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Baroness McIntosh of Pickering
To ask Her Majesty’s Government what assessment they have made of the implications for the United Kingdom’s future trade relations of the failure to reach an agreement at the G7 Summit in Canada.
Baroness McIntosh of Pickering (Con)
My Lords, I am delighted to have secured this topical debate today and I look forward to hearing noble Lords’ contributions. Perhaps I may take this opportunity to welcome the Minister to her place and say how appropriate it is, on the longest day and the summer solstice, that in responding to the debate she represents the department known as the “department of sunshine”.
The G7 summit earlier this month, hosted by Canada and held in Quebec, aimed to promote the rules-based international order to advance free and fair global trade, promising talks leading to more trade between the subscribing nations. Why does the G7 matter? In my view, it matters precisely because it bridges trade relations between the EU and world trade through the World Trade Organization. In looking at the implications for our future trade relations in this debate, we must ponder the reasons for the failure to reach agreement in Canada.
The background to the June G7 summit was the latest UK trade figures in April 2018 showing a widening of the total UK trade deficit to £9.7 billion in the last quarter for which figures are available. This change was due mainly to falling exports in both goods and services. Exports of goods fell by £3.1 billion due to falls mainly in exports of machinery, pharmaceuticals and aircraft, while exports in services fell by £2.5 billion. I find the figures surprising given that the pound is at a low level. In this situation one would have expected exports to have risen. Given the fact that we are negotiating our exit from the European Union, it is perhaps not surprising that our trade deficit in goods with the EU has grown while that with non-EU countries has improved.
Looking at the backdrop to these figures and the failure to reach agreement at the G7 summit, I conclude that trade relations pose the greatest threat to the global order. In a post-Brexit world, we in the UK are seeking to negotiate our own trade deals, with the Government aiming initially to strike a good trade deal with the EU and subsequently with America, India, Australia and so on. Success will depend on all players playing by the rules but, following Donald Trump’s behaviour at the summit and subsequently introducing tariffs on trade, respect for these rules is now in doubt.
I am delighted to say that Yorkshire seems to have bucked the trend. Trade figures show that the region outperformed the national average in the first three months of 2018, with an increase in both the amount of goods that Yorkshire exports and the number of companies exporting. In terms of food and farming, Yorkshire is well placed to compete with other regions of the UK and internationally. Exports to China from Yorkshire are growing, helped in particular by the sale of pigs’ trotters and other parts to China where they are considered delicacies.
Without doubt, the EU is the UK’s most important market for food and drink exports, followed by the US and China. It generated £13.3 billion of the total food and drink exports in 2017, which accounts for 60% of the total. The EU has 36 preferential trade agreements with more than 60 countries, representing 15% of all UK-traded goods, not just food and drink. Many Commonwealth countries have economic partnership agreements with the EU, giving preferential access for their goods to what will be a market of 440 million consumers after Brexit. The application of the EU’s standard rules of origin on the day after Brexit would be hugely damaging to UK-EU trade. Will my noble friend the Minister give the House a commitment today that the Government intend to negotiate specifically that this could not possibly happen?
In terms of the share of national exports as a percentage of world exports, China, excluding Hong Kong, led in 2016, followed by the EU, then the United States. As a major trading nation, the UK should welcome every opportunity to improve its international trading relations, so it was a disappointment that the June G7 summit was divisive and inconclusive. The attempt by President Trump to persuade the G7 partners to readmit Russia, following on from the decision to impose US tariffs on steel and aluminium, poisoned the atmosphere of the talks, which were then doomed to fail. Russia was admitted to the G7 in 1997 and removed in 2014, following the annexation of the Crimea. We should remember that in August 2014, Russia announced a ban on imports covering a wide range of agri-food and drink products from the EU, the US, Canada, Australia, Norway, Ukraine and other countries. In the year following the ban’s implementation, UK food and drink exports to Russia fell by 52%. EU food and drink exports to Russia fell by 53%. US threats to impose tariffs on EU and Chinese exports to the US look set to raise the temperature in international trade talks further still, with consequent retaliatory measures. Rising trade tensions globally do not augur well for trade; nor do the signs of the world index in stock markets across the globe falling, as we saw this week. Signs of slower economic growth can only be increased by the prospect of a trade war between the US, the EU and China.
How can we best navigate these choppy waters in international trade? How do we replace the existing market of 505 million consumers on our doorstep with alternatives? There appears to be no simple answer. Current international tensions highlight the dangers of leaving a trading bloc of 505 million consumers, of which we have been an intrinsic part since 1973. This debate provides the Minister with an opportunity to share on their behalf the Government’s priorities for future trade talks, mindful of the importance of talks to the food, drink and other manufacturing sectors.
I conclude with a small number of questions for my noble friend the Minister. The World Trade Organization’s existing trade dispute settlement mechanism currently dictates that the EU Commission manages trade disputes on behalf of the UK and other member states. Can the Minister assure the House that by the time we leave the EU on 29 March 2019, the Government will be in a position to defend any trade disputes brought against the UK? Can she share with the House what the dispute resolution mechanism will be, as was envisaged—we would know—in the White Paper at the end of last year?
Finally, what is the current progress of the recent EU dispute brought before the World Trade Organization, relating to the US tariffs on steel and aluminium imports? As a general rule, what is the average length of time for such a dispute to be resolved? No matter how difficult we might think our relations and negotiations with the EU have been, I think the Minister will confirm that future negotiations on trade matters with the World Trade Organization could be 10 times worse.
Lord Whitty (Lab)
My Lords, I thank the noble Baroness, Lady McIntosh, for this timely debate. I am somewhat worried that there are not many speakers; indeed, I am the only Back-Bench speaker. I intended to participate in the debate after contributions in support of the noble Baroness from many sides of the House. I will utter a few correctives to the overall approach.
I certainly agree with the noble Baroness, Lady McIntosh, that this is a crisis point for the world and the UK. Unfortunately, the two coincide. The timing of Brexit, along with the timing a breakdown in the cohesion of the G7 and the rejection, in many respects, of the WTO order by the United States, presents us with a double problem. The noble Baroness also pointed out that the British trade balance has moved in the wrong direction, with the notable exception of Yorkshire. Despite the low level of sterling being a bit of a cushion hitherto, we need to take that signal very seriously. The situation underlines the need for us to come to terms rapidly with the EU on our future trading arrangements—thereby moving into the 36 countries that have a trading agreement with the EU—and how they will apply to the UK and beyond.
However, I intended to make two rather broader points. My first concerns how the theory and actuality of world trade sometimes clash. Secondly, I want to refer to the political reaction in many countries, including our own, against the perceived consequences of free trade. I am interested in two news items from the past few days. First, the Charlevoix communiqué, which was very noble. It talked about many things but did not say much about how to extend freer trade. I was also taken by a poll in the United States, which indicated that nearly 80% of the population thinks that the present system of free trade does not benefit them. I am afraid that this may well be repeated in many other countries.
As to what we do about it, my mind is taken back to my youth, which was quite a long time ago. In far left circles, there was an argument between those who argued for socialism in one country and that any trade barriers would defend the building of socialism—as espoused largely by the Communist Party at the time—and those who argued the opposite, as espoused by some but not all strains of Trotskyism: that workers of the world should unite and we all benefit from trading with each other, as long as it was not in the hands of the capitalists. Some of those arguments are still going on. In a sense, I am not surprised that they are still going on in the Labour Party and the far left, but I am surprised that they seem to extend, in a rather mirrored form, to the right of the political spectrum and to the Cabinet, between those who are for a Brexit that is a sort of little England taking control and running our own affairs, and those who see us as a buccaneering global power doing deals with everybody but with nobody restricting the way we do it.
The reality is that progress towards freer global trade on a multilateral basis had already stalled long before President Trump came into office. Indeed, I go back 20 years to when we began talking about the Doha round for a multilateral trade agreement that never transpired. It partly fell on its face—I speak as a former Minister of Agriculture—because of the inability to deal with agriculture in that context and protectionism within it. In fact, we moved from that ambition to relying very heavily on regional free trade areas or near free trade areas—the EU, obviously, but also Mercosur, NAFTA and the Pacific agreement. It was expected that the blocs would have deals between them. That, of course, has not happened. Indeed, the whole TTIP saga shows that it is very difficult to make it happen. Therefore, progress towards world free trade under a rules-based system has been stalled for a long time. It has been replaced by some serious inconsistencies between different approaches in different parts of the world and some weakening of the rules in the World Trade Organization et cetera.
Meanwhile, we have the political reaction. In the United States, Europe and many developing countries the political reaction has been against any further reduction in trade barriers. It is denounced in some circles as populism. Populism is basically an idea that the lower orders find attractive and the elites deplore. In this context, the ability of the European Union and the powers that be within Europe to face down this popular reaction, or to convince those who, for understandable reasons, are beginning to support that action, is one of the big political problems of our time. There has been a very serious reaction against the effects of free trade on people’s jobs, on the structure of industry, on the nature of employment and on the degree of migration that some of that free trade has been associated with.
We also have to remember that they are not entirely wrong. The lesson of history is at best mixed. After all, the UK grew to its manufacturing predominance behind high barriers—plus a bit of imperial preference. So did the US, Germany and Japan. More recently, so did China. It is only very recently that China, having become a successful power, has emulated the United States and Britain in earlier things and, having developed its industry behind barriers, become a great advocate for free trade. At the Davos before last, China claimed that it was the biggest advocate of free trade in the world. The world is actually in a bit of a mess on this.
Democracy is also in a bit of a mess, because when the population blame the world order for their problems and not their own Government we see a kicking over of the traces. We see it in the election of President Trump, in Brexit here and, in a slightly different context, in the election of anti-migration Governments in Poland, Italy and other parts of Europe. We need to grapple with that. It is no use assuming that the rules under which the WTO has operated will work for ever. There is a fear that the supposed rules of the WTO are not being enforced properly and that, as a second order issue, the enforcement mechanism of the WTO is neither accessible nor effective in enforcing those rules and that it takes an awfully long time over it.
But there is another aspect. Whereas rules on, for example, labour standards, modern slavery, treatment of workers, health and safety and so on are often not enforced as part of trade agreements—likewise, environmental standards are not being properly enforced—some aspects are, directly or indirectly, because of the world trade order. For example, on state aid or preferential public procurement states can claim breach of WTO rules and get the WTO to do something about it. The rules that apparently everybody agrees with in standards, treatment of workers, the environment, safety and product standards are not being enforced properly, whereas the rules related to government intervention are being enforced rather officiously—on occasion, they are even claimed to be part of the US Government’s attempt to turn over the WTO procedure.
This suggests that the world trade order and the political reality are getting seriously out of step. We might need to rethink not only how we deal, in the G7 and elsewhere, with world trade and how we take immediate steps to off-set the detrimental effect of Brexit in our own trade negotiations, but whether the WTO rules and disputes procedure are right or whether we as the G7—I hope led by the EU while we are still a member—ought to take the issue a little more seriously and look at how the system as a whole works under the WTO.
Lord Purvis of Tweed (LD)
My Lords, we are indebted to the noble Baroness, Lady McIntosh, for bringing this Topical Question to the Chamber to elicit the Government’s position so fresh after the very worrying G7 summit in Quebec. We are grateful to her. I will address some of my points to the very pertinent issues she mentioned. I know that it is a gentle convention in the House that the Front-Bench speakers reflect on contributions made by the Back Benches. I can do that very briefly by saying that I agreed almost entirely with the contribution from the noble Lord, Lord Whitty.
The point that the noble Baroness, Lady McIntosh, mentioned that is probably the most troubling of all is that we see trends in global trade and global growth that are a worry. In a recent meeting, representatives of the World Bank were very clear that they are concerned that what has been happening over the past decade—a global growth trend that was uniform across the planet—is now under threat. We start to see this particularly with what is likely to be a looming trade war, where leaders’ pride and nation states’ interests collide. That will mean that many citizens and consumers will be worse off. I represented a constituency that is still living with the impact of a trade war in the 1990s with high tariffs on the textile industry. Trade wars impact people’s livelihoods and their futures. They are not to be taken lightly.
The Minister will know that for a number of months I have been concerned about the WTO’s capacity to address some of these issues. I was at the WTO ministerial conference in Buenos Aires in December. It failed to agree a communiqué as the US delegation left early. I was not entirely surprised, therefore, with the US’s approach in Quebec. I had the benefit of being in Washington last week, which I will return to a little later. It was fascinating meeting the Canadian ambassador, discussing with the US trade envoy’s office to Europe the very pertinent issues that the noble Baroness, Lady McIntosh, raised.
I also agreed with the noble Baroness in raising issues relating not just to tariffs. In many respects, the debate about non-tariff measures is as important as that about tariffs. While such measures serve highly legitimate policy goals such as protection of human health, animal and plant life and the environment, they make it more difficult for SMEs and small farmers in smaller nations and least-developed countries to compete effectively in the international markets.
According to the WTO, there has been a phenomenal increase in the number of rules and regulations affecting international trade. While most favoured-nation tariffs have declined from an average of 5% to 6% to below 3% to 4% between 1995 and 2015, the number of non-tariff measures rose from more than 1,500 in the mid-2000s to more than 2,500 in 2015. It was the UK’s desire in the 1980s to avoid what was known to be the trend of growth in non-tariff measures and to reduce the cost and burden on business and exporters that led us to support a single trading market in goods and services. No doubt we will return to Brexit in other debates in the House.
It is a simple fact that smaller nations and least-developed countries lack the financial and technical resources to develop effective policies, regulations and institutions to address non-tariff measures such as technical barriers to trade and vital sanitary measures. UNCTAD and other bodies are doing sterling work to raise issues regarding the burdens on least-developed countries. Those who lose out in trade wars between large nations are not just consumers in those nations; there is a considerable impact also on smaller trading nations especially on a regional basis. In many respects, they are the collateral damage of such trade wars. It is therefore no surprise that there is considerable concern among members of networks established for the very purpose of reducing trade barriers, such as Mercosur, the Pacific Alliance, within the Maghreb, SADC and ASEAN, all of which are focused on reducing non-trade measures, reducing time and cost of border crossings, reducing customs costs and aligning and then harmonising regulations. There is deep concern across all those networks that the WTO is in many respects hampered by the position of the United States and not assisted by the strategic position of China, with its alternative approach that we are starting to see in the Shanghai Cooperation Organisation.
The UK Government must have a clear position. We would have needed a clear position regardless of Brexit but, with it, the Government need to be clearer than ever. As we embark on the first trade negotiations in history to create trading barriers rather than reduce them, the Government need to be even clearer.
This might have been an easier situation to manage had it not been for the latest position of the United States. There is no doubt that the White House has a transactional, nation-state-first trade policy that is not likely to change in the foreseeable future. If we add to this the very clear position of our non-EU trading partners that they will need to know what arrangements the UK enters into with the EU before they agree positions with us, we see that this is not a conducive trading environment in which to be entering a new, third-country relationship with the biggest single trading bloc.
The position of the US was made clear to me on my visit there last week. As the noble Lord, Lord Whitty, said, it cannot be denied that there is no universal support for free trade anywhere within the United States and certainly within Congress. It is perhaps possible to re-engage in the TTIP discussions; it is perhaps possible to rescue from the embers the NAFTA relationship within the United States; and some form of relationship with the new progressive trade partnership being formed within Asia and the Pacific may well be possible, but it cannot be guaranteed—nor can we base our future trading relationship with the US on those assumptions. It cannot necessarily be taken for granted that the US Congress would be satisfied with a UK FTA. I met delegations in both the Senate and the House. Both Republicans and Democrats made it clear that they would not support a free trade agreement. They would support trading relations and look at areas where barriers could be reduced, but what they would ask for would be broadly unpalatable to us. It would be helpful to get a clear understanding of the latest position of our trading and investment working group with respect to the United States.
I met a Congressman who addressed the point mentioned by the noble Lord, Lord Whitty: the dichotomy of where we are. Republican Congressman Joe Wilson from South Carolina has a massive Trump-supporting base in his district, but he also represents a BMW factory that employs 10,000 people there. Any X range of BMW that you see on the streets of London is made in his district in the United States. He understands how interrelated are global supply chains in trade, but the White House has a position which is absolutely contrary to it. That is likely to be a contradictory position that we see going forward.
We know that the policy of the White House, with Ambassador Lighthizer and adviser Navarro, is for disruption, uncertainty and unpredictability, but we need to address the fact that it is not directed towards adversaries only; it is directed also towards allies and trading partners. That it is the President’s clear position to offend, insult and undermine a key ally to the United Kingdom in the Canadian Prime Minister should be a clear warning signal. Ultimately, it means that when we consider our approach to trade post Brexit—if it happens—we will need to address much more deeply the type of trading relationships that we have and not just what goods and services are included in them.
This Parliament will need a much clearer position on setting a government mandate, to enhance scrutiny arrangements and to have deeper means of ratification than those currently provided by the Government. I thank the noble Baroness, Lady McIntosh, for bringing these issues to the House. I know that they will set the cloth against which we look at our trade policies in a post-Brexit world. I look forward to hearing what the Minister has to say in response.
Lord Stevenson of Balmacara (Lab)
My Lords, I, too, thank the noble Baroness, Lady McIntosh of Pickering, for securing this debate, which comes at a good time, poised as we are to go into the Trade Bill. “Poised” may be an overstatement; I think that we might get to it at some point in the next six months, but we are not being told when. This debate gives us a chance to reflect on some of the issues that arise, specifically from the G7’s failure to reach agreement but also in a wider context.
I agree with the noble Baroness that the G7’s failure to deliver even the pre-agreed communiqué was astonishing, and it was right that she drew attention to it—I think that we are at a crisis point in that sense. I agree also that deteriorating trade relations represent one of the biggest security threats around. More worrying is the US abandoning, or seeming to abandon, a rules-based system—if indeed it is doing that. It may make for good domestic US politics, but it sends a tremor over the whole world, as growth will be affected. I look forward to the Minister’s responses to the noble Baroness’s specific questions.
My noble friend Lord Whitty took a slightly wider approach to this issue, drawing attention to the lack of agreement on the benefits that free trade can bring. I agree that it is also a particular problem. If we are going to make a success of where we are post the EU withdrawal Bill, we will have to spend a lot more time thinking harder about what we want to say to people about the benefits that can flow from a much more engaged approach to free trade. It is also true, as the noble Lord said, that another series of actions is going on in the world, with a different, perhaps more populist, approach to politics that is anti a sense of engagement with an open basis for trade and which will have a wide impact if we do not think harder about how to counter it. His comments were important and should be listened to. The noble Lord, Lord Purvis, also picked up, as did my noble friend Lord Whitty, that we were already in trouble before the G7 summit. The WTO seems to have stalled in terms of its activities; it has lost credibility in the last decade or so and there will be real problems if a trade war gets going in any real sense.
Although the numbers signed up to this debate might suggest otherwise, I believe that there is a burgeoning interest in trade issues, and I think we will be able to capitalise on that as we go forward to the Trade Bill. Having said that, I take the Government’s view that this narrow, technical Bill is not something we can use to expand very widely on considerations to do with trade. However, I argue that if we are seeking to emulate, post Brexit, the arrangements currently in place for the making and amending of EU trade agreements, which is the main, narrow purpose of the Bill, it must make sense to see the Bill in the light of where the Government see us ending up on this more generally. Of course, we have to scrutinise the main measures in the Bill, such as the powers of the new trade remedies body. We need to check that the TRA has sufficient expertise, knowledge and resources; we need to think about government procurement; and there is the question of state aid rules, particularly following the announcement that the CMA is to be given responsibility for this area across the whole country.
We need to have more detail on the Government’s thinking on what exactly our trade policy is. What, for example, is trade? It sounds a very simple question: it obviously includes goods, but what about services, intellectual property and investment? Most modern trade agreements deal with all these issues—they are interwoven and inseparable. Our policy will need to reflect that approach. How does trade interface with development? There is clearly a link between grant in aid and the economic activity that follows from it: it may be based initially in agriculture, but it soon works out that it needs to be involved also in economic growth.
The noble Lord, Lord Purvis, said that one of the biggest threats to free trade was non-tariff barriers such as regulation. How do we approach that? Are we going to look for a mutual recognition approach or will we be reliant on detailed agreement on our regulatory framework, making sure that it stands up to any tests that anybody might wish to put it to? If we are a rule taker, that does not sound a very good place to be. How will we be sure that our regulations will be effective and where will disputes be settled? Does the WTO have the skills to expand and act as an enforcement regulator if we are talking about much broader issues than simply goods and not services?
Others have talked about country of origin rules, which are really important, and not just for the EU. I was at a meeting yesterday at which someone was talking with expertise about what happens to New Zealand chickens. It may be a familiar story to others, but I was completely shocked to discover that the average chicken is divided into 48 different component parts, each of which goes three times around the world, virtually, before it finally gets consumed—the mind boggles. Not just the mind—the stomach boggles as well. And don’t get me started on what happens to chickens in Northern Ireland, where the problem is not so much what happens to the actual chicken but what happens to its feathers, which are apparently taken off early—don’t ask—and taken to another country, probably the Republic, and dealt with under different rules. That will cause real difficulties in any trade agreement. We will perhaps not be working at the level of detail of chickens, but I think we will be going to interesting places on the Bill. Yes, it has narrow issues, but it has to be much broader.
How are we going to balance consumer rights and producer rights? Will we be able to assert professional standards in a way that will allow us to make sure that they are treated properly across the world? Will we even be able to get membership of the world’s standards bodies when we are not part of the EU? On the much broader canvas of engagement with other groups, we are not going to be part of the EU single market, it seems, but we already hear suggestions that we should join NAFTA and the CPTTP, which is the Trans-Pacific Partnership agreement that took over from the TTP when the United States left. Membership of those bodies is a very different concept from engaging with free-standing free trade arrangements—it may indeed be a jump out of the frying pan into the fire.
In some ways, that makes a much broader point. If we are talking about joining other trade blocs, these are also about geopolitical alignment. The fact that we are in a trade alliance with this bloc or another may actually be more important than the volume of trade, however it is defined, that is being done. Who decides that? What interest does the Foreign Office have in these matters?
I will end by talking a bit about human rights. If we are going to take this step into the unknown with a new set of trade arrangements, we have to think very carefully about what we in Britain want to see coming out of them in terms of our respect for the various rights. Most of us will be interested in the fact that many companies increasingly understand that there is a very good business case for respecting human rights. It brings business benefits in various ways. It helps protect and enhance a company’s reputation. It helps it to protect and increase its customer base. It helps it attract and retain good staff. It reduces risks to continuity from conflict inside the company and it appeals to institutional investors, many of whom have interests in human rights. Companies told us that they need policy coherence and clear and consistent policy messaging from the Government. It is interesting that the Foreign Office has adopted the Ruggie principles, emanating from the United Nations Human Rights Council, almost lock, stock and barrel. Can the Minister confirm whether DIT will do the same?
In any case, we have ratified a series of international treaties that need to be accommodated. Our treaties and agreements include the International Labour Organization’s eight core conventions, the International Covenant on Civil and Political Rights and the International Covenant on Economic, Social and Cultural Rights. The Government may have turned their face against incorporating the European Convention on Human Rights, but I sense that the issue has not gone away. In any case, the Human Rights Act ensures that individuals in the UK have a remedy for the breach of rights that are protected by the ECHR, and it applies to all public authorities and to other bodies performing public functions, as private companies sometimes do. So this is definitely going to be in play—and this is before we look at broader legal frameworks such as employment regulations, equality legislation, the Health and Safety at Work Act, environmental protection and most recently, of course, the Data Protection Act.
So there is a lot of regulation already in place and we have a lot of history and practice in this area. There are many instruments, such as the Bribery Act, the OECD guidelines for multinational enterprises, where we have a national contact point, and our own Companies Act 2006, which makes it clear that directors have to have regard to the impact of a company’s operations on the community and the environment, and the desirability of the company maintaining a reputation for high standards of business conduct.
The Trade Bill is not just a simple, technical exercise in making sure that we can move from an EU-led series of negotiated agreements to agreements negotiated with the UK: it is not cut and paste with a word processor. It raises all sorts of questions about where we want to be on trade, how we want to define it and take it forward, which elements are important to us as a country going forward, and which will pay the best dividends in terms of the negotiations we have. Are we going to go to blocs and join them in much the same way as we do with the EU? Are we going to continue to try to plough our own furrow? And all this comes at a time when there are upsets and difficulties in the whole rule-based system that we are used to. We need much more certainty about that. It would therefore be worthwhile taking this forward. I look forward to the Minister’s comments.
The Minister of State, Department for International Trade (Baroness Fairhead) (Con)
My Lords, I, too, thank my noble friend Lady McIntosh of Pickering for her Question. I thank her and other noble Lords for their rich and probing challenges. The noble Lords, Lord Whitty, Lord Stevenson and Lord Purvis, raised the challenges of the multilateral trading system, and I think we can all see that those challenges are there. As we said, the G7 was one of the most tense of recent years. My right honourable friend the Prime Minister made it clear that the discussions were difficult. But we also have to see that these meetings provide opportunities for close allies to discuss many things apart from trade, such as empowering women, security and sustainability, in particular of the ocean environment. It should be recognised that they have that purpose as well.
However, the debate today is on trade and that is where I will focus. I shall touch on the summit at the beginning. The agreed communiqué had two parts. The first was, indeed, about the importance of a rules-based international trading system and the continued fight against protectionism. The second strand was a trilateral discussion between the US, the EU and Japan, talking about level playing fields, industrial subsidies, inadequate protection of IP and non-market oriented policies. As noble Lords have highlighted, the communiqué was later dismissed by the President of the United States, but let me be very clear that the commitment of the UK to the contents of the communiqué and to the other non-US members of the G7 remains unchanged. Furthermore, there is a determination to work constructively with all parties, including the US, on that trilateral dialogue between the US, the EU and Japan.
As the noble Baroness, Lady McIntosh, pointed out, the summit took place against the backdrop of the US decision to raise tariffs on steel. We are allies—close allies—but where we disagree, we will say so. We disagree with these tariffs. We have made clear, and continue to make clear to the US Government at the highest levels, the importance of UK steel products to US businesses and defence projects. We will continue to work with the EU and the US Administration to try to achieve a permanent exemption because, as the closest allies, we think we should be permanently and fully exempt.
That said, we have proceeded with our complaint at the WTO. The noble Baroness asked for some information about the timing of that and where we were. On 1 June, through the Commission, we launched the case at the WTO. These typically last around two to three years. However, we are able to impose countermeasures relatively immediately. Those countermeasures were announced on 18 May and can be applied 30 days after that. We can also conduct studies and investigations, one of which is under way on steel, to look at whether any safeguarding is needed to protect our industry. That is what we are doing.
We have been very clear that we do not want a tit-for-tat escalation. The important thing here is to focus on the global overproduction of steel, and a multilateral approach is the right way to do it. The noble Lord, Lord Purvis, spoke of his concern about a trade war. It is a real concern and we need to work multilaterally to find a solution. Free trade matters. I take the point made by the noble Lord, Lord Purvis, about his visit to the US. Free trade is challenged at the moment in the US and elsewhere but we should look at what it has achieved: 1 billion people taken out of poverty. In the 1990s per capita income in developing countries grew three times faster if they opened their borders. In the developed world, the OECD found that a 10 percentage point increase in trade exposure led to a 4% rise in income per capita. It is good for consumers and good for choice.
In addition, multilateral systems allow us to bring down the cost of trade. I take the point made by the noble Lord, Lord Whitty, about some stalling in multilateral capability in the WTO but there is progress; for example, the recent entry into force of the Trade Facilitation Agreement. Once fully implemented, it will improve global trade by £70 billion. Yes, it has stalled in many areas. The noble Lord, Lord Stevenson, also made the point that the CPTPP was signed recently. That was 11 disparate countries. So there is progress.
The challenge for us is that we need to have free trade and a multilateral system that works for all. There has been a sense that it works on a broad basis but the costs and impact are local and immediate. That requires a much more sophisticated, joined- up reaction, both domestically and internationally. Domestically, we are making sure that the industrial strategy focuses on bringing skills and people so that we have skilled jobs all around the country, bringing a future for the young people of this country. We are linking that up with the export strategy that is coming down the track. We are trying to look at regional development as well.
The noble Lord, Lord Stevenson, mentioned the importance of trade for development. I am absolutely clear that trade helps not just prosperity but security and sustainability. I hope the noble Lord will be pleased to hear that the DIT has recently taken responsibility in government for leading the Prosperity Fund, aimed at development but with trade as one of its focal points.
Concern was expressed about leaving the EU. I will touch on some of the general numbers on our export performance that the noble Baroness, Lady McIntosh, gave. I think she gave the monthly numbers. I tend to look at the annual numbers because there can be volatility. On an annualised basis, exports grew by 7% and the deficit reduced. Historically we have seen a reduction in the amount of exports to the EU. We are likely to see non-EU trade growing faster over the long term because that is where faster growth is expected. As we leave the EU, we are clear that we need to grow and build a strong and ambitious relationship with our EU allies as well as countries outside the EU.
The noble Baroness, Lady McIntosh, raised rules of origin. Clearly, those are part of the negotiations. I agree they have a particular effect on food and drink. It is too early to say exactly what those will be. It is part of the technical way that we will have to adjust some of the agreements that we have with third countries, but we recognise that this is an issue that needs to be given serious attention and that is what we are doing.
A number of noble Lords raised concerns about the WTO and how it is working. We know it is not perfect but we believe the best way to manage it is from within. That is why I am happy to say that my right honourable friend the Secretary of State is in Geneva today with the WTO, meeting ambassadors there, including our ambassador to the WTO, making the case for free trade and a multilateralism that works for all.
As we exit the EU, our primary focus is on continuity, to make sure that there is no cliff edge for our businesses and the businesses of the EU. We are also working in parallel with the other parties that we are party to agreements with because of our membership with the EU. We fully understand the importance of EPAs with developing countries, which the noble Lord, Lord Purvis, talked about. I agree that non-tariff barriers are as much of an impediment as tariff barriers to their coming up and developing. That is clearly going to be a part of what we are making sure that we follow over.
When it comes to the TRA and the dispute resolution mechanism that we will have, we believe in free trade but we need to make sure that we have the powers to protect our consumers and our businesses. That is why we are working to set up the TRA—Trade Remedies Authority—before we leave the EU to ensure that we can continue to provide a safety net. We have taken a number of steps already, including a ministerial direction on 29 March 2018 to begin critical spend on the establishment of it prior to Royal Assent on the Trade Bill. We have begun recruitment, including of the chair and specialist roles. On 10 May 2018 we announced the location: Reading. Our aim is that the TRA will have a full suite of remedies at its disposal.
A number of noble Lords talked about the relationship with the US. Clearly, the US’s approach to free trade has raised some concerns. We have a commitment from the highest level to enter into preparatory discussions with us. Noble Lords will be aware that we cannot negotiate but we have a trade and investment working group. It has met three times already, focusing on SMEs and science and technology. We also have an official-led financial regulatory working group. We will be proceeding on that and there is active progression of that preparation.
Lord Purvis of Tweed
We are grateful for the Minister’s very clear response to the debate. While I was in Washington last week it was apparent that there is some lack of transparency over what issues are discussed and the scope of the working group’s discussions. Will the Government lay in the Library some more information about the meetings, their scope and the meetings that are planned for this trade working group?
Baroness Fairhead
I believe we give what we can. We obviously have to agree it with the US, but I will look into it and see what we can do in that context.
Environmental, human and labour standards do not have to come at the expense of future trade agreements, and we will be looking at all options in future trade agreements. The noble Lord, Lord Stevenson, made some very clear points about human rights. It is a very complicated area and I think I would prefer to write to him.
This is a challenging time for the multilateral trading system. However, we will continue to be a strong believer in the multilateral system in championing the needs of developing countries, and a strong voice that wants the lives of citizens all around our country and in the world to be strengthened so that we have a more prosperous, secure and sustainable world.