The Bureau of Investigative Journalism | July 11th, 2012
How City lobby supported controversial Indian trade deal
by Melanie Newman
TheCityUK, a powerful City lobby group, used its own India group and its membership of the European Services Forum to argue for more skilled workers to be temporarily allowed into the EU from emerging markets under an agreement known as ‘Mode 4′.
The group wants the Indian government to remove restrictions on European banks and other financial services companies setting up in India. As a sweetener, TheCityUK pushed for the EU to accept more Indian graduates on temporary working visas.
In a 2010 paper on EU trade policy it argued against taking social factors into consideration when signing trade deals and said it was important to ‘secure acceptance’ among European governments for Mode 4 ‘if agreements with certain markets are to be concluded’.
The industry also lobbied through the European Services Forum (see box below).
A draft of the UK-India Free Trade Agreement, leaked earlier this year, revealed that the lobbying was likely to be a success.
The draft suggested the UK would take in far more temporary workers in sectors such as IT and auditing services than any other EU country – despite a recent UK Border Agency report failing to confirm that such temporary workers benefit the economy.
The Trade Unions Congress has voted to oppose the India deal.
TheCityUK’s influence on Britain’s input into EU trade policy is unrivalled. It counts Lord Brittan, the former EC vice-president, among the unpaid members of its advisory council. Last year Brittan spent six months as trade adviser to the prime minister, and wrote the government’s white paper, Trade and Investment For Growth.
TheCityUK also runs the Liberalisation on Trade in Services (Lotis) Committee – a place where ministers and the financiers meet. Lord Brittan previously chaired this committee.
The insider’s view
The ‘regular briefings’ TheCityUK receives from the government contrast with the position of the TUC.
Owen Tudor, the TUC’s head of international relations, says it has to rely on leaks.
‘Although we have had some meetings with officials, the only detailed information we have had about the negotiations has come through leaks,’ he said. ‘We have not been shown copies of negotiating drafts and we understand certain members of the business community have been shown them.’
He added: ‘Trade negotiations tend to take place behind a veil of secrecy.’
Myriam Vander Stichele, an expert on international trade negotiations at the Dutch Centre for Research on Multinational Corporations (Somo), says the financial services industry’s privileged position when it comes to trade deals is nothing new.
She attended trade talks where a senior British negotiator was said to have ‘phoned the financial lobbyists from inside the negotiating room to ask if the result of the negotiations is what they wanted’.
And she describes a ‘long but little-known tradition’ of British trade officials working out strategy with industry through the Lotis Committee.
‘There is a huge imbalance here. Industry is allowed to be fully engaged in the negotiations while other stakeholders like consumers or civil society organisations are not allowed to know anything. The secrecy means the consequences of certain positions are not being examined or discussed before they are agreed,’ she told the Bureau.
Linda Kaucher, a researcher on trade policy, says TheCityUK is not only talking to British trade officials, but setting the agenda for them. In 2009, she gained a place at a Lotis Committee meeting. ‘Representatives from banks were giving the civil servants their orders,’ she said. ‘The master-servant relationship was obvious.’
A BIS spokesman said the UK supports the inclusion of sustainable development aims in free trade agreements and such aims were expected to be included in the India deal. It declined to discuss the leaked draft document, but has said any deal would ‘not undermine the immigration cap’.
A spokesman for TheCityUK said: ‘Government departments always consult widely when developing policy. As a representative body for the financial and professional services sector, TheCityUK plays an active role in the policy consultation process. TheCityUK is an independent, politically neutral organisation. We represent the views of our members in discussions, but it is for the Government to set UK policy.’
The Lotis Committee has regular briefings with the Treasury on financial dialogue with India and recently met privately with Ignacio Garcia-Bercero, the chief EU negotiator on the India Free Trade Agreement for ‘an update on the state of play’. The public knows little else about the deal, although a paragraph in Lord Brittan’s white paper says it ‘will create significant benefits for both India and the EU, amounting to as much as €4bn [£3.3bn] by 2020′.
The Corporate Europe Observatory (CEO), a Brussels-based campaign group, launched a legal action in February 2011 against the EU’s executive, accusing it of discrimination and of breaking the EU’s transparency rules. The EU had withheld information on the India deal from the campaign group while sharing it with corporations and their lobbyists, the group claims. A hearing is expected later this year.
The Bureau requested minutes of Lotis Committee meetings under Freedom of Information rules, but UKTI and BIS refused, saying publication could prejudice international relations.
‘BIS officials do not sit on the Lotis Committee as such but attend as “government observers”,’ a spokesman added.
The FCO released a heavily redacted set of minutes. Minutes for a meeting in March 2012 said ‘a political understanding’ on the deal should be reached by autumn this year.