compensation. You cannot use ISDS to change Government policy. It cannot override. That is in the hands of sovereign Parliaments. I think I would make a slight caveat about domestic courts. It rather depends on what basis makes a legal claim. I am not a legal expert, but if it is a contractual dispute it will not affect Government policy. If it is a challenge on the legality of a particular piece of policy, then it could. I suspect other supranational courts like ECJ may have an effect on that as well. It rather depends on what basis you take it domestically. However, I would probably say the nature of the ISDS is very much more like a contractual dispute in terms of the answer is compensation. ISDS can only be about compensation; it can be about nothing else.
Q378 Chair: It would be disingenuous to say that an ISDS decision against a Government would not affect its policy, but in legal terms the one does not logically follow the other.
Lord Livingston: Many people have said this will mean Government policy being overturned. It is very clear that it cannot overturn Government policy. I think, if you look in particular at a UK point of view, the UK has been pretty good over the last 30 or 40 years. We do tend to respect property rights and things like that. We tend to believe in that in the UK and I think that is why we have never lost a case.
Q379 Chair: I am not a lawyer. The great majority of the public are not lawyers.
Lord Livingston: You might think differently sometimes.
Chair: There have been campaigns based on a certain legal assertions there, and I think that particular point has not been fully brought out in the debate. It needs to be if we are to have an objective consideration of the relative pathways. Could I just also just bring up this situation? There is now a Government consultation on ISDS, as a result of the consultation exercise that was taking place. You have said the Government has an open view. This is the moment at which the Government needs to spell out exactly what its position is on this, not to have an open view. What is likely to be the, shall we say, response from the Government, in defining what its position is exactly on ISDS?
Lord Livingston: I think what is really important is that the Government’s position is we should have an ISDS clause, because I think that we have a very strong view it should be that, and also a very strong view on what it needs to balance. For, I would say, 95%, 97% or 99% of ISDS, we are very clear. What we are saying is, for instance with something like an appeals mechanism, it is quite reasonable for the Government to say, “Let’s talk about how it might work”. We have no objection in principle to an appeals mechanism, I do not think. We have got to understand how it might work. I think it is quite reasonable; we are talking about quite technical details about how certain things would work. Often, ISDS is described as secret courts. The CETA agreement makes it quite clear they will not be secret, and the UK has signed up to the UNCITRAL transparency protocols. We very clearly want to see that, and, by the way, so are the Americans.
I think for the vast majority we are very clear. A consultation, when you are completely closed does not seem like a great consultation. We genuinely want to understand the challenges people will raise are and how practically they will work. I think, frankly, a number of the objectors to ISDS fundamentally have an objection to signing an ISDS clause with America. I think that is the main thing. We are talking really around a percentage of a few things: how can you tighten it up further? How can you tweak it? I think it is reasonable we listen to the mechanisms.
Q380 Chair: Could I just quote to you an article in The Guardian? I accept this is a press article. Reportedly the Minister, Vince Cable, was pressing the EU to ensure private companies would be required, in any disputes with Governments, to choose either domestic courts or an investment tribunal, rather than having two bites at the cherry. You have not mentioned that in what the Government will be proposing. Is that the position?
Lord Livingston: CETA, I mentioned, does already talk about that. To be clear about that article in The Guardian, I know you know better than I that you should not believe everything you read in the newspapers, even in The Guardian.
Chair: We do not, but it would be remiss of us not to put it to you.
Lord Livingston: I was in the Cabinet during that discussion and my memory may be playing a trick, but I certainly do not recall that level of detail even being discussed in the Cabinet. CETA does have a requirement for you to describe which branch you are taking. Can that wording be tightened or changed? We will absolutely listen to some of the arguments about at what point you need to make the decision. How many months, for instance, should you take before making the decision? For instance, if you insist that somebody has to try domestic first of all, and you have got a court system in the country that takes three years before it hears the domestic case, is that fair and reasonable? On the other hand, if it can be decided in three months, then that may be entirely fair and reasonable. It is about real practicalities of looking at it. Certainly, we do not want to see people operating multiple paths. We are not in the business to want Government to be disadvantaged. We want, however, investors to have fairness, and Governments to have fairness, and that is what we are trying to reach. A lot of it is about process.
Q381 Chair: Can I make it clear that we do not necessarily accept what is in The Guardian report? However, there will be a substantial part of the public who do, and will be asking questions on the basis that this is correct. As a Committee, it is our job to arrive at, as best we can, the evidence and the truth. I make no apologies for challenging you on what is in The Guardian article.
Lord Livingston: You need make no apology for it, but you probably overestimate the readership of The Guardian. There is actually something that, if I can I should make a point on. I think I only saw this very recently, because it came out in early January. We do talk a lot about public opinion in this matter and you have talked a lot about it. There was a Eurobarometer question done by the EU, which actually asked people the question about whether they were for or against a trade deal between the EU and the US. In the UK, the answer was 65% for and 19% against. I am very happy to send you details of that. In the EU on average, it was 58% for, 25% against, and 17% don’t know. Actually, when you ask people, “Do you want to do a free trade deal?”, they actually tend to say, “Yes”. They do want to do it. If you ask them, “Do you want to privatise the NHS?” and nonsense like that, then, funnily enough, you get a different answer. If you base it on the wrong question, you get the wrong answer.
Chair: I think, as publicly accountable politicians, we are only too aware of that particular thesis. However, it would be very helpful if you could just send us the details of that.
Q382 Mr Binley: Lord Livingston, you have shocked me to the core. The thought that Dr Cable could ever put a spin on something that is not quite the fact shocks me totally.
Lord Livingston: I do not think for a moment I suggested it was Dr Cable that that quote came from.
Mr Binley: Never mind.
Lord Livingston: One can never know where The Guardian gets its reports from.
Q383 Mr Binley: I am pulling your leg, my Lord. Before I go on to ask the question I am deputed to ask, I would like to talk a little about labour laws. Of course, we did talk about how the trade treaty has to take account of labour laws and, indeed, if you are going to have fair trading, some sort of equalisation in labour laws is really pretty important. The situation between Britain, particularly, but many other European countries, and the States, in terms of acceptance of the ILO conventions, is pretty wide. How do you think that impacts upon what you are trying to achieve in terms of more open trade, but also fairer trade?
Lord Livingston: I think there is this distinction between the formal acceptance of the ILO conventions and actually when you look at how people are employed in the US. Average wages in the US are higher than most of Europe. We are not talking about an ultra‑low wage economy.
Mr Binley: I understand that.
Lord Livingston: In the conditions under which they are employed, the US has a particular issue; it adopts core principles, but actually it does not adopt individual conventions. This is as much about its political position. If you actually look at how people are employed in the US, I do not think the differential is that substantial. I would point out, of course, that the UK already has, from the EU, certain different adoptions of directives. I think if we were talking about dramatically different wage levels and things like that, then that does create some issues in free trade agreements. I think, in this case, what we are talking about is the way people are employed in the US. I do not think it is a big issue.
One of the complaints there has been about TTIP is, “It is going to mean the importation of US standards into Europe”. We are not going to import US labour standards. By the same token, we are not going to be able to start putting a 35‑hour week in in the US, or say that they are going to have to adapt to the Working Time Directive etc. I think we have to accept that there will be different positions on employment. On the basis of looking at average wages, employment levels and general conditions, yes, it is easier to hire and fire in the US; on the other hand, people also are employed in reasonable conditions, I think, for the most part. If you compare and contrast with some of the new accession members in Europe, the wages are certainly way, way higher, and yet we of course are in a single market with the new accession members in Europe and we manage that.
Q384 Mr Binley: Thank you, I am grateful for that. Can I come onto this thing about the current approach to ISDS, which includes a clause that will ensure that the state will have to pay the costs of a given action, even if it wins? It is a minor point, but is that true?
Lord Livingston: CETA should be the basis from which we build. CETA actually has a loser-pays principle unless, I think, the arbitrators decide, for some reason, that there is a caveat, but it is a loser-pays principle. As I said, CETA should be the basis from which we move.
Mr Binley: I am grateful.
Q385 Chair: Can I just raise an issue that was raised with us by BritishAmerican Business? In its submission to the EU, it argued that ISDS clauses should have “no provisions on so‑called ‘frivolous’ claims”. Do you support that?
Lord Livingston: Again, CETA does have an ability to reject at a very early stage, and I think that is right. I think it is quite difficult to stop people making frivolous claims in any court of law. I think you can have mechanisms to try to kick them out as quickly as possible.
Q386 Chair: You would support a process that had a filtering system to prevent that.
Lord Livingston: Yes, that would kick it out. I do not think you can stop somebody making a claim.
Chair: No, I understand that.
Lord Livingston: That has an early look and says, “This is ridiculous; there is no foundation”. CETA already has that within it.
Q387 Katy Clark: BritishAmerican Business also argued that the right to invest should take precedence over the right to regulate. Do you support that view?
Lord Livingston: I think it is a balance. I think we want to protect the ability to invest, but Governments need to have the right to regulate. If they do it in an unfair, discriminatory manner, then there should be the right to claim that breaks its treaties and there should be a right to claim compensation. You need to reflect that. The right to regulate should be the Government’s right and the right to invest with the company, and I do not think we should have a situation where one trumps another. The right to regulate has to be in the sovereign Government.
Q388 Katy Clark: How do you get that balance? What do you do in a situation where there is a conflict? Does that not mean that the company’s right to invest could override the Government’s right to regulate, which is basically the right to make policy? For example, the right to have services in the public sector is one of the biggest concerns about this treaty—that it is going to force all sorts of parts of what could be in the public sector to be open to the private sector and insist that they either stay in the private sector, or are brought into the private sector. Is that not a conflict and how do you address that?
Lord Livingston: I will deal with the second bit of that, and then I will deal with the first. On the second bit, it is completely untrue that anything in TTIP will change the position. It will not force governments to put anything—
Katy Clark: You have already addressed that in your earlier response. If you could answer the question.
Lord Livingston: You said that in in the second bit of your question, that it could force the NHS—
Katy Clark: I did not mention the NHS. I mentioned public services. I did not mention the NHS.
Lord Livingston: You did mention public services then, and I will particularly cover this point. I sent our note around from Cecilia Malmström to the Clerk of the Committee yesterday. Has the Committee received it?
Chair: Yes.
Lord Livingston: It yet again sets out, hopefully helpfully for the Committee, very clearly the position. The EU has made the point about public services. I think even it may refer to it in the note. Public services, in general, are not on the table. The US chief negotiator has also said quite clearly, “The US does not include public services in its trade agreements and it is happy to confirm it will not seek to do so in TTIP.” Public services are not in the ambit of the agreement. It is up to Governments to decide. We can park that one.
In terms of where there is a conflict, Governments will make public policy. That can’t be overridden. It is a question of discrimination. It is a question of it being done in a manifestly unfair way. If the American Government, for instance, decides to nationalise all the assets of British companies in America, that of course is up to the Government to make the policy. However, if they decide to pay no compensation for that, then an ISDS clause would come in and there would be the right to take action in a supranational court through the tribunal mechanism to sue for that. That is not conflict of public policy and it is about compensation if it has been done in an unjust way. I am not sure all ISDS clauses are perfect today, but that is a clause we want to get in future.
Q389 Katy Clark: I have seen the note that you referred to earlier. If you look at treaties such as GATS and other agreements, the way that they describe it is services supplied in the exercise of government authority, which is only core Government functions. This means that the vast majority of public services, including healthcare, since you have mentioned the NHS, would not fall under the scope of that exception. Are you saying that the British Government would only support TTIP if it was drafted in such a way that it enabled domestic governments to decide whether services should be kept in the public sector or, indeed, should be brought back into the public sector if that is the will of Parliament.
Lord Livingston: The EU has made it clear that that is the position.
Katy Clark: I am asking you for your position and the British Government’s position.
Lord Livingston: I fully support the EU on this matter. We are at one. There is nobody saying otherwise. I do not understand where this notion that it is going to be otherwise comes from. The EU is saying the same; the US is saying the same; the British Government is saying the same. The NHS will not be affected and nobody is asking for it to be.
Q390 Katy Clark: Where it is coming from is what other treaties say. You know as well as I do that there is a huge amount of concern about this. We are putting those concerns to you, and we wish to ensure that these concerns are addressed in the British Government’s position in the negotiations the EU is taking part in. You are saying that the TTIP agreement will not affect domestic Governments’ ability to keep services in the public sector, or to decide to take sectors which are currently in private hands into public ownership, if that is the democratic will of the parliament.
Lord Livingston: Yes. They have to follow contract law and things like that. If you have got a contract, you have got to deal with that. But I think the letter is extraordinarily clear that it will not affect that. It is domestic Government policy. The reason this has got great public interest is, frankly, no matter how many times—and I quote Commissioner De Gucht on this, who said some time ago that, “The NHS is exempted. The NHS was always exempted. It is just being used in your country for political purposes”. It has been used by a group of people who actually, I have to say, largely do not care about the answer. They have made this point repeatedly. There was a very good letter from the head negotiator to the Health Committee that made it clear. The US have made it clear.
Katy Clark: I have not been making specific points about the NHS. I am asking for assurances in relation to states being able to make decisions as to whether services should be in the public or private sector and you have answered that question.
Lord Livingston: Yes, that is quite clear. That was set out. That has always been the case and nothing has changed.
Q391 Chair: The letter to you from Cecilia Malmström is pretty specific on this. However, could you give an undertaking now that if there is any possible change in policy, or if there is anything that comes from the EU that might indicate that this is no longer the case as stated here, you will come to both this Committee and Parliament to make that clear?
Lord Livingston: If there is a change of policy, the European Scrutiny Committee would be the first place to go to, and we would oppose it, absolutely.
Chair: Thank you.
Q392 Mike Crockart: We have talked for quite a serious amount of time about ISDS provisions. It is clear that there is a fair amount of controversy around those, given that the negotiating team have parked the negotiations on that at the moment, while the consultation goes ahead. As part of that, you are going to have to submit the UK Government’s views on what ISDS proposals should look like. Given the lack of transparency that there has been around a lot of the negotiations up to now, would you agree that publication of the UK Government’s submissions to that consultation would help with dealing with those public concerns?
Lord Livingston: We would certainly be happy to give a UK Government view. In fact, can I take a step back to talk about transparency and then get to the point? The EU would make the point that these have been the most transparent negotiations in its history, and people would say it has not been transparent enough. Both are probably true. The UK position, and the one that we push for—and to be fair the EU under Cecilia Malmström has changed the position quite significantly—is that we should release everything that does not harm the people of the EU. One thing that I would not wish to do is release a UK position that says, for instance, “You can give that and that to America”, without them knowing. In terms of the UK’s position, we will continue to make clear what the UK’s position is.
What we are going to do is listen, first of all, to how people do some of the mechanisms. But I have got to say, as a starting point, as I keep on pointing out, the full text of CETA is in the public domain. I think, for a very, very large part, it represents the correct starting point. The sort of issue we should then talk about is, as I said, whether it has got the right mechanism between domestic and international courts, the appellate mechanism in it and that sort of thing, so a really good level of detail. We think, certainly, CETA represents about 90%‑odd of the way in terms of improvements, but there are some other issues that are still outstanding. We will listen to submissions we get, and we will continue to make clear our point. If there is something in an individual submission we make to the EU that has an impact on the citizens of the EU, then clearly we would be a bit careful about it, but otherwise we will make clear our position.
Q393 Mike Crockart: I hesitate to mention The Guardian again, since it is has already got enough publicity in this.
Lord Livingston: You have got most of The Guardian readership here.
Mike Crockart: Not on this side. If I can test your memory of the Cabinet meeting again, it is reported as the Secretary of State saying that Ministers would seek EU agreement for formal sight of documents for UK MPs, and identifying further UK‑generated material we can publish, as well as how this can be better distributed.
Lord Livingston: That represents absolutely our policy and it is something we are working on just now. I would like to see a wider distribution to MPs, and to see if we can have equivalent rights to MEPs, something where we are writing around. That is certainly what I am seeking and we are writing around to get views on it. It is something we will discuss, I think, particularly with the European Scrutiny Committee. I would like to see more transparency.
Q394 Mike Crockart: Distribution to MPs is one thing, but wider distribution to deal with public concerns would be another. Is that something that you are looking at?
Lord Livingston: Yes, already. If you look, just to give you an idea, those things represent what the EU has issued. One of these is what they issued last month. I think you have to understand that there is a lot coming out. There have been a dozen position papers, I think. There is already a lot coming out from the EU. I think that is right, and we will continue to press that with the same basic thesis, which is we should release anything that does not harm our negotiating position. Cecilia Malmström seems to have that view very strongly.
Q395 Mike Crockart: I am not suggesting that you deliver that to every household in the UK, but it could be useful to get a distillation of what is going on distributed more widely.
Lord Livingston: We do indeed, and have sent out to every MP a facts and myths on TTIP. The EU has published actually some really good things. I have got to say that the Commission’s work has been good, just setting out very simply what it is and what it does. Within that, there is a very simple one. They will be available on the website and social media; they are tweeted. I think as we progress, of course, we will explain to people what is in it, as I am sure all of you are doing now as the people’s representatives. It is, of course, a bit early; we are a year and a bit into it. But certainly, if anyone would like, from our Department, the summary document of what is in it, what is not in it, from the EU, and links to resources of that, I sent a letter to every MP just before Christmas with a link to all the different resources. It is absolutely there and as the people’s representatives I am sure you will share it with the people.
Chair: I have some more questions. You have at least in part pre‑empted some of them in your previous responses. I am just going to ask each question and if there is anything over and above that area that you have answered and they want to ask.
Q396 Rebecca Harris: I was going to talk about the NHS again, because it has been such a huge issue. So many organisations and individuals have been concerned about it. You mentioned the European Commission’s letter to the Chair of the Health Committee. I think you have spoken to that quite clearly. We have had, for example, David Babbs here, from 38 Degrees, giving evidence, and it is quite clear that he strongly believes that TTIP is going to not just open us up to irreversible privatisation, but it will probably drive forward the privatisation by bringing in US companies. Do you think that the apparent secrecy of the process has been what led to these concerns in the first place?
Lord Livingston: You say he strongly believes. He strongly states. I cannot speak to his belief set. I think what has opened up this process, frankly, for a number of people, is being against the US. Actually, on the NHS, there have been a number of statements and documents issued, and people still say, “We still don’t believe it. We’re still going to maintain the same”, despite all the documents that have been issued. I would love to feel that these things could be cured by presenting the facts and the truth, which we have really done on the NHS, in a great deal of detail about the mechanism by which it would be done. It has been said on numerous occasions that it is not part of it. We did also release the mandate and made it clear what is in, what is not in, etc. I do not particularly feel that that is the issue.
There was a comment by one think tank that described this process as, “The well‑informed but ill‑minded are misleading the ill‑informed but well‑minded”. I think there is some truth in that. I think a lot of people have been unnerved by some of the statements of apparent fact made that are completely misleading. It is our job to keep on being very clear about the facts, and really concentrate on the genuine issues that there are in such a complex trade agreement. We will continue to make that clear about public services not being affected, about food standards, about worker standards and about all these sorts of things. We will carry on making statements.
Vince has met with 38 Degrees. I have met with Stop TTIP. I have met with the Trade Justice Movement. We have both met with Frances O’Grady, etc. Some of them, and I do not include the TUC within that, I suspect will not want to be persuaded. I think with some of the others, if we set out reasonably the facts etc, as I hope with trade unionists, we will have a sensible discussion, and also take on board their points.
Q397 Chair: Basically, do you agree with the assessment that was given by the EU to the Health Committee?
Lord Livingston: Yes, absolutely.
Q398 Mr Walker: This is basically the same question Rebecca was going to ask. I guess part of the challenge here is that, because this is being conducted by the European Commission rather than necessarily by someone like yourself, who is directly accountable to Parliament, there is a perception that it is harder to scrutinise, it is less transparent and it is further away. I appreciate you cannot necessarily answer hypothetical questions, but how can we go about increasing the transparency of future trade deals? You talked about the need to do deals with other countries and open us up. How can we address that public perception and make sure that actually we have a strong voice for the concerns of the UK public in delivering the benefits of free trade?
Lord Livingston: I think until this trade agreement, to be honest, the public level of interest in trade was not overly high. I am sure you probably did not get a huge number of letters on the Korean trade agreement, or indeed on Canada until very recently when some of the lobbying groups have realised it is a place just to the north of the US. I think certainly the case with the US has attracted a lot more attention on issues like this, partially because we have Snowden in continental Europe, and it is the biggest.
I think the Commissioner has done a lot now to put out public documents. We are certainly doing the resources, sending out documents, responding to letters, so doing all of these things. We will continue to do so, but also to have things like public meetings; we have a stakeholders group that is a wide range of society. Cecilia Malmström is going to be coming here in a few weeks’ time and she is going to be doing speeches. I am certainly doing a lot of public things. I did one together with my Italian counterpart. There are newspaper articles. It is often commented that is not discussed a lot in Parliament. There have been three debates in the House of Commons; I think there has been a similar number in the House of Lords. There are currently four select committees—three in this house and one in the Scottish Parliament—running investigations into it. I am appearing at three out of the four. I am currently not on the Environmental Audit Committee, but there is still time.
Actually, there have been a lot of reviews. There was a Select Committee report from the House of Lords about a year ago. Actually, it has had a lot of view and focus. What we just need to make sure is we put on the table the facts as they are today and keep on doing it. There are certain things we do not know, but certain things are absolutely certain because they are within the mandate. Hopefully, over time, we can assuage genuine concerns and also highlight the benefits. It is also important that people affected, good and bad or indifferent, also speak up about what exactly the impacts are, such as small businesses. Also, frankly, businesses should start talking about how much prices can come down, as we think they did in the Uruguay Round, for example.
Q399 Chair: Again, we are coming back to The Guardian article. The Business Secretary, it is reported, also told the Cabinet the Government needed to do more to make sure concerns about the transparency of the negotiating process between the EU and the US are addressed. It seems a bit odd, given the fact that he is the Minister effectively responsible for this from the start. What do you think he means in terms of being more transparent? What should the Government be doing now that is has not done so far?
Lord Livingston: I think it is the conversation we had earlier. We are following up on what the EU has done, which I think is a really strong step forward in the transparency. Of course, until the EU released some the documents, we could not, but we now have to look and say, “Look at what the EU has done and now what documents might this allow us to make available to Parliament?” Also, how do we make sure that ongoing flow of information from the EU and the UK Government to people who want to see and understand it is available? That is something that as a Government we are absolutely looking at doing, and I expect to continue to do so. I do not think there is anything new in those statements because, as I said, we have got a write-around as to exactly the best way of ensuring the information for instance is with parliamentarians. We did press, and to be honest we did not really have to press very hard with the new Commissioner because she was very keen to have greater transparency. I think we have seen a remarkable step change. As I pointed out, there is that folder that has just come in January. There is a lot of stuff out there. Whether people want to read it is a bit more tricky, but there are also some good summaries in there as well.
Q400 Chair: Can I just pick up one other issue? Earlier, when you were discussing non‑tariff barriers, you included public procurement as one of the problem areas in the US. Is it possible that we could, by default, arrive at a situation whereby we opened up public procurement to companies in the US but kept in place the barriers, particularly those at state level, within the US to British companies wishing to compete in the US?
Lord Livingston: We already believe the EU is a lot more open than the US. To a degree, you could even argue that is the position we are largely in today. What we are going to be doing is pushing back very much to get a better balance. You are absolutely right to highlight the difference between federal and state level. Certainly, it is easier to get things done at federal than state level. It is absolutely one of our key interests in the US. It is also going to be difficult, and that is why I mentioned it as one of the issues. To a degree, we believe we are already in that position. There is probably more openness to European public procurement than there is in the US.
Q401 Chair: Lastly, I did ask earlier about any academic or non‑government assessment of the impact on other countries. I believe I saw a flurry of notes going about. If you have got that evidence here, could we have it? If not, could you send it?
Edward Barker: I think it is probably better if we write separately. There is essentially quite a lot of reports looking at the potential impact: either the UK reports, the Commission’s reports, the Bertelsmann report. They all draw some conclusions about that. I think I would rather prepare a note that sets it out clearly.
Chair: Thank you. That concludes our questions. Can I thank you once again for coming before us? Your responses are very helpful, and we will of course be following them up with a report and recommendations in due course. Thanks very much.
Oral evidence: Transatlantic Trade and Investment Partnership (TTIP), HC 704-iv 21