EU-US Trade and Investment Agreement
(11 years, 5 months ago)
Commons ChamberRead Hansard Text Read Debate Ministerial Extracts
John Healey (Wentworth and Dearne) (Lab)
I beg to move,
That this House has considered the economic implications for the UK of an EU-US Trade and Investment Agreement.
I was glad to secure this debate, with the support of the hon. Members for Aberconwy (Guto Bebb) and for Carmarthen East and Dinefwr (Jonathan Edwards), and I am glad to open it within a week of formal negotiations starting in Washington on a comprehensive trade deal between the European Union and the US or, as we have been led to refer to it, a transatlantic trade and investment partnership. It is fitting that the debate should be taking place in Back-Bench business time, because I think that underlines the strong cross-party support for a full and fair trade deal, so long as it is clear that there will be benefits to British consumers and workers as well as British businesses.
Julian Smith (Skipton and Ripon) (Con)
I pay tribute to the right hon. Gentleman for his work in setting up the all-party group on European Union-United States trade and investment and ensuring that this activity has been cross-party. The Prime Minister played a major role in making the agreement a major part of EU-US negotiations, but the right hon. Gentleman really put the cross-party approach front and centre.
John Healey
I am grateful to the hon. Gentleman. He is right that the UK has for some time been one of the prime movers in the argument for a comprehensive transatlantic trade deal, which is a point I will return to later.
The fact that this debate has been initiated by Back Benchers from both sides of the House does not absolve the Government from the responsibility to ensure that the public are properly informed about the negotiations and the potential for this deal, or that the House has a regular opportunity to debate progress and scrutinise the actions the Government are taking to secure a successful agreement. That cross-party, and indeed all-party, support and interest was evident two months ago when, as the hon. Member for Skipton and Ripon (Julian Smith) mentioned, we set up the all-party group, which I am fortunate enough to chair. We are working closely with the well-established and well-regarded British-American Parliamentary Group, of which Mr Speaker is the distinguished chair. We have set up working relations with the TUC, the CBI and Which?, and we have now been offered welcome administrative and policy support from BritishAmerican Business, which of course is the joint US-UK chamber of commerce.
The aims of the all-party group are: first, to provide a focus for UK parliamentary cross-party support for a comprehensive trade and investment agreement; secondly, to contribute to better public understanding of the potential benefits that such a deal could bring to consumers, workers and businesses across Britain; and thirdly, to strengthen the scrutiny that Parliament can exercise over Government actions towards securing such a successful agreement.
Mr William Cash (Stone) (Con)
The right hon. Gentleman may know that the European Scrutiny Committee is looking at the whole question of the scrutiny of this agreement and, indeed, other free trade agreements. One of the problems is that the negotiating mandate is not available to Parliament on the conventional basis until the conclusion of the agreement. We are pursuing that matter with the Prime Minister, and I have just received a letter from him about it. I shall refer to that in my speech.
John Healey
I am grateful for and interested by that intervention. I will come to the general questions of the relationship between the UK Parliament and the UK Government and the requirement for a better and more formal system of scrutiny of decisions and involvement in the European Union. I will be interested to hear the hon. Gentleman’s remarks when he contributes to the debate.
Finally on the all-party group, we see this as active but time limited to the period of negotiations towards what we hope is a successful conclusion of the deal. Personally, I hope that Presidents Obama, Van Rompuy and Barroso are right when they declare that they want this deal done within two years.
Mr Bernard Jenkin (Harwich and North Essex) (Con)
Does the right hon. Gentleman agree with the Ifo Institute that the UK has the most to gain from a transatlantic free trade agreement, but the problem is that we are likely to be hampered by the foot-dragging and protectionism of other EU member states? Given that non-EU member states in Europe already have free trade agreements with the United States, it remains an option for us to leave the EU and enjoy our own free trade agreement with the United States. Can he think of one reason why we do not have a free trade agreement with the United States like that of Switzerland? Is it because we are in the EU?
John Healey
If the hon. Gentleman looks, for instance, at the Bertelsmann Institute’s report, he will see some interesting evidence on the assessment of the potential impact of a comprehensive deal. It points out that the countries that are in Europe but not part of the European Union are likely to lose out the most. Britain could gain tens or even hundreds of thousands of new jobs in the long term through an agreement. In contrast, countries such as Iceland are set to lose at least 1,000 jobs, while Norway is set to lose about 11,000 jobs. In other words, the countries in Europe that are not party to the agreement are likely to lose out in future. The evidence is rather different from that which the hon. Gentleman cites.
John Healey
I will, and then I will make some progress, because I am conscious that the Deputy Speaker might want me not to delay the House for too long.
Mike Gapes
I must declare that I went to Korea last month, and my entry will be in the Register of Members’ Financial Interests. Is my right hon. Friend aware that as a result of the EU-Korea free trade agreement there has been a significant increase in British trade with and exports to South Korea in the past year? We will therefore clearly benefit from being part of the European Union negotiation with the United States.
John Healey
My hon. Friend has a great deal of expertise and experience in this area, and he makes a strong case. I think that there is a cross-party view, irrespective of views on the British place within Europe, behind the value of well-negotiated and fair trade deals. The example of the Korean deal demonstrates that a deal negotiated through the European Union has particular benefits to Britain.
This debate is welcome though somewhat overdue. About three months, ago I contacted the House of Commons Library to ask for a briefing on the EU trade and investment deal. I said to the researcher, “I’m sure you’ve got something on the stocks; perhaps you could just update the standard briefing that you’ve got.” The response was, “We don’t have one. No one’s asked about this before.” The Library subsequently produced a very good briefing, as well as a very good briefing for hon. Members for this debate. That briefing, combined with the research that the Centre for Economic Policy Research has produced for the European Commission and the impact assessment produced by the Department for Business, Innovation and Skills, underlines just how important and ground-breaking this deal could be. Simply put, these are the biggest, most ambitious, best prepared bilateral trade negotiations ever. This would be the first ever such deal between economic equals. In other words, the partners have no significant imbalances in power or wealth.
Why do I say that these are the biggest negotiations? Together, the European Union and the US account for about 30% of global trade and almost half the world’s output. The more reliable of the studies and assessments suggest that if the deal is done, it could bring a boost to the UK’s national income of between £4 billion and £10 billion, and a boost to our exports of between 1% and 3% a year.
Why are they the most ambitious negotiations? The transatlantic trade and investment partnership aims not just to remove the remaining tariff barriers to trade between the EU and the US, but to reduce the non-tariff barriers by aligning the regulations, rules and standards to which we operate. It also aims to open the markets in services and public procurement.
Finally, why are they the best prepared negotiations? Really serious work has been going on for almost two years since the high-level working group on jobs and growth was set up between the EU and the US in November 2011.
It is important to remember that this is potentially a deal on trade and investment. Although the two-way trade between the EU and the US is worth about $1 trillion a year, the two-way investment flow is worth about $3.5 trillion each year. Of course, trade and investment have both been sole competences of the EU since the 2009 Lisbon treaty.
Mr Jenkin
I am interested in that aspect of the agreement. Historically, the UK has been able to access foreign direct investment free of EU interference. If such investment becomes subject to an international agreement, it will effectively become an exclusive EU competence. The other member states have been very jealous that we get so much foreign direct investment. How can the right hon. Gentleman be so sure that the deal will not be used to hamper flows of foreign direct investment into our country, because that would affect us far more than our fellow member states?
John Healey
Investment is already an EU competence. The deal is not about controlling the flow of investment, but about creating the conditions in which greater investment can flow across the European Union, including to Britain. All the impact assessments, including the one that the hon. Gentleman cited earlier, suggest that that would happen if we secured a comprehensive agreement.
Gordon Banks (Ochil and South Perthshire) (Lab)
Does my right hon. Friend agree that the UK economy would benefit from an opening up of the US economy, and that the Government should seek to gain access to that marketplace for our small and medium-sized enterprises to provide a stimulus to the UK economy?
John Healey
I suspect that in my hon. Friend’s area, as in mine, many of the important and good small and medium-sized companies depend on trade and export for their success. The agreement certainly has the potential that he mentions, but realising it requires the Government to ensure that it does benefit small and medium-sized firms.
One or two of my friends have said to me recently, “Look, you are a Labour politician on the centre left. Why on earth are you supporting a deal that looks set to reinforce the cause of global capitalism?” I have three answers to that. The first, quite simply, is jobs. The success of many good south Yorkshire firms depends on increasing opportunities for export and trade. This deal could bring that boost to jobs and the economy in south Yorkshire, as well as the whole of Britain.
Secondly—this may break the sense of cross-party unity—I see the deal as a way of regulating global capitalism. It is indisputable that the EU and the US have some of the highest standards of consumer safeguards, environmental protection, employment rights, legal process, trade rules and regulations. Together, as the two biggest economies, we have the opportunity to set standards and regulations that could become the benchmark, or gold standard, of any bilateral and multilateral deals.
Julian Smith
Will the right hon. Gentleman confirm that he is not talking about formal regulation? There is a huge opportunity for mutual recognition of standards, but we are not looking for Marxist-style overarching regulation of the world.
John Healey
The hon. Member for Stone (Mr Cash) mentioned the negotiating mandate that has not been formally published, but has, in an unorthodox way, been made available. That certainly does not talk about a Marxist global system. However, given the size of the economies and the potential scale of the agreement, setting mutual recognition standards on workers’ rights, environmental protection, consumer safeguards, trade rules and legal process can set the standard we expect, and lead other parts of the world on, in future deals.
Mr John Spellar (Warley) (Lab)
Does my right hon. Friend not agree that that last exchange was enormously revealing? There is a tendency in part of the Conservative party to follow the Tea party Republicans: the sort of 19th century Republicans that let the robber barons run loose. They even step back from that great Republican President Teddy Roosevelt, who took pride in being a trust buster. They are the party of the robber barons. They are the party that supports the tax evaders. They do not want to regulate at all.
John Healey
My right hon. Friend makes a strong and vivid point. It will be interesting to see the degree of unified purpose and support on the Opposition Benches, and the divergent, not to say conflicting, views on the Government Benches.
Michael Connarty (Linlithgow and East Falkirk) (Lab)
I intervene not necessarily to score a political point, but to make the point that between the World Trade Organisation, the International Labour Organisation and UN conventions, the EU and the US are already signed up—and are trying to sign up other countries, such as China—to raising important standards. Is that not what we want the treaty to advance?
John Healey
Indeed. In this post-global financial crisis period, and the global downturn in trade that followed, there is a crisis in citizen and consumer confidence in business. Reasserting that confidence will require standards and agreements that people believe will benefit them, their families and their areas, and are not just deals done by politicians and big business in the backrooms of Brussels.
John Hemming (Birmingham, Yardley) (LD)
Will the right hon. Gentleman give way?
John Healey
The hon. Gentleman is the only Liberal Democrat in the Chamber, so I am delighted to give way.
John Hemming
I thank the right hon. Gentleman for giving way and congratulate him on his all-party work, which he is very good at. I agree that the views on the Government Benches are not united. I have a lot of sympathy with the idea of maintaining minimum standards.
John Healey
I am grateful for that continuing cross-party support at least. [Interruption.] The Minister is chuckling away; I look forward to hearing what he has to say a little later.
I have a third answer to my friends who ask why I am backing the deal, and it is this. I am pro-European and pro-internationalist, and I think this potential agreement underlines more clearly than anything the benefits for Britain of being part of the European Union. Those benefits would be simply unavailable if Britain left the European Union and tried to go it alone.
John Healey
I will give way to the hon. Gentleman; then I would like to quote President Obama to him.
Neil Parish
Does the right hon. Gentleman not see that there is sometimes a conflict between international trade and the situation in Europe? My experience is that sometimes the way in which Europe organises trade is far too prescriptive and can be a barrier to greater international trade, rather than progressing it.
Madam Deputy Speaker (Dawn Primarolo)
Order. Before the right hon. Gentleman quotes President Obama, I would gently remind him that he has been speaking for 20 minutes and I will have to set a time limit on Back-Bench contributions in this debate, so I would be grateful if he began to bring his comments to a conclusion.
John Healey
Thank you, Madam Deputy Speaker; I will indeed. I think I have spoken for probably not quite 15 minutes, given the interventions I have taken, but I am conscious of what you have said.
When President Obama was with our Prime Minister in Washington in mid-May, he put it very delicately:
“I think the UK’s participation in the EU is an expression of its influence and its role in the world, as well as, obviously, a very important economic partnership.”
However, his officials were much blunter. They made it clear that there would be little appetite in Washington and no deal for Britain if it left the European Union. I have already said to the hon. Member for Harwich and North Essex (Mr Jenkin) that some of the research suggests that European countries that are not part of the European Union would lose out most in the event of such an agreement.
However, this agreement must be well regulated and command public confidence. It will not and cannot be a deal done in the diplomatic backrooms, because Congress and, now, the European Parliament must approve the terms of any agreement. The European Parliament has already shown its mettle in rejecting the anti-counterfeiting trade agreement that was recently negotiated, including with Japan, Australia, Canada and the US. Unanimity, and not just a qualified majority, may well be needed in the Council of Ministers to approve some parts of any future agreement in, say trade in services, intellectual property, foreign direct investment and anything to do with social, education or health services. There is also a case for expecting any agreement to involve mixed competences. In other words, there could be a contestable case that member states, rather than the European Parliament and the Council of Ministers, will have to ratify any elements of such an agreement dealing with, for instance, intellectual property, transport or investor-state dispute mechanisms.
Let me begin to wind up. There are four things that the Government could do to help to secure a successful, well negotiated agreement that commands wide support. First, they should swallow hard, accept that we are in the hands of the European Union and throw their weight behind the Commission’s negotiators. That means—I say this to the Minister—no public criticism, no freelance discussions with the US and no distancing ourselves from the deal while it is being negotiated.
Secondly, the Government should map and publish the jobs linked to foreign direct investment and exports in every area of Britain. The US does that on a state-by-state basis for every member of Congress and every Senator. Even the British embassy in Washington, together with the CBI, has produced a state-by-state analysis of the jobs there that are linked to exports to the UK. Surely we can do that for ourselves in Britain as well.
Thirdly, the Government should deal with the fears that will arise during negotiations that could derail public or parliamentary support for the agreement. These include concerns about the NHS being opened up to big US health care companies and concerns about employment, consumer or environmental standards being weakened. There might also be concerns about the investor-state dispute system—even though the EU and the US have long established traditions and well proven systems of due process, the rule of law and respect for property rights—particularly when an ISDS is being abused in the way that Veolia, the French company, is abusing the system in trying to sue the Egyptian Government for raising the national minimum wage.
Fourthly, the Government should make the process open and transparent to the public and Parliament. In the US and the European Parliament, the negotiators are holding briefing sessions—in the Parliament and with the Parliament—before and after each set of negotiations. They are also doing that with wider interest groups and making public some of the position papers as they go into the negotiations. I would like much more formal reporting and accountability of the UK Government to Parliament on EU matters. Other countries, such as Germany, Portugal and Denmark, have formal legal agreements with their Governments and Parliaments covering negotiation mandates, the provision of documents, and notification and reporting arrangements. It would help to build wider confidence in, and strong democratic influence on, our involvement in the European Union if we followed that sort of model. We can start on this European trade and investment agreement.
Today we are at the start of the negotiations on what could be a groundbreaking US-EU trade deal. We are at the start of the debates that this House will have and the scrutiny that we must offer of the Government’s contribution to those debates. This is the first such debate but—I hope and expect—certainly not the last.
Madam Deputy Speaker (Dawn Primarolo)
Order. Given the number of Members who wish to participate, the time limit will be seven minutes, but it might be necessary to review that as we progress through the debate.
Mr William Cash (Stone) (Con)
It is quite a big ask to do it in seven minutes, Madam Deputy Speaker, although I will not attempt to go through all the issues for that reason. I am extremely aware of the time constraints, so I will try to concentrate on the main issues and set out some headline points that are worth bearing in mind.
Curiously enough, I approach this issue in line with the EU constitution, by applying the precautionary principle. I would not want to be over-enthusiastic about something until I knew what the terms were. There has been a great deal of hype about this issue and some exaggerated views expressed. I would be cautious, for a variety of reasons, about making any assumptions that such an agreement will ever happen, given the Doha round and all that happened there. Nor would I wish to become over-excited about it necessarily bringing the benefits that have been described, because nobody knows.
Part of the reason for that is that the negotiating mandate is not available, as I said in an intervention. As Chairman of the European Scrutiny Committee, I have correspondence with the Prime Minister and the Minister for Trade, Lord Green. At the moment, the whole thing is under discussion. Let me quote from a letter I received on 10 July from the Prime Minister, in which he said:
“Both the EU and the US are aiming for the maximum level of ambition”—
I am always keen on ambition, as long as it does not vaunt itself—
“in these trade negotiations.”
The letter continues:
“This means that all sectors are within scope, except, as I mentioned, the audiovisual sector”—
that was in reply to a point I made the other day in response to a European summit statement—
“although there is the option to include the sector at a later stage in the negotiations.”
The letter continues:
“The areas normally covered in a trade agreement with a developed nation will be included. This ranges from trade in goods, services, public procurement, to regulatory issues and rules in intellectual property rights, sustainable development and customs. Some of the issues covered are areas of Member State competence or shared competence; the EU’s negotiating mandate was therefore agreed by consensus.”
Whenever I hear the word “consensus” in the context of EU administrative arrangements, I get slightly concerned, to say the least, because it means that a deal has been done behind closed doors. We know that the negotiating mandate is being discussed behind closed doors, and we need to know who is going to benefit most from these arrangements, and in which sectors.
We have only 12% of the votes in the qualified majority voting arrangements. This is an exclusive competence of the Commission, which drives the entire operation. It has no particular interest in what goes on in the United Kingdom, and I am entirely dubious about the claims that this agreement would generate £10 billion-worth of advantage to the UK. I do not know whether it will, and I do not think that the people who are saying that know. As Chairman of the European Scrutiny Committee, I would like to insist—so far as I can—that we be given all the necessary information.
Julian Smith
Does my hon. Friend agree that the 12 or 13-person team from the Department for Business, Innovation and Skills and the Foreign Office that focuses on trade should try to achieve some of the things that he is looking for when influencing the UK’s position in this deal?
Mr Cash
I am sure that they will do their best, but whether they will do well enough has yet to be established. If we do not know what is going on during the negotiations —and if we do not even know what the mandate is—I must express my concern on that count alone.
I shall continue to quote from the Prime Minister’s letter:
“As David Lidington told your Committee when he appeared before it on 4 July, while the confidential nature of such negotiations means that formally depositing documents is not possible”—
which I have to say concerns me greatly—
“Ministers will keep the Committee abreast of significant developments in writing and we are happy to offer the Committee informal, private briefings on the progress of negotiations.”
We will be monitoring all this. I see that the Chairman of the Business, Innovations and Skills Select Committee, the hon. Member for West Bromwich West (Mr Bailey), is in the Chamber, and I would be happy to exchange ideas and thoughts with him on this. He was a member of the European Scrutiny Committee with me for many years.
Mr Jenkin
Does my hon. Friend agree that the challenge will be to reconcile the differing objectives of the member states? That will be extremely difficult because, as a major European economy, we uniquely depend on imports, and we export more to the rest of the world than all the other member states except Germany. At the same time, we are dependent on trade with the EU. We have a unique set of circumstances and a unique economy, and it is going to be extraordinarily difficult to reconcile our requirements with those of the other, very different economies of the EU in one single agreement.
Mr Cash
I very much concur with that.
A number of extremely learned articles have been written about this matter, and they show that many European countries stand to be gravely disadvantaged by the deal. I cannot claim that we would be exclusively enhanced by it, but many of the Parliaments and trade associations of many other countries will also be watching these developments. Several countries will be given quite a jolt. An article entitled “Transatlantic free trade: boon or bane for economic cohesion in the EU” states:
“in a broad free trade agreement, trade activities between Great Britain and Sweden as well as between Great Britain and Spain are expected to drop by about 45%. Likewise, Sweden’s imports and exports with Spain and Finland will decline by 40%, and Irish-Dutch trade relations will shrink by 35%.”
All those factors must be taken into account.
However enthusiastic we may be about the concept of free trade, it is important to ask whether the deal is actually to be beneficial to the United Kingdom. It is our task to secure such benefits, and not only that of the EU. We also trade with the whole of the Commonwealth, and our trade relations with the emerging countries, the Commonwealth and the rest of the world have been improving. We have a net surplus of trade with the rest of the world of about £15 billion a year, according to the latest figures for 2012. However, we have a trade deficit with Europe. The figure for 2011 was minus £47 billion; it is now minus £70 billion. The Germans, on the other hand, had a surplus in 2011 of £30 billion, and it is now £72 billion. Many people believe that the United States will benefit the most from the deal, and those figures suggest that it will weigh up all those factors when dealing with these questions. This is a potentially difficult situation that will have to be dealt with.
An article in the Financial Times states:
“There would also be damage around the world from a sweeping US-EU deal. Advanced countries such as Canada, Australia and Japan would suffer, as would many emerging economies. Mexico and Chile, which have strong trading ties with the US, would be among the worst hit, along with most of Africa, Asia and Latin America—with the exception of Brazil.”
Brazil is in a lot of difficulty at the moment, however. The article continues:
“China’s trade flows with the US would shrink”.
There are many elements of all this that need to be thought out.
In the short time left, I shall draw the House’s attention to an article in Economia by Zaki Laïdi, entitled “Europe’s bad trade gamble”. Mr Laïdi is Professor of International Relations at the institute of politics known as Sciences Po in France. I am not saying that he has all the answers, but his article is well worth reading and can be obtained from the Library.
There are many conflicting views of the benefits that could be derived from the deal. The European Scrutiny Committee has made inquiries of the Government, and I would dispute the advantages of the EU-Korea free trade agreement. We know what the position is with regard to the EU, but unfortunately we cannot make any comparison with that arrangement to substantiate the claims of advantages for the UK.
Mr Adrian Bailey (West Bromwich West) (Lab/Co-op)
I congratulate my right hon. Friend the Member for Wentworth and Dearne (John Healey) on securing this debate. It is fair to say that, although the issues we are discussing have exercised the financial press, their implications have not yet achieved high levels of visibility among the general public. I hope that this debate will at least go some way towards rectifying that. Given the limited time available, I will not talk about the more general issues. Instead, I shall focus on the implications of an EU-US trade agreement for my own area. My right hon. Friend mentioned the need for the Government to demonstrate what the potential impacts would be in local areas, and the fact that some of the issues would be of particular importance to the west midlands and the black country has not hitherto been recognised.
Historically, the area’s manufacturing has been dominated by the car industry, which has suffered for many years but is now undergoing a renaissance, largely as a result of the foreign direct investment by the Tata brothers and the revival of Jaguar Land Rover. It gladdens my heart when I see those vehicles queuing up at the docks awaiting export. About 80% of the cars we produce are exported, and the US is the second-largest market after Europe for those exports. Jaguar Land Rover holds second and third place with its Land Rover and Jaguar models, but if they are considered together, it holds first place.
Mr Spellar
I thank my hon. Friend and good neighbour for giving way. As a fellow black country MP, I know that it is good that foreign buyers are buying from Jaguar Land Rover, but would it not be even better if British public bodies, especially the police, bought from Jaguar Land Rover rather than from Mercedes and BMW, which they tend to prefer?
Mr Bailey
I know that my right hon. Friend has campaigned on this issue for many years and I totally agree with him. We need to look properly at procurement policies to realise that point, but I will not get tempted further down that path now.
As far as I can see, the big issue for the motor industry is that, for the UK and the US, tariff barriers are relatively low but that is not quite the same as the barriers between the US and the EU. One of the challenges for the British negotiators as part of the US team is to ensure that the EU does not concentrate only on overt tariff barriers. If that is the case, there will be a general benefit, but the EU will benefit disproportionately. In case anyone considers this to be an anti-EU argument, let me make it absolutely clear that I think we have a far better chance of prosecuting a good deal as part of the EU negotiation than we would if we were not part of it—but this particular issue does need to be addressed. The fact is that the removal of non-tariff barriers within the US is considerably more important for stimulating exports or reducing costs, and the British Government must concentrate on those as part of the EU negotiating team.
Let me highlight a few areas where I believe the British Government need to get behind those who are already engaged in this work. The first relates to how the myriad of technical regulations—quite understandably in respect of road safety and the environment—dictate a range of different regulations in different countries. Standardising them provides a big challenge. I know that the European Automobile Manufacturers Association and the American Automotive Policy Council are working on this at this moment, but it is up to the Government to see that that work comes to a positive conclusion and give it all the support they can.
Secondly, on the global scale, the United Nations is working on standardising global technical regulations. Although this might not be part of the specific brief of the EU negotiating team, it would be helpful if the EU and the US, working with the UN, standardised their approach so that the standardisation of regulation applies not just within the EU and the US but throughout the rest of the world. That would provide a further impetus for both sides.
Another issue affecting our dealings with the US is the disparate and federated nature of its regulatory bodies. There are national federated bodies involved in regulations on environmental protection and road safety, but there are, of course, state bodies as well. That provides a specific challenge to get the sort of coherence and pace of reform that we need to conform to the timetable.
Mr Cash
Would the Chairman of the Business, Innovation and Skills Committee consider whether there will be a fast-track agreement in Congress, as this has been an issue of some contention? In that context and within the framework of the constitutional arrangements of the United States, it is important to bear in mind that the commercial rights of the states themselves are important, too.
Mr Bailey
The hon. Gentleman raises an important point. Provision exists within the US constitution for a fast-track process. To conform to the timetable we are looking at, that would certainly be necessary, and it is up to our negotiators to ensure that it happens.
The standardisation of the customs procedures is another issue. Manufacturers often complain that many hours are lost as a result of non-standard procedures, so this should be a potentially fruitful area for negotiation.
Finally, let me acknowledge that although the details are all terribly difficult, extremely technical and often obscure, their impact on trade and thereby on countries’ economies, jobs and growth is very significant. The Government therefore need to do everything they can to work with the organisations engaged in resolving these highly technical problems.
I mention the BIS publication, “Estimating the Economic Impact on the UK of the Transatlantic Trade and Investment Partnership (TTIP) Agreement between the European Union and the United States” final project report, which I am sure the Minister knows by heart. It spelt out the disproportionate level of benefit that would accrue to the motor industry and companies such as Jaguar Land Rover and their suppliers in my area of the black country from a successful reduction of both tariff barriers and the sort of non-tariff barriers to which I have alluded. On an optimistic view of a 75% reduction in non-tariff barriers, car exports could go up by as much as 26%—a 26% increase on the already vigorous and buoyant production from Jaguar Land Rover in my area. That would be of enormous benefit for economic growth and jobs.
I believe that by working with the EU to expand our market to 800 million people—half the world’s gross domestic product and a third of the world’s trade—the motor industry could be incredibly successful. I hope that the Government will map out the benefits of such a free trade agreement for areas such as mine.
Jonathan Evans (Cardiff North) (Con)
It is a great privilege to follow the hon. Member for West Bromwich West (Mr Bailey), and I agree with much of what he had to say. Let me take the opportunity to congratulate the right hon. Member for Wentworth and Dearne (John Healey) and my hon. Friend the Member for Aberconwy (Guto Bebb), who played such an important part in creating the new all-party group, whose establishment is both timely and necessary if we are to realise some of the prizes that should flow from a new transatlantic trade deal. Let me make it clear, bearing in mind some of the speeches we have heard, that I regard myself as an old-fashioned Tory. I believe in free trade, and I think it crucial for parliamentarians here in the UK and throughout Europe to be well aware and fully informed of all the arguments and implications at the very earliest opportunity.
Mr Cash
It is inevitable. When my hon. Friend referred to himself as an old-fashioned Tory, I was bound to reflect on the fact that nobody was much more protectionist than Disraeli and that nobody was more in favour of free trade than John Bright and Richard Cobden, who were of course Liberals.
Jonathan Evans
I cannot help thinking that we are missing my hon. Friend the Member for North East Somerset (Jacob Rees-Mogg). I had thought that we were likely to get on to the corn laws at some stage of this debate, but let us move that issue to one side.
The negotiations will be led by the European Commission, which is inevitable as we currently stand, and the White House. Legislators in Europe, however, will in many instances have the final say on whatever emerges from these negotiations, so I view early engagement with parliamentarians as of real importance. I also want to welcome the willingness of Ministers—we have already seen it from my noble Friend Lord Green and my right hon. and learned Friend the Minister without Portfolio—fully to engage with us. I welcome, too, the commitment of President Obama to place the delivery of this new trade partnership as a key objective of his final term, but it is important to understand that the aim of creating a truly free transatlantic market is not a recent phenomenon.
As colleagues may know, after an all too short period of service in this House during John Major’s premiership, I served as a Member of the European Parliament, leading the Conservative delegation, and I was later elected by the European Parliament as the president of its relations with the US Congress. I took up that post eight years ago, and from then on it was clear to me that many legislators on both sides of the Atlantic had already devoted decades of effort to bringing about much closer economic co-operation between the United States and Europe. I pay particular tribute to two British MEPs who will leave the European Parliament next year for the unswerving commitment that they have shown to the promotion of that trade partnership, and to the achievement of a truly free transatlantic market.
My Conservative colleague James Elles, who served six terms in the European Parliament, was the founder of the Transatlantic Policy Network, a forum for debate between Atlanticist legislators which I believe has played an important role in bringing us to where we are today. One former US chairman of the TPN is Chuck Hagel, who now serves at the heart of the US Administration as Defence Secretary. There is no doubt that many other members of the Obama Administration share the objectives that have been promoted by the TPN.
Another former TPN chairman who will leave the European Parliament next year is the Labour MEP for the South East, Peter Skinner. It may be strange to hear it said from these Benches, but I am pleased to say that Peter is one of the best-regarded parliamentarians in Brussels. We worked very closely together in the Economic and Monetary Affairs Committee of the Parliament, and also later when I served as chair of the advisory board of the Transatlantic Economic Council, set up by Chancellor Merkel and President Bush in 2007. I well recall encouraging Peter to join me in establishing better links with our US friends, words that he took quite literally—I mention this particularly in the context of an earlier intervention—when he met his future wife Kimberley, a Penn State republican, during one of our parliamentary visits.
Much of the background research on the massive opportunities for economic growth to be gained from an EU-US an agreement has been done by the Centre for Transatlantic Relations at Johns Hopkins university in Washington. Daniel S. Hamilton and Joseph P. Quinlan from the university produce an annual report on the transatlantic economy. I know that my hon. Friend the Member for Skipton and Ripon (Julian Smith) has seen that document, which surveys jobs and trade and investment between the US and Europe, and whose details make a powerful case for closer transatlantic co-operation. I shall ensure that my hon. Friend the Member for Stone (Mr Cash) receives a copy, because I think it crucially important for him to see it.
The Prime Minister has said that a successful transatlantic agreement could be the biggest trade deal in history. I have heard some cynical observations about the figures, but much of the analysis shows that not only will the agreement constitute a gain for Europe and for the United States, but there will be gains elsewhere as a result of the growth in the world economy that will follow.
No one doubts the challenge that we face in achieving agreement. As may have become evident during today’s debate, we sometimes hear protectionist voices, which can be at their most seductive during times of austerity. I know that comments have been made about the “Buy America” legislation which exists in no fewer than 21 states. The latest state to pass such legislation is Maryland, whose legislators seem to be unaware that some 70,000 people in the state work directly for European companies, that $13 billion from Europe is invested in Maryland annually, and that every year $3 billion worth of goods are exported from Maryland to Europe. Immediately after signing the new “Buy America” law, the Maryland state governor flew to the Paris air show to urge Europeans to buy defence products made—believe it or not—in Maryland. You couldn’t make it up.
Narrow protectionism does not protect jobs in Maryland or anywhere else in the United States, and it does not do so in this country either. Reference has been made to the effectiveness of laws of that kind. I think it worth observing that Government procurement agreements made by the United States at the World Trade Organisation grant EU countries full reciprocity with Maryland providers and manufacturers. I believe that, in this instance, “Buy America” laws are not just wrong-headed but a blatant deception of US and Maryland voters. Let me add that my warning against protectionism is just as appropriate in the case of the French voices that successfully compelled the European Commission to remove audio-visual services from the scope of the negotiation.
Finally, let me say a little about the financial ties between Europe and the United States. At this point I should draw the House’s attention to my entry in the Register of Members’ Financial Interests, although my own interests will not be affected in any way by this particular deal. Those financial ties represent a market share of between 66% and 86% of global financial sectors, which render this deal crucially important to the United States, and to us here in the United Kingdom. Delivering the deal by 2014 requires a tight timetable, but I urge Ministers to continue to engage with us as we proceed with our work.
Gordon Banks (Ochil and South Perthshire) (Lab)
I consider this to be a very important issue. I want any new trade agreement between Europe and the United States to have a substantially positive impact on the economy of Britain and, indeed, that of Scotland. I think we can all agree that international trade deals are vital to the creation of long-term economic growth and jobs in a world that is becoming smaller and smaller.
I was pleased to note that the negotiations on this agreement were formally launched, at Lough Erne on 17 June, under the UK presidency of the G8. When the G8 last met in the United Kingdom, it was hosted by Gleneagles, which is in my constituency and which is perpetually linked with our attempts to deliver improvements in the world through the millennium development goals. I hope that Lough Erne may be remembered for playing a massive role in the equalising of access to the United States market for United Kingdom and, indeed, European Union businesses.
I congratulate my right hon. Friend the Member for Wentworth and Dearne (John Healey) on securing the debate. As he told us earlier, the United States and the European Commission have suggested that the deal could be completed by the end of 2014. As we know, it is a very complex deal. I may be a pessimist, but I rather fear that at some point we may be dragged into the 2016 presidential election campaign if we hit a road block, and I hope that matters do not stagnate during 2014 and 2015. I assume that, once the deal is done, it will have to be ratified in this place and in another 28 national Parliaments—including the United States Congress—as well as in the European Parliament, and I am also slightly concerned about the time that will be taken by its journey through 30 Parliaments.
Free trade agreements are very important to Scotland. For instance, the agreements between the European Union and Singapore and between the EU and Colombia and Peru are vital to the Scotch whisky industry, which exported £4.3 billion worth of whisky last year. The United States is the top whisky export marketplace: more than £700 million-worth was exported to it in 2012. It goes without saying that there is no expectation that the negotiations will have any damaging effect on Scotch whisky exports, but I have given that example to demonstrate how important and valuable such agreements can be when UK businesses seize the opportunity to promote the best of British around the world.
It is possible that at the time the agreement is approved, Scotland will be facing an independence referendum. I fear that, if Scotland votes for independence, we shall be very short-term beneficiaries of this piece of work. Perhaps the Minister will tell us at some point whether he has received any representations from the Scottish Government about the challenges that Scotland would face if it became independent and, being outside the European Union, could not benefit from the agreement. Indeed, one has to wonder what would happen to all the benefits of all the other free trade agreements negotiated by the EU if Scotland became independent. What would be the impact on, for instance, Scotch whisky production, exports and jobs?
Let me now return to more mainstream arguments. As my right hon. Friend pointed out, it is important for us to be able to explain the benefits of the deal to the population of the United Kingdom so that our constituents understand what it means to them in their daily lives.
The deal has the potential to be the largest trade deal of all time because the building blocks of trade between the EU and the US are already in place. As my right hon. Friend the Member for Wentworth and Dearne said earlier, one major British car manufacturer has already told Danny Lopez, the British consul general in New York, that it will save about £130 million annually from the elimination of tariffs as part of this deal. There are real gains and benefits for the UK and UK manufacturing from this difficult set of negotiations, therefore. The Government must ensure there is a road map that allows British SMEs to reap the benefits of this deal, because we will get real growth in this economy from the manufacturing and exporting SMEs.
It is difficult to conclude without referring to an issue that has hung over this debate: our membership of the EU. I do not always agree with the statements of Ministers in this Government, but I was pleased to hear the Minister without Portfolio say it would be very difficult for a trade agreement of this sort to continue if the UK left the EU. He might want to remind some of his party colleagues of the benefits of being part of the world’s largest trading bloc. That is important to the UK.
Gordon Banks
I fundamentally disagree. The Minister without Portfolio will tell the hon. Gentleman where he is wrong in his thinking. There is no doubt that if he speaks to the Scotch whisky industry it will tell him about the benefits of being in a large trading bloc. The Scotch whisky industry has benefited, and if the hon. Gentleman will not take cognisance of that, he will not take cognisance of anything.
This is a really important opportunity for the UK. I want it to be important for Scotland, and I want it to be important for Scotland in the UK and in the EU.
Guto Bebb (Aberconwy) (Con)
It is a pleasure to contribute to this debate, and I congratulate the right hon. Member for Wentworth and Dearne (John Healey) on securing it through the Backbench Business Committee. I am also very pleased to be involved with the all-party group on European Union-United States trade and investment, because it is important that we debate this issue sooner rather than later, as the House should take responsibility for what is potentially a very important treaty.
My hon. Friend the Member for Stone (Mr Cash) raised the important issue of scrutiny. That starts by having a debate on the Floor of the House in which Members can highlight important issues of concern. We have already heard a great variety of comments, which shows this House is making an important contribution to the scrutiny of this issue.
The debate has also been memorable because it marks the first time I have ever heard my hon. Friend the Member for Skipton and Ripon (Julian Smith) described as a member of the Tea party. It is a shock that that description should be applied to him because if I were asked to identify the Conservative Member who would be least likely to be a member of the Tea party it would be him. I think the comment was made in jest, however.
There are issues to be discussed in respect of this trade and investment deal between the EU and the US. I was intrigued by the comment of my hon. Friend the Member for Harwich and North Essex (Mr Jenkin) that small countries could negotiate such deals better than the EU. That would be worthy of discussion, and I am sure the all-party group would be delighted if my hon. Friend were willing to contribute to our discussion by debating that issue.
Jonathan Evans
Specifically on that point, does my hon. Friend think it might be useful to invite the minister-counsellor from the US embassy in London, who has already made it clear that the concept of some separate UK-US trade deal is a non-starter?
Guto Bebb
That comment has indeed been made, and the all-party group could have a good debate on these issues. I am happy to have this argument. That is why we wanted to establish the all-party group and to have this debate. We need to ensure all the views in this House are heard.
I am a believer in free trade as I think it is beneficial. The concerns raised by some Members on the Government Benches are not about free trade, however: they are about whether the agreements would enhance free trade. That is a reasonable concern to have, and it needs to be scrutinised by this House. If we are to negotiate a free trade agreement between the EU and the US, we need to make sure it is a genuine free trade agreement.
The main town in my constituency is Llandudno, and the largest secondary school in Llandudno is Ysgol John Bright, which is named after an individual who believed strongly in free trade. To have concerns about whether this agreement would enhance free trade is not to oppose the treaty; it is more about making sure that what we create will benefit not just the economy of the UK, but the global economy. I say that because I agree that a genuine free trade agreement between the EU and the US will not just have an impact on the states in Europe and the United States; it will have a global impact as well. These issues are worth discussing, therefore, and that is why it is important that we have this debate at this point in time.
I have concerns about the time scale of two years for this agreement. I had the good fortune last night to be in discussions with one of the Canadian Prime Minister’s advisers, because one concern that must be expressed is that for a long period—certainly since I have been elected to this place—we have been involved in discussions between the EU and Canada in an attempt to reach a satisfactory trade agreement between those two trading blocs. Unfortunately, as yet, despite promises on numerous occasions that we were very close to an agreement, no agreement has been reached. We are being told by some individuals involved on this side of the pond that the issues are all to do with concerns about Canadian farmers and agriculture, yet when I was discussing this issue last night with that representative of the Canadian Prime Minister the concerns were all about the demands of the EU in terms of our agriculture. This two-year time frame presents a real challenge for us, therefore. If an agreement cannot be secured after so much time between the EU and Canada, there is a real question about whether the EU-US agreement can be secured within two years.
The two-year time frame should be applauded for its ambition, however. We should go into all negotiations with an ambitious timetable, but we also need to be realistic and acknowledge that that agreement with Canada is not yet in place. It would be a great achievement if we could have that agreement in place to show the way forward for a genuine free trade agreement between the EU and the US.
Julian Smith
Does my hon. Friend agree that pace is important, however, lest lobby groups and trade groups—especially very dynamic ones in America—get their act together and start slowing things down to the point of halting progress?
Guto Bebb
I thank my hon. Friend for making that excellent point. It is one of the key concerns in relation to the fact that we are still waiting for a Canada-EU agreement, because the more the issue is highlighted, the more it seems that the opponents come forward with further concerns about why the agreement should not go ahead. As I have said, I do believe we should support this ambitious target, but I highlight the fact that the experience in relation to Canada has not as yet been particularly positive.
I also think we should express concern at the ability of some countries in Europe to highlight their protectionist views in relation to this proposed agreement. It is a concern that the audio-visual sector has been excluded from negotiations. That is also a positive issue in many ways, however, because the decision to move ahead with talks has been made despite the fact that the European side has excluded that sector. We are aware of why that specific area has been excluded, but it is encouraging to see that one problem has not necessarily resulted in a decision that the whole negotiations should be stopped.
That shows a pragmatic attitude, which we saw when I was in Washington last year. People on the Hill felt that this was an opportunity to create a genuine agreement between the EU and the US. That is noticeable, because there was a feeling when we were there that the time to strike on such an important issue is when people can see the advantages. When the economies of the western world are doing well, the need for such an agreement is perhaps less.
Last summer in Washington, it was very apparent that people felt that the States still required fundamental changes to their economy. They saw the opportunity for freer trade with the EU as important and thought that it would lead to a much better agreement on much better global trading. An important point about free trade between the EU and US that has not been made this afternoon is that we would end up with an agreement on regulations, for example, that would be acceptable in many parts of the global economy. If the EU and the US were to agree on certain consumer protection standards that were acceptable to those two large trading blocs, they could be the basis for agreements on a raft of other issues that would allow other parts of the global economy to aspire to enjoy the benefit of global free trade and of an EU-US trade agreement by working to the same standards rather than undercutting them.
Mr Cash
I want to make a simple point. Some of the commentators—I would include myself—are slightly concerned that the objectives from the European point of view are driven less by the question of free trade and more by the idea of becoming a linchpin of the moves towards political union so that they can stitch up deals all over the world under the Lisbon treaty, which would then result in a greater opportunity for political union. Does he agree that that is a possibility?
Guto Bebb
I would be reluctant to agree with that rather negative view of the reasons behind the trade agreement. Again, one of the reasons I was keen to be involved in the all-party group was to ensure that we discuss such issues openly. If there are significant concerns of that nature, it is important that they are aired and that we instigate a public discussion.
Let me finish on the issue of whether such a trade agreement will have an effect on our relationship with the European Union. I am often made despondent by the behaviour of the EU and I believe that we need to renegotiate the relationship between it and the UK. We need to show the people of this country once more that the EU could benefit us, rather than being problematic, a drag on economic growth and a cause of deep frustration. As someone who represents a constituency that is dependent on small businesses, I see that small businesses clearly feel frustrated by much of what comes out of Europe.
The agreement is a hugely important opportunity for the EU to show the people of the UK that the EU can provide us with much more trade, which is what we want from our relationship with our European partners, and much less of the other stuff, which is so problematic. This is a challenge to not just the United Kingdom but our European partners to show that we can create something in the EU that will benefit the economies of Europe and the rest of the world. That is the challenge that the EU needs to stand up to. If it fails, it will make a huge problem for the future of our relationship with the EU.
Mr John Spellar (Warley) (Lab)
I congratulate my right hon. Friend the Member for Wentworth and Dearne (John Healey) and the hon. Member for Aberconwy (Guto Bebb) on securing the debate and on setting up the extremely important all-party group on European Union-United States trade and investment.
Let me start by putting the subject in context. Even though the Chamber was rebuilt after the second world war, the ghosts of the 19th century and the debate on free trade seem still to be haunting it in today’s debate. I was slightly surprised that the hon. Member for Stone (Mr Cash) did not pay tribute to the work of Robert Peel, who, after all, represented a neighbouring Staffordshire seat in Tamworth.
I want to look more at the period after the second world war, when the architects of the new world order fully understood that an open economy and world trade were important not only for prosperity but for peace. They had seen the significant problems in the inter-war period—the time of Montagu Norman, austerity, competitive devaluation and, in particular, the Smoot-Hawley Tariff Act in the United States and competitive trade wars around the world—that resulted in a diminution of world trade from $5.3 billion in 1929 to $1.8 billion in 1933. That world financial crisis led inexorably to the rise of fascism and Nazism and into the second world war.
The post-war negotiators realised their responsibilities, particularly Keynes, whose searing intelligence and insight is lacking in some of the international discussions now. First, the negotiators recreated an international financial architecture through a World Bank and an International Monetary Fund, which were the preconditions for the other changes of freer trade, barrier reductions, the post-Korean boom, the consumer society—at which many elitists sneered at the time—and the huge surge in technical development. They also depended on significant transatlantic initiatives. We had the creation of the European Coal and Steel Community, which then merged into the European Community, but before that we had the Marshall plan and the creation of NATO, and both were key parts of the changes brought about by that towering genius of foreign affairs and the British Labour movement, Ernest Bevin, who could see the opportunities —perhaps even more than some of those whose names are associated with them, such as George Marshall—for creating a new world situation. He saw them not as separate developments, but as interwoven and inseparable.
Now we face new challenges following the global financial crisis and the new architecture of the world economy. Although many underestimate them, the Atlantic ties are still enormously important. Many of the world’s democracies and the most productive economies are on either side of the Atlantic, as well as the most technologically advanced countries. Half of the world’s GDP would be encompassed by such an agreement.
Yesterday, the Commons debated Trident, and we also recently debated NATO and its future post-ISAF and Afghanistan. As we negotiate an evolving international architecture, trade and security go hand in hand. It is not just about the formal relations but about the cultural links, which are especially important and significant for the United Kingdom—as many Members have mentioned, we are uniquely placed to benefit from such arrangements —finance, business, security and defence. For the UK more than any other EU country, this is important.
As hon. Members, particularly the hon. Member for Cardiff North (Jonathan Evans), have remarked, President Obama and his officials have made it very clear that they are not interested in doing a number of minor deals with different countries. They see the negotiations between the EU and the US as crucial and they see the advantages. That does not mean that we should enter into the negotiations naively. They will be tough; the Americans are tough negotiators. We should drive a very hard bargain. There is also a danger that some on both sides of the Atlantic will seek to smuggle in a neo-liberal policy to try to undermine many protections for consumers and workers.
Mr Cash
Is the right hon. Gentleman aware of an article by Fred Smith in Forbes Magazine from about 10 days ago? It illustrates the fact that the United States is concerned about the importation into the agreements of regulatory and environmental standards. That might be a sticking point.
Mr Spellar
There is the possibility of many sticking points. That is why it is so important to keep an eye on the bigger picture of the huge benefits. Talks of this kind can always be undermined by a number of niggling details, and therefore by local campaigning. That is not unimportant, and we need to recognise that there will be losers as well as winners, but we should also recognise the huge benefits, not just for the US and the EU, but for the world economy. That is possibly what happened in the talks between the EU and Canada, and we need to be concerned about that. A number of difficulties have started to bog down those negotiations for those reasons.
An American official associated with the negotiations said that the talks needed to be
“done on one tank of gas.”
They need to move forward. Regard has to be paid to the checks and balances, but no one should deny the overall impact and huge benefits.
We also need to look at how we make sure that the benefits are shared with others in the world. No one should underestimate the huge impact that the expansion in world trade has had, not only on the economies of developed countries, but on the hundreds of millions who have been taken out of poverty all around the world, not least in China, where about 400 million people have been lifted out of poverty. We have also seen the largest migration of humanity in history from the countryside to the cities. The benefits have to be shared, and we need to ensure that the architecture of the agreement does not close off that avenue.
Having sounded that cautionary note, I think that we should wish the talks well, and I hope that they are conducted with speed and a degree of urgency. I hope that they go into the fast track with that one tank of gas. I say: “It’s time—let’s get rolling.”
John Hemming (Birmingham, Yardley) (LD)
First, I refer the House to my entry in the Register of Members’ Financial Interests. I do not think that I have any relevant financial interests on this occasion. I am a member of a copyright society, and I have traded with America in the past, but I do not think I have a direct financial interest; obviously, my constituents have a substantial financial interest in the subject, because I am the Member of Parliament for Birmingham, Yardley, and although there are no Jaguar Land Rover plants in the constituency, it is next to the JLR plants in Solihull and Castle Bromwich. An agreement could mean 26% more exports of vehicles, which would reduce yet further unemployment in my constituency, and that is obviously something that I would like.
The UK and the US were, in many ways, the first countries to promote and extend free trade worldwide, as we see it today. That vision has been furthered by our membership of the EU, and we have been a driving force in extending and widening the free market. There have been set-backs, both in the UK and the US. Both countries have toyed with protectionism—that is even going on at the moment—often with negative effect. More recently, the EU and the US have had periods of fracture. The dispute over the two biggest aircraft manufacturers in the world, Boeing and Airbus, at the World Trade Organisation was not good. The US obligations to scan shipping containers and the “Buy America” provisions have also served to undermine trade. The EU emissions trading scheme for airlines was seen as unilateral by international partners, despite decades of inaction on the issue.
Bars and grills have an exception from music licensing rules in the US; that exception exempts 70% of bars and restaurants and almost half of shops from having to pay copyright royalties, and that remains a key outstanding issue. That exemption was found incompatible with the agreement on trade-related aspects of intellectual property rights, yet it remains in force, and no compensation, however minimal, has been made available to European and British artists since 2004. Interestingly, people are critical of China for not abiding by intellectual property law, but the US has an issue in that regard as well.
Jonathan Evans
That is sometimes called the music case. It is interesting; the US Government did pay some compensation on behalf of those people who are breaching the law, but they have not paid it since, so there is a clear precedent for their recognising that they are in the wrong.
John Hemming
Yes; I think $3.3 million was paid before 2004, which is why I said “since 2004”. The US Government recognise that there is an issue, but the problem continues none the less. I think that the US has been critical of China, but it should sort out its own issues as well.
I am sure that the House will echo my call for American Congress to uphold its obligations under existing international trade laws, respect intellectual property and use this process to salve wounds. A disregard for intellectual property only encourages others to have a similar disregard. It would be quite wrong for our laws to ignore American intellectual property, and it is about time the United States returned our courtesy.
Despite those set-backs, this new free trade agreement is to be strongly welcomed as a once-in-a-generation opportunity for the UK that will bring benefits of around £10 billion a year to our economy, help to build a stronger economy, and create many much-needed jobs. It is proof that our participation in the European Union does not restrict us from trading with the rest of the world.
Although the EU and US combined account for more than half of the world economy, our agreements with Korea have seen EU exports to Korea go up by 16.2%. For the first time in 15 years, we have a trade surplus with Korea, and UK exports to Brazil, India, China, Russia and South Africa have jumped from £12.7 billion in 2007 to £27.1 billion last year.
Being a member of the largest free trade area in the world creates jobs and opportunities for British industry around the world, and our relentless drive to widen and deepen the single market has created prosperity for the many, not the few. We simply get a better deal when we work with the world’s trade superpower—the EU—than when we act alone, which is why we should work with our allies to concentrate on reform and ensure that the European budget spends more on boosting jobs, research, development and infrastructure, as we did with the multi-annual settlement up to 2020.
The coalition Government are to be commended for ensuring that there is an overall cut in the budget and an increase in job-boosting measures. We need these negotiations fast-tracked, and I hope that Her Majesty’s Government are able to impress both on our allies in the US and our European partners the need to enter these negotiations in a spirit of can-do—with the “single tank of gas” approach mentioned earlier.
We have seen the greatest slow-down in world growth since the 1930s depression, and stalled starts must not be tolerated. My party, the Liberal Democrats, wants to see a relentless focus on jobs and growth. I personally do not believe that we can delay the discussion with the electorate on our role in the European Union, but I am unashamed to make the case for working with Europe to boost our economy.
Lilian Greenwood (Nottingham South) (Lab)
I am sure that, like me, the hon. Gentleman has seen that the CBI’s director general recently said that we pack a bigger punch in securing trade deals when we are inside the EU, rather than outside. He clearly set out that the US wants that bigger prize. Is that not exactly why the uncertainty about our future position in the EU is really unhelpful to British business?
John Hemming
I disagree. I think that we owe it to the British people to give them a vote. There is uncertainty until that has happened. It has been far too long since the vote in the 1970s, and we need a referendum on the issue, although I am happy for it to wait until 2017. I would most likely vote to remain in, but that does not mean that I do not support a referendum. The issue needs to be resolved by us asking the British people.
It is in our national interest and the interests of the wider world to encourage free trade through Europe and increase prosperity for all, because it undoubtedly works. We must uproot direct barriers to trade; end import tariffs, business restrictions on services and regulatory barriers; and make it easier for investment to reach both sides of the Atlantic. Where joint positions on rules governing competition, state-owned enterprises, raw materials, energy, small and medium-sized enterprises, and transparency do not exist, it would be beneficial if joint positions could be established, so that we can form a new global standard of excellence in trade.
The potential benefits of an agreement are huge. The US is our second-largest trading partner, with two-way trade totalling £129 billion in 2011, while £200 billion has been invested by US companies in the UK. It is in our vital economic and national interests to ensure that we expand our economy, and this US-EU free trade agreement should receive support from all sides of the House.
I accept that there are complexities, and I have sympathy with the argument that we should not have a rush to the bottom internationally, so I am sympathetic to the idea of looking more widely than just at issues to do with tariff barriers in discussions. However, from the point of view of the financial interests of my west midlands constituents who work either directly in the motor business or in the supply chain, it is clear that an agreement would be a very positive step forward in most respects and should therefore be supported. However, it is good that the all-party group on EU-US trade and investment has been created, because the fear in such processes is that if we do not look at the issues until the agreement is brought about, what can we do about them? I welcome the fact that the right hon. Member for Wentworth and Dearne (John Healey) and his colleagues asked for this debate, because we need to discuss the agreement before it is decided; otherwise, it is too late. However, generally, the agreement seems a good idea.
Michael Connarty (Linlithgow and East Falkirk) (Lab)
I always come to debates about the EU with a copy of the consolidated texts of the EU treaties, as amended by the treaty of Lisbon in January 2008. That usually stops people talking a lot of hot air because they have not taken the trouble to read the treaties.
The question of competence is settled. The treaty on the functioning of the European Union states in article 3(2):
“The Union shall also have exclusive competence for the conclusion of an international agreement when its conclusion is provided for in a legislative act of the Union”.
It is clear from that where competence lies. We should therefore get behind the EU because, whether we like it or not, since Lisbon the EU has been given this responsibility. If it did not carry out its responsibility or if it did not seek those agreements, we would be right to criticise the EU for not using the strength that it has to benefit members of the Union.
There are remarkable opportunities available and I am grateful to my right hon. Friend the Member for Wentworth and Dearne (John Healey) and the hon. Member for Aberconwy (Guto Bebb) for securing the debate and setting up the all-party group. A trade agreement will run on for a number of years and must be studied in detail as it does. There are important opportunities for jobs and growth, and I can give examples from my constituency. Syngenta is a Swiss company that does its research in England and develops products that are made in factories in my constituency. It sells $1.5 billion worth of one product to the world, mostly used in the US to prevent soya rust, which is very important. We also have Ineos, made up of former parts of BP, which is seeking to buy ethane from the US, where it is now one tenth of the price of ethane from the North sea, to produce the chemicals required for industry.
Those firms would be helped massively by a tariff agreement, but, as my right hon. Friend the Member for Wentworth and Dearne said, a trade agreement is not just about tariffs; it is about standards. The standards of the EU are set out in the treaty on the European Union in article 3(5):
“In its relations with the wider world, the Union shall uphold and promote its values and interests and contribute to the protection of its citizens. It shall contribute to peace, security, the sustainable development of the Earth, solidarity and mutual respect among peoples, free and fair trade, eradication of poverty and the protection of human rights, in particular the rights of the child, as well as to the strict observance and the development of international law, including respect for the principles of the United Nations Charter.”
What could be opposed in setting out to establish a free trade agreement with another massive nation that has similar values? If we think that is not the way to go, perhaps we are talking about having the type of agreement used by companies in Bangladesh, where the Rana plaza collapse revealed the use of buildings that were utterly unacceptable. That is the reality. If companies are not bound by trade agreements that contain priorities and strictures, then, as has been said, the result is a race to the bottom—the lowest standards, the greatest abuse of labour, and the least protection for the people who produce the goods that we use in our country.
Combining the EU article with the standards of the International Labour Organisation and the World Trade Organisation and with the conventions of the UN would result in an ethical trading alliance, and what a massively strong ethical trading alliance the EU and the US would be if we could bring that about. President Obama has declared that he intends to eradicate modern-day slavery, and already California has a transparency of supply chains Bill that makes firms audit for supply chain abuses and ILO labour abuses. Apple recently admitted that it had found child labour in part of the manufacturing process of the iPad in China, which it must now eradicate because of US law. It would be wonderful if we could spread that across the rest of the trading nations that we deal with.
There are many things to be gained from a trade agreement, apart from jobs and prosperity. However, concerns were expressed by the Labour Government during the negotiations on the Lisbon treaty, when we got a derogation on the provision of services of special interest. The health service was specifically named in the Lisbon treaty as something that would be controlled by the Government. Sadly, it is the Government here who are abusing the health service by bringing in not just free trade, but a Hayekian free-for-all in the provision of services in the health services.
Julian Smith
Does the hon. Gentleman accept that Labour allowed the private sector into the health service in Britain, which had positive effects in many cases?
Michael Connarty
I do not think the hon. Gentleman was in the House at the time. The Labour Government said that we would use private services when they were available for people who needed public health services. It was not a case of giving provision over to the private sector. Now there is an open door for the private sector. It is a Hayekian model. Hayek was the driver for Mrs Thatcher’s advisers—the idea that there was no need for a state and that any service that was required could be brought in from the free market. If one reads Hayek—I am an economist—he even went as far as saying that armies should be hired, instead of a state having an army of its own. He also advocated private prisons, and sadly we moved down that road under a Labour Government.
The free trade agreement is regulated. Under the EU treaty, the EU will have to provide for the protection of services of special interest. Every Government in the EU will then be allowed to decide whether to have private sector involvement in their health service. It is interesting to note that in the EU-Canadian trade agreement which has just been accepted, the health service is not part of the agreement. That is a decision of the Canadian Government rather than of the EU, but it may have been influenced by the fact that the EU has that provision for protecting services of special interest.
For me there must be conditions, and I liked the four conditions set out by my right hon. Friend the Member for Wentworth and Dearne—putting our weight behind the EU team, not being a drag on the process, and so on. I have three conditions. One is transparency. The hon. Member for Stone (Mr Cash), in his role as Chair of the European Scrutiny Committee, is quite correct to say that the Committee should be able to see the process stage by stage, but that alone is not adequate. Parliament must hear about it. There should be special reports from the Minister for Europe, the Foreign Secretary and even the Business Secretary to tell Parliament what is happening, what has been negotiated at any stage and what the potential decisions are. We do not want a secret process.
There must be accountability. Instead of one proposal at the end of the process, perhaps there should be staged proposals coming back to Parliament, where certain sections of the trade agreement are taken before the House and debated by a Select Committee or on the Floor of the House. For me, there should be conditionality. Everything that happens in the European Union should be conditional, the condition being that we do not end up with an agreement that subverts what we signed up to in our last treaty. It cannot be an attempt to rewrite the treaties by the back door, so we must always ascertain whether the conditionality of any trade agreement or any other agreement will undermine the rights contained in the documents to which I referred.
We want a more prosperous world, but one that is based on fairness and on the improvement of the conditions of the people who supply us with our goods and services and those who work in industries and enterprises in the EU and in this country.
Julian Smith (Skipton and Ripon) (Con)
I shall not speak for long, as I am still reeling from the accusation that I am sympathetic to the Tea party.
It is important that I start by paying tribute to the Prime Minister, the Chancellor and the Government as a whole for putting an EU-US trade agreement and talks at the centre of the strategy for the EU and for growth, which this Government are so relentlessly pursuing. All of us in the House understand the importance of America, and we need to make the case to the country and to British business that although there is rightly a pivot east in trade and activity—to the BRIC countries and other emerging economies—the American economy, with 310 million people with a per capita income of $48,000, and an energy sector that looks as though it is going to get incredibly competitive over the coming years, is a phenomenal opportunity for Britain. It would be wrong just to accept that we already have a relationship which is established and going quite well.
Companies in my constituency, such as Silver Cross Prams which produces traditional prams that hon. Members may have used or been in in the past, sell across the world, but in America they have to go through pages and pages of health and safety and other procedures in order to sell their already safe and already EU-recognised product in America. If Jet2, which flies out of Leeds Bradford airport, wants to fly to an American city and then on to another American city, it is unable to sell seats on the domestic US side, which has an impact on its business. Principle Healthcare sells drugs, vitamins and other products that are perfectly safe and have been rigorously tested here in the UK and in Europe, but when it tries to sell to America, it must start the whole procedure yet again.
I have great respect for the right hon. Member for Wentworth and Dearne (John Healey), but I was worried by some of his remarks. The idea that this agreement should try to have top-down formal regulation of all these things is quite wrong because to get the pace we have been talking about, we need to think much more about mutual recognition. If we have safe drug products in America and safe drug products in the EU, how do we recognise those regulatory processes? That is not to say that we should have a free for all but that we should recognise and be pragmatic about what we do. One of the strongest messages I have for the Minister is a request that he utilise his innate pragmatism to influence these negotiations.
The second push I would make is on something we have talked about: pace. There are moves afoot already in America—we have seen the French examples and there will be others from all interested parties—to slow things down and to have carve-ups and opt-outs. We must make the case for pace and ensure that we stick to the rigorous timetable set in place by the negotiators. I also think that the point made by the right hon. Gentleman is key: this debate cannot be a closed shop in this place or in Brussels or in America. We must take the argument to our citizens and businesses and explain to them the importance of the jobs that will be created by the agreement and by enhancing our relationship. The benefit for EU supporters is that if we can do that for this agreement, we can use that information and build on that argument as we make the case for Britain continuing to be an active member of the EU.
Finally, although we have a number of Ministers who are active in this negotiation on the British side, I hope that my hon. Friend the Minister answering today’s debate will be at the forefront of some of these discussions as they take place over the next couple of years.
Mr Deputy Speaker (Mr Lindsay Hoyle)
Order. Just to say we are overshooting on time. The other debate is well over-subscribed, so there will be a six minute limit.
Mr William Bain (Glasgow North East) (Lab)
This debate is very timely because of the discussion about where the UK’s future economic growth is going to come from: away from an overreliance on domestic consumption, which is now creeping back into the economy, and shifting once again, we hope, towards exports and manufacturing. Although the value of the pound is a fifth lower than it was at the onset of the economic crisis, unlike in previous downturns exports from this country have not risen but fallen. Completing a trade and investment area between the US and the EU will create more opportunities in this country for businesses and investors to grow out of the crisis. That will add to the 36 other countries with whom the EU already has a trade agreement in place.
The EU exports more in goods and services than it imports from the US, and 30% of the EU’s foreign direct investment is in the US, too. The estimated benefits to Europe of successfully negotiating a free trade area with the US would boost growth across the Union by 0.9% a year, and, according to an assessment by the Department for Business, Innovation and Skills, would provide £10 billion in direct economic boost to the UK.
The effect of a successful agreement would align technical standards; harmonise labelling and product specification standards; protect intellectual property; improve access to Government procurement schemes; cut agricultural tariffs; and, most important, help our largest manufacturing industry in this country—the food and drink sector. But to extract the full benefit from such an agreement, if it is successfully completed, the UK has still to be a full member state of the European Union. If we want to shape the terms of this trade and investment partnership, we can do so only from inside, not from the margins or, even worse, by excluding ourselves completely.
The Prime Minister was happy to accept President Obama’s hospitality on a recent visit to the United States, but it might help British business even more if he accepted some of President Obama’s friendly advice, too. The President, in his press conference on 13 May, said:
“We discussed with the Prime Minister the importance of moving ahead with the EU towards negotiations on the Transatlantic Trade and Investment Partnership. Our extensive trade with the EU is central to our broader economic transatlantic relationship which supports more than 13 million jobs… I believe we’ve got a real opportunity to cut tariffs, open markets, create jobs and make all of our economies even more competitive.”
According to The Guardian, a senior US official commenting after the Washington visit of the Prime Minister said:
“having Britain in the EU will strengthen the possibility that we succeed in a very difficult negotiation, as it involves so many different interests and having Britain as a key player and pushing for this will be important. We have expressed our views of Britain’s role in the EU and they haven’t changed.”
The indications are that it will take between 18 months and two years to reach an agreement but perhaps as long as 10 to 15 years for the full effects of a successfully agreed accord to come into force. But perhaps before the end of the arbitrary time scale that, unfortunately, many Government Members wish the House to follow on an in/out EU referendum, the UK would already be seeing some of the gradual benefits accumulating from that transatlantic free trade area, only potentially to be forced out of it shortly afterwards as a result of such a referendum. The House of Commons Library has confirmed that all EU trade agreements would have to be renegotiated by the UK if it left the EU, so by leaving the EU and leaving the advantages of this agreement that we hope to see very soon, the UK would lose access to over 130 free trade agreements, which would not only have a negative impact on the economy but imply huge costs in individual renegotiation.
As my hon. Friend the Member for Ochil and South Perthshire (Gordon Banks) said, the same logic applies to the plans to see Scotland leaving the UK, thereby harming our Scotch whisky and food exporters and seeing them lose the enormous potential benefits of the free trade agreement with the United States.
I hope that these negotiations will be completed speedily and effectively. I hope that they will equip our manufacturing sector with access to a larger free trade area. This debate has been important in emphasising the responsibility that the UK Government and the devolved Governments have in these islands to ensure that this future source of sustainable economic growth and high-skilled employment for all our constituencies is not put at risk by ambitions to erect constitutional barriers in a world in which they are increasingly irrelevant.
Paul Blomfield (Sheffield Central) (Lab)
I add to the congratulations to my right hon. Friend the Member for Wentworth and Dearne (John Healey) and to the hon. Member for Aberconwy (Guto Bebb) on securing this debate. What a difference a week makes, or maybe two weeks. Here we are today debating something of importance in relation to our membership of the European Union, focusing on the benefits of our membership, and the Government Benches are empty, in such contrast with the excitable packed Benches we saw—[Interruption.] Practically empty. I apologise to those few Members who are there. The contrast, however, is not with the Opposition Benches today but with the Government Benches two weeks ago. Today we are debating a serious and important issue to do with our membership of the European Union.
Julian Smith
The hon. Gentleman says this is a serious and important matter, but does he agree that giving the British people a say on Europe is also serious and important?
Paul Blomfield
I thought the debate a couple of weeks ago was more about resolving internal differences in the Conservative party than a wider concern for the views of British people.
What an irony it is that too many Government Members want to lead us out of Europe, just at the moment that the already substantial benefits from our membership of the EU are set to become even better. I might even feel sorry for the Prime Minister if these problems were not of his own making. He knows that our future lies in Europe, just as our past always has done, and he wants this country to be at the heart of the European Union and his party to stop banging on about Europe. He knows the importance of this trade deal, but he made an early mistake back in 2005 when, lagging behind in the leadership contest for his party, he threw red meat to Conservative Members who would take us out of the EU with a promise to leave the European People’s party. He was warned by his Conservative allies in Europe—
Jonathan Evans
Perhaps I should point out to the hon. Gentleman that I was leader of the Conservatives in the European Parliament at that time, and the Conservative party was never in the European People’s party at any time.
Paul Blomfield
The Conservative party’s alliances when the hon. Gentleman was in the European Parliament were better than those it has made subsequently.
Paul Blomfield
Let me make some progress, My point is that the Prime Minister did not understand that the more red meat he threw to those on his right, the more they would want. We find ourselves being pushed towards the exit door of the European Union at a time when the case for membership has never been stronger.
Let me turn to the trade deal and the comments made earlier by the hon. Member for Stone (Mr Cash), who sadly is no longer in his place, when he sought to diminish the importance of our trade with the European Union. The EU is the UK’s main trading partner and comprises around 52% of the UK’s total trade in goods and services. Of course growing markets in China and India are important, but those two markets account for 5.6% and 1.6% of our current trade. Through the Department for Business, Innovation and Skills, the Government estimate that 3.5 million jobs in Britain are linked, directly or indirectly, to our trade with EU member states.
Let us look to the future. It has been estimated that by 2020 the UK will have fallen to the ninth largest economy in the world. In contrast, the EU is the largest economy in the world, home to 7.4% of the world’s population and accounting for almost 20% of world GDP. The EU is not important to the UK simply for that reason, but also because of the access it provides to other markets. The EU is the top trading partner for 80 countries and currently has free trade agreements with more than 40. That process is continuing, and the EU is currently negotiating agreements with more than 70 countries, including important UK partners such as India and Japan, as well as growing economies such as Brazil. According to the CBI, the European Union has negotiated trade agreements that cover around 30% of trade outside the EU area, and it is in the process of raising that figure to 70%.
It has been estimated that the deal we are considering today will generate around €119 billion of benefits to the EU and create 2 million jobs. As my right hon. Friend the Member for Wentworth and Dearne pointed out in his opening remarks, that could benefit the UK economy by up to £10 billion a year. My hon. Friend the Member for West Bromwich West (Mr Bailey) was right to point out that current tariffs averaging around 4% are quite low, but given the volume of trade, the benefits are significant. Even more significant—my right hon. Friend the Member for Wentworth and Dearne referred to this—is the alignment of regulatory standards and the opportunity that offers not only for trade between these two important blocs, but in raising standards internationally.
My right hon. Friend was also right to highlight concerns about the potential privatisation of public services—a threat that has been targeted wrongly at this deal. It is important that we reassure those who are worried about the impact of this deal on public services, and the health service in particular, which might disappoint some Conservative Members who would like to see much greater privatisation.
In the free trade agreements that the EU has negotiated, public services exemptions are provided in two ways: first, by provisions that refer to
“services exercised under Government authority”—
the police, for example, and the justice system—and, secondly, by provision for public utilities, which would cover health care. The former provisions are automatically excluded from all trade agreements. The latter are not automatically excluded but reservations are attached that allow EU member states to maintain public provision or limit access to a certain number of providers—both domestic and foreign—in those sectors.
It is important that we send a clear message that the EU-US trade agreement in itself cannot lead to further privatisation of health care in this country. The policies of this Government will do that—or perhaps not, if they are successfully defeated. The trade agreement could, however, lead to a significant boost to the UK economy. It would be the most significant bilateral agreement, and our combined economies are worth almost 40% of world GDP. We must be honest when responding to comments made by some Government Members who are no longer in their seats, and recognise where we stand internationally. The UK alone would not have the negotiating clout of the EU in striking the sort of deal that would benefit all member states, including the UK. As with so many other things, we are stronger together in Europe, and this deal is yet another reason why we must be at the centre of the European Union.
Mike Gapes (Ilford South) (Lab/Co-op)
It is a pleasure to follow my hon. Friend the Member for Sheffield Central (Paul Blomfield). I agree entirely with what he said and I particularly endorse his remarks about public procurement and the importance of the national health service. It is vital that debates on this issue make it clear that the trade agreement will not be used as a way of justifying the privatisation policies of the Conservative and Liberal Democrat coalition, by blaming it on the requirements of some European-US deal.
Julian Smith
I reiterate the question I asked earlier. Does the hon. Gentleman accept that the Labour party in government regularly used the private sector to deliver better services, where necessary, in the NHS?
Mike Gapes
I accept that because of the problems we had when we came to office, we had to get extra capacity. My constituents in Ilford benefited from the independent treatment centre that was established on the site of King George hospital. They had operations on their knees and noses that would not have been available previously because of the lack of capacity in the NHS. I make no apology for the fact that my constituents benefited from the investment and policies of the Labour Government, but that is not what this debate is about.
I want to make three points. First, in an earlier intervention I referred to the European Union-South Korea free trade agreement which, as the Foreign Secretary recognised in the House a few months ago, has not just been of great benefit to the European Union as a whole, but the removal of 97% of the tariffs that existed between Korea and the European Union led to a significant increase in British exports to Korea.
Mr Cash
I alluded to that in my speech. After inquiry, the European Scrutiny Committee was informed that it was difficult, if not impossible, to make a true comparison between the apparent benefits to the EU in general and the advantages to the UK individually, apart from in the car industry, where there appeared to be a distinct benefit.
Mike Gapes
On 23 April, the Foreign Secretary said:
“The free trade agreement with South Korea eliminated nearly 97% of tariffs, and some British businesses are now enjoying a huge increase in exports to South Korea as a result. We want to see the same thing happen on an even greater scale in relation to the United States.”—[Official Report, 23 April 2013; Vol. 561, c. 743.]
I suggest the hon. Member for Stone (Mr Cash)has some comradely discussions about these matters with the Foreign Secretary in the next meeting of the 1922 committee or somewhere else.
I want to emphasise a point made by the hon. Member for Skipton and Ripon (Julian Smith) about the significance of reducing the regulatory obstacles. Many of my constituents work in financial or banking institutions in London. TheCityUK has published a paper saying that it
“strongly supports the efforts being made in the US and the EU towards a Transatlantic Trade & Investment Partnership.”
It believes that that needs to be comprehensive and should cover all aspects of the economy, and it highlights the absurdities of different regulatory regimes, the additional costs this imposes on both sides of the Atlantic and the serious delays involved.
In another publication, British Influence highlights how the pharmaceutical industry has completely different requirements on the acceptability and availability of drugs in the US and Europe, meaning that drugs that have already gone through one rigorous testing procedure must then go through another one. That is not necessarily anything other than an obstructive measure to preserve markets for certain companies by squeezing out competitors. If it can compete on quality—and our pharmaceutical industry is certainly high quality—industry in Europe and Britain will be well capable of competing on a level playing field in an American market.
There will be people in the US, as in Europe, who will try to resist and obstruct these measures. We have heard some of those voices today, unfortunately. The reason for that is partly ideological, but it is also linked to pork-barrel politics, the two-year congressional election cycle and all the other difficulties people have in winning public office in the US, so this will not be an easy process, and these negotiations will take time; it is a bit optimistic to think they could be over in two years, and they will not be helped if the EU adopts a minimalist position or says it wishes certain items to be taken out of the negotiations at the start. That will play into the hands of those in the US who also want to play that game.
It is a bit like the Conservative party’s position on renegotiating our membership of, and repatriating powers from, the EU. We cannot take things à la carte, and in the negotiations between the EU and the US, we will not get all we want; it will be a difficult process, and it could well be undermined significantly by diversions, such as those relating to Scotland, to which my hon. Friend the Member for Ochil and South Perthshire (Gordon Banks) referred. It could also be undermined, however, if British negotiators, obsessing about other issues, divert their efforts and energies away from getting the best deal for British business and investment and trade in the United States, as my hon. Friend the Member for Sheffield Central pointed out earlier.
According to The Daily Telegraph, the Prime Minister said that
“if Britain weren’t in the EU you would not directly benefit from an EU/US trade deal”.
That is the fundamental point. If we embark on a process of renegotiating terms with, or withdrawing from, the EU, we will damage our position within an internal EU process and our long-term relationship with the US. As the US President, the ambassador and others have made absolutely clear, the US believes it to be in the interests of its co-operation with Europe that the UK play a full part within the EU. If we want to get an EU-US trade and investment treaty, we need to support it wholeheartedly.
Mr Iain Wright (Hartlepool) (Lab)
I congratulate my right hon. Friend the Member for Wentworth and Dearne (John Healey) and the hon. Member for Aberconwy (Guto Bebb) on using their strong persuasive abilities to convince the Backbench Business Committee to agree to this important debate. This issue has not had the prominence it deserves, and I pay tribute to right hon. and hon. Members for redressing that situation. Given the potential of this agreement, this is an important discussion.
This has been an important and, on the whole, positive debate. The sheer size of the American and European economies means that the potential prize of a significant free trade agreement is huge. As my right hon. Friend the Member for Wentworth and Dearne said, together the EU and the US account for just under half of global GDP and about a third of world trade. About $2.7 billion of goods and services cross the two continents every single day—a trillion dollars every year. The proposed free trade agreement could be the biggest bilateral trade deal in world history, both in terms of its value and in the range of subjects, sectors and markets covered. Given the size of the sums involved, even modest reductions in barriers would lead to huge amounts of money—$325 billion—that could be ploughed into extra jobs, more investment and higher economic growth.
As has been said, a potential trade and investment agreement would yield an estimated increase in UK national income of between £4 billion and £10 billion a year over the next decade. That is huge and worth fighting for.
Mr Cash
Lord Mandelson said that when he was trade commissioner the over-regulation of business cost 4% of Europe’s GDP and about £6 billion a year to the British economy. Is that not something we should be tackling, and does the hon. Gentleman agree that some of his figures are based on estimates?
Mr Wright
The hon. Gentleman makes an important point. I was about to say that, as mentioned several times, the nature and structure of trade between the EU and the US is such that we do not have substantial or excessive trade barriers between the two blocs. Most of the gains would come from a reduction in non-tariff barriers. In response to his point, I would add that I am keen to see regulatory convergence.
Reductions in non-tariff barriers would result in reduced costs for producers and traders and so increase productivity, leading to greater investment and higher gains per worker. Forecasts predict that increased trade would lead to higher wage rates of between 0.2% and 0.5% for workers in this country. Again, that is a prize worth fighting for. If the free trade agreement were to focus more on tariffs than non-tariff barriers, the gains for the UK would be substantially less, as the Chair of the Business, Innovation and Skills Committee said.
What has been clear from today’s debate is that there is a huge amount of ambition in this House for this agreement, so will the Minister confirm that the scope and ambition of the agreement that will be negotiated will be as wide-ranging and comprehensive as possible, in order to ensure the maximum gains for British companies? Will he ensure that Britain is pushing for negotiations to be focused on where that maximum gain will be, which, as I have said, is on the elimination of non-tariff barriers? Will he give us an idea of the scope and scale of agreement he hopes to achieve?
Right hon. and hon. Members have rightly been talking about how the House can be involved in this process. Will the Minister tell us how he hopes to keep the House informed of progress on the agreement? My right hon. Friend the Member for Wentworth and Dearne talked about this, but will the Minister tell us a bit about what he has planned for the scrutiny of the negotiations by this House? How can we debate this matter on a periodic and, we hope, positive basis?
Will the Minister also give the House a sense, wherever possible, on when he expects the talks to be concluded? I know that that is difficult, but it has been mentioned several times in the debate, and the US vice-president has said that he hopes talks can be agreed on “one tank of gas”, which means the completion of negotiations within 18 to 24 months. This is obviously a big priority for the Obama Administration, as I think it is for the British Government, but will the Minister give us a sense of when he thinks the process will be concluded? My hon. Friend the Member for Ochil and South Perthshire (Gordon Banks) asked about this directly, but how will this House ratify the deal? Will that be done by a full, substantial debate in Government time on the Floor of the House so that we can question and scrutinise the deal carefully?
I wish to focus on a few specific industries that could benefit enormously from a comprehensive and ambitious free trade agreement. The motor vehicles sector, which has been mentioned, is forecast to see considerable growth as a result of an ambitious transatlantic trade and investment partnership—TTIP. Estimates predict a rise in exports of between 15% and 26%. That will obviously help the German manufacturers, but we certainly should not discount the impact it will have on our important and growing automotives sector, where we are producing great-quality, high-premium cars that the rest of the world are keen to buy. That was mentioned by my hon. Friend the Member for West Bromwich West (Mr Bailey).
In that regard, I hope the Minister will reassure us that regulatory convergence to ensure great export growth will be at the top of the agenda in the negotiations. I hope he will agree that a vehicle considered safe to drive in Europe should also be considered safe to drive in the US. Will he ensure that duplication of safety and environmental standards is dealt with and that negotiations prioritise mutual recognition agreements and equivalence standards? Will he also address the point, not entirely confined to the automotive sector, that differing regulatory arrangements apply at a state, federal level? Will negotiations ensure that state differences are dealt with, too? That point will apply to many industries, such as those producing electrical goods, chemicals and cosmetics. My area has the highest concentration of chemical engineering in western Europe, and if Europe and the US had mutually accepted standards, the potential for the chemicals industry in the north-east would be enormous.
The global aerospace industry is dominated by Europe and the United States, and particularly by Airbus and Boeing, as was seen in the recent sales at the successful Paris air show. Britain is the largest player in this industry in Europe and is second only to the US in the world. The European aerospace industry generates a third of the EU’s manufacturing exports, and we in this country are at the heart of it. We have to maintain our competitive advantage. The industry is subject to fierce competition from other nations. China is particularly ambitious about launching an aerospace company—COMAC—to rival Boeing and Airbus. Does the Minister accept—this is an important point—that an ambitious free trade agreement between the US and the EU would actually help to maintain our competitive advantage in this field, as consistency of international regulatory standards should give existing firms and their supply chains an important lever to use? That was certainly the conclusion of an important Chatham House report on manufacturing published this week.
Services are a key part of the British economy; we are the best in Europe on services. Will the Minister comment on the nature of the agreement in that area? For example, a UK lawyers’ qualification is not fully recognised in the US, which is an impediment to UK lawyers’ practising. If the EU and US recognised each other’s professional qualifications, a great boost would be given to trade, which would particularly benefit the British economy. Will he discuss that a little?
The scale of the prize indicates how important it is that Britain has a leading role to play in Europe, as my hon. Friend the Member for Glasgow North East (Mr Bain) said. Does the Minister agree with Sir Mike Rake of the CBI, who said that there is an overwhelming case for Britain being at the heart of Europe for the sake of our businesses? Does he agree with my hon. Friend the Member for Ochil and South Perthshire, who indicated that he agreed with the Minister without Portfolio that it would be curtains for our ability to play any leadership role if we exited the EU? The right hon. and learned Gentleman said in a recent article:
“Irony of ironies, it is of course the EU that is making deals with the United States and Canada possible. It should come as no surprise that Obama’s officials have commented that they would have ‘very little confidence’ for a deal with the British alone.”
Does this Minister agree?
Will the Minister also address the warnings from the Obama Administration that if the UK leaves Europe, we will exclude ourselves from a EU-US trade deal worth billions and that it would be unlikely that Washington would try to negotiate a separate trade agreement with Britain? A senior White House official is quoted as stating:
“Having Britain in the EU...is going to strengthen the possibility that we succeed in a very difficult negotiation, as it involves so many different interests and having Britain as a key player and pushing for this will be important...We have expressed our views of Britain’s role in the EU and they haven’t changed…TTIP negotiations underscore why we think it’s important that it continues.”
Is it not clear from White House officials that the United States believes that one of the key reasons for the special relationship is that we are in the EU, and that it would be naive and impractical to suggest that we could negotiate a separate trade deal that could have the same potential positive effect on jobs and growth?
Mr Deputy Speaker (Mr Lindsay Hoyle)
Order. I would just like to be of help, because the shadow Minister has taken 10 minutes so far and he said he would only take that long. He will have reached 11 minutes in a moment, so we should be careful.
Mr Wright
Thank you, Mr Deputy Speaker. I will mention one final thing and then draw my comments to a close.
Several hon. Members, including my hon. Friends the Members for Linlithgow and East Falkirk (Michael Connarty), for Sheffield Central (Paul Blomfield), for Glasgow North East and for Ilford South (Mike Gapes), have mentioned the NHS. Will the Minister confirm that the free trade agreement will not be a green light to private health companies in the US to take over services within the NHS? Will he absolutely rule out that happening?
This agreement is a huge prize and the whole House is keen to see success on it. I hope that the Minister will be as ambitious as the House is on this, because the potential for jobs, growth and prosperity, on both sides, of the Atlantic is immense.
The Parliamentary Under-Secretary of State for Skills (Matthew Hancock)
It is a pleasure to wind up this debate. It has run over time, for which I apologise to hon. Members taking part in the next debate, but that is testament to the importance of the subject and the exceedingly high-quality contributions. More important than the quality of the rhetoric has been the unanimity of argument in favour of an EU-US trade deal. Of course important questions need to be addressed, and I will deal with as many of those as I can in the time available, but all speakers have been in favour, in principle, of pushing to make this deal happen, and that message should go out loud and clear from this House. As a passionate supporter of free trade, believing that free trade and capitalism has been the greatest force for prosperity ever invented by man, I am proud to be part of a political consensus in this country in favour of free trade. That is one of our great political and economic strengths.
On that note, I pay tribute to the right hon. Member for Wentworth and Dearne (John Healey) and my hon. Friend the Member for Aberconwy (Guto Bebb), not only for securing this debate, but for starting up the all-party group on European Union-United States trade and investment to make sure that a forum is available for all Members to discuss the issues relating to the TTIP deal. The launch of the negotiations started last week, and they are a once-in-a-generation opportunity to secure the biggest bilateral trade agreement in the history of the world. As many hon. Members have said, it would bring significant economic benefits, in growth and jobs, to both sides of the Atlantic.
There are also compelling strategic reasons for the agreement, as the right hon. Member for Warley (Mr Spellar) and the hon. Member for Linlithgow and East Falkirk (Michael Connarty) argued, putting the proposal in its historical context. It would be good not only for trade but for the relationship between our two continents. A successful conclusion could allow the EU and the US to agree common standards and rules fit for the 21st century. The principle of mutual recognition is an important one, and perhaps the mutually recognised standards would form the basis for standards around the rest of the world, given the sheer scale of a free trade area between the EU and the US.
We heard Opposition Members argue passionately in favour of the EU and against giving people their say, not least the hon. Members for Linlithgow, for Sheffield Central (Paul Blomfield), who gave a spectacularly passionate argument against allowing people their say in a referendum, and for Glasgow North East (Mr Bain). I think that the TTIP is central to our vision of a reformed EU that is more competitive and better able to deliver jobs and growth for its citizens, and for that proposition to be put to the British people in a referendum is a strong strategy for the way forward. Opposition Members talked about Barack Obama’s White House officials saying this and that, but I will go by the words of the man himself, who fulsomely supported the strategy of renegotiating our relationship and putting it to the people in a referendum.
The EU-US trade deal would be the biggest in the world, and it would build on our strong relationship.
Mike Gapes
The Minister just said that President Obama had supported a referendum. Perhaps he will give us the source of that statement.
Matthew Hancock
The source of the statement was President Obama. He said during a press conference with the Prime Minister—I do not have the precise quote, but I have the substance of it—that he thought it was right to try to renegotiate a relationship before deciding to leave. I will write to the hon. Gentleman with the precise quote. I think that it is better to listen to a politician, rather than officials representing a politician.
Crucially, the free trade deal must genuinely support free trade, which I think it will. My hon. Friend the Member for Aberconwy commented on that, channelling Bright. Negotiating an ambitious programme is vital. Many numbers have been quoted in the debate. We are already negotiating trade deals with Canada, India and Japan, each of which represents 2% of our exports. The United States represents 15% of our exports. I think that sums up the scale and importance of the proposition.
The relationship is already exceptionally close and deep. The US is the top export destination after the rest of the EU, and the US and the UK are each other’s largest foreign investors, supporting over 1 million jobs in this country, and US investment stock in the UK is worth around £200 billion, which is eight times the size of US investment stock in China. The scale is important, the Government’s ambition is high, and all areas are in scope. Of course, as has been mentioned, the audio-visual sector has been set to one side, but there is the potential to include it if negotiations go in that direction.
With regard to whether regional jobs data can be made available, the hon. Member for West Bromwich West (Mr Bailey) and the right hon. Member for Wentworth and Dearne argued strongly that we need to ensure that we make the argument for the deal. We will look at publishing regional jobs data in as robust a way as possible. Arguments were made, not least by the hon. Members for Hartlepool (Mr Wright) and for Birmingham, Yardley (John Hemming) and my hon. Friend the Member for Skipton and Ripon (Julian Smith), giving specific examples of how the deal would help British businesses and jobs and be a positive force for the economy and prosperity. It is some of the specific examples that were given that make the case most eloquently and strongly.
Mr Jenkin
Will the Minister address the concern, raised by my hon. Friend the Member for Stone (Mr Cash), that there are already vast disparities of economic potential in different parts of the EU, which has caused massive trade imbalances between member states? The danger is that a genuine free trade deal would exacerbate those tensions? Will the incentive in the EU not be for a more protectionist deal than we would want? How will he address that?
Matthew Hancock
The incentive in the EU is for liberalisation, because overall the analysis of the European Commission and the analysis that we commissioned on the impact on the UK indicated a positive impact on every member state. Of course there are winners and losers, but the overall impact on each part of the EU will be positive. That is what the Commission’s analysis showed.
Matthew Hancock
Yes, of course. I was just about to move on to scrutiny, which came up in many Members’ contributions and is important. I agree with my hon. Friend the Member for Stone (Mr Cash) about the uncertainty of forecasts and numbers, but I will give the Committee the analysis. The Committee will play an important part in scrutinising the negotiations. Of course, as many Members have said, the negotiations will be led by the Commission, so we must ensure that we do not get in the way of positive developments of substance by publishing things that the Commission would not want us to publish, but within those constraints we will ensure that we engage with the Committee, and indeed with Members on both sides. I think that it would be positive to have debates such as this one as the process goes forward.
Mr Deputy Speaker (Mr Lindsay Hoyle)
Order. The Minister has now been speaking for 10 minutes, so I am sure that Bob Stewart can save himself for later.
Matthew Hancock
Let me just run through as quickly as I can some of the other points that were made.
The objective in the negotiations, including in TTIP, will be to have commitments in health services that are broadly in line with existing international trade agreements, so I can reassure Members on that point. It is true that this is an ambitious project, but our goal is that it should be concluded within 18 to 24 months. The US interpretation is that it should be concluded on one tank of gas, and we wholeheartedly agree. The British Government will put in place whatever support is necessary for the Commission to help that happen. The benefits will come not only as a result of reducing tariffs, although they are relatively low, but from non-tariff barriers, mutual recognition of regulation and the treatment of intellectual property, which has been mentioned.
We are under no illusions that this will be easy, but we are well placed and have a strong political commitment. In the first negotiating round, which took place last week, good progress was made. A framework for the negotiations was agreed and an initial productive exchange of views on ambition and approach across each dossier was achieved. As the Prime Minister has said, it is a once-in-a-generation prize and we are determined to seize it to ensure that the benefits of free trade can increase and strengthen jobs and prosperity in this nation and around the world.
Mr Deputy Speaker (Mr Lindsay Hoyle)
I call Mr John Healey. You have up to two minutes, but please be brief.
John Healey
This debate has confirmed a strong cross-party interest in the negotiations—specifically, in the areas that will loom large in any deal, in how we make sure that we get the strongest benefits for Britain, in the historical and political background to free trade, and in Government reporting and accountability to Parliament during the process. It is clear that these negotiations will be tough, that an agreement is not certain, and that the benefits will depend on the content of any agreement. That is all the more reason for Parliament getting behind the negotiations and following them closely.
We have heard 13 Back-Bench speakers. I apologise to those who were unable to give us the full benefit of their expertise because of the time limit. As the hon. Member for Aberconwy (Guto Bebb) said, it is clear that scrutiny starts with this debate. As we heard from the hon. Member for Stone (Mr Cash) and my hon. Friend the Member for Linlithgow and East Falkirk (Michael Connarty), these negotiations are a stage-by-stage process that require in this House stage-by-stage reporting from the Government and scrutiny. This debate is a marker for the months ahead, and this subject is one to which we must return.
Question put and agreed to
Resolved,
That this House has considered the economic implications for the UK of an EU-US Trade and Investment Agreement.