Transatlantic Trade and Investment Partnership (EUC Report)
(10 years, 5 months ago)
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Lord Tugendhat
That this House takes note of the Report of the European Union Committee on The Transatlantic Trade and Investment Partnership (14th Report, Session 2013-14, HL Paper 179).
Lord Tugendhat (Con)
My Lords, it is customary on these occasions to begin with thanks, and on this occasion I do so in a very warm manner. It is no formality. The committee has been exceptionally well served by its staff and its specialist adviser. I should also like to thank all in Brussels and Washington as well as those in this country who gave evidence, especially those who came from a long way to do so. Last, but above all, I thank my colleagues on the committee for their constructive contributions, their diligent attendance, their support and good company.
Normally, on these occasions, the chairman would talk about the Government’s response to a report but, as this debate is happily being held so soon after publication, the Government have not yet had an opportunity to reply. We shall therefore look forward with heightened anticipation to the Minister’s response to the debate. For my part, I will highlight certain aspects of the report on which I should particularly like to hear from him and which I regard as particularly important. My colleagues on the committee and others who have put down their names to speak will no doubt weigh in on the issues that they consider to be of particular importance.
I begin by reminding the House that today is the first anniversary of the 2013 Lough Erne G8 meeting which, under our Prime Minister’s chairmanship, launched the TTIP negotiations. Mr Cameron described them then as,
“a once-in-a-generation prize”,
that could be,
“the biggest bilateral trade deal in history, a deal that will have a greater impact than all the other trade deals on the table put together”.
Our central finding supports that view, and not just because of the massive figures for the potential economic benefits quoted by the Prime Minister—£100 billion for the EU and £80 billion for the US, figures which we suggest should be treated with a certain amount of caution. There are other reasons as well. One is that TTIP provides the European Union and the United States, while they still account for some 50% of world GDP, with an opportunity to set the template for international trade for a generation to come. In our view, this will encourage China to adopt a more co-operative stance to international trade negotiations, and we think that there is evidence of that already. We also believe that the deal should be structured to enable third parties, including developing economies, to join and to take advantage of the benefits. As I said, this is an opportunity to set the template at a time when the United States and the European Union account for 50% of world GDP. That is not going to last very long and if we lose this opportunity it will not recur.
Another reason why we attach so much importance to a TTIP agreement is that we believe that it could revitalise the transatlantic partnership by adding an economic dimension to the security link that already exists. Then there is the emphasis which is being placed in the negotiations on removing non-tariff barriers and building for the future. Tariff barriers are important, but in transatlantic trade non-tariff barriers are much more so. Their removal could provide a level playing field for manufacturing and service companies on both sides of the Atlantic that would lower costs and open up huge new opportunities for small and medium-sized enterprises as well as for large companies. Large companies know how to get round non-tariff barriers, but for small and medium-sized enterprises non-tariff barriers are often in effect an impregnable wall that is impossible for them to penetrate. Therefore, the emphasis being placed in these negotiations on the removal of NTBs could have very far-reaching effects.
By “building for the future”, I mean establishing a structured dialogue on regulatory matters within which barriers can be progressively removed by agreement over a period of years. This is what is meant in this context by a living agreement, and it is somewhat analogous to the construction of the European single market. I ask noble Lords to imagine a single market, or something analogous to it, that would comprise not just the European Union but the whole north Atlantic area: the United States and also Canada, with which an agreement was reached a short time ago. We believe that TTIP has massive potential of very great significance, both politically, in terms of the European Union and transatlantic relations, and economically, in terms of boosting growth and freeing world trade.
I now turn to some of our recommendations directed at the United Kingdom Government and at others. The first one I shall mention concerns the continued exclusion of financial services regulation from these negotiations by the United States. We say in our report that there is an issue of principle at stake here. In a negotiation between equals it is unacceptable for one party unilaterally to exclude a chapter proposed by another. Of course, there can be hard and difficult negotiations and there is no bounden duty on either side beforehand to reach an agreement. However, for one side at the outset to exclude a chapter of importance to the other is contrary to the spirit in which these negotiations are supposed to be taking place.
That said, and given the weight which the United Kingdom attaches to this issue, the committee does not think that either the United Kingdom Government or the European Commission has as yet made a compelling case for the inclusion of financial services regulation. We look forward to hearing from the Minister today and on other occasions stronger arguments than have been put forward hitherto. I should also like to draw the Minister’s attention to the story in today’s Financial Times on this subject, although I am sure that it has been already. Can he cast any light on that and say whether the FT has it right, as it generally does, or whether, on this occasion, it has it wrong?
My next point relates to agricultural issues, which do not get much coverage in the UK media. Our view is that there will not be an overall agreement unless understandings can be reached on such matters as genetically modified organisms and geographical indicators. These matters are also likely to engage considerable attention in Congress and the European Parliament during the ratification process once an agreement has been reached.
A flagship issue on which the Minister might also be able to report is procurement. This is likely to be a particularly hard fought issue as the European Union hopes to obtain commitments from the various states of the United States as well as from the federal Government. That has been achieved in the Canadian agreement to which I referred earlier—the provinces have signed up. I would be interested to know what price the Minister would give on whether the states of the United States will be as amenable in this matter as the provinces of Canada. As not all European Union member states apply European Union procurement rules as diligently as they should, does the Minister agree with our view that it would be very good for the single market and for this country if TTIP put pressure on them to do so, which would lead to a further development of the single market?
I turn to the industrial and service sectors that stand to gain from an agreement. We were very impressed by the way in which the automotive industry on this side of the Atlantic and in the United States put its case to us. It demonstrated the practical and public benefits that it believes will flow from the agreement and eloquently explained why some of the fears that opponents of the agreement have expressed are unfounded. We came across nothing remotely comparable in any other sector. I urge other sectors of the economy in this country, elsewhere in the European Union and in the United States that hope to gain from a TTIP agreement to look at what the automotive industry is doing and to follow its example.
I conclude with some political points, bearing in mind the fact that the key period for reaching a TTIP agreement, or at least for breaking the back of the negotiations, will be once the European Parliament elections are over, as they are, once the new Commission is installed, after the US mid-terms and before the US presidential election. In that connection, we express concern about the lack of progress in Washington on securing a trade promotion authority. Unless a trade promotion authority is secured, the negotiations are in danger of being kicked into touch before they even start. On this issue, the US Administration certainly talk the talk but have yet to walk the walk. We came across no sense of urgency in Washington on this matter and the impression one gains from a distance is that that sense of urgency is still lacking. I should be grateful if the Minister could cast any light on that.
What is happening on this side of the Atlantic is also somewhat disturbing. In Germany, TTIP has been caught up in the fallout from the Snowden affair. The two obviously bear no relation to each other. Germany would be a big net beneficiary of TTIP but the view has taken hold that resentment over Snowden is a good reason for creating difficulties on TTIP. In France, I understand that there are threats that TTIP will be held hostage to the completely unconnected affair of BNP Paribas’s problems with the financial regulators in the United States. I do not know whether the Minister can cast any light on that.
Meanwhile, in the European Parliament, many of the new populist MEPs are said to be hostile to a deal. Indeed, I read in the media that even the group that includes Conservative Members of the European Parliament will, if the Alternative für Deutschland MEPs join that group, have a majority against the TTIP agreement. I find it barely believable that Conservative MEPs should be in a group that is hostile to an agreement of this sort—an initiative launched by the Prime Minister. I should be grateful if the Minister could tell us something about that.
Against this background, the committee’s recommendations that the Government should put more weight behind their communications and diplomatic efforts in support of TTIP take on additional urgency. Within the United Kingdom, they should formulate a communications strategy around the promotion of TTIP that involves Ministers with sectoral responsibilities, not just Trade Ministers. They should include Treasury, Agriculture and Environment Ministers. All the rest should be involved. In the European Union and the US, it must mean the redoubling of the Government’s efforts to secure the agreement of others. I pay tribute to the efforts that have already been made. I was impressed with the work that our embassy in Washington has been doing, but I had the feeling—I think that my colleagues shared this view—that much of the heavy lifting is being left to the Commission and that the British Government, who have such a stake in the success of these negotiations, could do more.
A successful TTIP would be of great benefit to the United States and Europe as a whole, but to no one more than this country. It is a great international initiative, launched under British auspices and with all-party support in this country. Can the Minister convince us that the Government are putting the weight behind it commensurate with the Prime Minister’s words when he launched the initiative at Lough Erne? I beg to move.
Baroness Quin (Lab)
My Lords, I, too, very much welcome this debate and the fact that it is taking place shortly after the publication of our report, which means that the timing is appropriate. As a member of the sub-committee, I should also like to say how much I enjoyed working on the report with colleagues. There was a constructive and friendly atmosphere in our deliberations, perhaps in no small way due to the calm, wise and always good-humoured chairmanship of the noble Lord, Lord Tugendhat.
It is a good report that deals with a wide-ranging subject. It has a good balance between an overview of the situation and a lot of detail and examples from the various sectors likely to form part of the TTIP. The committee staff certainly deserve thanks for marshalling this huge amount of information and presenting it in a logical and readable way. I hope the report will be read in Parliament and outside, and by those involved in the negotiations.
As the noble Lord, Lord Tugendhat, has said, the significance of this agreement is huge. It has been compared to the achievement of the European single market, and in some ways it has obvious parallels with the work that was done on completing the single market. However, I know concerns have been expressed about it as well, and I should like to comment on these, as well as giving some examples of where I hope and expect the UK will do well out of the agreement.
First, the partnership is still at an early stage. I was quite taken aback to receive an e-mail from a friend in Germany, urging me to vote against TTIP through an online petition. I think that was partly because of the reasons the noble Lord, Lord Tugendhat, has already explained, which are currently part of the political climate in Germany. However, signing a petition at this stage, when one has very little idea of the details of the agreement, does not seem at all a good idea to me. We certainly need to see what comes out of the agreement before deciding whether it is something that is worthy of support.
However, concerns have been raised. My noble friend Lord Rosser, in winding up the debate on the gracious Speech last Wednesday, asked the Government to give assurances that there would be no weakening of employment conditions and the working environment as a result of this agreement. Concerns have also been expressed about environmental and phytosanitary standards. These are important issues to which attention needs to be given. However, I was very glad to see, in the excellent briefing pack prepared by the House of Lords Library for this debate, a publication from the European Commission that is more recent than our report, entitled TTIP Explained. It already has some reassurances on those issues. For example, it says very robustly,
“we need to ensure that our high standards in the areas of the environment, health and safety, protection of privacy as well as workers’ and consumer rights are maintained. Our high levels of protection are not, therefore, negotiable”.
That is an important statement to bear in mind.
Concerns were also expressed in the course of our inquiry about how much democratic oversight of the process there was. Indeed, one of our witnesses felt that the European Parliament in particular had influence over this process only at the very last stage. However, I do not believe that is true. The trade committee of the European Parliament has already issued papers and reports about TTIP, which have been presented to the Parliament as a whole. The European Parliament, like any other, has plenty of opportunities to initiate debates and questions—questions to the Commission and questions to the Council of Ministers—so parliamentarians who are interested in this issue will have many opportunities to raise it in the course of the negotiations. I certainly hope that will be echoed in work being carried out in national parliaments as well. Perhaps the sub-committee has set the ball rolling in this respect, but I am very pleased that there is an all-party group across both Houses that is very active in consideration of issues to do with TTIP.
I should also like to praise Commissioner De Gucht for his openness, both in his dealings with the committee and in his meetings with representatives of various business and consumer organisations and trade unions, which have a natural interest in TTIP. He has been very open with us in particular, and I hope that the new Commission will continue very much in the same spirit.
As to other concerns, one matter of considerable discussion in the committee was the concern about the investor state dispute settlement arrangements and whether these might have a harmful effect on Governments seeking to protect the public nature of the services that they were offering to their citizens. The Commission document is quite robust on this particular issue. It refers to the carve-out that already exists in international trade to enable the European Union to keep monopolies for the provision of public services at all administrative levels, including local councils, and says that similar concerns have been satisfactorily met in the trade agreement being negotiated with Canada. I hope that this is the case. It is certainly an issue that needs watching very closely during the course of the negotiations.
I turn briefly to some of the areas where I think there should be gains. The chairman, the noble Lord, Lord Tugendhat, mentioned the automotive industry, and certainly that industry has a great deal to gain from regulatory alignment and cutting the costs of production through agreement with the United States on a whole range of standards, without safety standards being jeopardised, which is obviously an important consideration. I agree with the chairman’s comments on financial services. This is potentially a very important area for the UK and I am interested to hear from the Minister what progress is being made with talking to the United States on this issue. It would be a great pity if potential gains to a sector where the UK has a lot to give were undermined by a very hostile US attitude.
Agriculture is also an area of interest to me. I hope that these negotiations will allow a resumption of the trade in beef and lamb and in some of the major agricultural products and processed foods in which we have a huge interest as a country. However, this agreement also has the potential to benefit small and medium-sized enterprises in the agricultural sector. One example I remember giving in committee concerned my frustration at not being able to send some excellent Northumberland cheese to friends in the United States. It is true that small speciality food producers find doing this extremely difficult, partly because of the expense of dealing with the FDA in the United States and getting agreement so that they can export their products, and partly because of the bureaucratic costs involved, both to the company wishing to export from here and to the recipients at the other end. It is a very frustrating situation. I can cite many other examples, including cake producers and speciality food producers, from regions up and down the country that have this problem, which I hope will be addressed in the course of these negotiations. Small and medium-sized enterprises, particularly those in rural areas, stand to benefit if we can get mutually agreed standards and cut bureaucracy and expense.
Finally, as important as the agreement itself is the fact that it is the beginning of a process for continued and permanent dialogue on regulatory issues between the two sides. That kind of process is vital, rather than simply relying on occasional trade talks or disruptive negotiations. That, for me, is one of the big potential gains of the TTIP arrangement. I believe that the United Kingdom has a particular role, being both an active member of the European Union and very close to the United States on many issues. Therefore, I wish the Government—and, if I may say so, their replacement Government after the next election—every success in pursuing these negotiations and, we hope, achieving a deal that is good for Britain, good for the European Union, good for the United States and good for world trade.
Lord Lamont of Lerwick (Con)
My Lords, I speak only as a member of the committee and only in order to express solidarity and agreement with the committee’s report. It was a real pleasure to be a member of the committee. My noble friend Lord Tugendhat has thanked our clerk Julia Labeta—who very deservedly has been promoted—our policy analyst Roshani Palamakumbura and our policy adviser Edward Bolton. All of them did a wonderful job in drawing together the huge weight of evidence that we had and helping us to draw the conclusions from it. However, my noble friend Lord Tugendhat deserves special praise for his chairmanship of the committee. He was a very balanced chairman and had a remarkable ability to draw out the different threads of the argument and to guide the committee towards proper and appropriate conclusions.
Like my noble friend, I believe that TTIP has huge potential benefits, to the advantage of both the United States and Europe. However, they are potential benefits; whether they will ever actually be realised is perhaps more of question than has hitherto been admitted. The benefits of an agreement are, of course, mainly about trade but they also extend to investment. Professor Baldwin pointed out in his evidence to our committee that, whereas US-Asian trade is very much just about trade, trade between the United States and Europe is also very intertwined with investment. An increase in trade between the United States and Europe is likely to lead to much more transatlantic investment in both directions as well.
The figures that were produced on the overall benefit of TTIP to the two economies were massive. A number of members of the committee queried the precise figures; they are quite right to be sceptical about the precision of figures of this magnitude as they are produced, but the dramatic impact cannot really be doubted. We also heard enough from our witnesses to banish some of the wilder fears about TTIP. There is no reason to believe that we are going to see social and environmental regulation being gutted, and there will not be reductions in consumer protection or a race to the bottom.
The hope, as my noble friend Lord Tugendhat said, is that TTIP will become a template for the future. In recent years, there have been many more bilateral negotiations, as global negotiations have stalled. This is hardly surprising, as Robert Zoellick made quite clear when the negotiations with WTO ministerial representatives failed at Cancun and he said, “I cannot do business with these people here. I will go and find people with whom I can do business”. That has increasingly led to a lot of different bilateral agreements. It is hoped, as my noble friend Lord Tugendhat said, that this very big bilateral agreement—if you can call one with 28 Governments a bilateral agreement, although it is two organisations negotiating together—might give impetus to restarting the global negotiations.
It also emerged that one of the thoughts in the mind of the United States Government was that concluding a successful trade agreement between Europe and the United States might act as an incentive to bring China back to the table and play a more active role in global talks once again. This was a good thought, although I think that all members of the committee would agree that when we met the representatives of the People’s Republic of China’s trade representation in Brussels, they were aware of but highly resistant to this thinking in the American position.
The point was made very early on and very quickly in our discussions that many of the issues in TTIP will be about non-tariff barriers, because tariffs have come down so much. However, it is important not to forget that there are some areas in which there are still relatively high tariffs, such as automobiles, textiles and clothing, which are very important sectors indeed. Non-tariff barriers are much more difficult to negotiate and, because of that, the issue seems to be not whether regulations as such can be harmonised but whether one can agree a path or process, into the future, by which future regulations, as they evolve, are based on a co-operative dialogue and increasingly harmonised.
The noble Lord, Lord Mandelson, drew a distinction between brownfield harmonisation and greenfield harmonisation for the future. I must say that this seems to be quite difficult and one must not be overoptimistic about it. There is a certain institutional lethargy here. Co-operation between regulators internationally is quite limited because regulators see their role as regulating within the jurisdiction in which they operate. Their responsibilities are often embedded in constitutional and legal structures. Regulators are often reluctant or afraid to trust the judgments of regulators in other countries, leading to a reluctance to have mutual recognition or passporting mechanisms that allow people who are approved in one country to operate in another. Moreover, regulators are often under a legal obligation to demonstrate this or that to national Parliaments. Finally, of course, regulators are often established and have powers for very strong political reasons that are not easily moved.
This was abundantly clear in the financial sector. As my noble friend Lord Tugendhat has said, there was absolute resistance in the US about the financial sector and strong opposition from US agencies, which do not wish to indulge in a form of harmonisation in the future. They were not having it, as one person who gave evidence to the committee put it. The fear in the United States seems to be that too much co-operation and harmonisation could cause Dodd-Frank to unravel. Dodd-Frank is umbrella legislation, so a lot of the detailed work will come later on in what we would call secondary legislation. The Americans are particularly anxious to make that fit for purpose in their country and for their conditions, and not to see it interfered with from abroad. For that reason, as the report says, we were not really very clear on what the Government’s objectives in the financial sector are. One could see certain things to do with insurance and Lloyd’s, but beyond that it was almost as though someone in the Foreign Office or BIS had just said, “What are we good at in the UK? We’re good at financial services, so we’ll have those as one of the objectives of this negotiation”. But boy, it ain’t going to get anywhere, and I would be interested to hear from the Minister how the Government see this.
Another difficult area is that of public procurement. The EU says that it expects no less than a quarter of the gains that might be made by Europe through an agreement to come from the benefits of opening up procurement, but that has to be reciprocal. We have a rather asymmetrical negotiation with 28 sovereign Governments, each with a public procurement programme, against one sovereign Government on the side of the United States. Plainly, the negotiation ought to involve the individual states of the United States as well, but it has been estimated that only 10 of them stand to gain, with just four, I believe, having indicated that they are prepared to participate seriously in negotiations. It was argued by one of our witnesses that transparency might be a middle way. If there was a public duty of transparency, that would force the opening up of procurement markets. However, we heard evidence of a shocking nature from other witnesses that transparency comes well after jobs in the eyes of many US legislators.
Finance and procurement are difficult areas, but automobiles, food and drink are more promising. As I said earlier, there is scope to reduce tariffs, as there is scope for the non-tariff barriers. It was suggested to us by the automobile industry that some manufacturers might move to the low-cost states of the United States in order to export back to Europe. As the noble Baroness, Lady Quin, highlighted, a lot of gains can also be made from the alignment of regulations, even on quite trivial things such as the sort of light you have to have on a car or a heavy goods vehicle indicating when the brake is on. All these little things, when added up together, can produce very considerable savings for manufacturers. An agreement in this area could not just stimulate trade but have a profound effect on the location of investment.
It was unfortunate that we did not hear more about energy in our report. One would have liked to have learnt much more about the possible future of exports of gas from the United States. Of course, what is happening in the energy markets in the United States could itself dwarf the impact of TTIP, because a lot of people will be attracted to trade and investment in the United States because of the lower costs, including the lower cost of energy.
TTIP is a very ambitious concept. It would be nice to say that it is an idea whose time has come. I hope it has. One day it certainly will happen but the difficulty is in making it happen in the near future. The important thing going forward is to advance the points that are most practical—to grab the low-hanging fruit—and then try to establish a path for future regulatory co-operation. As the noble Lord, Lord Mandelson, said, most trade negotiations are a snapshot and the trick is to turn the snapshot into a movie for the future.
Lord Liddle (Lab)
My Lords, I do not have much to add to the excellence of the report by the noble Lord, Lord Tugendhat, and his committee. It is a truly comprehensive report. I put my name down to speak in this debate because, as a strong supporter of open trade—as a believer that it is a driver of economic growth and of great help to poor people through lowering prices—I am very concerned, on the basis of my own contacts and workings on the continent, about the political mood towards TTIP in the European Union at the moment, and I think that a major political effort will be required if this objective is to be secured. At the end of the debate I would like to hear from the noble Lord, Lord Livingston, whether he shares this concern about the progress of the negotiations and the rising political opposition to TTIP, and what the Government propose to do about it.
Of course, trade negotiations are always difficult, as I learnt in the time I spent in my noble friend Lord Mandelson’s cabinet when he was Trade Commissioner in Brussels. The United States is an extremely difficult partner to deal with. Its political system is, if anything, even more dysfunctional than that of the European Union. Therefore, it is extremely difficult for an American Administration to get their ducks in a row to do a major trade agreement.
There is no certainty at the moment about when trade promotion authority, which is essential to this, is going to be secured—possibly at the end of this year, possibly early in the life of the next Congress. There is great uncertainty about that. There is a lot of opposition to trade agreements within the Democratic Party as well as on the part of the Tea Party on the right. The noble Lord, Lord Lamont, is right that the way in which the regulatory institutions in the United States operate is that a lot of them are independent, as it were, of the Administration and it is quite difficult to get them to agree to make progress.
We have the great advantage, which I think the Government have not properly recognised, of having a European Commission that has been pro-free trade and is a key driver on the European side, but in my opinion there is no natural majority on the Council for ambitious trade agreements. We have allies among the northern Liberals but we always have to carry Germany, and if we are going to get an agreement through we always have to carry Italy as well; the Italian vote in the Council is crucial on these questions.
I am concerned about the general political mood after the European elections, which the noble Lord, Lord Tugendhat, referred to: the feeling that what has gone wrong, the reason for the rise of populism on the left and the right in Europe, is not that Europe has not economically reformed enough in the direction in which many in Britain want it to: rather, that there has been too much liberalisation and globalisation and that the EU has partly contributed to that. That is a large part of the motive behind the support for populism and the rise of protectionism.
There are also specific reasons, which the noble Lord referred to, such as the Snowden and BNP Paribas affairs, but the last time that I was in Brussels attending debates on this subject I was amazed by the strength of feeling among NGOs on the question of whether environmental and food safety standards would be threatened by this agreement or—the point my noble friend Lady Quin referred to—on the question of the investor-state dispute mechanism and whether it could be used as a lever to, as it were, privatise our sacred public services in Britain, including the NHS.
What alarmed me most was to be told that the German and Austrian trade unions, which in European affairs I normally look on as pillars of common sense on matters European, both economic and political, are having serious doubts about the TTIP agreement. The worry that one has politically is that there are already populists in the Parliament, but if at the same time the trade unions, the Greens and the social democratic left are mobilising against this agreement, we will find that we do not have a majority for it in the Parliament.
That would be a great pity, because the economic gains as set out—although, like anyone else, I do not believe the precise numbers that are put on these things—are potentially huge. It would also be a pity geopolitically, as the agreement would revive trans- atlanticism. At a key point in history, when there is a real risk of America turning to Asia, this would be an opportunity to revive the transatlantic relationship. It could build something that might have great long-term potential if we can, as it were, establish a trade agreement that contains within it mechanisms for agreeing on regulation for the future. That would be a tremendous step forward in America and Europe’s ability to set global standards in a world where economic power is shifting against us. It would be very important for us and crucial for our ability in future to defend our interests and values in trade.
Also, the Government have said that TTIP is very important for their own objectives of achieving reform in the EU and, if they are re-elected, for building a case for support for the EU in a referendum. Do the Government share these concerns? What are they going to do about them? How are they going to address them? We have to try to reassure on some of the points that have been made on environmental standards and food safety standards. We have to find the means of providing reassurance. We have to provide the means of finding the assurance that we are not signing away special legal privileges to corporations that allow them to override national policies and insist on their entitlements to win contracts where we want to protect our public services. We have to find some way of providing those assurances.
If you are going to win support for trade agreements that involve very big economic adjustments—and there will be big adjustments in agriculture and textiles, and possibly in automobiles, as a result of this agreement—you have to have some social mechanisms in place to compensate for those difficult adjustments.
We face a potentially serious situation. It is of great concern, and I hope the Minister will be able to assure us that the Government are fully on top of this, are determined to find allies, and have a political strategy for ensuring that this important agreement goes through.
The Earl of Sandwich (CB)
My Lords, this has been a fascinating learning exercise for me, and I think for other people involved. The chairman has given us an upbeat introduction; I hope and think that he is not being overoptimistic, but that is his characteristic. It has been a privilege to work with him, not only because of his extensive knowledge of the EU and the United States but because he has been such good company, and it was a pleasure to travel with him and some of the committee to Brussels.
I was brought up in a non-government environment in which fortress Europe was a concept to be resisted because it was always going to be built at the expense of the rest of the world, notably the poorest developing countries. The notorious CAP we all remember, in the time of the butter mountains, was also the enemy because it would ultimately work against protectionist philosophy and destroy markets enjoyed by the old Commonwealth countries.
Time has moved on and the CAP has been slowly adapted to the needs of the environment. I have to admit that I am a very minor beneficiary of the CAP through the countryside stewardship scheme. The Cotonou agreement has made life a little easier for the African, Caribbean and Pacific countries in the transition to freer trade arrangements, which have to come. The new treaty will also bring many benefits in the long run to third countries, as our chairman has said, and as our report tries to demonstrate, although it is a difficult argument to make at this time.
The wild card is, of course, China, whose premier, Li Keqiang, is in London this week. We in the UK have a lot of ground to make up if we are going to attract more trade with China while retaining our proud position on issues such as Tibet, human rights and student visas. It seems very likely, as the noble Lord, Lord Tugendhat, has said, that TTIP will help us in this situation in the long run. My strongest memory in Brussels is of the Chinese envoy to the EU, Mr. Zhang Kening, stoically pretending across the table that TTIP might help the US and the EU, but that it would not be a suitable template for a multilateral treaty. This was not what we wanted to hear, but, as we state on page 23 of the report, the Chinese warned us quite solemnly that there were varying degrees of economic development around the world among WTO members, and each member would have to see whether the idea was “a good one or a bad one”. I felt during our inquiry that this is a critical issue in the negotiations: whether the treaty, whatever its advantages for the two parties, can also become a catalyst to international trade as a whole and provide a new impetus to the moribund Doha round, as the noble Lord, Lord Lamont, mentioned and I think the Government believe.
We all know that the US and some EU member states have their eye firmly fixed on China and the potential prosperity that we will enjoy and how it will react to TTIP, given its immense present and future influence in world markets. Our former Minister, the noble Lord, Lord Green, expressed the hope that China would become increasingly involved and that following the Bali agreement the UK should keep up the momentum in our own global interest. Equally, we must take seriously China’s message to us that it stands with developing countries when it comes to making concessions in the Doha round.
There is a school of thought, mentioned by the noble Lord, Lord Liddle, I think, that TTIP could be an economic version of NATO, softening the Atlantic relationship into one which will gradually lubricate the crevices of political alliances and opposing nation states. The disadvantages of this happy metaphor are obvious: that the EU and the US are still mainly concerned with themselves and their western concepts of freedom and democracy when in fact they ought to be opening out still further to a much wider world of partnerships and trade links.
That, in broad terms, is the position of the unions and the trade justice campaign, which see fair trade disappearing into a sea of mercantilism and the long-fought rights of workers dissolving in the erosion of core labour standards. They are also apprehensive of the investment and procurement provisions of TTIP which they say could, under this treaty, enable US companies to buy into much cherished institutions at home, such as the NHS.
I am sorry that we did not give a little more space in the report to the impact on third countries because the evidence was inconclusive. The TUC and others said that tariff changes in TTIP could have a negative effect on countries, such as Bangladesh, selling footwear and textiles and could devalue existing agreements. On the other hand, the noble Lord, Lord Mandelson, told us that most developing countries were not competing with the EU at the top end of the value chain.
Professor Baldwin indicated that the EU could provide development assistance which would compensate the losers, as it had in the past with free trade agreements. Perhaps the Government will comment on that. Another benefit was seen in the form of harmonised regulation: if TTIP succeeded in its aims, and the principle of mutual recognition was non-discriminatory, the rest of the world would be dealing with one set of regulations instead of two.
We cannot expect everything from this treaty. I agree with our chairman and the noble Baroness, Lady Quin, about the virtues of a living agreement. That is surely going to come and is something that I think the trade commissioner was advocating privately.
The usual channels have been generous in giving us time for this debate. We were concerned that TTIP was still an obscure subject. I have never seen the Chamber empty faster than today when our poor chairman rose to speak. It was certainly not a comment on him but shows the awareness of the subject. This is partly because the negotiations are still not transparent. Our report could help to spread the word, although it will hardly be at a popular level. We asked for a communications strategy and the new Minister, who is here, the noble Lord, Lord Livingston, appeared to agree—I hope he will confirm that—and told us that increasing public awareness of the treaty was a priority for Her Majesty’s Government. Perhaps he will comment on the relationship between that and the negotiations. Surely this is much more important in the public mind than the musical chairs going on in Strasbourg and Brussels.
Finally I thank Julia and Roshani and our specialist adviser, Dr Dennis Novy, among others, for their remarkable grasp of this quite complex subject and for making it intelligible to me and the army of readers who we hope will be scrutinising this report.
Lord Giddens (Lab)
My Lords, like my noble friend Lord Liddle, I speak not as a member of the committee that produced this report but as an interested and motivated outsider. I commend the noble Lord, Lord Tugendhat, on his excellent introduction, and also congratulate the committee on its report, which is detailed and thorough and brings some fresh insights to the issues. That is not an easy task because the European Commission has already produced a large amount of documentation on TTIP, its prospects and problems. I should know, because I have waded through most of it.
Probably the most famous thing that has ever been said about TTIP is the observation that it should be achieved on “one tank of gas”—a now celebrated statement but something that, as other noble Lords have quite plainly shown, is not destined to come about. The reasons were given by my noble friend Lord Liddle and others: this is a far-reaching enterprise, and we have to be in it for the long haul. A range of problems and issues, including those mentioned by my noble friend, have been identified by other noble Lords, too.
There can be no doubt, however, about the potential benefits of a developed version of TTIP if it could be realised. The facts and figures that are bandied about are, as has been said by other noble Lords, estimates at best, although this is another area where the Commission has done a good deal of valuable and detailed work. Yet we all know that the potential positive effect on the EU and US economies is huge. We all know it is not a zero-sum game and that it will transfer to other countries in the world. I strongly support what the report says and other speakers have said about involving third countries in the enterprise. As the report quite properly points out, such an agreement could be a vanguard model for trade agreements elsewhere.
Just as important, as other noble Lords have already observed—I think noble Lords have said most, but not quite all, of the things I am going to say—it could breathe new life into the transatlantic relationship. Therefore this goes well beyond the purely economic level. We all know what is happening on the edge of Europe, in Ukraine. We can all see that we need, in some sense, to re-establish the West, and this could be a mechanism that will help us to do so.
For these reasons, it is worth keeping option C.2 in the Commission’s recent assessment report at the forefront. It is the most ambitious in the range of options analysed therein, but it provides an overall framework. We should certainly try for the low-hanging fruit but, at the same time, sustain an overall framework which supplies an overall approach. The Commission emphasises—and the report says this, too—that such an agreement would have to be of a “living” nature. Regulatory issues that could not be resolved early on should form part of a continuous dialogue that would evolve and deepen over time.
Other noble Lords raised issues of environmentalism and environmental protection. This is the nub of many of the objections that my noble friend Lord Liddle mentioned, some of them coming from Germany. I am an environmentalist. I have written extensively on climate change, but I am strongly positive towards TTIP precisely because it centres on regulatory issues. It enforces a dialogue that can be of value in Europe and the United States. I will give an example—an illustration—of the precautionary principle. This principle is very important in some contexts in Europe and is enshrined in European documentation, but it is a questionable idea. To me, the precautionary principle simply vocalises, when put in this way, one simple everyday saying: “Look before you leap”. Yet there is always an opposite to every saying, which in this case is: “He who hesitates is lost”.
What we need in Europe is a discussion of the scientific balance of risk and opportunity—and for me the balance always has to be assessed in a specific context. That is the reason why the kind of dialogue that is partly enforced by the progress of TTIP, if it is seen and brought to public attention in the right way, could be enormously fruitful rather than a barrier.
I will briefly follow up what noble Lords have said and ask the Minister three sets of questions to which he might consider responding. As other noble Lords have said, there has been a lot of discussion across Europe—again, some of it pretty hostile—about the investor-state dispute settlement mechanism. The problems, to my mind, are very well analysed in the report. Will the Government be reconsidering their position on this issue? If so, in what way? Does the Minister agree that this question especially needs to be given a full and open public hearing? If you look at it in some detail, it exemplifies just the issues that I was talking about. It is not, I think, purely a negative set of arrangements once it is unpicked, but it needs to be unpicked.
Secondly—other noble Lords have asked this—what is the Government’s view of the state of play on the key question of the inclusion of financial services in a trade deal? Can the Minister comment on newspaper reports that a “draft offer”, as it is has been put, of the EU’s proposals to the US has already been decided on that will omit reference to financial services? Is there any evidence that this is the case—because, as other noble Lords have quite properly remarked, the issues here are obviously huge? We all know about what the European view describes as American intransigence. I think it is more complex and interesting than that, although I recognise all the problems on Capitol Hill and the devolved nature of the United States that is crucial to all of this.
Thirdly, and finally, what further efforts should be made both in the UK and across the rest of Europe to bring TTIP to public attention? It was quite appropriate that the Chamber just emptied when the issue was mentioned. This is a gigantic scheme, after all. This is world historical. It is a very odd conjunction. This is one area where the Lords report is especially good. What it says, as everyone here who was on the committee will know, is that,
“insofar as a public debate on TTIP exists, EU member states are losing it”.
One of the main impulses, as has been said, of some of the populist parties in Europe is precisely a return to protectionism. A proper and detailed discussion in public of the benefits of TTIP could surely contribute positively to countering these isolationist tendencies and the resentments that fuel them—but how would such a debate get off the ground? How would it be organised, what role should the Government play and what role should civil society groups play? It would clearly have to go well beyond the purview of Governments themselves.
Lord Trimble (Con)
My Lords, I join other members of the committee in thanking the staff attached to the committee for the help that they gave us in producing this report. I would also like to express my appreciation of the chairmanship of the noble Lord, Lord Tugendhat, who handled these very complex issues in a skilful manner, as noble Lords will have seen demonstrated by his comprehensive introduction to this report this afternoon. That enables me to cherry pick, as I want to go to one particular bit of evidence that we received which I find absolutely fascinating.
This may not be news to other members of the House or the committee, but it was considerable news to me. I refer to the evidence of Professor Richard Baldwin, the director of the Centre for Economic Policy Research, who described to us the main factor behind what he called the sea change that has taken place in international trade over the past two decades. I will paraphrase what he said in explaining that sea change. Professor Baldwin said:
“Around 1990 the ICT revolution changed the nature of trade in the sense that it allowed stages of production that were done within a factory to be dispersed overseas”.
In a sense, that was nothing unusual: it had been happening between the rich countries—between the US and Canada, and with western Europe and the Common Market and so on. However, apparently, what changed since the 1990s was that that could happen along a north-south axis, between the US and Mexico, Germany and Turkey, Japan and Thailand. He said:
“It was a global change, driven by the ability to co-ordinate complex activities overseas”.
What was happening was that there was,
“not just goods moving between production bases. It was that ideas, knowhow, training, capital and people were moving inside rich company factories”.
At a later stage—on page 28 of the evidence document—the professor said that,
“the know-how is staying inside firms but crossing borders”.
and that possibly the best way to think about that is that,
“the notion of national competitiveness or comparative advantage … has been denationalised”.
That is a fascinating aspect of globalisation, which I am sure in general would be a good thing.
However, as Professor Baldwin says, that development requires particular forms of discipline. The firms are connecting across borders, so things such as infrastructure services, telecommunications, capital flows, investment insurance and intellectual property right assurances are transferring and that itself needs particular assurances to be built in so that companies can proceed to do that.
Apparently, once that started, the nature of some trading agreements changed. Those had developed through a series of bilaterals between Japan and its factory economies and between the US and its factory economies. The nature of this,
“makes it sensible to knit together some of these agreements”.
That is basically what is happening in the large agreements we are seeing, starting first with the Trans-Pacific Partnership—TPP—which started to knit those things together. TPP is, in effect, knitting them together under a US template, and the European Commission realised that in these circumstances there needed to be a European template on the table as well. That is the reason for the sudden emergence of TTIP, so that is the background to what is going on.
The second major point that the professor made, which was touched on by other noble Lords, is that a lot of what is happening here aims for regulatory convergence or harmonisation. That process has started and is going on. However, as was pointed out by the noble Lord, Lord Lamont, there is considerable bureaucratic resistance to that convergence and harmonisation, as national regulators are reluctant to see powers move from them to other ways of doing things. As the professor said,
“That is the best that TTIP will do: start a process in which, first, the regulations stop diverging and the existing ones start to move, or we get mutual recognition. That is a process, and the best we can hope with TPP is to set in place a framework for … going forward”.
The big thing is,
“starting a process, so I do not think it will be done at the end of this year or anything”.
He said that in a sense one should not be concerned about not meeting those targets; the important thing is that people are discussing issues and making progress in a dialogue, and,
“a lot of this stuff can be done without signing a free trade agreement”.
I can perhaps see how those comments chimed in with some of the evidence we got from the City, particularly from TheCityUK. Noble Lords will find that on page 37 of our report, which deals with the existing provisions for a dialogue on regulatory matters between Europe and the United States. That existing dialogue is criticised, and those criticisms are set out in the report at that stage. TheCityUK said to us that it was well aware of the reluctance of the Americans to put financial services on the table and the way in which they wanted to ensure that the Dodd-Frank Act was not in any way reopened. I hope I am accurately repeating what TheCityUK said to us—they had no great expectation of there being any significant move in terms of enabling financial services to be more liberalised. However, what they want is an effective and continuing negotiation or conversation between Europe and the United States. This might be the most important thing that comes out of this.
Reference has been made to having a living agreement. Reference has also been made to the evidence we received from the noble Lord, Lord Mandelson, who used quite a few interesting metaphors. We have had the noble Lord, Lord Lamont, talk about his phrase about great trade agreements being a snapshot and what we really wanted was not just a snapshot—a picture taken at a moment in time—but a movie that is going on over a longer period of time. I have no great difficulty with the noble Lord’s reference to brownfield and greenfield. When he was referring to the difficulty of getting regulatory convergence in some areas where there were existing regulators, he likened that to a brownfield site, which is much more difficult to work with. It is much easier to work with greenfield sites—sites where there are no existing regulatory arrangements. The noble Lord, Lord Mandelson, at one point referred to moving into virgin areas where a more comprehensive set of proposals could be made. I am sure that will be necessary. I suspect, too, that the process that Professor Baldwin described about the way in which competitive advantage has been denationalised, in which firms are transferring know-how across borders into third-world or developing countries is a good thing and one which needs to be encouraged.
If we can get TTIP with all the bells and whistles, good; if we cannot, it is important we should not give up and say “Oh dear, opportunity lost”. We should ensure there is an effective dialogue put in place which can then be built on over time.
Baroness Henig (Lab)
My Lords, as a member of the EU sub-committee that undertook the inquiry, I draw your Lordships’ attention to my declaration of interest in the report.
I start by thanking the noble Lord, Lord Tugendhat, as others have done, for his expert chairing of the inquiry and particularly for ensuring, with his customary good humour, that we focused our minds on the central and strategic issues that we needed to discuss. Given the complexities involved that we have already heard about and given the wide range of issues that we could potentially have covered, that was no mean feat. The report bears all hallmarks of his erudition, long experience and great expertise; we all benefited from that. That is what I should like to put on record. I also extend my personal thanks to our special adviser, the committee clerk and the policy analyst, whose help and guidance I greatly appreciated.
We in this Chamber are all well versed in international trade and investment issues. I am sure that is true, looking around. Where do we start to explain to non-experts and to the person in the street and on the doorstep what TTIP is all about, what it might deliver and why it is potentially so important? A good place to start might be with a very current analogy with which some of your Lordships may be familiar: the World Cup. In Brazil at the moment, there are 32 teams drawn from across the world, very different in style and approach but all playing to the same rules on identically laid-out pitches. Noble Lords might ask what that has to do with TTIP. Of course, in the field of international trade and investment, countries and trading blocs have their own individual rules and regulations. The United States has in place a structure within which business and commerce operate, and so does the EU. Unfortunately, the structures are not the same and that causes difficulties, but the important point is that the rules and regulations that are in place have been derived over decades from political debate and from public participation.
As between the United States and the EU, there are many similarities in both approach and ethos. Therefore, the importance of TTIP, as the noble Lord, Lord Tugendhat, and my noble friend Lord Giddens, have both emphasised, is that it is an ambitious but timely attempt to forge as many common sets of rules and regulations as possible between the US and the EU, which together account for nearly half the world’s GDP. It is important that we do not lose sight of that overall vision in the detailed, myriad discussions about individual issues and categories of product—or, indeed, in the labyrinthine issues about investor-state dispute mechanisms, about which I listened at great length, although I am not absolutely certain even at this moment whether I fully understand them.
As our report points out, TTIP,
“has both a strategic dimension, and a geopolitical one … One of its most important legacies may be the establishment of a structured dialogue on regulatory matters between the EU and US sustained into the future”.
It is important that we point out that that agreement would not be at the expense of the rest of the world. Experts from the Centre for Economic Policy Research predict that it would have a positive impact on worldwide trade and incomes, and that it would be pivotal to the progress of other multilateral initiatives, including the Doha round.
We have already heard from the noble Lord, Lord Liddle, that by no means all political groups in the EU support this vision. We know, for example, that the Green parties are campaigning strongly for policies of self-sufficiency and that UKIP wants the UK to go it alone and unilaterally draw up its own rules and regulations. We have also heard from the noble Lord, Lord Tugendhat, that, curiously, Conservative MEPs have joined the Conservatives and Reformists Group, which looks as though it will strongly oppose the TTIP agreement. Therefore, we have the most curious spectacle of Conservative MEPs in Europe opposing their own Government’s policies on TTIP. That really is bizarre. I do not suppose that the Minister wants to say too much about it, but I feel that I have to point it out.
Further afield, China is watching all this very carefully. We know that it plays to its own government and Communist Party rules, and we know that it does not have too many public debates about trade agreements. We know, too, that it does not tolerate pressure groups, such as Friends of the Earth. None the less, assuredly, China will fall in with whatever trade structures are most advantageous to its worldwide economic interests. Therefore, even if TTIP does not achieve all its objectives, it will, as speakers have already emphasised, give the opportunity for the EU and the United States to lay down a template for future trade and investment agreements, and other big powers, such as China and India, will have to take note of that. That is one of its big, important points.
Our report makes clear the ambitious scale and complexity and the difficulties involved in these negotiations. However, we have not heard too much—and we ought to raise this—about substantial progress. I think that there has already been a lot of substantial progress, which we should be celebrating and highlighting. For example, on the EU side, there is a lot of common ground among members and agreement on a great majority of issues. There is a clear view of what the EU wants from America. For me, what is really significant about all this is that Britain is playing a pivotal role in the negotiations, because of its strong links with the United States and its membership of the EU. Our report again points that out.
Everything that we read or hear about Britain’s role in Europe at present is depressingly negative, yet here we have the British Government playing a really important central role in a set of groundbreaking trade and investment negotiations, which could have a major impact for the rest of this century. We also see Britain working with EU partners, forging strong relationships with France and Germany and shaping the negotiations with the United States. Should we not be hearing more about this? Is it not the answer to UKIP, to Conservative MEPs and to the Brexit advocates who want to pull us out of Europe as quickly as possible?
Would we really want to be Norway, Switzerland or Turkey at this point, watching anxiously as the negotiations proceed, wondering how they will impinge on our own interests, working out how we can tap into any benefits that might result and not get left behind? Of course we would not—it would be like being relegated from the Premier League. Who wants to relegate themselves voluntarily from the Premier League when TTIP offers so much for the development of trade and industry in the coming decades, for jobs and new opportunities, and when we in Britain are playing such a central role in helping to shape it? I really think that we should be hearing more about this, so I ask the Minister, as I asked him when he came before the committee: how are we spreading the word? What is the Government’s communications strategy for this good news story? Who is spreading the word about what is at stake, the role Britain is playing and how small businesses and consumers are likely to benefit if a deal is concluded? I should like to hear, as other speakers have already raised, what is planned in this area. What are the CBI, the Institute of Directors and other business and trade bodies doing to spread the word? This is not just a government issue; a number of organisations should be sharing the load of explaining what is going on and what is likely to result.
We are looking at the prospect of international trade being made easier by the adoption of common rules, the lowering of trade barriers, the cutting of bureaucracy and regulations and the liberalisation of trade in services and public procurement. All that is not just good news for established businesses or for global corporations; I agree with the noble Lord, Lord Tugendhat, when he said that it is also good news for ordinary people. For example, there are those who buy and sell on the internet—what we might call the eBay economy—which is spreading very fast in this country. It really matters, yet, as the noble Earl, Lord Sandwich, said, if you stopped 100 people walking down Millbank this afternoon and asked them about TTIP, almost none—probably absolutely none—would know anything about it. That is a major problem and we need to change it.
What are the prospects for success? We know that there are political constraints on both sides. In the United States, there will not be much progress this side of the November mid-term elections, and that probably gives a window of about a year before American attention switches to the forthcoming presidential elections. In Europe, a new Commission will have to settle in, so it seems that 2015 will be the critical year for making progress. Again, of course, there will be constraints that hold things up. In Europe it will be having to clear every decision through the Commission; in the United States it will be what can be agreed by Congress and what has to be reserved for the individual states, which, we can be sure, will jealously guard their own power and interests. So progress is likely to be slow and patchy.
We have already heard that the United States wants to exclude financial services from any deal. We know about European sensitivities over genetically modified food and the protection of countries’ cultural heritage. Yet it is possible that negotiations will be more successful than we fear, and that momentum will gather pace. Assuredly, there will not be agreement on everything, but to return to my first point, if it proves possible to lay down common rules in a number of areas and if procedures are agreed for future negotiations, that will be a big win. It will in turn help to lay the basis for future trade and investment agreements, not just between the EU and the United States but across the globe. It is because of that vision and that prospect that we need to do everything we possibly can to ensure that these negotiations are successful.
Lord Radice (Lab)
I congratulate the noble Baroness, Lady Henig, on an excellent speech. I, too, speak as a member of the sub-committee, but also as a very humble student of a very complex subject. It is wrong to say that everybody in this room knows all about trade. I do not believe that to be true. In fact, if one did a poll of the House of Lords and asked what TTIP was, I think we would find that almost nobody would have any idea at all what it is. I have been asking my friends, most of whom are reasonably intelligent, and they do not know what it is. That is an issue and one which we raised, I think rightly, in our report, and I want to return to it, but I begin by thanking our exceptionally able clerk, Julia Labeta, who has gone on, not necessarily to better things but to other things; our very expert specialist adviser, Dennis Novy; and our indefatigable policy analyst, Roshani. I will not say her surname in case I get it wrong and she feels offended, so I will call her just Roshani. Like everybody else who has spoken, I pay tribute to the wise, extremely skilful and experienced guidance given by our chairman, the noble Lord, Lord Tugendhat, who was an EU Commissioner for many years. He helped produce a comprehensive and clear report on this very difficult subject.
One thing that probably would be widely accepted in the House of Lords, and indeed in the other place, is that trade is crucial not only to production, growth and jobs but to prices and consumer choice. Therefore, what happens to trade is important. Part of the background to the TTIP idea is the failure over many years of the Doha round’s multilateral approach. It has not succeeded. We have also had the world recession, out of which we have only recently emerged. It is in this context that a deal between the United States and the EU, which between them account for nearly half the world’s GDP, as we point out in our report, could provide a substantial stimulus to world trade and growth over a number of years. We mentioned the figure of £100 billion. We should be careful about figures, but we point out that the gains for such a deal could be substantial. We mentioned £100 billion a year for the EU, £80 billion a year for the United States and £10 billion a year for the United Kingdom. I do not know whether those figures are right as it seems to me that we have made some fairly heroic assumptions, but clearly we are talking about a very big agreement indeed.
As the chairman pointed out, the focus of this agreement is new. It is not centred on getting rid of tariffs, although that could be very helpful given the massive trade flows across the Atlantic, but tries to reduce non-tariff barriers and promote regulatory co-operation. That has never been done before, certainly not on this scale. Therefore, we are talking about something very big and very difficult. It is no wonder that the idea of a living agreement has emerged, because we are not going to get an agreement straightaway. Therefore, we need to have a procedure that will ensure that we go on talking—that is what a living agreement amounts to in my view—and that is very sensible and realistic.
Our report also makes the important point that a deal on such a scale could set standards for the future in trade and investment agreements and could therefore be important for our relationships with emerging superpowers such as China and India. It is worth repeating what the chairman said in that regard. In that sense, TTIP has a strategic dimension, especially if there is also provision for allowing, and indeed encouraging, third parties to participate, as we suggest in our report. The noble Lord, Lord Mandelson, said that TTIP should not be,
“a closed shop for Europe and America to serve and suit each other but an open architecture that others can join and emulate”.
That seems to me a rather good description of what the Government, the European Union and America should be trying to do.
The UK Government are to be congratulated on their involvement in this matter. They rightly attach importance to TTIP. It is no coincidence that it was launched a year ago, as the chairman said. As our report emphasises, the UK stands to benefit considerably from a successful deal. We discussed some of the priorities, which I shall not go into at this stage because other Members have mentioned them.
I will, however, say this about the financial sector: as we found out on a frozen trip—I am talking about the climate—to Washington in February, there is no enthusiasm in the US Treasury for involving the financial sector in any kind of deal. We will have to live with that; it may well be that we have taken a realistic position but we will, no doubt, hear from the Minister about that. There is, however, a case for involving the financial sector, and the chairman was right to say in principle that it is a pity that one major partner just says that it is not an issue worth discussing, when it clearly is.
I repeat: the fact that we are in the EU is important for us. It makes us far more influential as a member of that bloc representing 28 member states and 500 million people than if we as a single country were trying to influence the United States. Let us say that loud and clear. It is something that the Government should say. It is very important indeed, when embarking on such an enormous venture, to point out that we are able to be involved only because we are a member of the EU.
I want to say a final word about the negotiations. They were launched with tremendous fanfare, but as everyone has been saying there is no certainty of success. The noble Lord, Lord Lamont, in an excellent, wise and skilled speech, pointed out just how complex all this is. The first round of talks was in June 2013 and they have continued every few weeks; there is a further meeting in July. We had excellent negotiators on both sides—Karel De Gucht for the EU and Michael Froman for the United States. Both are brilliant men, but technocrats, however brilliant, cannot carry the weight of negotiations entirely by themselves, which is what we are asking them to do at the moment. TTIP also needs the energetic support of individual Governments and individual Ministers at the very top level, as well as at the level from which we will hear this evening. That is true not just in the United Kingdom but elsewhere.
TTIP will also need the backing not just of the big corporations—we have been speaking to the automotive industry representatives, and there is no question that they back it strongly—but of trade unions and civil society. I was pleased that Karel De Gucht seeks to reassure Europeans that high levels of environmental safety and the safeguarding of workers’ and individual rights are not on the table for negotiation. A lot of disinformation is going on, but those issues are not on the table for negotiation.
As I said at the beginning, there has been little public interest in TTIP at all, but in so far as there is a public debate, member states are losing it. I quote from our summary, which is absolutely right:
“Proponents have yet to articulate the purpose or possible gains from TTIP in a compelling way”—
the name itself is a turn-off—
“or offer convincing responses to legitimate concerns”.
One example of legitimate concerns may well be the investor-state dispute settlement, or ISDS, on which De Gucht is holding a public consultation. That is a difficult issue on which we ought to try to reassure those who are arguing strongly against it.
As the chairman pointed out, from our investigations we have drawn the conclusion that there could well be a window of opportunity to make significant headway in negotiations after the installation of the EU Commission and the mid-term elections in the United States but before campaigning for the presidency begins. This could be the moment when politicians on both sides of the Atlantic seek to mount a concerted effort to face up to the outstanding issues, and to mount a campaign to make the public aware of potential benefits. We are right to take a slightly warning tone in parts of our report that without such political impetus the opportunity to make substantial progress might be stalled or even lost. If TTIP negotiations are to be successful, the watchwords must be carpe diem, which roughly translated for the non-Latinists means that we have to seize the day.
Lord Jopling (Con)
My Lords, this report has been extremely well received all round. I hope very much, when the Minister comes to reply on behalf of the Government, that he will be able to tell us that the Government have received it as warmly as it seems to have been received everywhere else. Extremely warm tributes have been paid both to our staff and in particular to our chairman. I want to endorse that as strongly as I possibly can. We have been extremely fortunate, both in the staff, but especially in the chairman’s experience as a Commissioner in Brussels, which has been absolutely invaluable.
I am in no doubt that there are major economic and trade gains to be achieved as a result of a successful negotiation of TTIP. However, of those people who put figures on this, I hesitate a little. How much the benefits will be, or how soon they may come, is an unknown and is only subject to pious hopes and, in my view, random speculation. For instance, a great deal will depend on the negotiating skills of the Commission in the months and years that lie ahead of us. In my experience, the negotiating skills of the Commission certainly used to be patchy. I can remember just a few years ago I aroused the wrath of that lovely man who many of us miss so much, the noble Lord, Lord Grenfell, when he had been told that I had been addressing a large audience in Brussels. I had been recalling the period when I was a member of the Agriculture and Fisheries Council of Ministers and said there were some members of the Commission whom I would not feel comfortable asking to go to market to sell a cow of mine.
Quite frankly, the Government must keep a very close eye indeed on this negotiation as it proceeds to ensure that the Commission is not giving away what it might be tempted to give away to get a deal. We should understand that the Americans do not take prisoners in negotiations of this sort. The noble Lord, Lord Liddle, referred to this, and he was absolutely right. It has been referred to earlier and the noble Lord who just spoke referred to it. I was deeply shocked by the take-it-or-leave-it attitude of the members of the United States Administration from the Treasury who we met. They refused to accept that financial service could be part of the negotiations. As my noble friend the chairman said, this approach is just unacceptable in a negotiation of this sort, and I hope that the Commission will be extremely tough in saying that it is unacceptable.
As has been mentioned, our report makes it clear that the largest part of an agreement will be on the issue of non-tariff barriers; they are much more important than the relatively low level of trade tariffs. The noble Lord, Lord Brittan, who came to give evidence to us, pointed out that the previous negotiation failed because an agreement on non-tariff barriers could not be arrived at. My great concern with regard to non-tariff barriers is that a successful negotiation might not give us everything that we would like because of the federal structure of the United States and the underlying structure of states’ rights. As I kept saying during the course of our inquiry, there is a danger that an agreement could be made that would be made effective at federal level but would not be fully applicable at state level. The danger is that individual states would be free to cherry pick the details of an agreement, endorse what is to their benefit and ignore the less attractive ones. This would be especially difficult over procurement issues, although procurement fairness within the EU on this side of the Atlantic leaves a certain amount to be desired and is nothing for us to be proud of. The reference in paragraph 136 of the report to the example of the Canadian agreement with the European Union is relevant here. The final sentence of that paragraph states:
“The Canadian provinces had thus ‘participated fully’ in the negotiations, which had resulted in access to an estimated 70 to 80 per cent of the Canadian procurement market between the federal government, the provinces, and the large municipalities”.
I think that we ought to apply ourselves to seeing what we could adapt from the Canadian agreement.
I will say a word about some of the agricultural problems, and here I declare an interest as a recipient of funds from the common agricultural policy. When this negotiation started, people were saying that agricultural problems could be among the biggest stumbling blocks, but it seems to me that at last Europe has begun to dismantle some of its headstrong opposition to, for instance, genetically modified crops. I understand that agreement has been reached in the past week or two that will mean that for the first time, quite rightly, properly controlled genetically modified crops will be grown in Europe, and that is welcome. However, the United States should realise—I am saying this for its benefit—that opposition to, for instance, genetically modified crops and growth-promoting hormones is really contrary to the science and is a straight policy of trade protectionism. When Europe banned artificially enhanced hormone treatment for the production of beef, I was the only Minister who voted against that ban. It was done in spite of the scientific evidence. It was evidence that the members of the Commission had requested, and when they got it, they suppressed it because they did not like the advice they got.
People should understand that these hormones appear naturally in beef, whether artificially enhanced or not; they are a natural function and natural part of beef. Quite frankly, it is impossible to tell from a piece or side of beef whether that animal was given artificial growth-promoting hormones—I say artificial but they are exactly the same as the natural ones in the meat. It is impossible to tell whether they were implanted in the beef or not and, quite honestly, the European Union’s opposition is nothing more than good old-fashioned luddism.
Here again there are lessons to be learnt from the Canadian agreement. During our discussions and evidence-taking, we came across relatively few outright opponents of the negotiation and, principally, they came from among the representatives of organised labour. However, I felt that the line that the American trade unions took and their approach, while understandable, were largely driven by fear of the unknown and that they were preparing for something that might be unattractive.
I was really surprised, when we went to Washington, that TTIP was far from the front of the minds of some members of the United States House of Representatives and the Senate. I think it was the noble Baroness, Lady Henig, who referred to the street outside and the noble Lord, Lord Radice, who referred to other places in the United Kingdom, where not many people know what a TTIP is. It was not terribly different on Capitol Hill.
Understandably, we now have a lull in the hard phase of the negotiations themselves. This is totally understandable with the elections we have just had in the European Union and the mid-term elections on Capitol Hill coming in only a few months’ time, together with the lame-duck Commission, pending the appointment of a new one at the end of the year. However, come 2015, early next year, there will be an 18-month window to come to an agreement. I believe that the President will be very keen indeed to achieve a settlement over TTIP in the final months of his presidency. The stakes and the benefits to his inheritance are very great, and I think he will go very strongly for it. My concern is that, if there is a totally Republican Congress on Capitol Hill, it may be tempted to play silly games in order to thwart him. That would be the greatest misfortune. It is vital that Congress gives the President the fast-track arrangements, which mean it cannot pick from the agreement but has to either take it or leave it. We were assured when we were there that Congress would give fast-track permission to the President, but the last two years of a presidency can sometimes give rise to actions in all parliaments which are not exactly logical.
I just hope that, in the 18 months of this window from the beginning of next year, we can achieve an agreement which will be for the benefit of both the Americans and Europe—including, in particular, the United Kingdom.
Lord Jones (Lab)
My Lords, it is good to follow the insightful speech of the noble Lord, Lord Jopling, and I most sincerely congratulate the noble Lord, Lord Tugendhat, on his wise and thoughtful introductory speech. I remember his high competence as a Minister in another place, but that was a generation ago. We are older now and parked in your Lordships’ House most patiently. The challenges for British industry today are ever greater as China, India and other nations waken and assert themselves in highly competitive global trade. Indeed, the emerging superpowers may elbow us aside.
I noted the quite deliberate deployment in the report of the words “strategic”, “ambitious” and “template”, and from my own particular point of view the key words “employment” and “prosperity”. Yes, I believe that the member states are losing it, and yes, that vehement opposition might always be expected from the United States concerning finance. Recent publications about the historic Bretton Woods conference illustrate the predisposition of the United States to insist on its own way. Indeed, the late, great Maynard Keynes, ill and isolated as he was, found the going at Bretton Woods more than tough. Let us hope that this trade agreement will be easier, but the great republic is somewhat imperial now, and the chairman of the committee who brought forward this report has given us a shrewd assessment that is far from sanguine when looking at the issues ahead.
Surely the committee was right to emphasise the word “geopolitical”. With luck, the Transatlantic Trade and Investment Partnership will help to rebalance the relationship between the United States and Europe. Referring to Dr Hamilton’s evidence, the old link of NATO is perhaps a little wobbly. In the list of witnesses, one can see the name of Edward Barker, the head of the Transatlantic and International Unit at BIS. He is surely an able civil servant who can assist Ministers in realising our objectives.
It is heartening to see that the report champions our motor industry. In industrial Deeside in north-east Wales, we have a Toyota engine plant of considerable size, great excellence, and with even further potential. It is well managed, and it would be advantageous to it if the proposed partnership could prosper. But I would posit the question: what of our great aerospace industry and its place in the report? Will the Government make a commitment to championing the British aerospace industry and ensuring a level playing field on which it can compete? Last November, Washington State announced that Boeing would receive a record $8.7 billion package of tax breaks. There must be a risk that an intervention on that scale will severely distort the market in Boeing’s favour and thus limit the ability of others to compete effectively. What assurances can the Minister give that this issue is being addressed by the European Commission and the WTO? Do the Government agree that our aerospace sector needs a level playing field on which to compete? How will the Minister help?
The signals I have had so far from the Secretary of State, Mr Cable, have been helpful. The champion of British interests in the Toulouse headquarters of the giant company Airbus, the great and successful rival to Boeing, is the highly respected and successful Mr Tom Williams, the executive vice-president of programmes, who may well be known to the Minister; he may well have met the Minister and had positive talks.
I would like to think that this report will help Tom Williams in his and Airbus’s strategic objectives because I know that in this nation Airbus employs directly some 14,000 people in two great plants and tens of thousands of other workers are engaged in work related to Airbus. Successive Prime Ministers—Mr Blair, Mr Brown and Mr Cameron—have gone to one of the greatest aerospace centres in the world, the Broughton plant in north-east Wales, where some 7,000 people are directly employed. This is a reservoir of great skills and great achievement. The industry in Britain now earns in excess of £8 billion a year. It is a colossal contributor to prosperity and employment and I hope very much that in his thoughtful consideration of this debate the Minister will be able to give me some assurances.
Lord Stevenson of Balmacara (Lab)
My Lords, I congratulate the chairman, the committee and, indeed, all the staff on a very comprehensive and informative report. Noble Lords may be aware that there has been a bit of a run on it in the Printed Paper Office. You can no longer get first editions; we are now on to second editions, so that proves something. Given that it was published only about a month ago, it is clearly something in which we should all take a great deal of interest. I thank all speakers who have contributed to the debate, including those who were not on the original committee. Again, that shows the wider interest in the topic, even though, as has been said, it will not catch the casual passer-by very easily. That will change, I think. There are things here that will reach out and become important.
We have heard tributes to the chairman, which I am sure were correct. He has become a friend and I am aware of his abilities in this respect. The committee has done its work very diligently by taking a huge amount of evidence, both here and abroad. That evidence is available and I have read quite a lot of it. It is extremely interesting and well marshalled into the report. Again, this sets our committee structure at the very heart of what we do. Something that does not get enough publicity, perhaps, are the efforts that the House makes to do a job properly, efficiently and in a timeous way so that the work is available for people to use as the debates move forward.
It is a pity that the government response has not been made available but I am sure that the Minister will explain what the issues are there. Given that both he and his predecessor gave evidence, perhaps we are not missing too much but it would be nice to get a sense of where the Government are coming from, particularly in relation to the pleas to pick up some of the main points from the report and use them to help get through the rest of the process.
It was said earlier in the debate that this issue had cross-party support. I am happy to confirm that from this side of the House, if it has not been obvious from the speakers who have contributed to the debate today. We take the view that TTIP has huge potential, and we very much support the principles behind the negotiations. We hope that it will lead in turn to job creation, higher wages for employees and a better deal for consumers. Europe and the United States are our most important markets today; indeed, the US is the UK’s biggest export market, and the UK economy attracts a significant level of FTI from across the Atlantic.
Crucially, as I have said, the benefits of the trade deal should filter down to employees and consumers. We would be concerned, having given our support for this, if any deal that emerged from it led to a watering down of workers’ rights, for example, or if in some sense the benefits that flowed did not get passed on to consumers through increased choice and reduced prices. However, as my noble friend Lady Henig said, does the whole experience of this process not rather prove the point that the UK’s national interest lies in remaining at the heart of a reformed EU, using our special links with the United States to achieve something that will be for everyone?
A number of noble Lords have said that the problems that are inherent in the TTIP as it currently stands—its weakness, as it were—is that it is almost too ambitious, and that it is probably the most complex trade and investment package we have ever attempted to put together. People have also argued, though, and I agree with them, that that is also a strength. The agreement’s scale is enormous; Europe and the US together account for nearly half of world trade in terms of GDP, although that will change as new markets develop in China, India and other places. The point has also been made by several noble Lords that the issues in play here relate not just to tariffs but to non-tariff barriers to trade. In some senses, and this is important for the future as well, the deal that might result from TTIP could become a template for a new generation of 21st-century trade and investment agreements, so, as many noble Lords have said, it has a strategic dimension.
As the noble Earl, Lord Sandwich, reminded us, attention needs to be paid to third-world accessions to either this agreement or ones similar to it. TTIP should be not simply a free-trade model but something that works against protectionism wherever it comes across it. It is also possible that in the process of developing this trade agreement, other desirable policy objectives could be obtained. For instance, while I do not think that this is necessarily a negative in terms of the debate, it is important to recognise that the US has still ratified only two of the eight major conventions of the ILO—conventions that we and all our EU partners have ratified. If it is possible to use the process of debate to bring forward desirable policy outcomes such as ratification within the ILO, that is also a plus.
I turn to some of the detail of the report. We are encouraged that the report says that in the committee’s view it should be possible to make progress on UK objectives in relation to TTIP—for example, with regard to the motor industry and geographical indications. That sense of a possibility emerging and a chance that it will come through is important for those who have to carry forward the negotiations. However, it is certainly true that there will be some difficulties in US public procurement, where there will be difficulties in obtaining agreement at the sub-federal level. The noble Lord, Lord Jopling, made an important point when he warned about cherry picking. The noble Lord, Lord Tugendhat, said that he wanted odds—actually he asked what price it was, but I suspect that he was thinking of a betting analogy rather than a straight cash transaction—on whether the sub-federal level would be included. I would be grateful if the Minister could give us his thoughts on that. The noble Lord, Lord Lamont, said that he thought four states were ready and willing to come into this, but I hope that there will be a higher number than that.
The question of whether financial services are included is important. It will be in the interests of the UK, rather than necessarily in the EU’s more general interest, for that to be resolved quickly. I have heard the argument about it being impossible to have negotiations without all cards being on the table, but maybe we should not be too restrictive on that; there may be things that can be done within the overall scheme that will help some way down the line. Confidence and experience need to be built up but, from the UK’s position, financial services are clearly very important and this will be one of the hardest-fought issues.
There are others which must concern us. For example, the audio-visual sector is a global success story in terms of the UK’s involvement, not just because of creativity or the level of investment, which is now very good, but because it delivers public value to domestic audiences as well as global ones. This comes because we have a very vibrant ecology comprising both public and private sector organisations. They are supported in turn by a complex set of policy interventions designed primarily to address market failures and to act increasingly as a counterbalance to the inherent asymmetry between the sizes of the audio-visual markets in the UK and in the US.
I say that because I am aware that there have been concerns about audio-visual activity in other parts of the EU. I will be grateful if the Minister, when he responds, could say where we are with audio-visual and whether that is also to be treated differently from other areas, as financial services may be. I should also like to know whether he recognises that there are some concerns about, for instance, the BBC and public service broadcasting in relation to that, which we would need to have preserved if we were going forward on this.
My noble friends Lord Radice and Lord Giddens mentioned the issues about the living agreement idea, which did not get much discussion elsewhere in the debate. I think it is a rather interesting idea. Clearly, getting to an agreement of such complexity will be hard enough but finding a way of constantly updating it may well be another difficulty. It is not something to which there is an easy answer. When the Minister responds, I would be grateful if he could update us on where he thinks the mechanism for that would exist. It is obviously in everybody’s interest if he can find one. I am just not quite sure if everybody even has the language to describe what it would be—whether it would be continual sessions around the negotiating table in order to update and change it or whether there would be some lock-step or other agreement that would allow us to do it.
My final two points concern the publicity for this issue, as we all, I think, share a sense of worry that the good things that are involved in TTIP do not get picked up, either in the press or in general debate. Who are the proponents of this? How can we convince them that the purposes or the possible gains from TTIP need to be put forward in a compelling way? This task, I think, cannot be left to the officials concerned. It has to be picked up politically. Trade Ministers will do it, I am sure, but a wider conspectus is required if we are to get a real sense of a communications strategy involving Ministers, involving the public and getting support for this.
Finally, a number of noble Lords have mentioned the political window and how difficult it will be to find it. I am certainly encouraged if it is as much as 18 months. My feeling is that it will be rather less than that as the issues that need to be addressed include the requirement of the US Administration to secure a trade-promotion authority. We have to anticipate both the mid-term and the presidential elections in relation to that. With all those out to play, there are obviously some issues. It is certainly difficult for negotiators even to get to the point where they can say that there is an agreement to sign, but if it is done within a very constrained timetable that would be very difficult. When the Minister responds, it would be interesting if he could respond on this particular point.
The Minister of State, Department for Business, Innovation and Skills & Foreign and Commonwealth Office (Lord Livingston of Parkhead) (Con)
My Lords, I am delighted to respond for the Government in this important debate. First, I would like to express my appreciation to my noble friend Lord Tugendhat and the whole committee for their thoughtful assessment of the opportunities and the challenges presented by TTIP. It is rare that a Minister can say he found his appearance before a committee to be both stimulating and enjoyable and also mean it.
I confirm to my noble friend Lord Jopling that the report has indeed been warmly received by the Government. The Government are considering its findings and will respond—we have two months to do so—by 13 July. If the noble Lord, Lord Stevenson, would like a first edition of the committee’s report, I think a deal could be done, as I have two copies. I have to say that the report was an excellent read, something I read from cover to cover. I am also grateful to all noble Lords who have spoken this afternoon for their contributions during the debate. I will attempt to cover the points raised, and I apologise in advance if there is anything I miss. I will write in detail later.
I welcome the report’s recognition of the significant opportunity that TTIP offers to reinforce what is already a very strong relationship between Europe and the US. As many noble Lords, including the noble Baroness, Lady Henig, said, the agreement could have not just an economic impact. There is an opportunity for a major geopolitical impact to reinforce the relationship between our two continents, but I will concentrate on the economic effect.
TTIP is an ambitious agreement. The numbers are by their nature speculative in some ways because we do not know what ultimately will be in the agreement, but it could be worth £10 billion annually to the UK economy alone. Whatever the number, it will create jobs and reduce prices for consumers in the EU and the US. It should not only eliminate almost all tariffs—that is sort of de rigueur in trade agreements now—but it goes much further. It could provide better access to markets and drive regulatory coherence across the Atlantic. In fact, regulatory coherence will account for more than half of the benefits that could arise from this agreement.
As we, the Commission President and President Obama have all emphasised, this is not about lowering standards—I really want to emphasise that—but about aligning or mutually recognising different standards that have similar intents. This represents a new territory for a major international trade agreement. I agree with noble Lords that it is not easy, but we should go for it.
Many detractors seek to describe the benefits of TTIP as being for big corporations, but I think that is entirely wrong. Many big corporations have the ability to overcome regulatory differences. If you have production lines that make 10 million of something, you can have a couple of them making it in a slightly different format. If you have one production line making 10,000 of something and there is a slightly different arrangement in the EU or the US, the net result is that you probably do not export at all. It is actually small and medium-sized businesses that will benefit far more. They are the ones that suffer through non-tariff barriers and differences in regulation.
There could also be a substantial gain for consumers. The EU’s estimate—and, of course, it is an estimate—is of a potential average gain of more than €500 for a family of four. That will come through lower prices. More choice, more trade and more competition give lower prices.
The noble Earl, Lord Sandwich, made a point about the impact of TTIP on other countries, and some have made the point that it will have a negative impact on other countries. I believe the agreement will benefit other countries. First, it will increase global growth, and that gives an opportunity for many. It will also allow countries wishing to export to two of the largest trading blocks in the world the opportunity to make one version of a product. Later, I will talk about the idea of a living agreement. I certainly share the view expressed by many noble Lords that the agreement should not be static and that other countries should be able to join. Perhaps we are starting to create worldwide standards for others.
While TTIP could bring huge benefits, concerns have been expressed—the noble Baroness, Lady Quin, among others, expressed them—about the impact of TTIP on regulatory standards, the effect of the ISDS clause and what it could do to public services. I shall address these issues in turn. As I said earlier, TTIP will not erode regulatory standards in the EU or the US. It is interesting that, when I go to both continents, I hear the complaint that the other has lower standards. We are talking about high standards in both. TTIP provides a good opportunity to take stock of existing rules on both sides of the Atlantic and remove any unnecessary regulatory duplication. This is not a static process. It is very important that we create a living agreement to deal with rules that have diverged over time for no reason at all.
My noble friend Lord Lamont raised a point about the difficulty of this process. He is right that it is difficult, but it has been done in other industries, sometimes with varying success. Accountancy bodies have managed to create a body of international accounting standards and we are seeing convergence over time. I know from my past in telecoms that one of the reasons that you can connect calls around the world is because of global standards, so it is possible. It will be easier for some industries, such as the automotive industry, and for some it will be more difficult. Again, that can be done without lowering environmental, labour or consumer safety standards.
Some noble Lords have raised how the inclusion of an ISDS clause in TTIP might affect a state’s right to regulate. These provisions, which will help to create a positive investment climate, are not new. They are being described by many NGOs as though they have been invented just for TTIP, but in fact the UK currently has over 90 of these sorts of agreements with other countries. To date, there have been only one or two cases against the UK and neither has been successful. However, investment provisions in TTIP must strike the right balance between protecting investors on the one hand, which we would want for investment into the UK and for our investors outside the UK, and on the other hand protecting the host nation’s right to regulate and determine policy.
The European Commission has recently launched a public consultation, which we very much welcome and we are listening to the concerns. It is good to have discussion because there is much misinformation. While some of the concerns about ISDS appear to be based on accidental—or, sometimes I suspect, intentional—misunderstanding of ISDS clauses, it is important to make the dispute resolution more transparent and to limit spurious claims. It is in the UK’s interests to create a modern investment agreement that will both encourage investment and create a model for future agreements with other countries.
Concerns have also been expressed that TTIP will somehow have a material impact on how the UK provides public services. It should be noted that we already have certain obligations under the General Agreement on Trade in Services. We are not seeking to expand those, and we have made it clear to the European Commission that it should be for member states to decide whether or not to open up public services to competition. This is the approach that the Commission is indeed taking.
A number of difficult areas were raised. My noble friend Lord Tugendhat mentioned financial services, which were also mentioned by the noble Lord, Lord Giddens. First, it is too early to start saying whether anything is in or out. Certainly, we will try to push back against red lines. We will continue to work with the Commission and industry—including in the US —regarding financial services. It is important to remember that financial services is not just banking; it also includes areas such as insurance and fund management. We must also recognise that, with Dodd-Frank, it is a sensitive time in the US. We have to be clear that we are not seeking to weaken US protection for financial services.
I agree that we must make a better job of explaining why their inclusion is important. There are a number of areas on which we will push further, but financial services are central to trade. If you do not have aligned financial services regulations, that will itself weaken the capability for global trade. It is also a global industry, as almost every financial services company operates around the world. There are conflicting rules that are meant to do broadly the same thing—protect banks and make sure that they do not cause systemic issues in the economy—so it is in everyone’s interests to deal with those. We have got to find ways of coming together to improve that.
That is not the only thing being challenged—the audio-visual industry was mentioned and people have made a number of other attempts to draw red lines. We will, however, continue to push the financial services industry, and we will continue to stress that this is not about weakening standards. We are not alone in that. The French and the Spanish, for instance, also have large interests in the financial services sector and are working with us in pushing these areas.
I now turn to another difficult area, which is procurement. It is important for Europe to obtain openness in US procurement, largely because Europe is today more open. However, I agree with a number of comments made by noble Lords about how Europe could also work on its single market. That is something quite separate that we will continue to push very strongly. It is important to gain agreement with America on the federal level and the state level, and the more that Europe can set an example, the better. States of course present a particular problem, but a lot of people have referred to the success that we have had with Canada on CETA, and the same is true for the US. We will continue to push the issue of the states as well as the federal government being included in the agreement.
One of the ways we are seeking to do that is with publicity. There has been some very good work by the British embassy in the US, which has produced a paper outlining the benefits of TTIP to every single state in the US in terms of jobs and economic benefit. I think this is the right approach. We have also stressed that the United States will not be able to pick and choose among individual states for individual matters.
I turn now to other issues, one of which is GIs or geographical indications. A number of European countries have concerns about the willingness of the US to accept them—feta cheese is raised in more Council meetings than you would believe. From the UK’s point of view, we believe that composite GIs are appropriate, such as for “Scotch whisky” or “West Country cheddar”, but we do not necessarily believe that cheddar on its own is something that needs to be protected, as it has become generic—the same probably applies to the hamburger and the frankfurter. We will continue to seek a balance on GIs and push for that.
On energy, which was mentioned, we are pushing very much for free trade. Recent events involving Ukraine and Russia have really indicated that a free trade agreement must include free trade in energy. That is something that is important on an economic level but even more important on a geopolitical level, and I suspect the US is increasingly recognising that.
The issue of China was raised by the noble Earl, Lord Sandwich. Today we have a very large Chinese delegation, including the Chinese premier, visiting the UK, and we will continue to discuss a free trade agreement. We have raised with the EU the commencement of a free trade agreement and we have seen greater Chinese interest in pursuing that. The Chinese were obviously involved in Bali and they have been involved in TISA, which is the Trade in Services Agreement. We have also seen them trialling free trade zones within their own country, changing their attitude as to what is and is not allowed. We would very much like to bring China into a free trade agreement. I think it is probably too early to suggest that China could be one of the early candidates to be included in a living agreement under TTIP.
We are also pushing free trade agreements with Japan and India—Canada has recently completed talks on the Pacific Alliance, which I think is very interesting—as well as, of course, multilateral trade agreements. Bali was a success, but we have to move on from that and the Doha development agenda is very important to us as well.
The noble Lord, Lord Jones, raised a point about US subsidies for aerospace. I will very much continue to champion the British aerospace industry, including Airbus and Rolls-Royce. Indeed, I visited Bombardier in Northern Ireland recently, where they are making the wings for the C series aircraft at one of the most advanced wings factories in the world. Every 2.5 seconds an aircraft takes off somewhere in the world powered by a UK company. We are the second largest producer in the aerospace industry, so I absolutely champion it and will continue to do so. There is a dispute about US subsidies for aerospace that has been ongoing at the World Trade Organisation between the EU and the US concerning the US Government’s funding of aircraft development programmes. The European Commission has already raised concerns about this subsidy package, and the Commission and the UK consider it to be an extension of the existing measures that the WTO has already found to be illegal. So we will continue, together with our EU partners, to take a robust line on this dispute. I think it is something that is separate from TTIP, but I can assure the noble Lord that both this Government and our EU partners are very much behind taking a robust line.
My Lords, I agree with the many noble Lords, including the noble Lord, Lord Radice, who raised the issue of making the case for TTIP. I also agree with the committee’s recommendation that it is really important that the Commission and all member states continue to reach out to citizens and civil society to set out the opportunities that TTIP will provide. It is important that we debate it openly, talk about the benefits and counter some of the myths. Within the UK, there are regular meetings with core stakeholder groups representing a number of business groups and, for instance, the consumer group Which? as well as a group of NGOs. We have also organised sectoral round tables as well as national roadshows in conjunction with BritishAmerican Business.
The noble Lord, Lord Radice, asked about the involvement of senior Ministers. I am sorry that I do not rank among them, but I hope that Ken Clarke—a big beast if ever there was one as a Minister—who has taken a special role in promoting TTIP will meet that requirement. In fact, he has been touring around both the UK and parts of Europe pushing for TTIP. Also, across the Cabinet, the Prime Minster has made it very clear that this is one of our key objectives and it will be so in the next period for the EU. So across the UK and across government we will push it very strongly.
I would caveat some comments that were made about the support for TTIP across Europe. Yes, Germany is unhappy in that it has some questions about ISDS clauses and it is unhappy about Snowden, but Germany is pro free trade, as is France. When I was in Spain last week, we saw very strong support for TTIP. From speaking to the other 28 Trade Ministers, I know that they are very supportive, so I think there is a strong majority in the Council. Of course, we have to see what final agreement we actually get.
As the negotiations become more substantive, we will increase the range and the frequency of our engagement activities. This will involve more stakeholder events, more involvement with the press and more digital engagement to promote the dissemination of accurate, substantive, user-friendly information that shows what the benefits are to small companies and to individuals. We will be holding, and participating in, a number of further stakeholder events around the country. For example, in a few weeks’ time there will be another regional event, and the Liverpool International Festival for Business includes an event in a few days’ time. So there is a series of events planned and we recognise the need for Government—as well many other parts of civil society and, indeed, this House—to make the case for TTIP.
There have now been five rounds of TTIP. On the last round in Arlington, Virginia, I have provided updates to the European Scrutiny Committee, to both Houses and to the All-Party Parliamentary Group on European Union-United States Trade and Investment. As the noble Baroness, Lady Henig, reminded us, a lot has actually been achieved in a year. It is only a year and we have made huge progress. Our assessment is that we are making reasonable headway, but it will be more difficult as we come across more difficult things. It is not easy—important things rarely are. We have got the mid-terms to concern ourselves with in the US. Hopefully, after that, fast-track authority will be easier. At the same time, the US is a bit focused on TPP with the Pacific countries, but we remain very focused on achieving a result by 2015.
My Lords, in summing up, I believe that TTIP is an important and ground-breaking agreement, but it will require a lot of hard work. Pascal Lamy, the former head of the WTO, commented:
“The new era begins with the Trans-Atlantic Trade and Investment Partnership”.
He contrasted it with every other trade agreement that had gone before. Someone as distinguished as the noble Lord, Lord Stevenson, said that it is a 21st century trade agreement, and I could not agree with him more. I thank the committee and the noble Lords who have spoken in the debate today for their role in helping us on the journey to achieving a breakthrough for the UK, for the EU, for the US and for the world economy.
Lord Tugendhat
My Lords, this debate has taken very much the course that I had hoped. Each speaker has approached the issue from an individual standpoint and has emphasised particular aspects of the report and the TTIP negotiations, yet all have cleaved to the central proposition that a TTIP agreement is both very important and highly desirable. I will mention only one of the speeches, that of the noble Lord, Lord Jopling, because of the optimistic tone he took, the way in which he positioned the pace at which this race is run, and how difficult it is to judge in the early stages how it might be in the later stages. He added to our debate a tone that was both optimistic and realistic.
Taken together, however, we confronted the Minister with the full range of issues and questions that were raised in the report. I thank him for his positive and comprehensive response. Both his manner and his content inspire a good deal of confidence in the way that this dossier will be handled by the British Government. He said that other Ministers would also become involved and mentioned my old friend Ken Clarke, whose contribution has been very great. I will press him a little further to say that we also need to hear from the sectoral Ministers—those responsible for the environment and agriculture, Treasury Ministers and the rest. I also remind him that a year ago the Prime Minister launched this initiative at Lough Erne and made it clear that this was a major issue for the United Kingdom and for the European Union. When the Prime Minister attends European Councils and bilateral meetings with other European leaders I hope that he, too, will be able to make it clear that this remains, as he said at Lough Erne, a once-in-a-generation opportunity. I beg to move.