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Agenda item 4 is our inquiry on the transatlantic trade and investment partnership. We are delighted to have with us the Deputy First Minister and Cabinet Secretary for Finance, Constitution and Economy. He is accompanied by Richard Rollison, whom we have met before in this context—thank you for coming back to the committee. The cabinet secretary has an opening statement.
Thank you for the opportunity to discuss the subject, which the Government considers to be important. In examining it, the committee has explored some of the significant public concern on a variety of issues that relate to the TTIP agreement.
At the outset, it is important to put it on the record that neither the Scottish Government nor the Scottish Parliament has any formal role in the negotiation and ratification of international trade or investment agreements such as TTIP. We proposed such a role in our submission to the Smith commission but, unfortunately, that responsibility still lies with the European Commission, the European Parliament and member states. The Scottish Government’s role is to represent the people of Scotland and to ensure that the UK, as the member state speaking for Scotland in the European Union, takes full account of Scottish priorities and concerns, whether they are economic or about devolved services such as the national health service.
As we speak, the eighth round of EU and US negotiations is taking place in Brussels. We will hear updates on that but, following Commissioner Malmström’s decision to publish position papers and negotiating texts, we have further information on what is being negotiated as part of the process.
We all appreciate and accept that not every aspect of a negotiation can be undertaken in public. However, given the degree of concern that members of the public have expressed, the process needs to be as transparent as possible. I encourage the Commission to consider the European ombudsman’s recent recommendations on that issue.
I turn to some specifics that have been a common thread in the discussions that the committee has had. They are the economics of TTIP, the impact on the national health service and public services, and investor-state dispute settlement.
The committee has a note from my officials that summarises the latest statistics from the global connections survey on Scotland’s exports to the United States. With £3.9 billion-worth of exports in 2013, it is clear that the US is Scotland’s single most important export market outwith the European Union. It is also worth noting that, with 580 companies employing some 98,000 people, the US is our largest inward investor.
TTIP provides an opportunity to build on that relationship. It could provide market access for Scottish goods and services and reduce non-tariff barriers. If that delivers growth and jobs for Scotland, it should be welcomed. However, we have to bear it in mind that, as the committee has explored, the liberalisation of markets does not always mean that business activity is convenient for our side of the argument. It can open up our markets here in the same way as it opens up markets to which we hope to gain access.
That takes me to my second point. It is important that markets are not opened up in a way that compromises public services or the Government’s responsibility for them. In the past six months, the Scottish Government has pressed the United Kingdom Government and the European Commission to ensure that TTIP does not affect the Scottish Government’s and Parliament’s ability to determine how and by whom the national health service and other publicly funded services are provided. We have written to the UK Government and the Commission and we have raised the issue at the joint ministerial committee. Most recently, the First Minister discussed the issue with the Prime Minister when they met in December.
Over the past few months, a number of reassurances have been given on the extent of protection for areas of the Scottish Government’s activities, in which the Government would be able to determine how and by whom services are delivered. Reassurances have been given, but it remains the case that, until we see the details of the agreement, we will not know whether those reassurances have any validity at all. I still take the view that the best way to allay our concerns and those of the public is, first, to have an explicit exemption for the national health service in the agreement and, secondly, to have absolute clarity that, although the UK is the member state, any decisions that it takes in the context of TTIP—such as opening up the NHS in England to more private providers—in no way interfere with the Scottish Government’s and Parliament’s devolved responsibilities.
Investor-state dispute settlement is another issue on which we have expressed concerns to the UK Government. We are concerned that ISDS might restrict the rights of Governments to regulate in the public interest. I know that the committee has discussed that concern, too. The European Commission was right to consult on the issue, but it clearly has some way to go in the coming months to convince people here and across Europe that ISDS is in the public’s interest. The four questions that the Commission has identified and which Mr Houben highlighted to the committee appear to home in on the right issues. I welcome Trade Commissioner Malmström’s statement that the Commission
“would never even consider an agreement which would ... limit ... governments’ right to regulate.”
On that issue and on the national health service issue, although assurances are being given, we will have final clarity only when we see the detail of the agreement that is negotiated.
The Scottish Government believes in free and open trade, but we must take the greatest care to ensure that the issues about which the public are rightly concerned are dealt with. Our ability to regulate and our ability to determine how the national health service should operate in our country should in no way be compromised by such agreements.
Thank you very much. Many of the aspects that you touched on are aspects that the committee has taken a keen and deep interest in. In particular, the committee has expressed great concern about public services and the investor-state dispute settlement mechanism.
As you mentioned, a few weeks ago we heard from Hiddo Houben, who is the European Commission’s deputy chief negotiator on TTIP. He gave evidence by videoconference; the session was not very successful in that his evidence was interrupted a number of times, but it was successful from the point of view of the information that we managed to extract from him. Mr Houben seemed to be clear that all the concerns that people have about TTIP are unfounded. He gave all sorts of assurances, but we could not get an understanding of where those assurances came from. In the meantime, we have received a copy of Cecilia Malmström’s letter to Lord Livingston, which backs up Mr Houben’s position but does not give us the detail that we seek.
On the NHS, Mr Houben suggested that the UK Government would seek from Brussels a reservation from the trade agreement. He did not seem to understand that the NHS in Scotland is run slightly differently, so it was not clear whether we would need to ask the UK Government to seek a reservation from Brussels on our behalf. There seemed to be a lack of understanding of how that process would work. From your end, have you managed to work out or get any understanding of what the process would be to protect public services in Scotland, especially our NHS?
The Scottish Government could not have made it clearer that we in no way want the legitimate right of the Parliament and, under the auspices of Parliament, the authority of the Government to be in any way questioned as regards our ability to determine how the NHS should operate, be structured or deliver services in Scotland. We want there to be no restriction and no danger of restriction on our ability to act properly in exercising our devolved competence in that area. If we want to protect the existing arrangements that allow us to determine those choices democratically here in Scotland, we must be absolutely certain that TTIP does not compromise that ability.
It is almost a double lock that is required. If the UK Government said that an exemption should be written into the TTIP agreement whereby the NHS would be outwith the scope of any possible impact of TTIP, we would also want the Scottish Parliament’s devolved responsibilities to be respected in that process because, as we know, the approach that is being taken to the management and organisation of the health service in England is very different from the one that we are taking in Scotland. It is important that a double lock exists in the form of a protection at member state—UK—level and a protection for the devolved competence of the Scottish Government acting with the Scottish Parliament’s consent.
We tried to get to that position, but we did not get far. Lord Livingston will appear before the committee in two weeks’ time, so I hope that we will be able to investigate some of that with him.
I open up the questioning to committee members. Jamie McGrigor wants to ask about areas that he is interested in.
Cabinet secretary, I take it from your optimistic approach, which I tend to agree with, that the Scottish Government’s current policy approach is to see TTIP as an opportunity. The convener mentioned the letter that we have had, which supports the theory that TTIP cannot affect the NHS.
Is the Scottish Government planning to make a statement about the matter? A lot of MSPs are receiving letters saying that TTIP is an issue, particularly in relation to the NHS. Those letters all seem to be coming from one source, as they tend to be fairly similar. People are looking to the Scottish Government for some sort of statement as to whether the NHS thing is a problem.
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That gets to the nub of the issues that are at stake. If Parliament wishes the Government to make a statement on TTIP, we will happily make a statement. My appearance here is designed to help the committee’s inquiry and to contribute the Government’s thinking to that inquiry but, if there was a desire for a parliamentary statement, the Government would happily agree to that.
Mr McGrigor asks me about the extent to which the Government, in such a statement, could provide reassurance that TTIP would not affect the NHS. I could not give that reassurance on the Government’s behalf, for the very reasons that I set out in my opening remarks. Although some reassurances are coming our way, we will not have the answer to that question until we see the concluded proposition. That is why it is so important that the concerns that the public are expressing about the danger of a negative outcome emerging for the national health service continue to be expressed. The Scottish Government will continue to express those views, because we will be concerned about the matter until we see, absolutely in black and white, that we have such protection.
The Government has nothing against trade agreements. There are lots of trade agreements from which Scottish companies benefit and in which they participate. I will make two points about that. First, we must have our eyes open about these things. Trade agreements go two ways—they might well open up opportunities for us, but they also potentially open up threats in our own markets. We should not view trade agreements as dewy-eyed propositions that are just one-way opportunities for us all. Secondly, the determination of such issues relies absolutely on the wording and terminology in the agreement. I do not have any visibility on that—I am not sitting in the room doing the negotiations—so any statement that I gave to Parliament would necessarily be slightly removed from the process of negotiation on TTIP.
I agree with you that things have to be watertight.
How has the Scottish Government engaged with the European institutions and the UK Government on TTIP so far? For example, who have you met to discuss the matter?
We have met the United Kingdom Government to discuss TTIP at a number of ministerial meetings and, at the highest level of Government, the First Minister and the Prime Minister have discussed it. It has been discussed in the joint ministerial committee. We have been in touch with UK ministers in writing on a number of occasions.
The issue was first discussed at the joint ministerial committee on Europe in March 2014, concerns have been raised directly with the UK Government and there have been a number of official discussions into the bargain. We have also been in contact with the European Commission about the issues, and we will be happy to engage in further dialogue.
Does the Scottish Government have any role in approving TTIP? Is it out of your hands altogether?
The Government has no role whatsoever.
You made the point that trade agreements are not a one-way street. Has the Scottish Government or its agencies done any modelling of the economic impact of a trade agreement with the USA?
We have undertaken some early modelling on the possible impact using the Government’s internal economic model. That is a computable general equilibrium—CGE—model of Scotland.
I do not want to suggest to the committee that the modelling that has been done is anything more than early modelling, but it suggests that the impact could mean that Scotland’s gross domestic product expands by 0.2 to 0.3 per cent of GDP. We estimate the range of export growth at between 1.8 and 3.6 per cent, but the range of import growth is expected to be between 0.8 and 1.5 per cent. That illustrates my point about the agreement not being a one-way street.
Those are the results of the early modelling that we have done, but it has been done without sight of all the provisions in the agreement. That is just looking at early indications.
We got similar feedback from the European Commission people—that there are winners and losers from any trade agreement. I have asked previously whether we can see benefits for the Scottish textiles industry, as there are barriers to Scottish exports to the USA of cashmere-type goods and the like. We could perhaps look forward to an increase in employment and activity in that sector.
On the other hand, for every job that is gained in Scottish textiles, might we lose jobs in other sectors? I am thinking of food and drink, for example. US producers might have increased access to the European market, but their standards might not be as high as we require in Europe. Has any modelling been done on the jobs impact of any agreement?
The information that I shared with the committee in response to Mr Ingram’s earlier question is at the earliest stage of our economic modelling. I have just noticed that my papers tell me that I should—I wish that I had read this bit first—refer to that as indicative internal analysis. I have now done that, but in slightly the wrong order—heigh-ho. I do not want to overstate the sophistication of that economic modelling, because it is at a very early stage.
I will put some detail behind the estimates. The expectation is that sectors such as food and drink might benefit—currently, Scottish producers face restrictions on imports into the United States, particularly of lamb products.
There might be opportunities in the energy sector. The lifting of restrictions on exports from the United States of crude oil and the associated impacts on downstream activity might be beneficial in that sector, but that is one area in which we could be exposed to as much internal impact in Scotland through the opening up of markets as we might gain from external markets. The situation is not clear cut.
There might well be opportunities to access US procurement contracts and there might be opportunities in financial services, but the financial services markets are equally markets that could be accessible to external parties.
That is some of the thinking that lies behind the indicative internal analysis that we have undertaken.
Okay. Can I sum things up by saying that you are approaching the economic analysis with some caution about the impact of a trade agreement and that you are not expressing an absolute desire to see such an agreement formed?
The Government’s policy position is that we believe in international trade, and the Government’s economic strategy, which we are currently revising, will have a very big focus on the internationalisation of Scotland’s company base. The Government is entirely supportive at that level. Our agencies are involved in the process and we evangelise with Scotland’s company base about encouraging companies to be involved in exporting and international business activity.
My point about TTIP is that we have to be careful what we wish for because, until we have clarity and certainty about its provisions, there may be just as many challenges as opportunities for us. Therefore, Mr Ingram’s characterisation of my view as being that we should approach the matter with caution is fair.
To return to your first answer, we really have to take what is given to us, because we do not have any influence on any decision that the United Kingdom makes on approving or not approving the negotiated agreement. Is that correct?
De jure, we will not be a signatory to the agreement. In that respect, we will not have the ability to finally control and determine its outcome. However, I reassure the committee that, at the ministerial and official levels, we are making the strongest possible representations to the United Kingdom Government, which will be involved in the process, to ensure that there is the widest understanding and acceptance of Scotland’s interests in the UK negotiating position.
The engagement is constructive. My officials are actively involved in dialogue with officials from the Department for Business, Innovation and Skills. There is a perfectly open and participative conversation in which my officials are setting out the issues that matter to Scotland and encouraging the United Kingdom Government to reflect those issues. That has also been the basis of ministerial contact at the very highest level in the Government.
I want to make some comments about the interaction with people such as Mr Boyd from the Scottish Trades Union Congress. He has very real concerns about the possible adverse impact on inequality in Scotland from such trade agreements. Obviously, I appreciate that the Scottish Government is not a signatory to TTIP, but can you assure us that you will take on board such concerns and discuss them with the STUC and others?
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I have seen a number of the comments to which Mr Campbell refers. We have regular dialogue with the STUC on all those questions, and I would certainly be happy to explore further some of those questions with it.
Tackling inequality is central to the Government’s agenda. It was at the centre of the programme for government that the First Minister set out in November and of the budget that we debated yesterday in the Parliament, and it will be at the heart of the Government economic strategy that will emerge in due course.
I assure the committee that the Government will focus relentlessly on tackling inequality. However, we must consider the context and the circumstances in which we do so. If inequality is exacerbated as a result of signing TTIP, the Government will redouble its efforts to tackle any negative consequences.
Thank you. I move on to the ISDS situation. As I understand it, there are no current negotiations in relation to ISDS. The point of having the 150,000-name consultation was to allow an opportunity to test public opinion throughout the European Union. The response has possibly surprised the European Commission, and the four questions that you identified are now being discussed further with stakeholders.
There are issues, and there have been assurances that the right of states to regulate will not be affected. There have been discussions on the format of the arbitral tribunals, and it was suggested that a lot could be gained from looking at the trade agreement with Canada, which has not yet been ratified.
Does the Scottish Government have any particular view on the state of play with regard to ISDS? Would the Government be involved in any way in considering the impact on domestic judicial systems, which was the third question? I raised that point with Mr Houben, who suggested that Scotland’s separate legal system—I declare an interest at this point as a member of the Faculty of Advocates—would be engaged. Do you have any general comments on where we are with ISDS at present?
I am an observer of the process, so I make my comments from that perspective. My sense is that the ISDS element of TTIP is probably retreating, because it is becoming unacceptable. That is quite clear.
I was struck by the European Commission’s statement on 13 January that it
“would never even consider an agreement which would lower our standards or limit our governments’ right to regulate. Neither would EU Member States, nor the European Parliament.”
I take from that the suggestion that the position of the ISDS argument is now very different from what it was six or 12 months ago. That shift has been a product of public concern and public pressure, and I signal to the public that now is the moment to continue to apply pressure in order to ensure that we get the agreement to the right place.
To answer Mr Campbell’s fundamental question, I do not see the necessity for a process under the investor state dispute settlement arrangements, because that would contradict or undermine the established systems of law within individual jurisdictions. I do not want the ability of the Scottish jurisdiction to determine issues that relate to the law of Scotland to be undermined in any way.
Even in the past week, the ISDS argument has shifted a bit further. The Greek finance minister said that Greece would veto TTIP if the ISDS mechanism remained within it, and I think that Greece would veto other areas too.
Given that one member state is taking a harder line, will that offer an opportunity for other member states to come in behind it? We would then be getting not just the public opinion but the geopolitical opinion, too.
It is not only the Greek Government that is concerned. I was interested to see the joint statement from the Governments of France and Germany, in which they asked the Commission to examine
“all the options for modifying”
the ISDS clause.
I get the sense that it would be very beneficial for the United Kingdom Government to be part of the movement within Europe that is expressing opposition to the ISDS provisions. Mr Campbell raised a point about the impact that the provisions could have on our domestic jurisdiction, and I make it clear to the committee that I do not want that to happen.
Good morning, cabinet secretary. I want to return to the question of the work that the Scottish Government and its agencies have done to raise awareness of the potential opportunities for small and medium-sized enterprises.
I will answer that in two respects. First, we are actively involved through the work of Scottish Enterprise, Highlands and Islands Enterprise and Scottish Development International in encouraging Scottish companies to trade internationally. A major part of the dialogue that goes on between our agencies and the company base in Scotland is aimed at encouraging more companies to export.
I would love to see a broader range of companies in Scotland participating in international business activity. The global connections survey was very encouraging on the extent to which that activity is happening, but I would like to see more of it. We progress that work actively with the company base in Scotland through all our existing channels.
Interestingly, I have noticed a fundamental change in the new-start business community in Scotland since I worked in the sector 25 years ago, when Mr Ingram was involved in similar activity. In the late 1980s and early 1990s, emerging start-up companies were unlikely to think of themselves as international business players, but digital connectivity has completely changed that.
In my experience, what happens now is that individuals start up a business and have a smartphone, and they think, “Here is my access to the world.” They think of themselves almost automatically as international businesses. That is very welcome, and I would not, in expressing our concerns about TTIP, want to undermine in any way my encouragement for the SME sector to get involved in international business activity.
The other aspect of my answer to Ms McTaggart’s question is that I do not think that we can properly prepare the business community for TTIP until we know what the agreement will be about. It is a bit of a chicken-and-egg question, as the content would determine how best we undertake that work. However, our need for clarity on TTIP notwithstanding, we will continue to support companies through our enterprise networks to get involved in international business activity.
Cabinet secretary, you said that the First Minister and the Prime Minister have held discussions on TTIP. That is very encouraging, because it means that a dialogue has been established.
However, on the question of influence, you said that we have none whatsoever. That disappoints me a little. If the First Minister has been speaking to the Prime Minister, we obviously have some influence, so to say that we have no influence whatsoever is not quite true.
I must correct you on that. The question that I answered from Mr Ingram was on whether we would be a signatory to TTIP.
It was before that, but I will not split hairs.
I am quite happy to reaffirm that our dialogue is with the United Kingdom Government and the Commission, and that we put our case to them as assiduously as we possibly can at the highest level of Government. However, it is a matter of fact that we will not be a signatory to TTIP.
That is another issue. The point that I want to raise on the back of your two comments is that the US has disproportionate power in extraditing people from the UK to the US compared with the UK’s powers in that area. With TTIP, will we be able to protect our business community better than that, will the status quo be maintained or are we discussing how to redress that in any way?
That gets to the ground that I was dealing with in my answer to Mr Ingram—no one should view trade agreements as a one-way street. If someone else’s market is being opened for us to go to, our market is being opened for someone else to come to. Mr Malik’s observations about the strength and the effectiveness of the United States and the disproportionate influence that it can exercise are comments of fact, given the scale of the US and the strength and power of its economy. We should have our eyes wide open about that.
I hoped that you would consider looking at the possibility of narrowing the influence gap, so that our business people do not feel vulnerable. I am very pleased with the process and the engagement that we have with the US. I am particularly pleased about the growing trade that we have with the US without TTIP, and I hope that we will have more business with the US. However, while we are encouraging that, I am also very keen to protect our citizens and their rights.
I entirely accept that point. It is important that we protect our citizens’ rights, opportunities and liberties. The Government supports that important value.
Thank you.
Good morning, cabinet secretary. I want to return to the issue about where the power lies in access to Scotland’s NHS potentially being provided through TTIP. Some people are saying that it is the evil European Union that can provide such access. However, at a previous committee meeting, Dr Arianna Andreangeli told us that the EU simply has no power to provide access to member states’ healthcare systems through TTIP unless member states confer the power on it to do so. First, does the Scottish Government agree with that? Secondly, does that therefore mean that the UK Government ultimately has the power to decide the matter?
It is difficult to give a precise answer to what might or might not be the interpretation of the treaty, because it has not been agreed and I have had no sight of it.
It is important to set out what we consider to be appropriate. Nothing should arise out of TTIP that restricts the ability of this Parliament and, by extension, the Scottish Government to exercise our democratic right to organise the national health service in whatever fashion we decide democratically to be appropriate for us. Nothing in TTIP should compromise our democratic right in Scotland to do that. As I have said, the simplest and clearest way to do that is to make that exemption or exception absolutely central to the drafting of TTIP so that that is beyond question.
You mentioned various correspondence with the UK Government and the Commission. Are you anywhere near getting the guarantees and reassurances that you seek?
We do not have a guarantee that there would be such an exemption. We have argued for it, and that has had a reasonably sympathetic welcome by the UK Government. However, I do not know where we will reach on the final negotiation on that point.
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Ultimately, if the UK Government went down the route of supporting the provision in TTIP by providing access to UK NHS services from the United States, would such an agreement have a consequential impact on Scotland by default?
We have to be very careful about that point. That is why I advanced to the convener earlier the argument about the double lock, which would mean that the rights and responsibilities that are enshrined in the devolved settlement would be taken into account in the position that the United Kingdom Government reflected. Ultimately, such questions will be answered only by the final agreement that is reached. However, we must ensure that the devolved issue is resolved in a fashion that gives us the maximum protection for our national health service, which would be delivered by exempting the NHS from the scope of the TTIP agreement—that would be the clearest way.
However, if the UK Government were to negotiate a TTIP deal that included the NHS because that would save its spend on the NHS by say, £10 billion, would that not have an automatic consequential effect on a budgetary settlement for Scotland? Or would we still expect to receive the same amount?
The way in which the Barnett formula operates means that if expenditure in England on the health service rises by £10, expenditure in Scotland rises by £1; if expenditure in England falls by £10, expenditure in Scotland falls by £1 in terms of the application of the Barnett consequentials. The scenario that Mr Coffey paints of a rising contribution to the health service budget in England from non-public sources that resulted in a decline in public spending on the health service in England would absolutely have an effect on the Scottish budget.
Thank you.
Do committee members have any further questions?
Cabinet secretary, I do not know whether you want to say anything generally about the impact of TTIP on regulatory standards. A lot of the evidence that we had from representatives of the business community focused on the point that the impact of TTIP on regulation might be of greater significance than a reduction in tariffs.
Regulation is in place to deliver good and positive outcomes in a number of respects. If an argument is to be advanced for the removal of regulation, it must have a sound basis. The Scottish Government has taken away different aspects of regulation at different times where doing so has been justifiable. However, if there was any erosion of the quality of food standards regulation, for example, because of TTIP, I think that people would understandably be horrified, given the journey that we have been through as a country about the quality of food.
The farming interests that I represent, which excel in the quality of the produce that they generate, often ask me “Where’s the level playing field?”, given the level of regulation in Scotland for the care and wellbeing of livestock to which they operate. Our product could be presented on a supermarket shelf next door to another product that has come from a lesser regulated scenario, and I have every sympathy with my farming constituents who have made that very point to me.
Regulation has its purpose, because it provides assurance on a lot of areas in which our confidence has been weakened by poor experiences—I am sure that we can all think of such examples. In no way, therefore, would I want TTIP to undermine our ability to assure our citizens that we have proper and effective regulation in place.
Jamie, did you want to ask a specific question about a specific foodstuff?
On the food and drink thing, which is so important to Scotland, Scotch lamb and Stornoway black pudding might not be of world-shattering importance, but they are very important to certain areas of Scotland. Can there be any guarantee that TTIP will not adversely affect those products?
It would be a very real mistake if TTIP were to reduce regulatory assurance around food safety standards. Indeed, I think that that would simply open up another concern about it, and I would be anxious to ensure that individual jurisdictions’ ability to take the proper approach to food safety was assured.
Thank you.
So the message is, “Protect the Stornoway black pudding”, Jamie.
It is delicious.
Absolutely.
We have exhausted our questions, cabinet secretary, so I thank you for coming along this morning. Our inquiry is continuing, and I have to tell you that we have had huge interest in this topic via social media; in fact, some of the questions that came up this morning were offered by people through those sources. That is a sign of a real 21st century committee and Parliament in operation.
We look forward very much to the evidence from Lord Livingston, who I hope will be able to fill in some of the gaps that we have identified through your evidence and the other evidence that we have taken thus far. Thank you very much for your information, cabinet secretary, and we look forward to seeing you back here some other time.
We move into private session for agenda item 5.
11:07 Meeting continued in private until 11:20.Previous
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