CPTPP (International Agreements Committee Report)
(2 years, 10 months ago)
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Baroness Hayter of Kentish Town
That the Grand Committee takes note of the Report from the International Agreements Committee UK accession to the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP): Scrutiny of the Government’s Negotiating Objectives (10th Report, HL Paper 94).
Baroness Hayter of Kentish Town (Lab)
My Lords, I am delighted to open this debate, which covers the UK’s application to join the Comprehensive and Progressive Agreement for Trans-Pacific Partnership. It is a trade agreement between 11 countries, stretching from Vietnam to Peru. It includes countries such as Japan, with which we already have bilateral deals, and others with which we are currently negotiating such deals.
The International Agreements Committee report before us was the first parliamentary report on negotiating objectives for a post-Brexit agreement. It, and indeed this debate, reflects our commitment to ensuring that Parliament has the opportunity to inform the negotiations. The debate takes place in the light of the Government’s application and their objectives, our report, which was based on hearing from 16 witnesses and 43 written submissions, and the Government’s somewhat disappointing response to it. International Agreements Committee staff and members worked hard to scrutinise the Government’s objectives, and we will hear shortly from five of our members, including the noble Lord, Lord Udny-Lister, the most recent recruit to our committee.
There are three key points that I would like to make in opening. First, those we heard from were broadly supportive of accession, many keenly so. Secondly, where there are worries, these arise largely from this being a pre-cooked agreement to which we will simply have to accede and may not be able to amend so as to answer some very real questions posed by a number of sectors.
We would be the first joiner after the founding 11, so it is unclear whether those 11 will allow some carve-outs from existing obligations, whether by side letters or waivers. Such exemptions will be vital for some of our sectors, so it is important to know whether the Government will prioritise these, whether they would have the force of a treaty, and whether they would therefore be subject to scrutiny under CRaG. The extent to which the agreement can be changed, at the very least by carve-outs to reflect UK interests, will be key, such as in the case of the European Patent Convention, whose requirements CPTPP rules directly conflict with. Accepting existing CPTPP rules on this could jeopardise the UK’s continued membership of the European Patent Office.
There are similar questions over drugs for the NHS, and whether the car industry would be able to take advantage of rules of origin prioritising supply chains in the Pacific region. I therefore hope that the Minister will set out the Government’s assessment of whether the UK will be able to negotiate such reservations and side letters, and whether the Government are actively pursuing such options.
Thirdly, some advise that the potential economic gains from accession are very minor. My own arithmetic reckoned that it would be about £2 per head in Wales over seven years. The Government themselves estimate a mere 0.08% increase in GDP over 15 years, and even that is dependent on new trade with Malaysia, which has yet to ratify the agreement.
Whatever the arguments about the potential economic gains from accession, any such benefits will be realised only with considerable help from government to assist businesses to take full advantage of the new trade freedoms. Yet we hear from the UK Fashion and Textile Association that it has not seen much export development going on. The NFU suggested that
“the government should put more energy and resource into export promotion and marketing”.
Our report welcomed the announcement of a new food and drinks export council to support farmers, and food and drinks businesses, to maximise export potential. However, we have yet to hear anything about its establishment. Could the Minister outline the progress in setting this up and indicate, perhaps, when it will be operational? Could he also indicate what export support will be available to businesses beyond the agri-food and drinks sectors?
We also know that there are continuing concerns from the devolved nations, including about the lack of any granular impact assessment; the promised one is due after the final treaty is signed, so clearly too late to influence anything. The devolved Governments are worried partly about the cumulative impact of the New Zealand deal, the Australia deal and now the CPTPP deal on their economies, and partly about the continued insufficient involvement of their Governments, who probably reacted rather badly to the Government’s assertion in their response to our report that as
“Negotiation of goods market access is a reserved matter … DIT protocol restricts information sharing around the compilation of these sections of the mandate and progress”.
That really is not involving the whole of the UK in the negotiations, so a little more assurance would be welcome that when the UK Government negotiate for the whole of the UK, they really do involve the other Governments in a meaningful and trusted way.
As our report makes clear, there are a number of other questions, some of which my fellow committee members will cover, that need to be resolved before accession is decided on ISDS, rules of origin, climate and environmental protection, food and animal welfare standards, and intellectual property. I leave those to others.
I shall finish on one important question as to Parliament’s role in scrutinising our accession to CPTPP. The Government have said in their response that there will be “ample time” for us to scrutinise the final text, which they hope will be at least three months before the text is formally laid under the CRaG requirements. Could the Minister confirm that this will include market access schedules and any side letters?
The Minister, we know, is well aware of our committee’s demands, on behalf of Parliament, for adequate information of proposed deals, along the lines that he promised during the Trade Bill, which also covered relevant MoUs and amendments to treaties. I know that he is very open to facilitating the work of our committee, and therefore to Parliament’s input, so he will perhaps share our disappointment that our comments on this in our working practices document and now on the proposed deal were not properly answered.
On this deal, for example, we asked the Government to set out the implications of the agreement for existing agri-food supply chains that are integrated with EU member states and which could, over time, experience disruption as standards diverge. That has nothing to do with the Government’s negotiating position or any need for secrecy, yet that is what is being used as an excuse for not providing further information. Indeed, I always worry when Ministers reach for the royal-prerogative excuse, as they do in their response, as this simply means, “Leave it to us to decide”.
Similarly, we asked how the Government plan to address the contradictions between the UK’s precautionary approach and the CPTPP’s science-based approach to food standards. Again, it was nothing to do with their negotiating position or with secrecy, yet the response from the Government only mentioned the option of
“provisionally adopting SPS measures where relevant scientific evidence is insufficient”,
but gave no further detail.
We also asked for the Government’s plans for ensuring that CPTPP membership does not incentivise greenhouse gas-intensive agricultural practices in other CPTPP countries. That point was not addressed at all in the Government’s response.
The whole point of our committee is to raise questions with, and to get answers from, the Government so that we are able to report accurately and meaningfully to Parliament on proposed treaties. It is my belief, and I think that of the whole committee, that we will get better outcomes from the countries if there is a more constructive dialogue. We hope that on this first occasion it will lead to much better dialogue in the future. I beg to move.
Lord Lansley (Con)
My Lords, I am very pleased to follow the chair of our committee, the noble Baroness, Lady Hayter, and thank her for so ably presenting the issues that are raised by our report. As the International Agreements Committee, we have taken on new responsibilities. This is a first example of where we have reported on negotiating objectives and the House has an opportunity to debate them. This forms part of a process by which, in due course, when the Government, one hopes, successfully negotiate an agreement and presents it under CRaG, we will be able to look back and say that we were very clear about the nature of what was being sought by way of this agreement and to measure the extent to which the Government have been able to achieve their objectives.
That is an essential part of our scrutiny processes. In my personal view, we are not at this stage debating whether accession to the CPTPP is a good thing or a bad thing; our starting point was simply that it was the Government’s policy, and it was essentially a good thing. The issue at this stage is whether we can be clear about what the Government are seeking to achieve. The noble Baroness, Lady Hayter, quite rightly raised a number of the issues on which we want clarity. I shall raise a couple more, and I know that colleagues from the committee will have others.
I want to say a word about the big picture. I should register an interest, as recorded in the register, that I am the UK chair of the UK-Japan 21st Century Group. The big picture seems extremely positive. Not only is the CPTPP one of the leading plurilateral trade agreements, but it is an immensely ambitious proposal on the part of government to accede to it. There was a degree of misplaced comment about why we were trying to join a Pacific agreement. The point is that that is where trade happens; it is where our prospects for growth in trade perhaps lie; it is where, when one looks at the shape of international trade growth and economic activity in the decades ahead, we need to be. Given that on current evidence we shall not have another multilateral round in the WTO, the ability of countries such as us to enter into a major regional agreement and increase the scope of it geographically and otherwise is a central way in which we can promote free trade generally across the globe and encourage others to do the same—perhaps even encourage America to do the same at some point.
Our chair raised the question of the impact assessment. I am somewhat sceptical about the value at this stage of such impact assessments. They rest essentially on the assumptions underlying them. An agreement of this kind, with the scale of growth in digital economies and in the provision of digital services and digital trade that it provides for, enables the UK to escape from the otherwise simple fact that we are very long way away from these markets and trade tends to diminish with distance. That may not necessarily be true to the same extent and in the same way for digital trade in the future, and it certainly is not the same in respect of services trade. We are an economy increasingly built on services and digital trade, so, for us, the CPTPP seems to create really serious opportunities.
As a remainer in the Brexit context, I obviously take the view that we should never think of the CPTPP as being, in some sense, a counterpart to reduced trade with the European Union. I want us to have both, and I am sure that we can and should aim to.
We should never underestimate the leverage that the United Kingdom is able to bring to the negotiations ahead. We are major importers. Maybe we would like it a different way, but we are net importers of goods, particularly agricultural goods. The European Union has benefited from that overwhelmingly in the past; many other countries might examine it and have ambitions on that agricultural trade. That is leverage in the negotiations. As we will debate at a different stage in relation to Australia, we should not let the opportunity for others to sell more agricultural goods to the United Kingdom pass without taking our opportunity to ensure that we can sell services and some of our leading manufacturing activities to them, and to have digital trade with them.
I have two points on our report and the Government’s response where more clarity is required. First, the Government have expressed their objective on medicines as being that their cost should not be “on the table”. The trouble is that their cost is on the table; the question is how the Government will manage to take it off. We heard from the British Generic Manufacturers Association that Article 18.53 of the treaty has a process requiring mandatory notification to the patent holder of a marketing authorisation application being submitted for a generic or biosimilar medicine. This would give scope and time for a legal challenge on the use of that intellectual property. That can delay the introduction of a generic or biosimilar medicine; we do not need to speculate about that, because you can see it happening in America and some other jurisdictions. That is important to the National Health Service. We are probably the most successful major health system in substituting generics for branded medicines at an early stage. The reduction in price at the point at which they come off patent is generally something of the order of 80%, so potentially it is of immense importance that this process works smoothly. We do not want delay. We share the concern of the generic manufacturers, as the Scottish Government clearly did, too.
The Government’s response is essentially to say, “Don’t worry. We’ll negotiate our way out of this”, and the implication is that there will be a set of comprehensive side letters. We are reaching the point where the Government should be very clear that this is what we should look for by way of the subsequent negotiation. Frankly, this is one of the areas where our negotiating partners in the CPTPP should not be surprised. They should expect and accept it, and our negotiators would find it easier if we were very clear that this was an absolute requirement.
The second issue is about the investor-state dispute settlement. We essentially asked the Government to tell us their negotiating objective, as it is not in their strategic approach. The implication of their response was simply, “Trust us; whatever we sign up to will, by definition, be in Britain’s best interests and therefore it will be okay”. But we do not know what it is. As a committee, we did not take a view on what the negotiating objective should be. Strictly from a personal view I know from my conversations with colleagues in Japan, who are much governed by the decades of investment activity in this country, that they want investor-state dispute settlement to be incorporated into the agreement. In fact, they may even require it for the agreement to go ahead.
We have been major investors around the globe for generations. We still have major investments, including in a number of CPTPP countries. I am not clear what we are frightened of. We have a right to regulate; there are already very clear provisions in the treaty about the ability to regulate our environmental, health, social and labour laws. As long as those are clear in the treaty, we should go down the path of a dispute settlement process like those being devised under UNCITRAL.
Those are the two issues on which the Government ought to give us greater clarity. Difficult though the ISDS debate is, this is the moment—and the agreement—where the Government need to get off the fence and start telling people what our approach in free trade agreements is to investor-state dispute resolution.
Finally, colleagues in the committee sought clarity in our report from the Government about China and Taiwan. Others may say more about that. Personally—I may need to apologise to members of the committee— I think it would probably not be in the Government’s or British interests for us to say much about China and Taiwan. I think our best interest is to accede to the CPTPP and be on the inside making decisions about this—hoping to do so before the other CPTPP members have made any progress whatever in considering the potential for China or Taiwan to accede. I would rather we were in there talking to the others than outside pontificating about it before we have entered, potentially making difficulties before we have joined the agreement.
This is the first debate of this kind. I hope it will be an opportunity. I encourage my noble friend the Minister to use it not only to restate the Government’s response to our report but perhaps to clarify some of these issues, which we will have to look at in a more challenging way when we see the agreement. I hope that we can say then that the Government have secured their negotiating objectives and that we can commend them under the CRaG process.
Lord Oates (LD)
My Lords, I am pleased to follow the noble Lord, Lord Lansley. I very much welcome the introduction of the noble Baroness, Lady Hayter; I am particularly pleased about the emphasis on how our committee can work and properly help to inform the House. It is really important that the Government give us some clarity on that and do not simply reserve it such that they decide what and when they will tell us whenever they feel like it.
I very much agree with the noble Lord, Lord Lansley, that the negotiating objectives are one of the most crucial points in our work in the committee, and for the House as well. By the time an agreement is signed, it is too late. This is the moment where we get to put our views. I hope the Minister will not only listen and respond but take on board some, if not all, of the points—if not mine, perhaps at least those of the noble Lord, Lord Lansley.
I will focus on the climate aspects, but the issue about medicines is critical; it goes back to the role of Parliament in the process. I would much prefer that Parliament, particularly the House of Commons, had to agree the negotiating objectives, because it would be very clear to our negotiating partners what they were. In the absence of that, on an issue as critical as this it is essential that the Government speak clearly and categorically, so that there is no doubt in the minds of our negotiating partners.
As I said, I want to speak principally on the climate-related aspects of the negotiating objectives set out in The UK’s Strategic Approach. I am afraid that the document seems to lack any positive ambition to combat climate change and to protect nature. There are just nine references to climate change in the whole document. Two of those simply state that, as a significant collection of nations, CPTPP has a potentially important role in tackling climate; I am sure that is true. In another reference the Government say that
“the UK will work with partners to support our mutual objectives to tackle climate change”—
I hope that was not in doubt. Another reference says that
“the UK will advocate for clean growth and cooperation in the global fight against climate change”.
Again, there are no details of how and there is no specific reference to the CPTPP. The fifth and sixth references, on page 60, simply state the generalised overall commitment of the Government to their climate change commitments and the statement that
“Climate change is a threat that requires an urgent global response”.
The urgent response is definitely not found in these negotiating objectives. The final references simply refer to the impacts of climate in this regard.
Nowhere—not once in the whole of this 67-page document, as far as I can find out—is there a single concrete negotiating objective. As our report points out at paragraph 140:
“The Negotiating Objectives … do not include any commitments or red lines to ensure that the UK’s right to regulate is maintained in support of climate commitments and environmental standards.”
Nowhere in the document will you find an indication of the overall approach that the UK will take to ensuring that membership of the CPTPP leads not only to regression in our climate ambitions, but actually to some ambition for a net-positive outcome in tackling climate change and driving down carbon emissions. Indeed, far from tackling emissions, the document concedes that UK greenhouse gas emissions will rise as a result of the agreement, according to the impact statement. Even then, the real impact of UK accession on greenhouse gas emissions is of course likely to be in partner countries, not in the UK. Regrettably, The UK’s Strategic Approach cannot give us any useful information about that at all. It says that it is all too complicated, and it may well be. Nevertheless, as the carbon intensity of production in almost all those countries is greater than in the UK, it is likely that any significant increase in trade will result in a significant increase in emissions. We noted, in particular at paragraph 141 of our report, that there is a danger that the CPTPP will incentivise
“greenhouse gas intensive agricultural practices in CPTPP member countries with lower environmental production standards.”
That has the potential to undermine the UK agricultural sector’s commitment to net-zero greenhouse gas emissions by 2040.
The Department for International Trade needs to step up to the plate here and recognise that UK trade policy has to factor in our climate ambitions, otherwise it will simply end up exporting jobs to countries with higher carbon-intensive production, causing economic damage at home and climate damage abroad. Regrettably, however, the Government seem to lack coherence on climate and trade. BEIS, Defra, the Treasury and the Department for International Trade all seem to be pulling in different directions, and it seems that there is confusion even within the department, between the department and the Board of Trade and within the Board of Trade about what this is all about.
The Board of Trade’s report last July stated:
“Climate change and nature loss are among the most complex issues of our time—they will touch every aspect of life and require all the tools at our disposal to resolve them, including trade tools.”
Yet this document on the strategic approach to one of the most important partnerships that we are likely to form in the coming years, if we go ahead, has nothing at all to say about our ambitions. I really think that the Department for Trade needs to start internalising; if we are serious about the Paris targets and serious about those commitments, they have to be taken into account in our trade negotiations.
Personally, I think we need a few rules about this. First, we could start prioritising trade agreements with countries that are willing to take ambitious steps with us on carbon emissions and wider issues of biodiversity and nature loss. We could insist that all trade agreements that we are prepared to sign up to will have to include zero tariffs and the removal of non-tariff barriers for certified green products and services. We could say that we do not intend to sign any trade agreements unless the overall impact from them can demonstrate a net reduction in greenhouse gas emissions and a net increase in biodiversity.
The challenges we face in reaching the Paris climate targets are already herculean; we cannot go on adding to them, however modest the Government may argue this is. Whatever the scale of the greenhouse gas emission increases arising from accession to the CPTPP, the Australia FTA or any other trade agreement that there turns out to be, they are too much. Trade policy is one of the tools that we have to drive down greenhouse gas emissions and drive up biodiversity. The strategic approach suggests that the Government are unwilling to use that tool. I really hope that the Minister can go back to his department and reinforce how important this aspect of trade policy is.
Lord Astor of Hever (Con)
My Lords, I very much support the Government’s aspiration to join the CPTPP and the strategic importance of working more closely with allies in the Asia-Pacific region. It is good news that there was also a clear wish by our witnesses to join a group of countries that constitute one of the largest and most dynamic free trade areas in the world. My noble friend Lord Lansley set out very well the benefits of trading in this area, and I support what he said.
When it comes to Britain being an outward-facing global trading nation, our intellectual property sector is a jewel in the crown. In 2021, the UK ranked second for the second year running in the US Chamber of Commerce’s global IP index, credited with its strong and sophisticated national IP environment. Much of the UK’s international reputation for excellence in IP can rightly be attributed to its membership of the EPC, the European Patent Convention, an international agreement independent of and separate from the European Union, which has enabled the UK to develop a strong, influential and internationally efficient patent regime.
I have recently spoken to the CIPA, the Chartered Institute of Patent Attorneys, which represents 4,000 members working across the IP sector. The CIPA welcomes the Government’s progressive international trade agenda and ambition for accession to the CPTPP. It is pleased to have received assurances from Ministers and officials that the Government do not intend to put membership of the EPC at risk.
Despite this positive recognition of the prime importance of the EPC, there remains a concern that the IP chapter in its current form could be found to be inconsistent with the terms of the UK’s membership of the EPC. The CIPA has cautioned that this could have serious unintended consequences for the United Kingdom and its reputation as an international leader in the field of IP, SMEs, patent professionals and UK GDP.
I was pleased to see the Government’s recognition of the value of the EPC and their pledge to remain a member of the convention as set out in their strategic approach. Following on from that commitment, I ask my noble friend the Minister what measures the Government will take in their approach to the negotiation process to ensure that they honour that fundamental commitment to the EPC. Specifically, will the Government commit to negotiating carve-outs or setting aside the grace period and patent term adjustment provisions that the CIPA and others have flagged with them? Will they agree to consulting the IP sector on other viable alternatives should they encounter difficulties in securing the appropriate carve-outs?
Lord Bilimoria (CB)
My Lords, in a speech on 19 November 2021 at the University of Birmingham, where I am proud to be chancellor, His Excellency George Brandis, the Australian high commissioner, announced that in September the US, the UK and Australia had signed the AUKUS trilateral security partnership. He said:
“The Indo-Pacific has become a centre, perhaps the global centre for strategic competition, certainly it is one of the principal global centres of strategic competition today. Prime Minister Johnson has acknowledged that ‘the world is tilting on its economic axis and our trade and relations with the Indo-Pacific region are becoming ever more vital than before’. The United Kingdom Government’s recently released Integrated Review demonstrates that this country recognises the geopolitical and economic centre of gravity is moving to the south and to the east, to the Indo-Pacific region … the momentous trilateral partnership will promote security and prosperity in the region for decades to come. As will other arrangements in the region like, for example the CPTPP (the Comprehensive and Progressive Trans-Pacific Partnership), which Australia hopes the United Kingdom will accede to next year.”
On 21 January this year, the Australia-UK Ministerial Consultations, AUKMIN, took place. There, Australia
“welcomed the progress made by the UK toward its accession to the … CPTPP … as a priority of the CPTPP membership. Both sides looked forward to continuing to work at pace on the accession process, reflecting the importance of advancing the CPTPP’s high-standard rules and promoting free trade and open and competitive markets.”
This country makes up under 1% of the world’s population, yet we are one of the six largest economies in the world. The UK has always been a great trading nation. We are the second or third-largest recipient of inward investment at any time. We are the second-largest services exporter in the world. We punch well above our weight. The reasons for joining the CPTPP are to increase trade and investment opportunities, to diversify trading links and supply chains, to secure the UK’s future place in the world and to advance our long-term interests. It will be an important part of our strategy to place the UK at the centre of a modern, progressive network with dynamic economies and, in that, to live out this global Britain mantra for businesses and investors.
Joining the CPTPP will help us to forge a leadership position in a network of countries and send out a powerful signal to the world. It will also be about championing free trade and liberalisation, fighting protectionism and removing barriers all the time.
In July 2020, Liz Truss, then Secretary of State for International Trade, said:
“But of all the opportunities I’ve seen, I think CPTPP is one of the greatest. It covers 13% of the global economy—if you had the UK that would be 16% … Membership of CPTPP would hitch the UK to the fast-growing Pacific region. It also helps us strengthen our ties with some of our key international allies like Canada, Singapore and Australia … We would be able to accede to this agreement in ways that don’t damage our national sovereignty … What it allows us to do is to be part of a modern, rules-based free trade area.”
There are huge benefits: modern digital trade rules that allow data to flow freely; eliminating tariffs on UK exports more quickly, such as on whisky, down from 165% duties to 0% in Malaysia; and reducing car duty to 0% in Canada by 2022 if we finish the negotiations—two years earlier than through the UK- Canada trade deal. When it comes to market access, the CPTPP provides for the almost complete liberalisation of tariffs among the participants; tariffs are retained in only a few sensitive areas—I can give examples. Here is the good news: it provides a single set of rules of origin, allowing content from all CPTPP countries to be cumulated, meaning that if goods have at least 70% CPTPP content they qualify for preferential tariffs. That is great; that 70% can come from any combination of CPTPP countries.
The agreement covers 11 countries, and I congratulate the noble Baroness, Lady Hayter, and her committee on their report. For completeness, the countries are: Australia, Canada, Japan, Mexico, New Zealand, Singapore, Brunei, Chile, Malaysia, Peru and Vietnam. We formally made our request to join on 1 February 2021, and the Minister for Trade Policy, Penny Mordaunt, said that the Government hoped to have negotiations concluded by the end of 2022. Could the Minister confirm that it is very much the objective to do that? We of course signed the Australia free trade agreement on 16 December 2021.
The committee raised various concerns about food standards, climate regulations, intellectual property and the protection of data, and the Government responded. On personal data, for example, they said that the CPTPP would not affect the current position, which is that
“individuals’ data protection rights are protected and upheld when their data is transferred overseas”.
Could the Minister confirm that?
Could the Minister also confirm that we are making the most of our relationship now, having completed the Australia free trade agreement, which I will come to soon? We already have bilateral agreements with eight of the 11 CPTPP countries—nine if we add New Zealand, which we will hopefully conclude soon. Could he update us on how soon he thinks the New Zealand agreement will be concluded? Then it will be only Malaysia and Brunei that we do not have bilateral free trade agreements with.
With these 11 countries making up 13% of global trade, according to the World Bank, as I said earlier, that amounts to £110 billion of trade for the UK as things stand. That is higher than the amount of trade with China, which is just under £100 billion. This is one of the largest free trade agreements in the world. The first phase of the negotiations, from September to November 2021, covered the UK’s compliance against each of the CPTPP chapters. We have submitted our evidence, which the members are currently reviewing before giving the green light to progress on the second phase. Could the Minister update us on where we are on that?
We will then negotiate market access. There are, of course, political sensitivities that we have to accept around China and Taiwan both announcing that they want to join the CPTPP, and Thailand and South Korea wanting to join as well. China will require significant work to meet CPTPP rules. The good news—I would like the Minister to confirm this—is that this could add momentum to the UK’s accession bid because bids are looked at one after the other and not in parallel.
The CPTPP is key for the success of global Britain. Globally, as I said earlier, the axis is shifting. The world economy is thriving to become greener, more services-orientated and tech-driven. Asia is taking centre stage to become a key export destination of the world. CPTPP members are the fastest-growing economies in the world, with an expanding middle class that has an appetite for British goods, products and services. They respect brand Britain. For the UK to remain globally competitive it must position itself as a trading partner of choice in the region.
Membership of the bloc has potential to deliver new opportunities for British business across many different sectors. The CPTPP could enable UK businesses to make products for all different markets without the need to change processes, parts, suppliers or components. This would be a critical enabler of UK supply chains, allowing companies to import and export components more easily and making investments more competitive. A deal could free up data flows, the lifeblood of the modern economy, for UK business across the Pacific, cutting across the UK service sector.
There is also a chance—a tantalising prospect—that the deal might help UK-US trade. The US helped shape some of the provisions under this trading bloc and, although it is not a member, the decision to rejoin may still be up in the air. Could the Minister acknowledge whether this is the case?
Central to the success of this deal is to make sure that it works for business. It is key that negotiations are not rushed and that the necessary carve-outs are made to protect UK business interests. As president of the CBI, I was personally involved in the rollover of the EU bilateral trade deals of 66 countries; we played a crucial role to help that happen on time. We also played a major role in the Australia-UK free trade agreement, working alongside the UK and Dan Tehan, the Australian Trade Minister, who was the vice-president of the accession committee of the CPTPP, and George Brandis, the high commissioner I mentioned earlier. We also have the New Zealand deal, working with High Commissioner Bede Corry. Now, of course, we have just launched the formal negotiations of the India free trade agreement with the UK.
Businesses must have a seat at the table, particularly as the UK progresses towards more in-depth second phase negotiations with members bilaterally. Could the Minister assure us that business will be around the table? The CBI stands ready to help. The UK will need to think how it uses its existing bilateral deals with individual countries to facilitate the access. Dan Tehan of Australia has said very openly that he will help in every way to try to complete this by the end of this year.
This deal will contribute to the levelling-up agenda as well. For example, the east Midlands alone exports £3.1 billion of goods to these markets. Joining the agreement could further facilitate this trade and contribute to us closing the gap in regional disparities. But this will require supporting more businesses to export, particularly those that are new to it. To this extent the Government’s export strategy is welcome, but superstar exporters—that is, companies that export more than 10 products to more than 10 countries—make up 14% of our exporters. In Germany it is 40%.
The CPTPP is worth £8.4 trillion in GDP. It is a gateway to the Indo-Pacific region, which is going to account for the majority of global economic growth between 2019 and 2050. We are at the front of the queue. Let us make this happen very quickly. To conclude, I quote from George Brandis’s Birmingham speech again. Remember that the term has changed—it is no longer Asia-Pacific; we refer to the Indo-Pacific. George Brandis said in his conclusion:
“The future of the Indo-Pacific will impact all our futures. It will impact the future of Atlantic nations as well as Indo-Pacific Nations because increasingly it will become the fulcrum of world politics.”
The Lord Bishop of St Albans
My Lords, I declare my interest as president of the Rural Coalition. I have to say I rise with a certain hesitation, because so many noble Lords speaking in this debate are either part of the International Agreements Committee, and have been working on this for so long and know so much of the detail, or indeed have been involved in international trade. I have none of that experience at all.
My particular reason for wanting to speak are two areas that I would like to focus on for a few moments, to do with the whole issue of environment and climate change, as we are seeking to trade internationally—although I note that the noble Lord, Lord Oates, has powerfully laid out much of that. So, I will not actually say much more on that; I will ditch that bit of what I was going to say. Let us keep going.
What I would like to do is to talk a little bit about agriculture and farming. I come from that background, and it is something that I am absolutely passionate about. I believe it is crucial, as we think about our future in the world—a world that we have seen dramatically, over the past two years, is sometimes vulnerable and susceptible to shocks and things that we could not possibly have conceived would have affected us—to highlight the importance of food.
In one sense, I am stating the absolute obvious, and please forgive me if I am just being really simplistic. I often hear it said in your Lordships’ House that the primary duty of government in the defence of the realm. That is certainly very important, but actually feeding the realm is pretty much up there, because if we have not fed people we will not have a nation within a very short time. We only have a few weeks of food in the country at any one time, and yet we are one of the most prolific producers of food. We have some of the best agricultural land in the world, and we have some of the best farmers. I am privileged to live and work in Hertfordshire and Bedfordshire. We have people who are absolutely at the forefront, in the world, or what is going on in agriculture. We have Rothamsted, and we have some fascinating new work going on with some of the most advanced forms of caring for soil, precision drilling and precision farming. It really is quite remarkable what is going on.
Let me return, for a few moments, to the whole issue of food. It is absolutely right that this is going to be part of our future trade agreements. It is very exciting that we are now looking at developing further trade agreements in the Indo-Pacific—I am personally very committed to that; I think it is excellent that it is going ahead—but we must have some special pleading for our farmers and our basic food security. Within days of a shortage, in a climate crisis, we can suddenly find that food supplies dry up. We have to ensure that we have a good, solid supply of food. Of course, we will never be entirely self-sufficient, because many of the more exotic foods that we want have to be grown elsewhere. It makes sense to have them come in, but our basic farming capacity is absolutely crucial. In the post-Brexit environment, there is no doubt that there is a gulf and growing mistrust between many members of the agricultural community and the UK Government, when it comes to negotiating trade deals. The president of the NFU recently described British food producers as pawns in post-Brexit trade agreements and was particularly critical of the FTAs signed with Australia and New Zealand. I hope, with the new Trade and Agriculture Commissioner officially up and running, there will be the heightened security of the cost-benefit analysis of trade deals and so on, of our agricultural sector. This will, I hope, ensure the interests of domestic food producers are protected.
The UK has, in principle, agreed to begin meaningful negotiations with Canada on a more comprehensive trade agreement in April this year. Canada, being one of the largest food producers in the world will, no doubt, have reviewed the terms offered to Australia and New Zealand on agricultural products, and I am sure that it will push for very similar access, or even better access. What is worrying is, as part of the CPTPP negotiations, Canada will have every right to delay ratifying our entry until we have offered them a similar status to Australia and New Zealand on agricultural products as part of the bilateral FTA due to be negotiated. Of course, this is hypothetical, but while it would be nice to believe these negotiations will be conducted in good faith, as a realist I know, from having spoken to people who have been involved in these negotiations, just how tough they will be and the sort of access to our agricultural markets that others will demand.
We have very high standards for animal welfare and how we grow our crops, and there is a really important issue here, as many of our farmers are concerned that some of those standards will be compromised. The fear in the long run is that, for our agricultural products to be competitive in trade deals that we will have voluntarily entered into, farms will be forced to consolidate into much larger commercial units. That is going on fairly steadily anyway, but is likely to speed up much more. The danger is that it will affect this country’s rural communities and rural sustainability. Our rural communities depend on the agricultural industry; they are rooted in it and gathered all around it.
Should we join the CPTPP, we might well have to deliberate and negotiate on China’s accession. Regardless of the economic issue surrounding state-owned enterprise—the obvious barrier to China joining in the near future—it is vital that the UK can retain an effective and moral approach to foreign trade and policy. The Government were not keen on the various iterations of the so-called genocide amendment to the Trade Bill, which many of us engaged with, which would suspend trade with a country where it was determined that genocide was being committed. These issues are hypothetical, but we have to think carefully about them. My fear is that, via the CPTPP, we could undergo a greater economic integration with China and absolve ourselves of the right—or, more worryingly, the ability—to criticise the actions of the Chinese Government.
I hope that, when the Minister responds, he might be able to set his comments in the slightly broader context of issues of food security and the environment as we look to these future trade partnerships.
Lord Hannay of Chiswick (CB)
My Lords, the case for the UK joining the CPTPP seems an entirely convincing one. That of course is one of the findings of the report that we are debating today, which was so excellently introduced by the noble Baroness, Lady Hayter. The case for joining would be all the more convincing if it was not overlaid by hyperbole which overlooks the fact that we are already in a free trade relationship with seven—soon to be nine—of the CPTPP’s 11 member states; and that the crude figures of our trade with all these countries, both imports and exports, provide no measure of the benefits that the UK could expect from joining the group.
I add, referring to my noble friend Lord Bilimoria’s quotation from the Foreign Secretary, when she was Secretary of State for International Trade, that a trade agreement of a bilateral kind such as accession to the CPTPP cannot be free of limitations on our sovereignty; every trade agreement is a limitation on our sovereignty, as I am sure the noble Lord knows. Also, there is the hard fact is that the CPTPP is neither the first nor the second of our principal markets. They are the EU and the US, and with neither of them are our trade relations in particularly promising shape.
I will focus my remarks on the implications for our accession to the CPTPP of the applications to join that group by China and Taiwan, which were referred to in paragraphs 33 and 34 of the report, and by several speakers in this debate; and on the consequences of our joining the CPTPP for Northern Ireland. Neither issue was properly addressed in the Government’s negotiating objectives. I hope that the Minister will be able to cast some light on both when he replies to the debate.
The applications by China and Taiwan are clearly relevant to our application, although they are quite separate from it. Their relevance is that if either or both is successful—as it is hoped ours will be—our trade relations with those two countries will in future be regulated by the terms of the CPTPP and not, as now, by our shared WTO status. Put clearly, we would be in a free trade area relationship with China—surely a major development indeed. The right reverend Prelate has referred to some of the problems that would arise in that situation.
It is clear too that the sequencing of the handling of these three bids for CPTPP membership, over which we have virtually no control, could present some really tricky challenges. The least likely eventuality, I suggest, is that either China or Taiwan, or both, join ahead of us, in which case they would have a say over our terms of accession. I do not honestly think that very likely. Slightly but not much more likely is that two or three of us join simultaneously, in which case we will have no say over the terms under which the others join, nor they over ours. Most likely, we will join first, in which case we will, presumably, have an equal say with other CPTPP members over the terms of accession of both China and Taiwan.
If I have those three alternatives right—I would be grateful if the Minister could say whether I do—it is easy to see that each of them bristles with choices of a considerable geopolitical significance that will have to be made further down the road. I am not stepping into the mistake of asking him to tell me what the position of the British Government will be in any of those three cases, merely whether I have correctly adduced the three possibilities.
With the implications for Northern Ireland of UK CPTPP membership, referred to in paragraph 37 of the report, we are on rather more familiar ground, alas, although experience in other contexts has shown that there are great complexities and difficult choices to be made there too, of which the negotiating objectives give no hint. While it is clear that the EU has no say over whether we join the CPTPP, will we ensure that the Commission is properly briefed during the negotiations to join the CPTPP, with a view to avoiding unpleasant surprises as far as possible in implementing the provisions of our CPTPP membership in Northern Ireland, which, for trade in goods, as the Minister knows very well, is part of the EU’s single market? Can he say whether such a precautionary approach of briefing the Commission will be undertaken or is in hand?
I will leave most of the other, more detailed aspects of our CPTPP accession negotiations referred to in the report to others more knowledgeable than I. But since several noble Lords have touched on patents and intellectual property, I hope the Minister can give a clear assurance that the UK will accept no CPTPP provisions that could be incompatible with or prejudicial of our continuing membership of the European Patent Convention and its European Patent Office.
I conclude with a comment on assertions being made that all this will be wrapped up within the current year. Given the complexities and sensitivity of many of the issues at stake, and the rather cumbersome nature of a negotiation that will require unanimity of all concerned at every stage, I seriously doubt whether that estimate is realistic. Setting it out now, however much it fits a desire to achieve it, will come back to bite the Government in the ankle when it is not achieved.
Lord Gold (Con)
My Lords, first I join those noble Lords who support the Government’s plan to seek entry into the CPTPP. As the Government state, it will
“put the UK at the heart of a dynamic group of countries”
as global economic growth centres on the Pacific region. The Government claim that accession could see 99.9% of UK exports being eligible for tariff-free trade with its members and will “facilitate services trade.”
While I welcome the boost that joining the CPTPP is predicted to give to our export market, in this speech I want to focus on services, especially financial and professional, which the Government claim will be boosted by our accession. DIT figures show that from 2014 to 2016 financial services provided the largest exports from the UK to CPTPP members, primarily to Japan, accounting for 28% of service exports to member countries. So we already have a strong foothold, which we should be well placed to strengthen.
I am sure that I do not have to remind my noble friend the Minister, formerly chairman of Barclays Bank, how important the City of London and financial services are to the wealth of this country. I do not wish to open up old wounds, but the risk that Brexit posed to the financial services industry—not answered by the 2020 EU-UK trade and co-operation agreement, in my view—remains real, even though our worst fears prior to Brexit thankfully do not appear yet to have materialised and hopefully will not. Just as the Government contemplate in their Brexit freedom Bill how we might take steps to benefit from Brexit, hopefully boosting the strength of the City of London and financial services, I trust that in negotiating our proposed entry into the CPTPP, the Government will ensure that this sector is not left behind, as the opportunities are great.
Of course, in joining we would be acceding to a treaty already approved by 11 member countries, so our scope for change is somewhat limited. In their response to the IAC’s report on UK accession, the Government stated that in 2020 UK service suppliers exported £25.1 billion worth of services to member countries and that our joining will provide
“benefit from modern rules which ensure non-discriminatory treatment and increase security, protection and transparency.”
It is the case that treaty members must abide by non-discriminatory obligations so must not treat financial institutions or investments from another member country less favourably than similar domestic investors. If we join, we benefit from that. Treaty members are also barred from imposing restrictions or conditions on suppliers from another member, such as limits on the number of subsidiaries or nationality requirements for senior management. However, the Government do not provide a specific negotiating objective for UK financial services.
In its evidence to the IAC, the Law Society stated that the aims of UK legal professionals are
“unlikely to be realised via CPTPP”.
The London Market Group, which represents the insurance industry, told the committee that
“there is nothing specific that we will get from this agreement”.
The evidence the IAC received was, as the noble Baroness, Lady Hayter, said, universally supportive of membership and anticipated potential economic benefits for the future, but not for now.
So how are we to maximise our gain from joining CPTPP? One way is through the negotiation of side letters, a subject already raised by the chair of the IAC, the noble Baroness, Lady Hayter, and my noble friend Lord Lansley. Leaving aside issues of legal enforcement and whether each member country must agree the side letter in order to be bound by it, unless we enter into bilateral agreements with each member—we have already entered into a number of agreements, with, I think, seven of the member countries—side letters seem to be the only way, pre-entry, to improve the terms of the treaty. It is imperative therefore that the Government take every step they can to negotiate side letters or bilateral treaties that assist our services sector. Accordingly, will the Minister confirm that every attempt will be made in the forthcoming negotiations to agree with each member country side letters or bilateral agreements that boost our ability to compete and enhance our financial services and professional skills in the CPTPP world? Can he also give us now an idea of what we will specifically be seeking in our negotiations? I realise that he will not want to say anything that might prejudice the negotiations, but I am not asking him to tell us what we might give up in our discussions, only what our starting position might be.
Assuming that our application to join is successful, we then have a great opportunity to influence the way in which the financial services industry can operate. TheCityUK noted in its evidence to the IAC:
“Most barriers to trade in FRPS”—
or financial and related professional services—
“are regulatory and require regulatory co-operation to resolve them.”
Being a member of this “club” enables us to work with other members to liberalise regulation which is holding us back.
An example is the recognition of professional qualifications, the failure of which, at present, prevents professional services firms fully operating and expanding in member countries. In their negotiating objectives, the Government state that “further liberalisation” could be achieved through the recognition of professional qualifications, but the agreement does not provide for this. Each country member is to
“encourage its relevant bodies to establish dialogues with the relevant bodies of other Parties, with a view to recognising professional qualifications, and facilitating licensing or registration procedures”.
In closing, I ask the Minister to confirm that on our joining the CPTPP every possible step will be taken to liberalise regulations that hold us back and to further the recognition of professional qualifications.
Viscount Waverley (CB)
My Lords, this Pacific partnership is potentially the most important regional trade agreement that the UK will negotiate, with the potential for wide-ranging repercussions, strengthening ties with international allies and signalling commitment to free trade.
Feedback from the supporter network organisations around the United Kingdom of the Trade and Export Promotion APPG, which I co-chair, suggests that they broadly support accession to the CPTPP. The noble Lord, Lord Lansley, whom I am delighted to see and who is a colleague on the APPG, was spot on when he said that the Pacific region is where we need to be, with serious opportunities. I share the points he made regarding the NHS.
There is clear value and opportunity for the UK in joining, working with members in the bloc to shape economic issues and be at the forefront of innovation when it comes to digital and trade provisions. However, the Government should explain how they will protect UK food, environment, IP, climate and data protection, and further explain how this FTA will promote human rights, international development and union rights.
The content of negotiations also has important implications for consumers—the choices they make, the prices they pay, the standards they can expect and the rights they can rely on. Consumers require the strengthening of four priorities: maintaining health and safety standards of food and products, maintaining data security regulations that protect consumers’ digital rights, maintaining the environment and using trade to address inequalities.
However, the report before us states:
“Immediate economic benefits are limited, but the Agreement may open opportunities for collaboration”,
which confirms that the UK sees this as a means by which to extend influence beyond purely increasing trade.
There is a concern among some as to whether CPTPP negotiations might become bogged down in a political quagmire. CPTPP’s economic provisions, particularly on governance, relate to state-owned enterprise. The question is: how does the UK expect to achieve our goal if it does not have the right policy with China? I was pleased to hear the remarks of the right reverend Prelate the Bishop of St Albans and the noble Lord, Lord Hannay, on the timetable issues.
The situation could become complex resulting from fear of retribution from Beijing against WTO members Taiwan and South Korea. Plainly there will be geopolitical implications, with Taiwanese accession opposed by China. Beijing’s regional influence might become the catalyst for a policy reversal by the United States also to apply to join the pact. That could become a game-changer.
This is an opportunity to request that the Minister help me. Given that the WTO has primacy over regional trade agreements and that China has a complex relationship with the WTO, what is the situation regarding the WTO membership criteria, which state that when a member enters into a regional trade agreement through which it grants more favourable conditions than for trade with other WTO members, it departs from the guiding principle of non-discrimination?
Australia has filed a formal complaint to the WTO over various duties imposed by China, with Australia seeking to be included in consultations about a trade dispute between the European Union and China, launched by the EU. Additionally, at a meeting on Monday past, Canada sought to further a trade dispute with China over imposed restrictions. Is it considered that these have implications for CPTPP?
In conclusion, what do the Government believe are the consequences of China applying, and how will we achieve our trade goals without, at the very least, pragmatic relations with that country?
Lord Udny-Lister (Con)
My Lords, it is a pleasure to be a new member of the International Agreements Committee, and I start by thanking our chair, the noble Baroness, Lady Hayter, and the other noble Lords for their warm welcome and introduction to the committee’s important work. I also draw your Lordships’ attention to my declaration in the register of interests as an advisor to HSBC bank.
Since joining the committee, I have had the opportunity with interest to familiarise myself with both the previous Sessions, the 10th report of this Session and, of course, the Government’s recent response to that report. Like many today, I welcome the Government’s commitment and action in ensuring that our accession to the CPTPP is both smooth and beneficial for all concerned. It will send a powerful message that the United Kingdom stands ready to champion free trade and fight the protectionism that has held back this country for far too long.
I turn to the impact of rules of origin on UK manufacturers. The Government are right to highlight the many benefits that the CPTPP rules of origin may provide to UK manufacturers in the long term. However, I fear that some industries may suffer unless the Government take bolder action to secure more generous local content thresholds. I would be grateful if the Minister could provide the Committee with an update on what work, if any, is being done to mitigate the concerns of the industry itself.
Furthermore, and without wanting to labour that point, while I gladly acknowledge that Her Majesty’s Government have made it abundantly clear that they will accede to CPTPP only on terms beneficial to the UK, are they able to provide the Committee with an update on whether any further consideration has been given to the use of side letters and/or other instruments to clarify certain policies or exclude certain provisions? I raise that point as I know it is of huge concern to those in the UK automotive industry. I hope that my noble friend will be able to put minds at rest in his summary remarks today.
It is further apparent that, when considering rules of origin, specifically in cases where we have existing FTAs in place, UK businesses may find it challenging to ascertain whether there is more benefit in their trading under localised bilateral agreements or the CPTPP. I fear that in such circumstances we could see businesses make costly misjudgments. Are the Government planning to introduce any measures to simplify that process or to put in place additional guidance so that UK businesses may have the confidence to know that they are always operating on the most favourable terms?
On consumer rights, it is of course important to acknowledge that the UK is acceding to an existing agreement, and with that come very limited options for the Government to seek the type of amendments that some would have. That said, I find myself reassured by the Government’s commitment to ensuring that standards, protections and consumer rights are protected.
Thanks to the sterling work of the Government, trade deals are already in place with the major economies of Australia, New Zealand, Canada and Japan, and the CPTPP is the next natural part of the nation’s onward-looking journey. I hope that the Government are seeking to enter the CPTPP not as a static partner but with the determination, innovation and energy that will be needed to help it evolve to meet the challenges and opportunities of tomorrow.
Having now left the European Union, the UK faces an unrivalled opportunity to unleash the benefits of free trade. With the EU itself acknowledging that 90% of future growth in global GDP will be outside the EU, and with the UK economy now surpassing pre-Covid levels and with stronger than expected growth, there could not be a better or a more exciting time for the UK to embrace this important partnership.
Lord Purvis of Tweed (LD)
It is a pleasure to follow the new member of the committee. I happily restate what I said on previous occasions: that this committee does the House a great and important service. This has been an important debate and I commend the noble Baroness on how she introduced it and the members of the committee on their thorough assessment. I appreciate also that they have taken by necessity an almost agnostic position while analysing the Government’s accession aims.
The Committee and the Minister will know that this House on a number of occasions has resolved that we would prefer that negotiating objectives were put to a resolution of Parliament, primarily the House of Commons. That would allow the very points raised in the helpful box 1 in the committee report to be attached to consideration of a resolution which improves the Government’s negotiating objectives. However, we have been round this course on a number of occasions, and I will not rehearse it.
As the committee indicated, and I will put on the record again, the Minister in particular is unfailingly accessible and helpful—as helpful so far as he can be in many regards—and he and his office are always very approachable, which is greatly appreciated.
The noble Lord, Lord Oates, and I are from the Liberal Democrats and our founding principles as a party are supporting free, fair and open trade. To that we now can add “sustainable”. That is why he made points about this being an opportunity for tackling climate change, and one we should not miss. It is to be noted, with regret, that even the Government’s own document suggests that acceding to this in the current way could increase emissions. That would be a retrograde step. I will return to that towards the end.
There have been a lot of column inches about the UK’s potential accession to the CPTPP. We heard a little from the noble Lord, Lord Udny-Lister, about this being a Brexit opportunity. The Minister is not known for hyperbole, which is welcome in this Committee. Nevertheless, we saw a glimpse in Questions of part of this narrative when he said that reductions in trade with the EU were being offset by growth from non-EU trade, primarily from the Indo- and Asia-Pacific area.
On the one hand, this could be seen as positive, but we need to analyse where that growth has been. It has been imports from China and Chinese trade that have seen that growth. It has not necessarily offset the reductions. But that trade with China in 2021, according to the Department for International Trade, was £92 billion—up 8.6% and double what it was a decade ago. The fastest period of growth of imports from China has been during Liz Truss’s tenure as Trade Secretary. Of that £92 billion, £66 billion was imports, representing a trade deficit with China of over £40 billion. That is unprecedented in our trading history and strategically worrying given that we now have a trade in goods dependence on China in many sectors. The Government have placed us in this situation. Our trade deficit is more than twice that of France with China, and Germany has a trade surplus in exports to China. Therefore, I question the narrative selling this application as one of the strands of an alternative to trade with China.
I have a further slight question mark over the net opportunity of growth in the UK’s trade with the region, because we tend to assume that the CPTPP’s trading growth in recent years has somehow not been connected with its growth of trade with China directly too. We could have seen the growth in that region simply as a result of the growth of trade with China. If we deduct that, we get a more realistic view of what the real opportunities for our growth are likely to be.
I agree with the noble Lord, Lord Lansley, when he counselled Liz Truss to stay quiet on China and CPTPP. He did not use those exact words; I am putting some words in his mouth in order for me to agree with them. But he hit a good point because he suggested, as the committee did, that we would probably stay a little quiet and wait and see. However, by having a quick look at elizabethtruss.com on 28 June 2021, I can see that she was far less reticent than the noble Lord. I can quote:
“By joining the CPTPP, we would strengthen it as a bulwark against protectionism and unfair trading practices from nations like China.”
It is some bulwark if we are dependent on the goods from that; it is even less of a bulwark if China is applying to be a member itself.
What also frequently goes unnoticed, and it has not been mentioned in the debate today, has been the creation of the world’s largest trade deal: 15 Asia-Pacific countries, including China, Australia and New Zealand, are members of the Regional Comprehensive Economic Partnership. According to UNCTAD, that represents 30.5% of global GDP in comparison with the US, Mexico and Canada agreement of 28% and the EU of 18%. The RCEP’s growth alone is estimated to be $200 billion to the world’s economy by 2030, according to UNCTAD. So, we would have a benefit from this growth regardless of whether we accede to any agreement.
Apart from the trade dependency aspect, China has applied to accede to the CPTPP itself. Furthermore, separate to those two agreements, there have been 16 rounds of negotiation between China, Japan and South Korea, for a CJK FTA. It seems as if China has prioritised the RCEP and has the CJK—if I get all of these correct during this debate, I will be impressed with myself. I cannot judge the respective prospects of China or Taiwan. As the noble Lord, Lord Hannay, indicated, we do not know whether they will indeed join the CPTPP, but the fact that there are common areas between those three is significant. It is significant to the terms that we want to have when we have to fit their rules. As the noble Lord, Lord Hannay, indicated, in many respects, that integration is already there. Therefore, we are acceding to a separate set of rules, over which we will have very little leeway if we accede to it, unlike the bilateral agreements we are a member of.
It already means that Liz Truss’s geopolitical assertion, that there will be a bulwark against China is plainly nonsense. First, we are dependent now on imports from China, and we are increasing our trade barriers with the EU, distorting our trade patterns over the coming years. It means that our strength, to try to secure carve-outs on any area of CPTPP, will be more important, but potentially weaker. So, I would be grateful if the Minister could say, during the discussions that are under way, what openness there has been to any UK carve-outs. My understanding of meeting the benchmarks on application is that we meet their rules—we simply demonstrate that we meet their rules. So, what areas and scope are there for specific UK carve-outs?
Secondly, taking up the point made by the noble Lord, Lord Hannay, with regard to accession, I looked at the accession rules. Rule 3.2 states that the commission of the CPTPP
“can take a decision as to whether separate Accession Working Groups are needed for individual aspirant economies or the processes can be combined into a single Accession Working Group.”
So, what is the position? Is there an accession working group that is unique to the UK accession, or are we part of the accession of other members? Is there clarity on the scope for the UK to deliberately state that it will not meet the rules?
It is the case, in the Government’s own estimates, that we are likely to see a very modest £800 million benefit to UK GDP over 15 years. I think it is worth reminding the Grand Committee that in one year we increased our imports from China by £18 billion. That is the comparison of the situation with our trade.
Before I conclude, returning at the end to what some of these areas of concern or carve-outs may well be, I note in passing a similar geopolitical argument has been made by the Minister in good faith, and by others, about our trading relationship with the GCC and the Gulf—because we also have other trade negotiations with other trading blocs, such as the Gulf. I know the noble Lord, Lord Udny-Lister, is very experienced in this regard as well. It is also worth noting that with the recent meeting between President Xi and the GCC Secretary General, after the fifth round of talks, there is a new impetus into that area too. The narrative of the UK geopolitical basis being a bulwark to China really is not the case at all.
Finally, returning to the very helpful box 1 of what the UK red lines may be, my noble friend Lord Oates indicated the concern about net-zero and the right reverend Prelate raised issues of standards. We will no doubt return to these areas with great focus, as we have done in all our previous trade discussions. It was very depressing to see two omissions in box 1; it is not the fault of the committee, but it is how the committee discerned what the red lines would be. We have raised many times the need for there to be a trade and human rights policy. One of the deficiencies of this agreement is the lack of a robust element on labour rights, human rights and the triggering of processes. That omission in the box is of great concern. Furthermore, as we raised in our debates on the China agreement, there is an omission on gender focus on those trade opportunities as well.
I agree with the Minister that trade agreements mean nothing if they cannot be operationalised and we cannot take up their opportunities. We have not needed a trade agreement to see some of the growth with some of our key competitors in these areas, and our dependence on China has been a result of there being no agreement. If we are part of a bloc over which we have little say, and if China is also a member, geopolitically we are weaker. That is an area of great concern, and I hope that the Minister will be able to reassure me.
Baroness Chapman of Darlington (Lab)
My Lords, it is a real pleasure to follow an excellent speech from the noble Lord, Lord Purvis, and to acknowledge the work of the committee. This is the second of these debates in which I have taken part since my noble friend Lady Hayter took over the chairmanship of the committee, and I have found both occasions incredibly enlightening and helpful. The principal demands of the committee in this case centre on a desire for clarity in how we intend to deal with joining an existing agreement. Our priorities and concerns will need to be accommodated in an already complex set of arrangements.
Can the Minister say something about how our food standards are to be protected? There are different approaches to animal welfare, environmental protections and the use of antibiotics and pesticides across the CPTPP, and there is already considerable concern here about the UK Government’s intentions. Perhaps it is not their intentions we should doubt, but we are concerned about how steadfast they are in their determination not to bend on these issues. Ministers have often repeated promises that we will not see any reduction in our food standards and animal welfare provisions in particular, yet there remains doubt. That doubt arises because there can be a tension between the promise to keep our standards and the desire to open up our market in return for access to other markets, although the two are not incompatible. The more that Ministers can say now on the record to reassure producers and consumers on these points, the better.
Particular concern comes from the devolved Administrations, as responsibility for many of the issues is devolved. The picture is complex and requires the fullest engagement with decision-makers in Scotland, Wales and Northern Ireland. That has not always been forthcoming from the Government. What will be done differently in future to make sure that we can move on with unity and confidence?
How future trade arrangements interact with the Northern Ireland protocol will be complicated but vitally important. In the Government’s own admission, we have seen what happens when they sign up to agreements without fully understanding them. The noble Lord, Lord Frost, says now that he recommended the protocol almost under duress given the political tensions at the time. There is clearly political pressure to move forward with our membership of the CPTPP, but we cannot have another situation where an agreement is entered into by the British Government, only for them to seek some sort of renegotiation a number of months later because consequences occur that we had not foreseen. We will lose all credibility as a trusted negotiating partner, and we cannot afford that.
I would welcome the Minister’s thoughts on how to improve the involvement not just of the devolved Administrations but of relevant sector bodies. In their response to the report from the IAC, the Government say:
“The negotiation of FTAs is conducted by the Executive under the Royal Prerogative. Full disclosure for some of our most sensitive positions would lead to worse negotiated outcomes.”
I agree with my noble friend Lady Hayter on the use of that phrase. It might help if the Minister could give us an example—just hypothetical, obviously—of how this might happen and what the huge disadvantage would be. In not being transparent and inclusive, there is clearly a danger that detrimental impacts can be overlooked in the negotiations, so the Government need to balance their desire for confidentiality with the benefits of involving others. Does the Minister think that at the moment the Government are getting this approach right?
How are the devolved Administrations being involved, as well as consulted, as negotiations progress? The committee suggests that this needs to be timely, detailed and transparent, and I agree. Ministers need to consider how obligations we may enter into as part of the CPTPP ease or make more difficult our trade with our nearest neighbours or even within the United Kingdom, particularly in the case of Northern Ireland.
The committee correctly draws our attention to the impact on and potential benefit to our motor manufacturing industry that could be achieved by coming to a specific arrangement with Japan. Can the Minister indicate whether this is his intention?
We welcome commitments from the Government that alignment with the European Patent Convention is a priority. The Government also confirm that they will not join the CPTPP on terms that make medicines more expensive or less accessible. This is reassuring. Can the Minister guarantee a blanket exception for our NHS and other essential public services?
On food standards, the Government say they will not sign deals that compromise our high environmental protections, animal welfare or food standards. This is reassuring, but it is also slightly confusing. An SPS agreement with the EU would do so much to alleviate friction at our ports, especially in trade between Great Britain and Northern Ireland, but the Government turn their face away from that option, saying they want the freedom to alter their standards. Why seek this freedom, at considerable cost to our producers and retailers, when the Government say they do not intend to use it and, given their statement about the CPTPP, do not need it for this trade agreement?
The Government repeatedly say that they will accede to the CPTPP only on terms beneficial to the UK—I should hope so—but are they seriously asking us to believe that there will not be winners and losers? Welsh Minister Vaughan Gething said of the deal with Australia that
“we continue to have significant concerns around the increased market access included in this agreement, the impact this may have on our producers and the precedent it may set for future deals. I am disappointed that my views on this element of the deal appear to have not been taken on board. My officials and I made this point very clear to UK Government during negotiations.”
The devolved Administrations are concerned—with some justification, given what we have seen so far—that the UK Government are not sufficiently mindful of the impact of deals across all sectors and all regions and nations. The detrimental impact of the Australia deal on British farmers has been discussed at great length and has clearly frustrated the Welsh Government and the farming community. This approach of signing up without listening to those directly affected will not end well.
Given where the UK now sits, we are keen to ensure that our membership of the CPTPP is seen as strengthening the agreement. It is a major agreement, and our membership should strengthen us and the existing 11 participants. This is an opportunity to use our economic power and influence, through this agreement, to make progress on workers’ rights and climate change, but whether the Government are going to be ambitious enough in their negotiations to deliver on these important priorities is still to be seen.
The Minister of State, Department for Business, Energy and Industrial Strategy and Department for International Trade (Lord Grimstone of Boscobel) (Con)
My Lords, I thank the noble Baroness, Lady Hayter, for tabling today’s Motion, and congratulate her on the 10th report of the International Agreements Committee regarding our planned accession to the CPTPP. As always, it is a highly detailed piece of work, and I have ensured that my department has considered each of its recommendations in detail, as we will the valuable points raised in today’s debate. Also importantly, I shall make sure that our negotiators are fully aware of the points raised today. I thank those who have contributed to today’s excellent debate and will endeavour to respond to the points which have been raised. If I miss some points out, as I surely will, I will of course write to noble Lords.
I welcome my noble friend Lord Udny-Lister as a new member of the IAC. I have no doubt that his experience and wisdom will greatly inform our debates on these matters going forward.
Membership of the CPTPP is central to the Government’s trade strategy and key to ensuring future prosperity at home and influence in the Indo-Pacific. As we have heard today, the CPTPP represents one of the largest trading blocs in the world, covering a population of over 510 million. It includes some of the world’s largest and fastest-growing economies, including Japan, Malaysia and Vietnam. As my noble friend Lord Lansley and the noble Lord, Lord Bilimoria, put it so clearly, the wider Indo-Pacific region is the world’s growth engine, home to half of the global population and 40% of the world’s GDP. We truly believe that accession to the CPTPP will allow the UK to engage more deeply with this part of the world, both through trade and on wider foreign policy issues.
It is pleasing that there is already considerable demand for UK goods and services in the region. UK trade with CPTPP members between 2016 and 2019 increased by an average of 8% annually, and by 2019 the overall value of UK exports to the bloc was a remarkable £110 billion. Trade with the region is already supporting jobs and prosperity at home and projecting UK influence overseas. Membership of CPTPP will consolidate this. As we level up the country, every region and nation of the UK stands to gain from UK accession to CPTPP. The West Midlands and Scotland are set to enjoy the greatest relative gains, through long-run increases to output of £177 million and £163 million respectively, as a direct result of CPTPP membership. Key industries such as food and drink, services and digital trade are particularly likely to benefit. I welcome the reference by the noble Baroness, Lady Hayter, to the food and drink council. No starting date is yet confirmed for that council, but we hope that it will be in action as soon as possible.
CPTPP membership offers something fundamentally different to our bilateral agreements with existing members, which have often been referred to in today’s debate. The agreement’s advanced provisions on services, investment and digital trade will deliver new benefits for British businesses, and its rules of origin provisions will allow companies to cumulate originating content from an £8.4 trillion free trade area, allowing more resilient supply chains to develop. I agree with the noble Lord, Lord Purvis, that the resilience of supply chains is so important and, frankly, something we have not paid enough attention to in the past. The CPTPP further offers increased opportunities for collaboration across vital areas such as climate change, sustainability and women’s economic empowerment.
Expansion to other like-minded market economies is a key purpose of the CPTPP—we hear this directly from its members. The UK is at the front of that queue. It is right that the UK does not offer a running commentary on any other applicants while we are still negotiating the terms of our membership. However, I will return to that point later, particularly the question of China and Taiwan. Looking beyond that, if just Thailand and South Korea joined the agreement, it would treble the long-run economic benefit from £1.8 billion to £5.5 billion.
The CPTPP will bring us together with a group of economies promoting free trade and high standards in a region where, frankly, the contest between rules-based trade and unfair practices is particularly intense. It would send a powerful signal that the UK, as an independent trading nation, will continue to champion free and fair trade, fight protectionism and remove barriers to trade at every opportunity.
In answer to the noble Lord, Lord Bilimoria, I am afraid I cannot give a timetable for completion of these or other negotiations which are currently under way—other than to say, unhelpfully, as soon as possible, consistent with reaching a successful outcome.
I will now address some of the concerns raised by the IAC’s report and your Lordships in this debate. The noble Lord, Lord Hannay of Chiswick, asked whether we will consult the EU on our negotiations. I am afraid we will not—
Lord Hannay of Chiswick (CB)
The noble Lord is very kind to have replied to my point, but he happens to have replied to the wrong one. I never suggested we should consult the EU; I suggested we should brief it.
Lord Grimstone of Boscobel (Con)
I apologise to the noble Lord. I should have said “brief”—I misnoted it as “consult”. However, I can equally confirm to him that we will not brief the EU on our negotiations. However, I can also confirm that our top priority is to protect the Good Friday agreement and the gains from the peace process, and to preserve Northern Ireland’s place in the UK. When we negotiate, the Government are negotiating on behalf of the whole UK, representing the interests of all the UK’s nations, including Northern Ireland.
I will say more on China, Taiwan and other economies seeking to accede to the CPTPP. As I have explained, as a non-member, the UK is not commenting—it would be inappropriate to do so—on the specifics of other economies’ interest in the agreement. The noble Lord, Lord Hannay—I hope I do not misquote him again—set out three theoretical scenarios. I will not give him my views on these in detail other than to confirm that we are the only country in negotiations with the CPTPP at the moment. It may also help the noble Lord if I note that there must be a full consensus between existing members to admit any new applicant. Once we are party to the agreement, the UK will have the same rights as other parties in respect of future applicants, which amounts to an effective veto. I hope noble Lords will understand that it is not appropriate for me to comment further at this stage on what are hypothetical situations.
CPTPP members and the UK rightly share the intention to be part of an agreement that embodies high standards in areas such as intellectual property, investment, procurement, rules on state-owned enterprises and data flows. Any applicant will have to satisfy CPTPP members that it can and will meet these standards. My noble friend Lord Gold and I share a common interest in financial services, and I welcome his comments on that topic. CPTPP has a dedicated chapter on financial services, which we believe will open up new opportunities for British businesses. The provisions in that chapter include matters such as non-discrimination obligations and liberalising cross-border flows of financial information. There is also an annexe on professional services that encourages mutual recognition of professional qualifications, which I think will be very helpful to us going forward.
It is a very good thing that more and more economies want to sign up in due course to the high standards of CPTPP, with Ecuador being the latest country to indicate an interest in doing that and submitting an application shortly before Christmas.
The right reverend Prelate the Bishop of St Albans certainly gave us food for thought in his speech. Of course, I have heard both his and other noble Lords’ concerns about potential impacts on UK food standards through the agreement. Let me be crystal clear: there are no provisions in this trade agreement that will force the UK to lower food standards in any area. I can give the noble Baroness, Lady Chapman, complete reassurance on that matter. I am pleased to be able to put that firmly on the record.
The Government’s strong position is that there is no inconsistency between the approach set out in the agreement and our existing domestic regulatory system. In other words, nothing in the agreement will change or lower the standards of food that we let into our country. The Trade and Agriculture Commission will no doubt be carefully studying that and will report to the House in due course on that matter.
Our wider environmental, product, labour and animal welfare standards will be protected too. CPTPP explicitly affords members the right to regulate for their own desired levels of domestic protection and thus will not undermine the UK’s objectives—on net zero, for example —in any way.
The noble Lord, Lord Oates, spoke eloquently about climate change. CPTPP retains the rights of members to regulate for their own levels of environmental protection and contains commitments to protect the environment. The system robustly protects the right of members to achieve their own ambitious net-zero goals. Of course, other CPTPP members, such as New Zealand, are also world leaders alongside us on climate action.
On the NHS and in answer to the noble Baroness, Lady Chapman, I do not think we could be clearer: protecting the NHS is a fundamental principle of our trade policy. During our negotiations to accede to CPTPP, the NHS and the price it pays for its medicines will not be on the table. The sustainability of the NHS is an absolute priority for the Government. We could not agree to any proposals that would put NHS finances at risk or reduce clinician and patient choice. This includes—and I say this categorically—making changes to our intellectual property regime that would lead to increased medicine costs for the NHS. I hope that reassures my noble friend Lord Lansley.
The Government have been listening closely to feedback from your Lordships and the wider business community about the importance of the European Patent Convention to the UK services and creative sectors, including today from my noble friend Lord Astor of Hever. I can once again confirm that accession negotiations will be consistent with the UK’s existing international obligations, including the European Patent Convention.
Regarding scrutiny, we remain committed to transparency. I wrote to the noble Baroness, Lady Hayter, about this yesterday evening in response to correspondence that the noble Baroness and I have been having. I can reassure the noble Baroness and other members of her committee that we will ensure that parliamentarians, businesses and the public have access to the information they need on our trade negotiations. The same transparency and scrutiny commitments we put in place for bilateral FTAs with Australia and New Zealand will apply to CPTPP.
The noble Baronesses, Lady Hayter and Lady Chapman, emphasised the importance of engagement with the DAs. I assure noble Lords that our approach to engaging DAs on trade policy is very comprehensive. We have engagement structures at all levels to make sure the DAs’ voices are heard. These include a quarterly ministerial forum for trade, regular bilateral ministerial meetings and the six-weekly senior officials’ group. The chief negotiators have regular calls running parallel to each negotiation round to keep the DAs fully informed of what is going on. Additionally, there are our six-weekly chapter-specific policy round tables and weekly working level engagement.
Your Lordships enquired about the potential for us to seek changes to the CPTPP text. I think that noble Lords recognise that this is an accession process, not a new negotiation, so it is not feasible to be seeking significant changes to the agreement. In this context, our negotiation objective is to be a part of a high-standard agreement, not to change it radically.
We are aware that other CPTPP parties have used side benefits to clarify certain specific policies. Let me reassure the noble Baroness, Lady Hayter, that this may be an option that is appropriate to explore in some cases. However, I hope noble Lords understand that the precise nature of that solution will be determined by negotiations. Offering a running commentary or setting out our intentions for side letters in public will undermine our negotiators’ leverage to secure any such solutions. It would be undermining the very thing we would seek to achieve through the side letters. I hope that the noble Lord, Lord Purvis, will accept that that is why I cannot be any more helpful in this regard. I can confirm that all such letters will be published before the CRaG process and thus will be open to the same full scrutiny as the agreement itself.
I will turn to a couple of other themes raised in the report. Regarding the sequencing of further applications, we have been repeatedly assured—this comes back to a point I made earlier—that our accession will be dealt with first, and interest from China or any other economy will not slow us down. In answer to my noble friend Lord Lansley’s question about ISDS, the extent of its coverage will be subject to negotiation during the agreement, but I am clear that we have nothing to fear from its use going forward.
On the expected economic benefits for the UK, our modelling does show—
Lord Purvis of Tweed (LD)
The Minister may not have anything to fear but the House does, and it has debated ISDS on a number of occasions. I recall from when we scrutinised the Canada agreement that it supports moving away from ISDS towards a multilateral approach, whereas the Japan agreement was neutral on it. Does that mean that the Government are now off the fence, as the noble Lord, Lord Lansley, asked us to be, and that we have landed squarely in favour of ISDS? I remain confused.
Lord Grimstone of Boscobel (Con)
My Lords, let me try to clear up that confusion, which I probably unwittingly added to. I know from my contact with investors that they all welcome some form of arrangements which allow investor protection to be secured. Many investors believe that the exact format of ISDS—one uses it often as a shorthand for how disputes should be settled—is not always necessarily the correct format. As the noble Lord will know, there are discussions about that in various multilateral organisations. When I talk about ISDS, perhaps it would be better if I said that appropriate forms of investor protection, with the right arbitration mechanisms agreed either bilaterally or multilaterally, are the way forward.
I thank noble Lords again for giving me the opportunity to speak on this topic today. I apologise for replying at probably too great a length, but I was anxious to deal with the points raised. CPTPP accession will boost prosperity and help to level up the country at home. It will deepen ties with key partners in the Indo-Pacific. I thank the noble Baroness, Lady Hayter, and the International Agreements Committee once again and look forward to further engagement with your Lordships, as I am sure we will have, on CPTPP in the future.
Baroness Hayter of Kentish Town (Lab)
I thank the Minister for his reply. We certainly do not mind long replies, because getting those is why we are here. It has been a really useful debate. As someone who has been involved, the noble Lord, Lord Bilimoria, is an enthusiast and a great champion of business, and I take all that he said, including that business needs to be at the table and that must continue. That came also from other speakers, and particularly in respect of the interests of the farming community, as the right reverend Prelate the Bishop of St Albans stressed. Agreements of this sort are key to society, and we must listen to everyone, even if they do not appear to be quite as obvious as business. That goes also for the devolved authorities and the consumer voices, as mentioned by the noble Viscount, Lord Waverley.
There are obviously issues that we will watch as negotiations continue. Our Liberal Democrat colleagues, the noble Lords, Lord Purvis and Lord Oates, helpfully reminded us that their party’s historical view about free trade has morphed completely into one about sustainable trade. Our regret that there is still not enough about countering climate change in this agreement is one that I can promise that the committee will continue to raise.
Other issues were raised. The noble Viscount, Lord Waverley, the noble Lord, Lord Purvis, and my noble friend Lady Chapman stressed human rights. These trade agreements cannot stand apart from human rights, workers’ rights, consumer rights and gender issues. They are about the future of our society.
We also heard about some of the details: the noble Lord, Lord Udny-Lister, spoke about the rules of origin and the noble Lord, Lord Astor, about IP. I hope we will continue with some reassurance about the EPC; let us promise that we will keep a close eye on this. The noble Lord, Lord Gold, stressed how important it is that if this is to work, it must work for the financial and professional services. It is already the gold in the crown—not the pearl in the crown in this case—but it has to be made to work.
I am not sure that the Minister quite answered the whole of the points the noble Lord, Lord Lansley, made on medicines. It was not just about price but about speed of access, of the move from branded to generic, so that will be important.
I think we will be reassured that the Minister said that any side letters will indeed be part of the treaties so to speak—the documents—and that they would come here. I think his words on side letters were, “This might be an option in some circumstances.” That sounded a little unambitious to me. I am not sure that putting down red lines on what we want undermines the negotiating position, so I hope there will be a little more strength to his elbow there.
I will finish with two important and quite broad points. One is about China. The figures cited by the noble Lord, Lord Purvis, of, I think, a £40 billion trade deficit—I got it right—and the wise words of the noble Lord, Lord Hannay, are a context that we must not forget. The second point is the Northern Irish issue. It is not simply, as the Minister said, that we will keep to the protocol; it is whether we have undermined trust in our negotiations. As my noble friend Lady Chapman said, we appear to be threatening to tear up something we so recently signed, and I hope that will not undermine the good faith of the negotiations that the Minister and his colleagues are now taking forward.
With that, I thank everyone for contributing to this debate, which will continue the work that our committee does.