TUESDAY 17 NOVEMBER 1998

MR BRIAN WILSON, MR CHARLES BRIDGE AND MR TOM SMITH

  140. One of the problems which people have always indicated in this area is what happens if things go wrong and there is a dispute. We do not really have too many examples of disputes being dealt with. The most obvious one in recent terms has been in the context of NAFTA where there has been the Ethyl case which is often quoted by opponents of MAI, although I think the consensus is that the jury are still out on that one, but what weight would you give to try and have a disputes resolution procedure incorporated within any kind of liberalised trade agreement on a world-wide basis?
  (Mr Wilson) Well, the idea of an investor taking a dispute with a government to international arbitration is not new and there are at present some many hundreds, I am told 1,700, bilateral treaties on investment and there is also the Energy Charter Treaty and, in practice, they tend not to come to a dispute settlement for very good reasons, that arbitration is expensive and companies usually prefer to pursue disputes through local courts, but there are cases where investors do not think they can get a fair hearing, so whatever rights investors receive on paper, they have to be able to have a forum within which they can resolve them in reality when the situation arises. There is not in WTO at present a ready-made arbitration forum and the right of whether investors will be able to go to arbitration is one which will have to be explored in the course of discussions. I agree with what you say that the Ethyl case was very influential in all of this. Our view is that the Canadian Government took a decision to settle rather than having to settle it and, therefore, the jury is still out on the issues involved in it.

  141. It has been suggested to us in earlier evidence that third party organisations where there is a dispute should have the right to make representations to those adjudicating and that they and NGOs and all sorts of other people who have an interest in the case should have such a right. Is that a view you would encourage?
  (Mr Wilson) It is certainly a view I would be open to. I think if you have a legal or a quasi-legal forum dealing with matters of public interest, then it should be open to those who have a legitimate interest in them to put a point of view and to enter any relevant evidence, so again it would be a matter for negotiation, but I think that if this is going to be pursued in a spirit of openness, and this would also apply, I think, to all the affairs of the WTO, the more openness there can be, then the greatest trust there can be and the kind of perceptions which have arisen around the MAI might not prevail.

  142. Let us assume that your own Department was involved in a dispute in relation to investment in the United Kingdom, would you then think it appropriate that other bodies who were not actually contracting parties, as it were, should have a right to be involved in that legal process?
  (Mr Wilson) It obviously depends on the forum and whether it is a legal process. If it is a legal process, then they would normally not have a right to access, but if it is a quasi-legal process or an arbitration process, then their views might well deserve to be heard.

  143. The United States was seeking exemptions for legislation passed by its various state legislatures. Did the DTI form any opinion as to whether this was something which was going to be beneficial to the United States and, if it did so, what consideration did it give to legislation passed by the Welsh Assembly and the Scottish Parliament for seeking exemption for that?
  (Mr Wilson) Well, the view that they took was that there was nothing which was going to be in the MAI which would impinge upon the rights of the Scottish Parliament or the Welsh Assembly or whatever regional assemblies might follow in England, and I go back to this, that the central purpose of MAI, as envisaged, was to prevent discrimination on grounds of nationality and, therefore, I suppose the working assumption would be that none of these estimable bodies would wish to discriminate on the grounds of nationality.

  144. Can I ask you then what thinking they formed about the reasons for the United States to seek this exemption for all of its states? Were they just wasting their time or were they just taking a belt-and-braces approach, saying, "We might as well ask them for an exemption just in case"? What was their motivation?
  (Mr Wilson) I will ask our head negotiator to tell you what view he formed, but I suspect the view was that there were presentational issues involved in this as well and maybe the Americans were anxious to satisfy the appearances of the states more than the substance of what might actually have arisen, but, with your permission, Chairman, I will ask Charles to supplement that.
  (Mr Bridge) First of all, a lot of the specific state laws which the Americans sought exemptions for were some pretty way-out things, like that you had to be an American citizen to run a billiard hall in Alabama, things of that nature. There was a very, very long list. I have to say I did not form a view as to whether this was important or unimportant for American or British citizens that they would not be able to run billiard halls in Alabama. The other important point to make about the Americans' request for exemptions was the fact it was a request for exemptions for existing state laws if ever they turned out to be discriminatory in terms of the MAI. The Americans were in fact offering that they would be bound not to introduce any new laws at state and local level which would be in breach of the non-discrimination principle. You could argue in many ways that is rather similar to the Scottish or Welsh cases in that we are talking about the future and not existing legislation.

  145. Could I pursue that issue in one particular case which is land ownership and land use which I think is going to be quite an important issue in the Scottish Parliament. Indeed, it has been suggested by at least one NGO that various potential conditions on the sale of land, the community right to buy, that sort of thing, if not against the MAI might be the subject of disputes of procedure. Did you form any view about that? Certainly other countries sought exemptions on various bits of land legislation that they had in place.
  (Mr Wilson) I formed a view on that and the view was that it was not true and that there was no threat posed to land reform in Scotland by the MAI, and I think it was a fairly far-fetched story, frankly. Again, I suppose it depends what kind of land reform you want. The kind of land reform I want is certainly not based on discrimination against nationalities. It is much more to do with competence and the motives of those who are involved in the ownership and management of land irrespective of nationality. I am sure you will agree history shows us that many of the worst landowners were Scots and some of the best landowners were not Scots. The important principle is whether it impinged upon the right of a domestic government to legislate in that particular area and the answer was it did not, subject to that caveat, that it did not discriminate on grounds of nationality which of course already exists as far as EU citizens are concerned. The particular scare story that was run was that it would in some way inhibit community ownership. That is self-evidently not true because if government as a matter of policy, as this present Government does, chooses to promote community ownership as a concept then arguably that discriminates against potential private owners of land within Scotland, within the United Kingdom. So it is not a matter of nationality; it is a matter of promoting a particular form of ownership and organisation of local affairs in relation to land. So there is not an element of national discrimination there which would fall foul of MAI and I cannot envisage any circumstances in which it would.

  146. Given that there were different interpretations of this particular provision (and you may say this interpretation was wrong) certainly we had a witness this morning on another issue who said he was a barrister and he had consulted a QC and a barrister on another provision and they were totally unclear as to what would be prohibited and what would not be prohibited. Would you say in any future agreement that it would be important to get these matters pinned down with much more clarity?
  (Mr Wilson) Yes in general I think there should be no area of doubt. However, what I cannot prevent, no matter what agreements are reached, is a pressure group or, heaven forfend, a barrister saying there was an area of doubt. I do not think there was an area of doubt in this case and with due respect I noted the week in which this particular scare story was run and it coincided happily with the annual conference of a certain political party, so I can understand your attachment to it but I do not think it was a serious story. I can assure you on a personal basis that there is absolutely no way that I would be party to anything which inhibited the aim of promoting community land ownership in Scotland which is one to which I am very much attached.

  147. Mr Wilson, could we turn to the MAI and its impact on the European Union at the moment. The United States and Canada were really rather keen, I think, to prevent causing MAI to allow EU Member States to treat each other more favourably than they do non-EU members. To what extent did the US and others use these MAI negotiations in an attempt to undermine the Single Market?
  (Mr Wilson) I do not think they did. A regional economic integration organisation clause was proposed by the Commission but the purpose of that was to ensure that the Community could continue to integrate further and enlarge without automatically extending the benefits of that through MAI to all signatories to the MAI and the US portrayed this, wrongly in our view, as offering a blank cheque for the EU to introduce new discrimination against themselves and other non-EU signatories. But the US knew that there was no prospect of the European Union signing up to the MAI without that clause being included in it. It is only very limited circumstances in which it is possible to imagine that clause being required and we argued, the United Kingdom argued, with some success that it should be very narrowly drawn in order to reduce the risk of misuse and also the perception of misuse from the American point of view.

  148. You presumably pointed to NAFTA as well in making that?
  (Mr Wilson) It would be a fair comparison to draw in order to compare and contrast.

  149. Or even trade between the Member States and the United States of America?
  (Mr Wilson) That would be a slightly further-fetched parallel.

  150. Perhaps slightly more seriously, the European Parliament concluded that the MAI might undermine the EU Common Fisheries Policy unless every Member State, including land-locked Members, applied for a reservation. How do you respond to the European Parliament's conclusion that the MAI could have adversely affected the Common Fisheries Policy?
  (Mr Wilson) Well, this was one of the areas of course in which the UK entered exceptions to cover the fishing industry, and in particular the requirement for a British-flagged fishing vessel to have a real economic link with a UK fishing community, so the negotiators were very mindful of the potential dangers to the fishing industry. I would find it difficult to draw a line from which the problems of the UK fishing industry are tied up in the Common Fisheries Policy, the Common Fisheries Policy being the problem, as opposed to what should be defended vis-a"-vis MAI, but certainly there was a recognition that this was open to abuse unless we entered that clear signal that, MAI or no MAI, fishing activity or the flying of a British flag would be tied to an economic link with Britain.

  151. Are you satisfied with the result that you achieved?
  (Mr Wilson) Well, I have no reason to believe that that was not going to prevail if MAI had gone ahead, and it is now hypothetical, but I have no doubt that in any future negotiations the same protections for the fishing industry would be sought and obtained.

  152. Mr Wilson, last Thursday you and I were at a very enjoyable event in Glasgow where you kindly donated one of Fidel Castro's favourite Havana cigars—for the raffle, I should say; it was not a general present for all and sundry. It does draw into sharp relief, I think, the Helms-Burton Act which I think was more than a passing concern of certain players in the discussions on the MAI where the secondary boycott legislation was seen as being something which was completely in contradistinction to what was being pushed forward in the negotiations. Would you envisage that an MAI could effectively outlaw the ability of an albeit major world power to interfere in the trading arrangements of other countries?
  (Mr Wilson) Well, we are very much opposed to the Helms-Burton Act and the principles which underlie it no matter which country it is applied to, and that would remain our position, MAI or no MAI. Whether MAI would have outlawed it or not is, I think, very much dependent on the legal status of what eventually emerges, but clearly it is not a way of conducting trade and investment policy which we support in principle or in practice and it would have been in conflict with the principles of MAI. I would prefer to look ahead and hope to persuade those who pursue that kind of policy that it is not consistent with free trade principles and do that in parallel with the new negotiations rather than to hypothesise on how precisely the two would interlink.

  153. We noticed your small endeavours by other means as well, but perhaps there is one last question. We are told, if we are led to believe last week's New Statesman, that Britain does not have an ethical foreign policy, but it, nevertheless, has the "Cook criteria" which I imagine trade policy seeks to march in step with, if one can march in step with criteria, but anyway the point I was wanting to raise here was let us say that the House of Commons was to buy Fairtrade coffee rather than Nescafe« coffee and was to do it not just as part of a boycott of the products of Nestle«, but because the country of origin was politically unacceptable to us. Do you think that the kind of thinking that was behind the MAI would prevent such a statement by an institution such as this, or do you think the idea that there would be some broad international agreement in favour of the liberalisation of trade would hamper individual gestures by national institutions like this against a particular state or company which was considered to be behaving in an unsympathetic fashion or in an anti-humanitarian way?
  (Mr Wilson) Well, if I can go back to the preamble to that question, you asked whether the trade policy marches in step with the ethical foreign policy—

  154. Which we do not have, I have to say. We have the Cook criteria because he has disavowed the words "ethical foreign policy".
  (Mr Wilson) It sounds like the name of a racehorse.

  155. That may be as close as he gets to it.
  (Mr Wilson) I think, and as I have learnt very quickly in this job, that when you start talking about trade policy as an arm of foreign policy, however ethical or high-minded, it does not take you long to be in difficulty because of course one man's high-mindedness is someone else's unacceptable imposition of criteria. By and large we have to pursue a very liberal trade policy. We promote very liberal trade principles within the world and we cannot cherry-pick at any particular time which opt-outs we seek to apply or to impose upon others. I would hope that in practice if an institution wanted to make a statement not so much against a particular country or means of production or in favour of less developed countries, that we would not get dragged into some great trade war over it or it would be invoked as a contradiction of the principles I have just stated. On the other hand, it is generally up to individuals to express their ethical judgement through their purchasing policy. There are very strict criteria that apply to local authorities and other public bodies to do with their procurement policies which are aimed at stopping gesture politics being taken to excess and therefore I would say do it on a case-by-case basis but in general I would say the government or the institutions of government should not set the example of linking trade policy and purchasing policy to foreign policy.

  156. I think that some of us might understand the rationale behind what you say but we do so in a world where there is no longer an apartheid South Africa and in a number of instances it was the individual action of states, companies and communities that so isolated that country that it resulted in the downfall of that system. I think that what some of us would worry about is that we would move towards a trade policy determined by international agreement which would not take account of social dimensions or give sufficient weight to it and perhaps tie the country's hands, the United Kingdom's hands, from indulging, if that is the correct expression, in the kind of gesture politics which in some instances have been seen to be internationally effective in the past. Would you agree with that?
  (Mr Wilson) I think there is a big leap from talking about what coffee the House of Commons buys—

  157.—It used to be Outspan oranges, with respect.
  (Mr Wilson) Outspan oranges were the expression of a much wider policy which had international endorsement. I think the dangers which I point to are those of unilateral action because unilateral action can be taken both by you and against you. If every country in the world was exercising trade policy on the basis of disputes, transient or long-term, then there would not be much trade done in the world.

  Chairman: I am always reminded of the story in the 1930s of the gentleman who would never go on holiday to any country that did not have a king. That may well be the reductio ad absurdum of such an argument. We will doubtless return to this in the future and I hope you will be able to come and be as fulsome as you have been today. Thank you very much.