Negotiating Objectives for a Free Trade Agreement with India
(2 years, 3 months ago)
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Baroness Hayter of Kentish Town
That the Grand Committee takes note of Her Majesty’s Government’s negotiating objectives for a free trade agreement with India.
Relevant documents: 6th Report from the International Agreements Committee
Baroness Hayter of Kentish Town (Lab)
My Lords, I am absolutely delighted to open this first debate under the auspices of the country’s new Prime Minister, a woman—I am sorry, but we can never let an opportunity to say that go. We hope that the new Prime Minister will welcome full parliamentary scrutiny over future trade deals and international agreements.
I am delighted to note that the name of the noble Lord, Lord Frost, appears on the speakers’ list. I looked twice to see whether there was a V beside it. Having heard the rumours of him searching for a Commons seat, I wondered whether he would be using this as his valedictory. From our point our view, I am delighted that there is no V after his name. We will certainly be interested to hear his and other views not only on this deal but on what it says about the Government’s approach to trade.
The International Agreements Committee has long called for a full position paper on how the Government see our future trade relationships, and how these sit alongside their broader foreign policy, defence and security approaches. In the Lords, we owe thanks to the noble Lord, Lord Grimstone. I was going to announce, with great delight, that he is about to join our committee, but if the speculation in the Spectator is true, he is actually going to become Leader of this House. I understand that this may be the Spectator speaking out of order; he was indeed thinking of joining our committee before. As the Minister, the noble Lord has made sure that the International Agreements Committee has had time to peruse the main trade deals and, when requested, has granted a debate, as today. I again welcome the noble Viscount, Lord Younger, who is either holding the fort or, for all we know, a new role—in which case, I welcome him twice over.
Today is important but perhaps also irrelevant. I will explain. We are here to debate the Government’s objectives for their negotiations with India, but the FT reported even before the Summer Recess that 11 of the 26 chapters were done and dusted, and the Department for International Trade claims that everything will be complete next month. So although the Government have had our report since the end of July, it looks as if they proceeded without awaiting any parliamentary input.
This haste brings two risks: first, that the final deal might be unacceptable to the Commons, which can delay ratification, theoretically indefinitely; and, secondly, that by tying itself to an arbitrary target date, Diwali, it risks settling for less than an optimal outcome. I would have thought—I cannot help looking at the noble Lord, Lord Frost, again—that the Government would have learned from the experience of the EU deal having to be sealed two years after Article 50 was triggered that when time is a major card in the hand of negotiators it makes no sense to gift it away. The committee worries that prioritising speed over content means that, come October, we will see something very thin by way of a deal, or worse—that in the rush we will compromise, and give away more than is needed for less than is wanted.
Indeed, business warned the Secretary of State to put the brakes on the talks or risk leaving important sectors behind. Eleven trade bodies stressed that
“It is the content of the deal which matters ... not speed of negotiation”.
They urged the Government to hold out for a meaningful, comprehensive deal, even if it means missing the self-imposed deadline of Diwali. So why the haste? Politico reported that the Secretary of State’s office had concerns about pressure to deliver a deal as a symbolic win for the new Prime Minister, and City AM was being told by various “trade department sources” that the Diwali deadline came from above, leaving little time to negotiate a thorough deal with the traditionally protectionist India. We hope, therefore, that the Minister will reassure us that UK interests, not a photocall for the new Prime Minister, will determine the content of any FTA and that a pre-publicised target date will not lead to an unsatisfactory outcome.
What is the outcome that the UK wants from a deal? Most Indian imports are duty free already, whereas some of our exports to India face very high tariffs—some of the highest amongst WTO members, with different tariffs in different states. These changing tariffs are of a size that makes exporting extremely testing, so movement here should be a major objective.
As importantly, if a trade deal is to mean anything to UK companies it needs to be easier to do business in India. As our report makes clear, there is much to do in this respect, yet this vital issue is absent from the Department for International Trade’s documentation. Our worry is that it is absent because the department does not understand its importance. It is regrettable that Ministers have not set out their priority areas. Government should be engaging with Parliament and stakeholders as to how it is seeking to lower business barriers, which is key for future trade.
Our report uses the word “corruption” to spell out just one of the challenges. But there is also uncertainty, delays, changing rules, lack of enforcement even when adjudication favours a UK exporter, inadequate policing of rules and procedures, ownership requirements favouring local providers, and so forth. For some areas, there is a complete lack of access. These issues need to be high on the Government’s list of demands. The committee is also worried by the lack of any push from our side for an independent dispute mechanism which UK investors and businesses can access, because without this the costs of doing business are very high, given all the risks that already face them in exporting. There was such a mechanism in play until ended by the Indian Government in 2017. We are worried that we are actually regressing on this issue.
One key indicator of the quality—the breadth and depth—of an agreement will be: does it make business easier? If India is to continue with the wide access it already has to our markets, and perhaps get greater access for its citizens to work here—and possibly not even pay NI—it behoves our Government to stand up for UK plc and ensure that this vibrant, expanding and potentially exciting market really is open to our service and manufacturing sectors.
There are two further questions for the Government before they offer a deal to India. These flow from our constant request of Ministers that they spell out their policy on trade and how it fits into their wider defence, security, development, environmental and domestic objectives. We raised this question of strategy with the Minister in our debate on Australia, after which he kindly wrote emphasising that the Government’s trade policy is framed by the strategic context set out in the integrated review. However, it is hard to see how expanding our economic relations with India sits with our unequivocal commitment to European security when we see India undermining our sanctions on Russia —indeed, profiting from increased trade with Russia—and failing to condemn the invasion of Ukraine.
Although the Government might argue that a trade deal will help build relations and therefore influence, elsewhere they suggest that they already have those relations, but they do not seem to be very effective. The Minister’s letter says that the Government will publish strategic cases for each new FTA and that each strategic case places the trade agreement within our wider strategic approach. If that is the case, can the noble Viscount set out how this deal sits happily with the Government’s welcome, and appropriate, stance on Ukraine?
Even more important, perhaps, is the second issue: the lack of a tie-up with the integrated review’s frequent references to tackling climate change. They are not evident from these negotiating objectives, which say nothing about India’s reliance on coal, nor about how the deal would help achieve the reduction in greenhouse gases to which we are pledged. Perhaps the Minister could again explain how the strategic case for this FTA really does, in his words, fit within our wider strategic approach.
Our trade with India is already substantial and will, I hope, become even more so. Any FTA would be the most consequential to date of any post-Brexit deal. We are talking about a large and expanding market, a Commonwealth country with which we have strong ties, and an economy that is becoming one of the world’s most significant. Such an FTA must therefore be robust, forward-looking and fair to consumers, workers, the environment, business and future generations, respecting both human rights and democracy. As we have made clear, a major issue is how business can be helped to make increased trade with India a reality, given the obstacles I have outlined. Will moves to overcome them be in such a deal, or will they be forgotten? We share the Government’s ambitions for trade deals, although we wish that they were realistic and that the objectives set out were less vague so that Parliament could see what Ministers are seeking to achieve.
Members of the International Agreements Committee, our clerk and advisers have worked hard to bring this report before your Lordships. I thank them all for their efforts; we will shortly hear from some of the committee’s members, covering different aspects of the report. Although we welcome Anne-Marie Trevelyan’s recent undertaking on greater involvement prior to the setting of objectives going forward, I fear that we are now too late to influence these particular negotiations one iota. I hope that, in future, the Government take soundings from us and our opposite numbers in the Commons so that, having taken back control—the noble Lords, Lord Hannan and Lord Frost, have often spoken of this—that control really will go to Parliament, not simply to the Executive. I beg to move.
Lord Frost (Con)
My Lords, I thank the noble Baroness, Lady Hayter, for securing this debate, as well as for her broader work in chairing this important committee and producing this report. I assure her that she will be hearing more from me in this capacity and that no valedictory is due—for the time being, anyway.
I go back some way in my interest and involvement in trade issues with India. Ten years or so ago, when I was the UK’s representative on the EU’s Trade Policy Committee—also known the Article 133 committee—I spent a lot of my time promoting the UK’s interests in what we hoped at that time would be a free trade agreement between the European Union and India. Even then, it was clear to me that the task was an almost impossible one. Coupled with the Indians’ reluctance to make major concessions, the fact that the EU Commission had to promote so many interests, both offensive and defensive, and approached the task in such a mercantilist way—as trade negotiators tend to do—made it always seem unlikely that the right balance would ever be found. Indeed, so it proved when the EU suspended the talks in 2013.
Luckily, we in the UK have been given another opportunity to reach an agreement with India thanks to the fact that we no longer have a trade policy in which we are a minority share participant. We are now in a position to prioritise our own objectives, determine our own trade-offs and, let us not forget, conduct a negotiation in which UK officials are actually in the room and negotiating directly rather than having to rely on accounts from a third party.
Moreover, as the committee’s report makes clear, the time is propitious, with India, I hope, taking a more positive attitude to trade agreements and with the strategic case for an agreement with India ever more important. Indeed, this more positive environment is why the EU too resumed negotiations in June, although I suspect it will find the task of balancing its different interests as difficult as ever.
We now have a new Prime Minister, one who was formerly Secretary of State for International Trade and one who I know to be an economic liberal and believer in the merits of openness and competition. I express the hope to my noble friend the Minister that this attitude will feed through to a new government approach to this negotiation.
The committee’s report endorses the observation of the current Secretary of State for International Trade—at least I think she still is—my right honourable friend Anne-Marie Trevelyan that the Government will sign a deal by Diwali only if it is “good for UK businesses”. Of course, what is good for existing UK businesses is not necessarily the same as what is good for the UK economy overall. This is particularly true when looking at trade liberalisation. We cannot determine whether an agreement is beneficial to us purely by looking at one test: whether it reduces barriers, tariff and non-tariff, for our exports. That is a very important test, but not the only test.
The important judgment to make is whether, taking one thing with another, the agreement is beneficial to our country overall. That requires a broader assessment. It requires looking at the benefits of increased competition to our economy through more openness to Indian exports, notably but not only in agriculture, even if that might make life tougher for some existing businesses. It requires looking at the broader national economic and security interest we have in rebalancing our trade policy away from the current arrangements, which, in effect, are a giant preference scheme for the European Union. And it requires looking at the strategic case for a trade agreement with India, in the context of our broader aspiration to join the CPTPP, which is in many ways complementary, and our aspiration for a broader strategic and defence political involvement in the Indo-Pacific.
That is why, with the greatest respect, I disagree with the committee’s judgment that there is only questionable value in setting deadlines for the conclusion of negotiations. The noble Baroness, Lady Hayter, alluded to this. I know, perhaps better than anyone, how much a deadline focuses minds on both sides, but I draw different conclusions. Without a deadline, we will always be prey to the wishes of our domestic lobbies; there will always be the wish to take a bit longer and to push negotiations that one step further. Like the tortoise in Zeno’s paradox, the perfect moment for concluding talks will always seem a little way in the future. This approach risks us never getting any agreement at all.
It may be that, given events, the Diwali deadline is a bit too soon, although I note that, strictly speaking, it was a deadline
“to conclude the majority of talks”,
not to have a completed agreement. Be that as it may, we should set a credible deadline soon, seek to reach the best agreement we can and reach a judgment on whether it is in our interests overall. If that agreement looks more like an interim than a comprehensive agreement, and it can be harvested so further talks continue, we should be very open to that.
I will briefly make two other points—one on which I agree with the committee and one on which I do not. On the first, I agree that it is time we had a broader UK trade strategy—one that sits within and is consistent with the revised and updated integrated review, which I hope we will see shortly. That strategy should also include some proposals and ideas for the greater involvement of Parliament in signing off agreements, as the noble Baroness, Lady Hayter, noted. I hope that the new Secretary of State for International Trade will take this forward.
My second point is on the committee’s comment that the devolved Administrations have concerns regarding the sharing of information pertaining to areas of reserved competence in the negotiations. The noble Lord, Lord Grimstone, the previous Trade Minister, is quoted as justifying the current arrangements on the grounds of confidentiality. That is all well and good, but there is a clue in the words “reserved competence”. Information need not be shared with the devolved Administrations in areas of reserved competence because, to put it bluntly, it is not their business. Where competence is reserved, it is for the DAs to implement decisions taken by the national Government in the negotiations. I urge the Government and the Minister to be more robust in policing these boundaries; we have seen a tendency for the boundaries to move, and in only one direction.
I conclude by once again thanking the noble Baroness, Lady Hayter, and the committee and by expressing my best wishes and support for their further work in this important area.
The Earl of Sandwich (CB)
My Lords, I join the noble Baroness, Lady Hayter, and the committee in welcoming this FTA, but only as far as it goes. I have lived and worked in India and am well aware of the joint prosperity our two countries have enjoyed since Sir Thomas Roe landed in Surat in 1615 and got a very good deal from the Mughal emperor Jahangir. That is summarising more than four centuries in a sentence.
I am well aware of the subsequent implications of colonialism and slavery, both ancient and modern, but they are not part of this debate, which is about the present intentions of our Government. What is relevant is that our two countries have a long common history, language and culture that have already laid a foundation for a range of trading engagements. India will be a valuable business partner under this new agreement. She is not only overtaking China in terms of population but will soon become the world’s third-largest economy. Under President Modi the economy has grown faster, although GDP growth of 13% in one recent quarter is fiercely disputed by Congress. There are also grave concerns about human rights violations and discrimination against minorities, which I know will be mentioned by my noble and right reverend friend Lord Harries in a moment.
I sense that the Government are right to press ahead with the FTA, provided they do not rush it and risk a bad deal, as the Independent put it. A Diwali deadline would mean sacrificing or avoiding some of the tricky core issues, such as the environment, health, fuller intellectual property protection and dispute resolution. The former Trade Secretary said that she wanted a comprehensive agreement, but the July joint outcome statement mentions the end of October and the signs are that the new Prime Minister, still riding on the wagon of Brexit, was right to get on with it. The Government’s drift eastwards since Brexit is also connected with our application to the CPTPP. The tilt towards Asia and the Pacific has been a well-understood priority of this Government, but how does India fit into that? Like China, she is unlikely to quality for the CPTPP and has no interest in joining it. In general, as the noble Baroness said, the committee believes that the international context of this FTA, and indeed of other recent agreements, has been left out. Will the Minister say what is the background?
What is the Government’s longer-term trade policy? The DIT claims as a strategic aim an increase in our exports to India by up to £16.7 billion by 2035. This seems quite possible if enough time is taken with the agreement, but how exactly will it be achieved? With India still famous for red tape and corruption, it is not an easy business environment, as the noble Baroness mentioned. Internal tax barriers are also a serious problem, notably over whisky earlier this year, yet the Government offer no solutions. Restrictions on foreign investors are formidable, and the DIT recognises that, but the published objectives of this deal are too vague to enable us to pick out the real priorities. The number one priority for goods is the lowering of tariffs. Our report points out that India is still a developing country, technically a lower-middle-income country, and is still enjoying many of the benefits of the GSP. This means that two-thirds of India’s exports to us are tariff-free, while we have to pay duty on all but 3% of our exports to India. However, the picture is changing and there are opportunities. The Government now need to prioritise goods that are not covered by the GSP, such as textiles, vehicles, chemicals, electronics and renewable energy, in which India is becoming a world leader.
Consultation with the devolved Administrations, mentioned by the noble Lord, Lord Frost, has never been one of the Government’s fortes, at least not in the experience of this committee. We heard concerns from the Scottish and Welsh Governments that SPS standards, the environment and possible adverse effects on other developing countries had all been virtually ignored in the agreement. I was sorry that this evidence came late and was not sufficiently reflected in our report. However, we did say that HMG had again failed to consult fully.
I can understand why pharmaceuticals are a sensitive issue and have been played down in the agreement and the UK’s strategic approach. Nevertheless, India’s generic drugs play an essential role in our health service. This must be more openly acknowledged, however contentious. To state it politely, there is a delicate balance between IP provisions and dependence on generics. We have invited the Government to explain how this balance can be achieved. Perhaps the Minister will have a shot at that as well.
Others will be much more qualified than I to speak about the environment, but we hope that HMG will offer India a deal to support its decarbonisation efforts, such as the international Just Energy Transition Partnership agreed with South Africa. With energy prices rising and more dependence on Russian oil, it will become harder for India to forecast the closure of any coal-fired power station. As with the Australia FTA, much more work could be done to calculate deforestation rates in the Himalayas, which are so critical to climate change.
The FTA will increase GHG emissions even before transport is included. What about the boost to green industries promised in January? Is that sufficiently reflected in the agreement? On visas, will the Government further relax the quite successful visa regime in favour of higher education and post-study work visas?
One could cover many other points, but I will leave it there, except to say that India’s long-held reputation as a non-aligned country has again been badly dented by her refusal to condemn the Russian invasion of Ukraine. Although it is not directly relevant to this agreement, it will surely dampen down our enthusiasm for it.
Lord Hannan of Kingsclere (Con)
My Lords, I begin by declaring an interest as an adviser to the board of JCB. I mention it because it has really become, in practical terms, an Anglo-Indian company. Since my noble friend Lord Bamford made at that time a rather countercyclical decision in the 1970s to invest heavily in India, JCB has become an immense employer there, to the point that many Indians think of it as an Indian company or, at the very least, in the same sense that they think of cricket—it may technically happen to have been invented in the United Kingdom but it is essentially, in all practical senses, a largely Indian institution. That company seems to me a symbol of what I would like to talk about: the opportunities for both our countries and why we need to seize the moment.
The noble Baroness, Lady Hayter, asked whether we are getting the timing right. I put it to the Committee that we are getting the timing right both directly and in a more macro sense. For a long time, India was very slow to open its markets at all. Protectionism cast a very long shadow there. Think of the Indian flag, with the blue wheel—the chakra—in its middle. That was a stylised form, as you see very clearly in the flag of the old Congress Party, of the handloom. It is the kind that Gandhi used to carry around with him because, in his mind, independence and self-sufficiency were aspects of the same concept—swaraj. Because of the moral stature of Gandhi, protectionist and mercantilist thinking lasted in India for decades longer than it would otherwise have done, greatly to the detriment of Indian citizens, particularly those on low incomes.
It was really only in this century that India began properly to open its markets and join the global economy, starting in its own region and then signing deals with ASEAN and, more recently, with Japan. As a result, our share of Indian trade has fallen as those other countries have taken our place. In the years since the turn of the century, as a share of the Indian total our goods exports have fallen from 6% to 1.3% and our services exports from 11% to 2.1%.
This is a remediable problem; there are institutional solutions to it. Indeed, I would argue that there is no country, certainly no western country, better placed than ours to have a comprehensive and mutually beneficial trade deal with India. It has become commonplace in politics, almost a cliché, to talk about every group of migrants as enterprising, but in this case it is difficult to think of any migrant group anywhere in history that has been more enterprising, more business focused, and has added more to the economy of the welcoming country than the 1.5 million Brits of Indian origin, dominating, as they do, our lists of successful entrepreneurs.
There are also plenty of reverse JCBs; British brands have been extremely popular, from Jaguar to Tetley, as targets for Indian investors. That two-way investment rests on the most obvious congruities of language and law, habit and history, culture and kinship. What has not yet followed is the trade, because we have artificial government-imposed barriers to what would otherwise be a very natural commercial flow. If he was still alive, Gandhi would be astonished to discover that on the question of textiles it is now the other way around; it is not Lancashire dominating the handloom industries of India but now Britain imposing tariffs against Indian textiles, or having at least inherited those tariffs from the EU, including a 9.3% tariff on men’s shirts.
There are, of course, tariffs the other way around, as the noble Earl, Lord Sandwich, reminded us, including on whisky, on which there is an extraordinary 150% tariff. We should always remember that tariffs do the most damage to the country that applies them. Yes, they do some incidental damage to the exporters of the other country, but the cost is paid by the citizens whose Government impose them.
Removing these tariffs is an easy and demonstrable game, but that is not where the biggest opportunities lie. We have to think like a 21st-century economy, not a 19th-century economy. The big gains are in tech, engineering and coding, and in the mutual recognition of credentials and professional qualifications, which will mean changes to our visa regime. I cannot believe that there is no deal to be done there. What has tended to slow it up is that Britain has been pushing for more flexibility from the Indian Government on taking back failed, or illegal, entrants into this country, while India has been pressing for more work permits, more tier 3 visas. Surely there is a landing zone there. It must be possible to hammer out a deal whereby it is easier for Indians to come here legally but not so easy for them to come here illegally. Both Governments could easily trumpet that as a victory.
As for doing it by Diwali and whether we are being too hasty, the best answer I heard was from my Board of Trade colleague Tony Abbott, the former Australian Prime Minister. He was Prime Minister of that country fairly briefly—for 18 months or so—yet in those 18 months he managed to sign fairly ambitious trade deals with China, South Korea and Japan. When I asked him the secret, he said that it was imposing an iron deadline because otherwise the trade negotiators on both sides would string it out indefinitely; they like process and being part of the process, and there is no incentive on them. As my noble friend Lord Frost adds, there is then a constant open door to domestic lobbies to push for further additions or accretions to the deal. It is extremely important to have a deadline, even if it is a deadline by which to have concluded the bulk of the talks rather than one for ratification, which of course is a different question.
Finally, a number of noble Lords have raised the wider geopolitical orientation of India and the disappointing refusal of the Indian Government to take sides on the Russia-Ukraine conflict. I share that disappointment—by the way, it is a policy common to every south Asian Government; I think that they have all taken exactly the same position on the Russia-Ukraine war—but it is especially disappointing from a state that tends to self-define as a democracy. Indians take justified pride in the fact that, unlike some of their neighbours, they have remained a law-based democracy since independence. Elections happen without anyone being exiled or shot; the army does not step in and take power. It is therefore somewhat disappointing that India did not take a stronger line on the Ukraine war—not as a favour to the West, but in accordance with its own values. But whereas some noble Lords seem to see that as a reason to hang back or hesitate, I see it as the opposite. The orientation of India is perhaps the key geopolitical question of this century. If India sees itself primarily as an English-speaking democracy rather than just as an Asian superpower, then the world is an altogether brighter and warmer place.
We have been through a great deal together. The two largest volunteer armies in the history of the human race were the Indian armies in the First and Second World Wars, respectively 1.5 million and 2.5 million volunteers. There was no conscription on either occasion. We have a living link made of the extraordinary enterprise brought here and the extraordinary contributions across our national life made by British people of Indian origin. I am certain that, coming together as free and sovereign equals, we can restore what should be the natural traffic in commerce between two countries bound by what my friend, Professor Madhav Das Nalapat, calls the blood of the mind—a shared habit, a shared way of looking at property and at commerce. I am sure that, in that spirit, the best is to come.
Lord Kerr of Kinlochard (CB)
Despite the undoubted quality of the report so ably introduced by the noble Baroness, Lady Hayter, and despite the expertise available in the Room, I have the feeling that the eyes of the nation are not on us. I think we now know how Rosencrantz and Guildenstern must have felt.
In another sense, this is an oddly timed debate. Here we are, looking at the Government’s objectives in a negotiation that has been going on for eight months and is due to finish in seven weeks. The document in which those objectives are set out is drafted in such general, unspecific terms as to make it clear that its objective is to tick every lobbyist’s box so that the Government can say at the end of the day, “Well, at least we tried.” It is not the basis for a serious debate. It should be possible—I look for support on this from my old colleague, the noble Lord, Lord Frost—to devise a more grown-up relationship between Parliament and the Government on trade negotiations.
However, this is the only document we have, so debate it we must. If we do not, the next thing to happen will be a fait accompli: an agreement that we then cannot change. I hope that, with the help of the noble Lord, Lord Frost, and possibly with that of the noble Lord, Lord Grimstone, we may be able to establish something a little more meaningful. Like the noble Baroness, Lady Hayter, I have never understood why taking back control means Parliament cannot be as well informed as it was when our trade negotiators were Brussels based, or as the European Parliament then was and now is. It would be in everybody’s interest that we be as well informed. As an ex-negotiator myself, I know from Washington and Brussels experience how the oversight of an informed legislature strengthens the hand of the negotiator. Therefore, the Johnson Government’s policy of concealment, highlighted in the ludicrously contrasting texts at appendix 5 in the committee’s report, seems to constitute a severe case of self-harm.
However, a new Prime Minister means a new Foreign Secretary. Perhaps we can turn over a new leaf and have a new start on this relationship. Meeting during the changing of the guard means that we can offer a bit of advice to the next occupant of the great office where Lord Grey watched the lights go out over Europe, Johnson penned his pieces for the Telegraph and Truss put up more flags.
I have three quick tips for the incoming Foreign Secretary, whoever he is; sadly, the forecast is not for frost. First, pay attention to the office experts on international law. They are very good. Defending the international system, as we must, means not just opposing people who scorn and subvert it, such as President Putin, but not breaking our international agreements, such as the 2019 treaty of the noble Lord, Lord Frost, or the 1951 refugee convention. The Foreign Secretary’s job is to remind Cabinet colleagues that our word is our bond and insist that pacta sunt servanda.
Secondly, respect my old service’s understanding of other countries’ attitudes and interests. In international relations, there are few symmetrical, zero-sum games. Widening the parameters in a negotiation and bringing in areas of interest to the other side are usually more effective than pouting and shouting. Use the expertise of the embassies—and not just for arranging photo ops.
Thirdly, believing in alliances means not disparaging allies. France is a friend, not a foe. There are only two types of European state: middle-sized countries and those that have yet to realise that they are now only middle-sized. Like it or not, we are Europeans too. We depend on their co-operation and custom. Naturally, our biggest market is our closest market. It is a pretty inexorable rule that trade halves as distance doubles. Global trade is now 20% above pre-Covid levels; ours has flatlined. We are not going to put that right until we rebuild a productive trading relationship with the rest of Europe. That must be the number one trade policy aim.
So let us get the India deal into perspective. According to the Government’s own analysis, by 2035, it might add between 0.12% and 0.22% to our GNP—not exactly game-changing. Incidentally, I hope that the new Government will tone down the boosterism. I am much less critical than some—including some in this Room—of the new trade agreements with Japan, Australia and New Zealand, but their economic effects will also be pretty marginal. It does not help those ready to defend them when government spokesmen systematically insist that what seem to be perfectly respectable geese are actually stupendous swans.
That brings me to my last, and very serious, point about the negotiation with India. Why the rush? Today’s top geopolitical priority must be the survival of a free and sovereign Ukraine. National Governments tend to be against invasions lest they prove habit-forming. The 1982 attack on the Falklands and Saddam Hussein’s 1990 occupation of Kuwait were condemned; with UNSCRs 502 and 678, sanctions followed. Russia’s veto rules out any similar UN action now, but I am struck by our apparent inability to orchestrate any similar worldwide condemnation of Putin’s aggression and Russia’s blatant breaches of the Geneva conventions. If we have been trying—if we have been calling the Commonwealth from Chequers—we have been keeping quiet about it.
We have not been doing very well in Delhi. Mr Modi’s Government have raised no objections to the invasion of Ukraine or the barbaric methods employed. His Government have refused to join any sanctions. Indian exports to Russia are rising steeply: India bought no Russian oil before February but is now taking close to 1 million barrels a day. Indian forces are, as we speak, taking part in the Russian Vostok military exercise. Are we sure that now is the time to reward Mr Modi with new trade concessions? Are we bringing any Ukraine conditionality into this deal? If not, should we not? If the conditionality is resisted and rejected, should we not go slow?
If Putin eliminates Ukraine, as he said he aims to, there goes the post-World War II international settlement. There goes the rules-based system. There, incidentally, goes the reputation of the new Foreign Secretary, whoever he is, and the new Prime Minister. Trade policy cannot be ring-fenced and immune from geopolitics, so my key advice is to get our priorities right, which, in this case, means not being driven by a vacuous Diwali deadline. I say to the noble Lord, Lord Hannan, that I do not think it is enough to be disappointed at the Indian attitude. We have to use all the means at our disposal and all the skills of our diplomacy, including our trade diplomacy, to try to get the Indians to think again.
Lord Lansley (Con)
I am very glad to have the opportunity to follow my fellow member of the International Agreements Committee, the noble Lord, Lord Kerr. On the issue which he quite rightly raises, but which our report does not take a position on—the question of conditionality of trade relations with India given the Russian aggression in Ukraine—where I personally stand is that, if we can maximise, as my noble friend Lord Hannan said, the economic partnership between ourselves and India, we can also maximise its adherence to democratic values. It does not always happen—it did not happen in China because of a one-party state—but in a democratic country, which India is and has been successfully, we can look for the economic interrelationships themselves to give rise to a strong feeling within India of who its allies really are. I think that will have an impact. For that reason, I am very much in favour of us trying to have not only a free trade agreement with India but one which is the starting point of a wider economic partnership. That is the point I really want to make.
There is a risk that we focus on what is to be published or not published by Diwali. The Indian Commerce Secretary, Secretary Subrahmanyam, was reported in Mint today as saying that 19 out of 26 chapters have been closed, that there are a couple of areas where we are negotiating, and that the Diwali deadline is not going to be missed. But what does that mean? I think it means a statement of heads of agreement, as it were, between the two Governments. From our point of view, we have a right to expect a free trade agreement which substantially covers all trade and which makes substantial reductions in tariffs, not least on UK goods going to India; but also that the heads of agreement in these chapters initiate a substantial series of relationships between ourselves and India on a range of economic issues, which will be developed over time. Indeed, the statements that might be made this year need to be expanded on and developed.
From my point of view, the issue in relation to our report is that I wish we could have had this debate six months ago, at the start of the negotiations, rather than two-thirds or three-quarters of the way through—as I think we all agree. However, I think we can still at this point ask, “What is it we are looking for?”, because the Government have not told us what constitutes a successful outcome to these negotiations. To that extent, with no disrespect to the Government, I think people might understandably look at our report and say that it is a good basis for judging whether there has been a good outcome.
Let me give a few examples of where we focused on some of the detail and added to what the Government said in their rather Panglossian way, which would be a good basis for thinking about what constitutes success. The Government talk about the importance of investment protection, but they did not say how or what they are looking for to protect UK investors in India. The committee discussed this a number of times, not least with my noble friend Lord Grimstone, who no doubt will bring a lot of further expertise to the committee. The point he often made was that we have been successful investors abroad, and where dispute settlement and investor protection are concerned the UK has a terrific record; nobody has pursued a successful ISDS case against the United Kingdom. However, we have often needed our investors to have the equivalent protection in other countries, and they have sometimes not had it.
We lost the bilateral investment treaty with India in 2016. The Government are not telling us what the nature of future investment protection should be. In our view, they should be prepared to pursue investor-state dispute settlement agreements, and ideally, in this and other contexts, try to bring India into an internationally agreed system for that purpose, such as through the development of UNCITRAL, not the EU system. As my noble friend Lord Frost accurately said, although the EU is still negotiating with India, it will complete the second round only next June. The EU will demand too many things of its negotiating partners, rather than seek some kind of international consensus. That is where our negotiators might have a valuable flexibility in getting us to an agreement that the European Union might otherwise not achieve. ISDS may be one of these places; it will be very valuable for there to be international agreement and for us to secure it with India.
I will briefly mention one or two other points. We cannot put it all in the agreement now, but it is important to have a process moving towards standard setting in India that meets international compliance. More than 80% of UK standards are ISO-compliant; less than a third are in India. We need India to move. For things such as mutual recognition agreements, which are important for goods, India relies enormously on us getting this kind of process under way. Likewise, our agricultural exports to India are often in premium goods, so we need geographical indications. We have heard the Government tell us that geographical indications are important, but they have not yet secured them through the Australia agreement or in Japanese domestic legislation. We do not even know whether they will seek a commitment to geographical indications in the India agreement, but they should, particularly because the Indian middle-class consumer is a large potential international market for many of these premium goods.
The last question I particularly want to mention, which is really important, is that of an innovation chapter. We have had innovation chapters, for example in the Australia agreement, and I cannot think of a potential free trade agreement for which the process of working and co-operating together on innovation could be more important than between us and India. It will clearly be looking for lots of services mobility and the ability for workers to come here. Much of that will be not only valuable to us, as I know well in relation to the National Health Service, but important to a wide range of innovative businesses—not only in health, but in life sciences, IT, fintech and beyond. We need that co-operation and innovation. The innovation chapter in this agreement might be the most effective one that we use in the future, but we will not see the detail of it in October. What we need, as with many of these free trade agreements, is something that meets the criteria now, but is the substantial starting point of an economic partnership that grows in the months and years ahead.
Lord Harries of Pentregarth (CB)
I thank the committee for its report and the noble Baroness, Lady Hayter, for her introduction. Like other noble Lords, I very much welcome the opportunity for increased trade with India, which can of course benefit both countries, and I have huge respect for India, in particular the resilience of its people. But like all countries, including our own, India has many ills and injustices that have to be recognised and challenged, and some of them have potential links with trade and trade agreements. One of the Government’s negotiating objectives reads
“Reaffirm commitments to international labour standards”.
By itself this is much too vague and general, which the International Agreements Committee rightly picks up on. In paragraph 89, for example, it says:
“India clearly has weaker labour laws than the UK. Witnesses noted … labour abuses in tea supply chains, including forced labour, failure to pay the minimum wage, gender discrimination and suppression of freedom of association”.
The injustice that is particularly relevant to trade and our desire to increase it, on which I want to focus, is bonded labour. This persists in India as well as in other countries in south-east Asia. During the summer we had a vivid example of this cruelty, not in fact from India but from Indonesia. As noble Lords may have read, workers were flown in to help pick fruit on our farms. They had to pay £5,000 fares for their flights and were subject to many other deductions, with their houses in Indonesia pledged as security. The result was that they were trapped in debt and likely to take very little, if anything, home. I am glad to say that the Indonesian Government are looking into this.
In India, this kind of debt bondage is all too prevalent. According to the 2016 world slavery index, there are 19 million Indians in some form of slavery, many of them in debt bondage. We know that the vast majority of these people in some form of slavery are from the scheduled castes, especially the Dalits—the former untouchables. According to Anti-Slavery International, this amounts to 90% of them. When Dalits try to exercise their rights or resist abuse and exploitation, they are faced with extremely hostile and sometimes brutal resistance by the dominant-caste villagers who uphold the hierarchy. Consequently, when Dalits resist their oppression they risk complete boycott, cutting them off from land use, access to markets and employment.
As we might guess, bonded labour is particularly prominent in the agricultural sector, where 64% of the population work. This is especially linked to caste and caste structures, which are deeply entrenched in rural areas. The reality is that landlords are of high caste, small landowners are of lower castes, and the landless and bonded labourers are almost exclusively Dalits. Bonded labour is also present in the brickmaking and mining industries. Women also suffer in multiple ways: patriarchal systems confine women to certain types of occupations such as domestic work, silk farming, carpet making and weaving. Young girls are commonly recruited to work in spinning mills in India in return for the cost of their marriage or a dowry payment. The parents often wait several years before receiving the money, which is usually less than initially agreed upon.
All this is illegal. Forced and bonded labour are contemporary forms of slavery, and as such are prohibited under international law—law from the United Nations and many conventions from the ILO. I could cite many of them, but I will not do so because of time. The point is that the law is in place and has been strongly reiterated in recent years, particularly in relation to bonded labour. India itself has signed up to all but two of the ILO protocols and conventions, but the practice still goes on. Lack of implementation of the legislative frameworks, failure of the authorities to observe the laws and the impunity of perpetrators are the most common obstacles to eliminating forced and bonded labour in India.
This is where the British Government and British importers have a key role to play. They can take steps to ensure that any goods that are imported were not produced as a result of bonded labour or any other form of slavery. This can make a difference, as we see with child labour. The report Sowing Hope examined child labour and wages in cotton and vegetable seed production in India. It demonstrated that children under 14 years old account for more than 18% of the workforce in the cotton seed farms surveyed. More than 50% of the child labourers in the sector are Dalits or Adivasis, and the majority of child labourers do not attend school.
Although still too high, the total amount of child labourers has in fact declined since 2015 due to initiatives by companies and NGOs. The report finds that wages across the sector are still far from the minimum wage, a figure that has not significantly improved, and that Dalits are still treated far worse than others, but in the 613 sample farms surveyed there was a direct correlation between the decline of child labour in companies that have implemented special programmes to address this issue, compared to those that have not yet tackled the problem. That shows that companies can have a real effect, so I strongly agree with the scrutiny report and its recommendation in paragraph 92 that
“The Government should either seek to strengthen labour protections informally, through co-operation mechanisms established in the trade deal, or formally, by requiring minimum levels of protection. It should discuss options with stakeholders, including development organisations and trade unions.”
I urge the British Government to insist in the final form of this trade deal that all companies importing goods from India or exporting to Indian markets sign up to the forced labour protocol of the ILO. Companies should also be obliged to map and disclose suppliers, sub-suppliers and business partners in their whole value chains. This trade deal provides a good opportunity not just to increase trade, but to ensure that the agreements that are made play their role in eliminating the horrible practice of bonded labour. The Government have a key role in ensuring that companies do this.
Lord Udny-Lister (Con)
My Lords, in speaking in this debate, I draw attention to my interests as set out in the register and to my work for HSBC. I, too, thank the noble Baroness, Lady Hayter, for securing this debate.
I mention the importance of this debate. It is now, I think, universally acknowledged that India is indeed on the climb and that by some projections it will become the world’s third-largest economy by 2050. As a country now unshackled from the EU and ready to embark on its own programme of international trade, securing a free trade deal with India is of strategic importance to the future success and prosperity of the United Kingdom.
That said, we all knew that this negotiation was going to be extremely challenging. India is well known for having tough and experienced negotiators, long-standing protectionist tendencies and complex regional variations in its bureaucracy. That backdrop provides a challenging, yet not impossible, set of circumstances which our Ministers and negotiators have had to overcome. I must draw your Lordships’ attention to the progress that the Government have made, especially after the Prime Minister’s recent visit to India, which seems to have secured a resumption in proper dialogue, providing a jolt of energy that secured more frequent communication between the UK Government and the Indian Government. The evidence for this is quite clear. We have now seen the problems surrounding Cairn Energy and Vodafone, which have been going on for many years—for Cairn Energy, they are over 10 years old—start to move towards some resolution.
In short, dialogue between the two Governments is important, and we have not had it at this level for some time. Her Majesty’s Government have made it crystal clear for some time now that the intention is to tilt the future of UK trade towards the Indo-Pacific. Thus, securing a free trade agreement with India will not only complement the UK’s existing commitments in the region, but strengthen our ambitions with regard to the CPTPP.
Some say that the brakes need to be applied to these negotiations. They do so by voicing concerns that some sectors may get left behind or that, through speed, our standards may become weakened. However, I see things very differently. International trade is moving at an unprecedented pace, and all the time we ask to stall, all the hours that are left dwindling, provide only an opportunity for others to come knocking at India’s door and for our overall negotiating position to become weakened. I challenge those who call on the Government for such a delay to show some faith in the natural forces of the market and to look at the Government’s recent successful track record in delivering free trade deals at a considerable pace and for the benefit of the UK.
It must be remembered that, in working with India, we are not starting from scratch. We are working with an old friend whom we know well, and it knows us. The UK has a long, complex and important relationship with India. Our already established economic links are significant—£23 billion in 2019—and through the Commonwealth the UK and India are already strategically aligned and share a common set of values and ambitions that can only be strengthened through proper trade. The Government should be commended for capitalising on the Commonwealth advantage in securing free trade deals with several Commonwealth countries, including Australia and New Zealand, and it would be great if India became the next.
Our cultural links with India provide a perfect backdrop for the forging of a new and ambitious future. Some 1.5 million British nationals are of Indian origin. With half a million jobs in each other’s economies already supported, the Government’s objectives not only look sound but are the way to move forward in future. The success of the Indian diaspora in the UK has laid that foundation for better business-to-business and Government-to-business relations. I hope that the Government can explore this as a way in which we can grow our business.
The geopolitical situation we currently face could not be more trying. Both India and the UK are now in the process of recovery from the twin shocks of Covid and the crisis in Ukraine. We have seen aggression and protectionism from certain states reaching levels that we can now feel at home. With this comes an absolute need for our businesses to be given the freedom to diversify into alternative markets. That is why we should encourage this negotiation to move at pace.
In their statement, the Government have made it abundantly clear that they are entirely committed to upholding the UK’s high environmental, labour, food safety and animal welfare standards. However, on the environment, would my noble friend the Minister agree that an FTA with India would provide an exceptional opportunity for the advancement of the UK’s leading renewables sector and that British firms currently innovating in this sector stand a great chance of playing a big role in the decarbonisation of the Indian economy? Further to this, I would be grateful if he could outline what actions the Government are taking to ensure that reducing tariffs on our green exports is an integral part of FTA negotiations, especially given that India has now committed to sourcing 50% of its energy from renewables.
We also have a proud history of standing up for and advancing human rights, particularly for women. The fact is that India has considerably weaker labour laws than the UK—a point made by the noble and right reverend Lord, Lord Harries. There are documented cases of widespread discrimination against women in India, which must not be ignored. It is vital that our trade deals are never seen to undermine the UK’s international commitment to gender equality. I therefore want clarity in these negotiations on what mechanisms the Government are seeking to deploy to strengthen labour protections, either formally through the agreement or informally, which is probably more likely.
In turning to the important area of digital trade, it is worth noting that digital and data services will underpin the success of the FTA secured. With this in mind, the UK must ensure that an adequate data protection regime is in place. Again, I would be grateful if we could get an update on that. I fully understand that there is no data legislation as such in India, although it is currently being put back through Parliament. I suspect that this whole section will be removed from the negotiations, but it is important that we ensure that we have some mechanism for coming back to it at a later point.
Public procurement is an area where we are, I hope, negotiating hard. Historically, there has been a reluctance from India to include public procurement in its FTAs but, in evaluating the growth of the Indian economy and seeing the exceptional demand for its infrastructure, it would be a huge loss if UK business did not have an opportunity to gain market access under the FTA. Again, it would be great if we could have some update on that.
This issue has already been raised but, through the UK Bribery Act 2010 and other legislation, the UK has a strong and tested anti-corruption framework. It is worrying, however, that some UK SMEs have either been put off trading or stopped trading altogether with India due to corruption concerns. I would be interested to know how we are going to deal with that.
The UK’s financial and professional services rely on the recognition and transferability of professional qualifications. This is most pressing in the legal sector, which, if we get this right, could stand to benefit significantly from the FTA. In pursuing the FTA negotiations, I would like Her Majesty’s Government to strive to achieve recognition of UK professional qualifications, particularly our legal qualifications, when UK professionals seek to enter India’s regulated professions. This step has the ability to increase drastically both the UK’s legal services exports to and legal services imports from India, so it is of value to both sides.
It is clear that the recognition of academic qualifications is just one part of the jigsaw puzzle. If the UK legal sector is really to reap the benefits of this FTA, we need to see a relaxation of visa restrictions on both sides, particularly for legal graduates and professionals. If the Government are successful in easing the cross-border movement of legal professionals, there will be an enormous benefit to be gained by lawyers both here and in India. We know that India wants market access to the UK’s legal sector, but we also know that it is protectionist about its own. AI and cybersecurity are other areas that are important in these negotiations.
In voting to leave the European Union, as we have now done, the British public were told that this would be our opportunity to set a course on a new era of international free trade. The Government have a clear mandate to use the UK’s recently regained sovereignty to seek and secure such free trade agreements. I wish our new Prime Minister and her team godspeed in delivering this one.
The Earl of Caithness (Con)
My Lords, I thank the noble Baroness, Lady Hayter of Kentish Town, and her committee for producing the report we are discussing and for their hard work in assessing the situation—which is opaque, to say the least. I also thank the Government for their intention to get a free trade deal with India as quickly as possible. That is highly commendable.
It is true that the eyes of the country are not on us at this moment, but I know that all the ears of the Committee listened carefully to the noble Lord, Lord Kerr of Kinlochard, when he said that he wished there could be a grown-up relationship between Parliament and the Government when discussing trade deals. I hope my noble friend takes that message back firmly to whoever is the new Secretary of State. Is the limit of our discussion on trade with India really this so-called debate? What further thoughts does my noble friend have on discussing this, because there is so much to discuss about trade with India that this debate cannot, in any way, be passed off as “We have consulted Parliament”?
I agree with my noble friend Lord Hannan of Kingsclere about the orientation of India. To me, this is probably more important in the long term than the orientation of China, which will certainly not change for some time. There is a huge role for Britain and the West to play with India, and it must be pointed out to them that it is also in their and not just western interests that that orientation is as close as possible. This potential free trade agreement is therefore an integral cog in that development.
I will slightly change the tone of the debate and refer to the report, because that is what we are discussing. I was particularly interested by paragraph 64, on our old friend the investor-state dispute settlement. I see the noble Lord, Lord Purvis, and others and remember the Trade Bill of 2020, on which we very nearly defeated the Government on ISDS. I cannot understand why the committee thinks this is such a good idea: I dislike ISDSs and do not think they help. Not only are they a blunt instrument but they can be used as a lever to distort trade before it gets to the court system. However, I totally agree with the committee in its final sentence of paragraph 64:
“Whichever mechanism is put in place, it must be independent and enforceable.”
Can my noble friend confirm that that will be the intention?
It will not surprise your Lordships that I turn now to the environment, climate change and farming. Not much is said about this in the Government’s objectives, but it is another area where a free trade agreement could be beneficial to both sides. It is hugely important, as the committee rightly points out in paragraph 86, that
“The Government should consider how it can support India’s decarbonisation efforts.”
If the importance of climate change did not register on Indians’ Richter scale until now, surely the devastating floods in adjacent Pakistan must have. If something is not done about it, there will be huge catastrophes throughout the world, particularly in India. India must surely realise that help in combating climate change will not come from Russia; armaments might, but that help will come from the West. That is so important in getting this free trade agreement right.
Farming is not even mentioned, but is crucial, because British farmers have nothing to fear in a free and fair level playing field of trade, as the NFU put it. I hope my noble friend confirms that that is the Government’s ambition.
My noble friend Lord Hannan of Kingsclere mentioned tariff barriers, but I want to mention non-tariff barriers, because they are equally detrimental to trade. I shall give your Lordships a couple of examples. There are 230 sanitary and phytosanitary measures on UK exports, compared with four that the UK applies to Indian imports. India applies 193 technical barriers to trade, compared to 54 applied by the UK. So it is not just tariff barriers that are important; equally important are non-tariff barriers.
Then there is the difficulty of doing business in India, which many of your Lordships have mentioned. For those in the farming and environmental world, there are seven Indian government bodies and authorities for agriculture and trade. That is something that I hope India will change, but it is also something that we can help it change for the better, with our experience.
Going into more detail—because of course the devil will be in the detail—I look forward to seeing what the free trade agreement has to say about eggs. I note the condition in which hens are kept in India, in cages which were banned in this country many years ago. Why should our farmers be subject to imports produced on a basis that would be illegal in this country? That is fundamental to how the free trade agreement will be judged.
In conclusion, I hope that my noble friend will confirm that agriculture and the environment will not be sacrificed on the altar of this free trade agreement, as they were with the Australian free trade agreement, and that considerably more importance will be put on these matters in the future.
Viscount Waverley (CB)
The relationship with India ranks alongside the most important. Free, independent and democratic, India is a powerhouse that will play a pivotal role in future world affairs and commands attention and respect. A potential United Kingdom-India free trade agreement would be the UK’s first with a south Asian country and India’s first with a major western economy and a member of the G7. India is the UK’s 15th-largest trading partner and accounts for 1.7% of total UK trade. The potential economic gains from this comprehensive agreement are projected to be more significant than those from trade agreements with Australia, New Zealand or Japan. However, the UK has lost market share, with every country in the G7 having faster growth in their trade with India in percentage terms. The UK needs to play catch-up, with a global Britain working hard and fast on its relationships.
There is much to be gained therefore in strengthening an historical, deep, across-the-board relationship, but we should recognise that this relationship should never be taken as a given. The previous UK Prime Minister’s visit to Delhi and Gujarat, recognising that half of British Indians are of Gujarati descent, was a helpful UK-India bilateral exercise that served to further opportunities across the energy and health sectors, the green economy, including offshore wind and hydrogen, and the important security and defence partnership, building on India’s desire to move on from Russian weaponry procurement. The need for effective new technology and hardware to respond to threats in the Indian Ocean as part of the Quad grouping alliance with the USA, Japan and Australia is geo-imperative. Our overdependency on China as a supply chain provider presents India with opportunities to be a reliable, competitive global alternative.
The UK should not be too starry-eyed. The Indians are canny and challenging negotiators, and the importance placed on trade agreements by India differs from our relentless, active pursuit of FTAs, contrasting with India’s scepticism. More remains to be done, however. India’s political class is questioning the merits of expanding trade links with the UK, with much of its thinking dating from the colonial era when unfettered imports from Britain had a negative effect on the domestic economy. India’s businesses are keen to safeguard their interests by advocating for a slower pace of trade and investment liberalisation, and I have little doubt that the Rajya Sabha, the Council of States, and the Lok Sabha, the House of the People, will wish to be assured that the interests of the differing regions of that vast country are properly covered before ratification.
Nevertheless, notwithstanding India having a record of pulling out of substantive negotiations, there are indicators of a fundamental change in approach. Delhi is unlikely, however, to acquiesce on reducing tariffs unless progress is made on mobility, a key demand that will allow skilled Indian workers into the UK. Tariff removals from India’s agricultural sector, for example, are crucial for protecting India’s ability to produce its own food supply and the employment of almost half the workforce. Significant additional challenges remain with divergences in the services, market access, digital, investment and dispute settlement mechanisms.
The UK might wish to consider the production of defence equipment in India and its exporting to third countries. I note the sailing from Kochi last week for sea trials of INS “Vikrant”, India’s first home-built aircraft carrier. India would welcome the British ship- building industry leveraging lower costs of manufacturing in Indian shipyards. Dual-use technologies are also considered important with cross-border data flows, data protection and cybersecurity as important areas that India and the UK could usefully collaborate on, in addition to energy security, including areas such as green hydrogen, beyond opportunities in manufacturing.
Advancing financial services is a key ask, from which the UK would benefit substantially in better access for our financial and legal services firms to the Indian market. The financial sector is emerging as a vibrant and dynamic area of growth in the Indian economy, but India ranks only 30th as an export destination for UK financial services. Figures suggest that Britain exported only about £3.8 billion of services to India, with financial services making up less than 10% of that total. Indian financial centres, unlike their Asian peers, are not sizeable in serving India’s economy. On the flipside, it is essential that the UK be competitive and offer attractive propositions to India, which would also serve to stem any general decline in our financial services sector.
Five rounds of negotiations have been concluded, with a whole raft of matters remaining. India is keen to tackle smuggling, counterfeiting and loss of tax revenue; improvising customs arrangements to reduce bureaucratic delays and red tape is considered crucial for small businesses. The UK Government have listed intellectual property as important within a trade deal that would enable low-cost vaccines to be produced by countries such as India.
Are concerns about toxic pesticides being allowed into the UK a potential stumbling block? Impacts on UK agriculture resulted from an increase in Indian wheat exports to the UK which contain chlorpyrifos, which was banned in 2019. International labour markets with low pay and exploitative conditions should be a factor. It is therefore considered important that an investor dispute settlement scheme be put into place to allow foreign investors to sue when profits are threatened.
A strategy to boost exports to India is needed. But if the UK is to be serious about trade, will the Prime Minister finally allocate a trade envoy to India—and not just one, by the by, but four, to accommodate India’s size and diversity? The detail must be got right. Deals of this size could typically take years to complete so it is questionable, given the challenges, whether the setting of an ambitious but arbitrary deadline for concluding the negotiations is the right approach. I am reminded of my grandfather’s remarks on the subject of local needs when assuming the governorship of Bengal at a challenging time in its history. Communities in both India and the United Kingdom should benefit from a draft that will stand the test of time and balances mutual advantage in addressing the wide diversity of India.
Lord Balfe (Con)
My Lords, I add my congratulations and thanks to the noble Baroness, Lady Hayter, on chairing this committee and getting this debate going.
I read the report with a sense of despair, because, if you strip it away, it does not actually say very much. It seemed to me a triumph of hope over experience, as they say. One of the things that struck me early on was the absence of any discussion with our friend, the noble Lord, Lord Mandelson, the Commissioner who began the negotiations on this at an EU level. Frankly, I was surprised that there was no attempt to find out what the problems at his level were.
A couple of years ago, I was fortunate enough to be in the Commission at a reception. I met a French diplomat. I said to him, “What do you do?” He said, “Blah, blah, blah—oh, and I look after the trade agreement with India.” I asked, “How’s that going?” He said, “Round in circles. It’s been 10 years now. We haven’t yet got a memorandum of understanding. We’re not actually going to get anywhere, but we don’t really want to drop it publicly.”
We are up against a certain amount of difficulty, and we need to learn from elsewhere. I know that I am an unrepentant remainer, but I am surprised that Europe is not even mentioned in any context in this report. However, it does mention, and is quite right about, the “notoriously difficult business environment”. It is notoriously difficult. Part of it is an inheritance from British rule, because when we left India we left the states of India with certain powers in relation to tariffs that they have been completely unwilling to give up. If you travel round India by road, as I have done on the odd occasion, one thing you notice when you get to the state boundaries are long queues of lorries waiting to get through the different state customs levels. When we talk about the need for change in domestic laws, we are rather glibly talking about something that has been a problem for some 75 years. The states do not want to give up their powers, because they use them as part of their weapons against the central state. It is a bit like having Nicola Sturgeon in the middle of India blocking your way of doing things and not being prepared to give up. I am pleased to see the remarks about the investor-state dispute settlement, but unless some flesh is put on it it will not work.
I am disturbed by the fact that the whole report does not mention human rights at all. You would not think from the report that the present Prime Minister of India was forbidden from coming to Britain and denied a visa for many years, and that this was lifted only when the Cameron Government decided that they might make some money there. Frankly, if you look at the state of India today and the tensions between the Hindu and the Muslim communities, you cannot honestly say that they pass the human rights test. You cannot honestly look at them and say, “This is a state that conforms to the human rights that we in Britain expect.” When I looked at the back of the report and saw a comparison with New Zealand, I thought, to paraphrase Noël Coward, “Small place, New Zealand. Nothing much in common at all, and certainly nothing much in common on the field of human and social rights.”
I also felt that it skated a little on labour rights. ILO rights are quite basic, down to the way in which international agreements must take place, and if we do not support the ILO it will wither away. Countries such as this are reliant on supporting the ILO and its rights to make them mean something, so there are some serious deficiencies.
We are India’s 17th-largest trading partner. Position 17 is not a high-leverage position for a start, but I will remark on two separate points that have not been addressed properly. The report mentions facilitation fees, but we do not seem to understand what they are. When I was a Member of the European Parliament, I was well known for my love of men in uniform running countries. For that reason, I was on one occasion sent to Bangladesh to find out what was going on there. I actually got on very well with the military Government that was in power then and with the Finance Minister in particular. I had a useful formal meeting with him, which ended with an invitation to dinner. He explained facilitation fees to me: they are ways to make sure that public servants have enough to live on, because the state cannot afford to pay public servants what they actually need.
The Finance Minister of Bangladesh was clear to me that the function of a facilitation fee was a fee for a service. If someone wanted something done, they paid a facilitation fee. Facilitation fees were not some sort of jungle; they set out quite precisely how much you could charge for what. Public servants knew what the facilitation fees were. The fact that you kept on and on paying them was, as far as Bangladesh was concerned, and I suspect it is exactly the same in India, a legitimate way of running the country. It was a way of getting things done. As the 17th-largest trading partner, we will have some work to get around this problem of facilitation fees, because we say they are corrupt, but they do not think that. They think they are part of the way of running the state.
The final point I will deal with is Russia. We seem to be surprised. It is said that India ended up as a friend of Russia because Winston Churchill, rather like Jinnah in Pakistan, drank whisky. The whole division between India and Pakistan is very real, but the division between Russia and the West was, to an extent, because India felt rather unwanted.
The history of Indian relations with Russia goes right back to the beginning of the state. We have all heard of Francis Fukuyama, who predicted the end of history. In 1987, he wrote the book The Soviet Union and the Third World: the Last Three Decades, in which he pointed out that by the end of the 1970s—50 years ago now—the USSR had helped to create 30% of India’s steel capacity, 70% of its oil-extraction facilities, 30% of its oil-refining capacity, 20% of its power-generating capacity and 80% of its metallurgic equipment production. This is not a recent relationship, and no one should be surprised by the quite favourable terms that Russia has consistently provided for the development of India and its substructure.
For instance, during the 13-day war in 1971, it was Russia that came to the aid of India when Britain was washing its hands, to an extent. There is a friendship treaty which goes back to 1971. There is a long history and it will not disappear because, frankly, as Russians will tell you, the Indians are not really interested in Ukraine. It is as sad and simple as that. India is interested in Indian foreign policy, which has consistently led it to look after its relations with the Soviet Union. It is looking after them now because it is benefiting from the sanctions.
We are in grave danger of getting into a situation where the end result of sanctions will be a permanent shift from Russia and the “-stans” looking west to their looking south. There is a whole middle class in China and India which is looking for energy in particular and can see the benefits of keeping on the right side of Russia. They cannot see any benefits to keeping on the right side of Ukraine. We need to remember that when we look at world politics because, at the end of the day, foreign policy is about getting the best for your country, not doing favours for the rest of the world. We always remember that when it is Britain—some of our foreign policy adventures have been pretty awful—but we often forget it for other countries, thinking that they should somehow be beneficent and do things for us. Friends, they are not going to.
Baroness Bennett of Manor Castle (GP)
My Lords, I thank the noble Baroness, Lady Hayter of Kentish Town, for securing this debate and the International Agreements Committee for all its work on this report. I strongly agree with some of its conclusions and strongly disagree with others.
In talking about a UK-India free trade deal, we have to start with history. For the majority of the past two millennia, the Indian subcontinent had the largest and one of the richest economies in the world, representing around 30% of global GDP. Then came the East India Company and the Raj. By 1970, India’s GDP was about 2% of the global total. It has now recovered to some 10%. Over those recent centuries, India was not an underdeveloped country but one that had been underdeveloped, as a process, by the yoke of British dictatorship. Here I disagree with the noble Earl, Lord Sandwich; this is not ancient history. If you talk to Indian officials and people, this is very much part of the reality of how they see their relationship with the UK today.
Even in recent years, our relationship with India—its Government and people—has not always been smooth. I have appeared on Indian national television only once, in a debate show that I was told had many tens of millions of people watching it in primetime. This was back in 2013 when, under the coalition Government, the UK planned a disgraceful £2,000 visa bond policy that was levied in an utterly discriminatory way on visitors from India, Nigeria, Kenya, Sri Lanka, Pakistan and Bangladesh. Rather oddly, I was the closest thing to a representative of the UK Government on the show. I had rather a torrid time, with Indians—including businesspeople with very large investments in the UK—understandably expressing their anger at this policy, which was an early attempt at the culture war hostile environment that we have seen so much more of in years since. That I was saying the Green Party opposed the policy really did not help much, because I am afraid there was not much sign elsewhere in British politics of opposition to the visa bond.
I reflect on that now because reading the Government’s documents and seeing their approach I do not see much sign of a sense of humility, of historical understanding or of the kind of respect that we need to see to establish a future equal, mutually beneficial relationship. As a number of noble Lords have said, it is impossible just to pull money out of the equation and say, “This is only economics and money”. We have to look at the whole geopolitical framework, and that involves history, the present and the future. The poverty, the human rights abuses and the destruction of Indian industries and communities that are the legacy of the Raj still have huge impacts today, and for all the lip service paid in the strategic approach to human rights, gender and workers’ rights, there is very little sign, as other noble Lords have said, of the practical delivery of such returns from our current trading approaches or plans.
We live in a world of globalised, frenzied trade which has delivered huge profits for a few while the rest of us have paid with poverty, exploitation and huge externalised costs to the climate and the environment. That is the story of trade for the UK. It is the story of trade for India, and the story of trade for the world. We need a different approach, and this is where I agree with the International Agreements Committee about the need for democracy. What we need from the Government is a trade policy covering our approach to all countries that receives proper, full democratic scrutiny. As the very useful WWF briefing for this debate highlights, the lack of scrutiny of free trade agreements and our overall policy may put the Government at risk of breaking their commitments under the Aarhus convention, which means that legislation with environmental impacts should receive meaningful public consultation before it is implemented.
My concerns lie particularly, as noble Lords might expect, with climate, environment and social justice, as well as with the crucial issue of tackling corruption. With the City of London being the global centre of corruption, freeing up trade in services risks exporting our problems to India, enhancing the issues that that nation already has.
Turning to environmental issues, it is interesting to take a case study. The Government’s documents and the committee’s report clearly foresee real advantages and potential for growth for the Indian garment industry in exporting to the UK. That has to be an area of great environmental and social justice concern. If we look at the environmental issues, the UK today by volume sells twice the amount of clothes that were sold in the UK 10 years ago. Do we really need more clothes, more waste and more plastic pollution? Do we really need this kind of industry that is so often built on, as the noble and right reverend Lord, Lord Harries of Pentregarth, made out so clearly, extreme labour exploitation of women, particularly young women?
In the interests of being positive, I am going to highlight one aspect of the Government’s approach that I am pleased to see, which is that there is at least a mention of antimicrobial resistance. I should perhaps warn the Committee that I intend to make this a focus of my work in the next year, so noble Lords will hear a great deal more on this issue from me. I would like a much stronger focus on a one-health approach which ties together the human, veterinary and environmental aspects of health. Both our nations face significant challenges in these areas. This helps to highlight why this narrow approach on trade and economics is a problem. We need to take a systems-thinking, holistic approach to how we can co-operate and work together to tackle our joint problems.
I come back to the points on which I certainly disagree with the committee, and probably with the Government, on the investor-state dispute settlement procedures. Here I also disagree with the noble Lord, Lord Lansley, as I have before and will probably often do so again. In this context, I note that, disgracefully, a British company recently won $190 million in compensation from the Italian Government, who had taken environmental measures to protect both their own population and the global climate. The Italian Government blocked oil drilling from 12 miles off their shores. Under the energy charter treaty—a subject of growing controversy—using an ISDS procedure and no-win no-fee lawyers, the British developer Rockhopper won $190 million. That was eight times the amount it had invested.
The Intergovernmental Panel on Climate Change recently warned that ISDS risks a “regulatory chill”, which will stop Governments taking the essential steps they need to on environmental issues. One study in the journal Science found that Governments could be liable for up to $340 billion of payouts through ISDSs for taking the environmental measures we all need. This is clearly extremely dangerous and deeply undemocratic.
I will also comment briefly on the considerable discussion there has been on the barriers to trade within Indian states and the difficulties in dealing with them. This is democratic decision-making. They are democratic governments—they are perhaps not always perfectly democratic, but then ours is not either—making decisions for their people. What right do we have to drive a cart and horses through those democratic decisions?
I will finish by reflecting on the alternatives on this. How might we focus on co-operation and working together, rather than looking at the narrow financial advantage, to tackle the issues we need to? I go back to history. Through the 20th century, particularly in the work of the Institute of Plant Industry in Indore, there was a great deal of understanding of the importance of soil health and the use of green and animal manures. Research was carried out there that was transported to the Soil Association in the UK, which now increasingly informs thoughts and scientific research in the UK about the future of protecting our soil, which the NFU and many others will acknowledge. This two-way exchange of knowledge, ideas and research is the kind of exchange on which we need to focus.
In thinking about that and putting it in this model, I drew the attention of the previous Government to how we might look at trade differently, as fair trade and co-operation rather than free trade that benefits the few. In 2019, Costa Rica, Fiji, Iceland, New Zealand and Norway announced the Agreement on Climate Change, Trade and Sustainability, which aimed to slash the barriers on trade in environmental goods and services, to phase out fossil fuel subsidies and to encourage voluntary eco-labelling programmes and mechanisms that could go across international arenas. It is based on a commitment to achieving environmental outcomes, not just to increasing export volumes.
The noble Lord, Lord Balfe, brought up Scotland. As we speak, Scotland is announcing what looks like an impressive programme for government. I am proud of the contributions that Green Ministers have made to that programme. I would welcome the chance to discuss more ways in which we might green Britain’s trade policy. The models are out there; we just need to adopt them.
Baroness McIntosh of Pickering (Con)
My Lords, this has been an excellent debate. I congratulate the noble Baroness, Lady Hayter, both on securing the debate and on the excellent report that has formed the basis of it.
One omission in the agreement that I was slightly surprised by—perhaps I have missed it—is to do with commercial aviation aircraft. The leisure sector is one out of which the UK would stand to do extremely well. It seems slightly odd that, as an area that might be very much in the interests of the UK, it is not on the table. I would be interested to hear where we are in that regard.
I fear that this agreement generally falls into the basket of the other agreements that we have debated in this very Room before, where there is a certain lack of symmetry in what the agreement proposes to do for the two parties. To me, that is a matter of great regret. This was an opportunity where we could be seen to remove the barriers—and not just tariff barriers, as one of my noble friends said. As my noble friend Lord Caithness said so eloquently, it is the non-tariff barriers in these free trade agreements that often lie at the root of the problem.
I want to give a couple of examples in this regard, if I may. This issue was picked up by my noble friend Lord Udny-Lister, who was of course not privy to our long debates on both the Trade Act and the internal market Act, as they now are. We want to see opportunities. I declare my interest as a non-practising Scottish advocate; I had wonderful opportunities to work in the European Union and have, I hope, benefited from that in my work in this House. It is interesting to note that paragraph 51 of the report clearly states that
“the Law Society of Scotland called for changes to the Indian visa system to open up the Indian market for legal services and stated that an FTA should build on mobility commitments made by India under the ASEAN-India FTA.”
I would very much like to know what the Government’s response to that is. My noble friend the Minister will remember those debates because he was privy to them and sat patiently through them. Having had the door to the European Union closed in many respects, there is potentially an opportunity here for legal practitioners on both sides of the border between Scotland and England to benefit. What was concluded in the committee’s report is very powerful.
I was taken by what the noble Baroness, Lady Hayter, said at the outset: that the test will be whether it is easier to do business with India afterwards. Again, I would like to see that on the basis of reciprocity, which brings me to my key point. The NFU is on the record as saying as far back as January this year that a trade deal with India
“could offer huge opportunities for UK farmers to export more quality UK food abroad”.
In its view, however, it is absolutely “vital” that any deals maintain the
“principles of high animal welfare and environmental protection and ensure these are upheld for imports too.”
I was slightly concerned by my noble friend Lord Frost’s comments. I may have misheard him but I think he said “even if it makes life tougher for existing businesses”. I welcome him to this place with open arms but I sometimes think that it would have done him enormous good to have gone out there, fought an election campaign and found out what is acceptable on the doorstep and what is not. In the last election, under the outgoing Prime Minister, what was acceptable on the doorstep was that we would have the highest possible animal welfare and environmental standards in our food production. To me, the corollary of that is what is good enough for producers in this country. A million people signed the petition organised by, I think, the NFU. What is good for home production and what consumers want to see in this country is our imports also meeting those highest possible standards.
I know it is of concern to other noble Lords, such as my noble friend Lord Caithness—I think the noble Viscount, Lord Waverley, referred to this as well—that pesticides which are not legal for production in this country are widely used in India. I have no doubt that the concerns expressed to the committee by the Welsh and Scottish Governments will be heard, but I would like to hear from my noble friend the Minister in his summing up how their concerns will be acted upon.
In conclusion, I want to draw attention to the aspects of the report which relate to the complex sanitary and phytosanitary rules which India applies to imports. Witnesses told the committee that these act as a trade barrier. The British Standards Institution went on to say that
“only 30% of Indian standards were harmonised with international standards and regulations … traditionally used by the Indian government … favour domestic producers and self-sufficiency”,
and argued against
“recognising Indian goods standards as equivalent or compliant.”
That lies at the core of my concerns. If we have achieved excellent production at very high expense in this country, we must not undercut our farmers in that regard.
I pay tribute to the committee for the work it has done, particularly on the aspects I have referred to relating to more lawyers having access to India and more food from this country going to India, but also ensuring that all Indian food and produce which comes into this country, of whatever kind, meets the highest standards that we exact here. I hope my noble friend will respond to the concerns raised by me, the NFU and the Scottish and Welsh Governments in this regard.
Lord Hussain (LD)
My Lords, I thank the noble Baroness, Lady Hayter, for securing this debate. I am grateful to be allowed to speak in the gap on the subject of a free trade deal with India.
I am just as eager to see our trade links with other countries, including India, improved as other members of this House are, but I have always believed that our trade must be linked with human rights. Looking at India’s record on human rights through the eyes of renowned international human rights organisations such as Amnesty International, Human Rights Watch and Genocide Watch, India is seen to be one of the worst human rights offenders in the world.
According to a 2022 Amnesty International report, the Indian Government have drastically intensified the repression of rights in Jammu and Kashmir in the three years since the change in the status of the region. The report notes how civil society at large, and journalists, lawyers and human rights defenders in particular, have faced relentless interrogations, arbitrary travel bans, revolving indoor detentions and repressive media policies, while access to appeals or justice via the courts and human rights bodies has been blocked. Amnesty International has also said that
“civil society and media in Jammu and Kashmir have been subjected to a vicious crackdown by the Indian government, which is determined to stifle dissent using draconian laws, policies and unlawful practices in their arsenal… By harassing and intimidating critical voices, authorities are targeting all credible, independent sources of information in and about Jammu and Kashmir.”
According to a 2022 Human Rights Watch report,
“Indian authorities intensified their crackdown on activists, journalists, and other critics of the government using politically motivated prosecutions in 2021 … The clampdown on dissent was facilitated by the draconian counterterrorism law, tax raids, foreign funding regulations, and charges of financial irregularities. Attacks against religious minorities were carried out with impunity under the Bharatiya Janata Party (BJP)-led Hindu nationalist government. BJP supporters engaged in mob attacks or threatened violence, while several states adopted laws and policies to target minority communities, particularly Christians, Muslims, Dalits, and Adivasis.”
According to Genocide Watch’s 2022 report, an expert, who is said to have predicted the massacre of the Tutsis in Rwanda years before it took place in 1994, warns that a genocide of Muslims in India could be about to take place. Gregory Stanton, the founder and director of Genocide Watch, said during a US congressional briefing that there are early signs of processes of genocide in the Indian state of Assam and in Indian-administered Jammu and Kashmir. We are warning that genocide could very well be happening in India.
In the light of these independent reports, how can the Minister reassure this Committee that the UK’s trade deal with India would meet our foreign policy and international principles and standards? If India continues with its human rights abuses and chooses to ignore these principles and standards, what would our Government be prepared to do?
Lord Purvis of Tweed (LD)
I thank my noble friend for his contribution in the gap. He gives a very good example of why the agreement that we are likely to have with India will require strong human rights clauses. This House twice resolved that there should be a trade and human rights policy and passed amendments for it to be included in the Trade Bill, but they were turned away by the Conservative majority in the Commons. This agreement will be a litmus test when it comes to human rights and labour standards. My noble friend is not alone in raising that issue in this debate.
This debate has been characteristically sensible and serious. I say to the noble Lord, Lord Kerr, that I have adjusted to the fact that contributions in Grand Committee do not always have the world’s eyes upon them and certainly cannot secure 10 million viewers like the noble Baroness, Lady Bennett. However, sometimes we make the news. After the noble Lord’s comments, I looked at Lords Grand Committee on Google News and two bits of news came up, other than the Parliament’s constant press releases promoting what we are doing:
“Chinese Embassy in the UK condemns wrong remarks on Taiwan by members of House of Lords”
and
“Peer voices concerns as Cumbria council restructure is approved”.
So we make the news in global ways from China to Cumbria.
I am very confident that this agreement will be a success according to the Government because we have not yet had an agreement under this Government that has not been gold-standard, world-leading, a Brexit bonanza or the most advanced ever signed—those are all quotes from government press releases about agreements. Therefore, I have great confidence that this will be amazing deal, in the Government’s press release anyway. As the noble Lord, Lord Kerr, indicated, with the former Prime Minister leaving, I wondered whether the boosterism would be toned down. I got a sign that that might not necessarily be the case because on 31 August the FT reported that
“Anne-Marie Trevelyan, secretary of state for international trade, told the Financial Times in an interview during a trip to Australia that the deals would help curb inflation in Britain”.
Given that this is likely to yield 0.00% to 0.08% over 15 years, I wonder exactly how that not-yet-ratified agreement is curbing inflation. I look forward to the Minister giving in his summing up an illustration of what the impact of the Australia agreement on UK inflation has been so far.
This debate has highlighted to me very clearly that negotiating objectives should be put to the Commons and debated there on a Motion for approval to allow there to be proper scrutiny of the important issues so clearly raised and illustrated by the committee’s excellent report. I commend the noble Baroness, Lady Hayter, and all members of the committee for this yet again gold-standard report.
This draws out the fact that either, as the noble Lord, Lord Udny-Lister, said, we are going to be in “extremely challenging” negotiations, or, as the noble Lord, Lord Lansley, indicated, it is pretty much a done deal already and we are now debating it. I do not know what the current situation is. To be fair to the noble Lord, Lord Grimstone, he was assiduous in keeping the Opposition Front Benches and committees informed of progress in rounds of negotiations, but the Government have been rather quiet on this, so I do not know what position they are in. I do not know what kind of chapters have been closed or not; I do not know whether our debate on this is utterly pointless or whether the Government can feed back from this House to the negotiators that there are emerging areas of concern. I simply do not know, so I hope the Minister can state where we are.
It also highlights, as we have asked today, the question of the trade rationale for Diwali. Obviously, there was a political rationale, which I understand, but I do not know what the strategic trade rationale was, especially in the context, in the intervening period, of the aggression and war in Ukraine and our strategic relationships with India. These are material circumstances which would of course have an impact when we discuss opening up significant UK markets which we have closed to Russia and which India now has policy positions to actively circumvent.
We know that some of these areas are significant, as the noble Lord, Lord Kerr, indicated. We know that India is not currently supporting the G7 consensus on an energy cap; we know that there is increased purchasing of oil; we know that, as the noble Lord indicated, there are Russian military war games and exercises which India is participating in at the moment. When I raised concerns to the noble Lord, Lord Ahmad, a couple of months ago that there would be a rupee/rouble swap, I was told that I was being premature. We now have that rupee/rouble swap mechanism to purchase increased levels of oil, which is a direct strategic difference from the UK.
These are material strategic interests of the UK. There is of course an argument that free trade should be completely separate from other areas of foreign policy, but when you intend a deep and comprehensive agreement, you cannot separate them. I would be interested to know from the Government whether, during the discussions on access to financial services and other areas, we have raised the foreign policy objectives of the UK.
We also do not start from a year-zero approach—or a 2016 year-zero equivalent—because we know, as the noble Lord, Lord Frost, indicated, that there were previous discussions on whether there would be an EU free trade agreement. Expanding what had been a trade and investment agreement had been problematic, because of Indian barriers on FDI and a lack of consensus on greenhouse gas emissions, nuclear energy, farming subsidy and policy, regulation of the financial sector and technology transfer. If the UK is now to have a full FTA covering all those areas which had been problematic previously, we need to understand how we believe these areas will be overcome.
I also recall that, for India, 20% of the trade with the EU 28 was with the UK. I have a perhaps incorrect recollection—I am sure the noble Lord, Lord Frost, will correct me in due course—that during the negotiations it was the UK which was not in favour of mode 4 reforms on visas. I recall that it was the UK that did not want any liberalisation on movement of people at that time. It was not the case, as he sought to give the impression, that as a minor shareholder in the EU 28 we wanted an agreement but were overruled because of other interests from other European countries. It is patently not true, because we effectively vetoed the process because of the desire from India for visa liberalisation.
It also does not explain to me that if we were in such a poor position with our clout, why, as the Government indicate, we are 17th as a trading partner and why Belgium is ahead of us. Why is Germany sixth? Why is Belgium able to be two places higher than us as a trading partner and not feel utterly constrained by being part of the single market, whereas we are now suddenly able to make the benefit from when we were in the single market?
There are other valuable areas that the committee highlighted across different areas of public policy that will need to be addressed. This is not just about agriculture or rural areas, but I am glad that the noble Baroness, Lady McIntosh of Pickering, and the noble Viscount raised pesticides. During the Trade Bill and subsequently, this has been an area where we have time and again raised concerns about not only the standards that our trading partners will be operating to but their practices. The Australia trade agreement effectively gave the game away: it allowed for products to come into the UK that have had pesticides banned here used on them. That, in effect, is a precedent, so we will need to look very carefully at whether the concerns of colleagues in this Grand Committee are realised, because I also fear that situation.
Obviously, we want a situation where we open up on services. However, without robust data agreements and robust legal frameworks to govern this, it is difficult to see how we will be able to have significant growth of this economic activity. In many respects, India has had ample opportunity to reform its legislation so that it is opened up for UK and EU data transfers, but it has chosen not to do so. Of course, we cannot determine or dictate to a trading partner its legislative framework, but in a trade agreement we can make sure that we do not offer concessions without there being a robust framework around them. That will be exactly the same on legal services or other areas of the service sector.
That is why, on agriculture and other areas, I very strongly but with respect disagree with the noble Lord, Lord Frost, when he spoke about the interaction with the devolved Administrations. One of the downsides of having this constrained period of negotiations for Diwali was the concern that has been raised, yet again, about what kind of consultation there will be. He is absolutely right that trade negotiations are reserved competences, but he is absolutely wrong to say that they are not the interest of the devolved Administrations and that he therefore does not see the need for them to be involved. Some of the founding documents of our constitutional arrangements since 1999 have been the concordats—he was a Minister, so I am sure he is aware of them—which state categorically that where there are policy areas that are reserved competences which have an impact on areas of devolved competence, there should be consultation and openness in that policy formation. This is a fundamental part of our devolved relationship. As the report clearly highlights, the fair position is that an agreement with India will have an impact on the devolved competences.
When it comes to areas of protection, I thought the noble Lord might have raised whisky, which I would probably strongly agree with him on; I know his experience with that. But, as has been mentioned before, we have not been able to protect geographical indications in the Australia agreement, so I wonder how we will do it in the Indian agreement. Indeed, we had the nonsense in the Australia agreement that the only way that UK GIs will be protected is if Australia signs an FTA with the EU in order for the EU to protect our GIs. I am not certain that that was the control we sought to bring back.
The final element, on which I want to close, is one of the most fundamental of those from the Government’s documentation. I commend the Department for International Trade’s officials on some of their documentation and understand the vagueness and opaque nature within it but, as is my wont, I often look at the technical papers. Page 36 in annexe 9 gives a table that fundamentally demolishes the Government’s case for this agreement and the benefits of it. That helpful table—I will come to this in a moment but it did not have a tabulated element to it—shows what the trade diversion of other countries would be under the assumptions of this agreement. The Government say that we are likely to have £5 billion of extra UK trade over the next 13 years and that there will be a £5.2 billion increase in imports from India for consumers, who the noble Lord, Lord Hannan, said should be paramount. That, from the summary page, is all well and good.
The Government did not then take into consideration the net impact from the trade diversion and the reduction in imports and trade with other countries. In annexe 9 of the technical paper, they listed what the experience of preference erosion and trade diversion would be—the negative impact. It is £3,262.1 billion. You have to discount every part of the benefit and take from it the loss of import trade of that £3.25 billion. This is not from insignificant countries. This is important because they are developing countries; they are exactly the countries, mostly in the Indo-Pacific, with which we want to increase our strategic relationships.
I will close on this. The countries that will have a negative impact are Botswana, Sri Lanka, Bangladesh, Pakistan, Kenya, Senegal, Ghana, Indonesia, the Philippines and Jamaica. The impact on Bangladesh is £1.5 billion less trade. The Government need to be much clearer on how they discuss net benefit because this agreement not only will have potential concerns for our public policy but is likely to cause a direct negative impact on a swathe of other countries. We need to debate this with our eyes very widely open.
Lord McNicol of West Kilbride (Lab)
My Lords, it is always a pleasure to follow the noble Lord, Lord Purvis of Tweed. I join others in paying my gratitude and appreciation to my noble friend Lady Hayter of Kentish Town and her committee for producing another balanced and insightful report, which forms the basis of our debate here.
The importance of the free trade agreement with Australia was rightly acknowledged, as it marked our first outing into the post-Brexit world, but negotiations with India will represent opportunities and challenges of a different order of magnitude. Last month, India celebrated 75 years of independence from Britain, which made last week’s announcement that it has overtaken the UK as the world’s fifth-largest economy particularly pertinent. The world’s largest democracy is set to become the third-largest economy by 2031, yet it already has the third-highest greenhouse gas emissions across the planet.
Given this context of importance, it is essential that Parliament is involved, consulted and engaged at all stages, ensuring that we set checks and a balanced framework for future FTAs. As we have heard in this debate, that has not happened. It is difficult to isolate these negotiations, as we heard, from the backdrop of the geopolitical events that shadow them. The Government have prided themselves on their role in leading talks to tackle climate change and global leadership in supporting Ukraine since the Russian invasion. These negotiations must not undermine this reputation; they should be seen as a unique opportunity to influence and enhance our global engagement.
Reading the vague and minimalistic nature of the Government’s negotiating objectives regarding the environment and climate is disappointing in the least. Estimates that an FTA with India would increase greenhouse gas emissions are not surprising; still, it is of concern that there is no mention of mitigating measures and that current projections do not account for transport emissions and carbon leakage. This latter issue is of huge significance as the offshoring of agricultural production to more carbon-intensive countries will devalue ambitions to limit domestic greenhouse gas emissions. Will the Minister therefore ensure that emission projections are recalculated so that they account for carbon leakage and transport emissions, because only then will we see the true figures?
Since the Russian invasion of Ukraine, as we have heard from many speakers, India has failed to support the British-led sanctions. It has seen its trade with Russia increase, abstained on a UN motion condemning the invasion and, last month, participated in a joint military exercise with Russia and China. Given this, can the Minister explain why Ukraine and the situation there is not mentioned at all—not once—in the negotiating objectives?
In a world of rising authoritarianism, disregard for the rule of law and persecution of vulnerable minorities, there are questions over the direction of the current Government in Delhi. Recent reports have suggested a rise in human rights abuses and breaches of academic freedom. In 2021, the International Trade Union Confederation rated India on the second-lowest rank on its global rights index. As stated by Frances O’Grady, the general secretary of the TUC:
“Suppressing trade unions, forced labour, child labour and other workers’ rights abuses are all widespread in India … A UK-India trade deal could encourage companies to outsource more jobs from the UK to India, leading a race to the bottom.”
She continued:
“The UK government should be using its leverage on the global stage to promote decent work”
and decent working conditions.
It is conceivable that climate change, India’s relationship with Russia and these alleged human rights abuses could form a significant part of the negotiations but, despite persistent calls across the Committee here today and from many organisations feeding into the consultations, the Government have yet to produce an overarching trade policy, making it difficult to determine the importance attached to each of these issues in the negotiations. Consequently, can I first reinforce calls for the Government to produce an overarching trade policy? Secondly, I ask the Minister to clarify whether he believes that any of these three issues—India’s commitment to reducing greenhouse gases, its stance on Russia’s invasion of Ukraine and reports around human rights—will be given any priority in future negotiations.
Predictions that an FTA with India could lead to a 0.22% increase in GDP may not meet some of those post-Brexit expectations. A sector with particular potential to benefit is Scottish whisky. Despite the 150% tariff currently applied to imports, India is the second-largest export market for Scottish whisky. Despite this, Scottish whisky constitutes only a 2% share of the Indian whisky market. The Scotch Whisky Association has warned that, as we have heard, many non-tariff barriers to trade, at both national and state level, need to be resolved so that business can flourish.
As yet, the risks to British farmers of a UK-India free trade agreement have not received the media coverage of the equivalent Australia and New Zealand agreements. The lack of regulation and the enigmatic nature of India’s agriculture mean these threats are less transparent, but they are just as real. Without the tightening of Indian law and regulation, British farmers could likely face unfair competition brought about by significantly lower standards and state subsidies. For example, we have heard that carrots grown in India are allowed to contain 500 times the amount of the fungicide captan, which is a known human carcinogen, than is allowed in the UK. Clearly, this raises future questions on the erosion of standards and consumer protections.
Another concern is state subsidies. In December 2021, the WTO ruled that India violated international trade rules concerning unfair subsidies provided to sugar exporters. This was highlighted by the NFU president, Minette Batters, who has reiterated the need to promote fair and equitable trading in the event of a future deal. These comments came after her previous comments on the Australia deal, on which she said:
“In particular, it is disappointing that the UK government has capitulated to Australian demands to time-limit any safeguards for sensitive sectors.”
Current government estimates already concede that a trade deal would see a decline in domestic agricultural output of up to £10 million. Given this, can the Minister say what will be done to help British farmers and the communities they support and what safeguarding measures will be implemented if disputes over subsidies and standards arise?
I think we can all agree on the importance of and the challenges posed by these negotiations. As was dealt with perfectly by the noble Lords, Lord Purvis of Tweed and Lord Kerr, it should follow that engagement with Parliament, the devolved Administrations and other relevant bodies should be extensive. Unfortunately, this is not apparent. The devolved Administrations have raised concerns relating to the Government’s lack of consultation and reluctance to share information.
Government transparency on the content of the negotiations also remains an issue. The update produced following the fifth and latest round of the UK-India negotiations contained a meagre 114 words that were vague and generic. I went back to look at the first, second, third and fourth joint outcome statements—I do not know if other noble Lords have done so—and they are virtually the same. It has been virtually the same statement for the last four sets. The first joint outcome statement is the only one that has a little more detail about some of the areas that were discussed and negotiated. I would like to know why the content of the first one, which had a little more detail, was not continued in future statements. It is still not enough, but at least it would be a step.
Perhaps most alarming is the self-imposed deadline of 24 October that looms over these talks. As discussions began in January, only a little over nine months have been set aside to conclude an agreement. By comparison, the recently signed interim trade deal between India and Australia lasted for nine rounds of negotiation between 2011 and 2015, followed by a further six months of detailed negotiations through 2021 and 2022.
As set out by the International Agreements Committee, India has been a notoriously difficult negotiator and has a history of protectionism and paper-thin deals, not to mention relatively low tariffs for its exports compared to ours. This considered, such a short negotiating window alludes to significant concessions being made, the agreement being limited to an interim agreement or a combination of both. As pointed out by the IAC report, this will likely make a more comprehensive deal much more challenging to achieve in the long term. Anxieties over the disproportionate amount of time allocated to talks are shared by trade unions, the devolved Administrations, businesses and industry leaders who have urged the Government to
“hold out for a commercially meaningful and comprehensive deal, even if doing so means that the self-imposed deadline of Diwali is not met.”
As my noble friend Lady Hayter said in opening, we share the Government’s ambition for trade deals. Given the broad consensus acknowledging the significance of these negotiations, we urge the Government to take a pragmatic approach and not to have any short-term deadlines, ensuring that the UK’s long-term position is not jeopardised.
Viscount Younger of Leckie (Con)
My Lords, whether I am temporary, permanent or in no role at all, I am very pleased to respond to this debate this afternoon. I thank the noble Baroness, Lady Hayter, for tabling today’s Motion and congratulate her and the International Agreements Committee on their report on the free trade agreement we are negotiating with India. As ever, it is a comprehensive report and the Department for International Trade is thoroughly considering its recommendations.
We have heard many insightful and helpful speeches today from Peers with much experience in this sector, including trade itself. As the Committee will know, we are currently in live negotiations. I will endeavour to respond to as many points from noble Lords as I can, but there is a lot to cover. I reassure the noble Lord, Lord Purvis—I was going to raise this before he did—that I will ensure that our negotiators are made fully aware of all the points raised today, although I doubt that I will be able to cover everything. My noble friend Lord Caithness stated that this debate cannot possibly cover all the points of the deal in depth. He is right, but it is part of a multifaceted process; I argue that this debate is a big deal but not perhaps such a big deal in terms of the whole process, which I will speak about later.
I am the first to say that this negotiation is a considerable challenge. India’s economy is vastly different from those of countries with which we have previously agreed free trade agreements. I recognise that it has historically taken a protectionist stance towards trade and agreed so-called thin free trade agreements with several countries. I note the realism in this respect expressed by the noble Viscount, Lord Waverley. However, I am also realistic. Every negotiation is different, and our ties with India are already strong. In this case, from the very top down, both countries have made it clear that we want to reach a thick deal—a comprehensive free trade agreement. Negotiations are gathering momentum as we work towards our shared target to conclude the majority of talks by the end of October. I know there are a number of questions on this, and I will come back to the timings and deadlines later in my remarks.
I believe that the prize that awaits us is great. My noble friend Lord Frost reminds us that we start from the position of being outside the EU and negotiating under our own steam. In 2021, India was the world’s sixth-largest economy. By the middle of the century, it is on course to become the third largest, so a free trade agreement will take the UK to the heart of the economic powerhouse of tomorrow. My noble friend Lord Hannan gave us a brief history lesson on trade with India, emphasising the need to address the tariff barriers, and of course he is right.
Last year, UK businesses exported more than £8 billion-worth of goods and services to India. As its middle class grows towards a quarter of a billion people, demand for the best of British is surely set to soar. That is why, through our negotiations, anything that we can do to make trading with India easier could be game-changing for UK businesses. To reassure the noble Baroness, Lady Hayter, it is to benefit UK businesses, not just businesses or consumers in India—an important point.
Today, some of our most iconic exports, such as Scotch whisky and Midlands cars, face import duties of up to 150%, which was raised in the debate, and our businesses are held back by restrictive rules and regulations. We are therefore looking to remove or reduce a range of tariffs and cut through as much red tape as we possibly can. This will make UK exports more price competitive in the Indian market, potentially giving our businesses a first-mover advantage over their global competitors.
The noble Earl, Lord Sandwich, asked about our objectives, and my noble friend Lord Lansley asked what would constitute success in negotiating an FTA. Those are both fair points and, although I cannot wholly answer them precisely, I will start by saying that the Department for International Trade’s modelling suggests that, by 2035, a comprehensive FTA could boost UK GDP by more than £3 billion. Of course, the exact benefits will depend on the final deal we achieve, but we remain confident of securing a deal that compares favourably to anything India has previously agreed. In any case, the Department for International Trade will carry out an impact assessment to build on the scoping assessment that has already taken place.
Several noble Lords, including the noble Baroness, Lady Hayter, my noble friend Lord Lansley and the noble Lord, Lord McNicol, asked about priority areas. They will know that the Government do not publish detailed policy positions, as that would disadvantage the UK in the negotiations. However, I can reiterate that our extensive stakeholder work, in both our consultation to set our mandate as well as our continued engagement with business in talks, is important.
A free trade agreement will be immensely valuable to the UK and to India, but I emphasise that it is just the next chapter in our long-standing trading relationship. Just as my ancestors exported beer brewed in Alloa in Scotland to India in the 19th century, today, thousands of British businesses exchange goods, services and ideas with India. Last year, our trading relationship was worth over £24 billion and, separate from this FTA, the UK and India share a road map to double our trade by 2030.
However, our relationship with India is defined by more than just numbers. As Prime Minister Modi has so often reminded us, a living bridge connects our nations—the world’s largest and the world’s oldest democracy. More than one and a half million people of Indian origin live in the UK. They make a profound contribution to our society, culture and economy. This living bridge has been built by partnerships—my noble friend Lord Lansley emphasised that point. One of the vaccines that protected billions of people around the world from Covid-19 was developed through a partnership between Britain’s AstraZeneca and India’s Serum Institute. Jaguar Land Rover is Indian-owned but British-made and employs almost 30,000 people in the UK. There are so many more examples of this collaboration across our economies. It delivers jobs and prosperity and enriches our society, and through a free trade agreement we can make it cheaper, easier and quicker for goods and services to cross this living bridge and drive growth.
I will touch on services and mobility, which was raised, not least by the noble Lord, Lord Purvis. As the Committee rightly recognised, services are also vital to our trading relationship. Prior to the coronavirus crisis, between 2009 and 2019, UK services exports to India doubled. Through our negotiations, we are also looking to open doors in sectors where our businesses are currently hindered from operating in India, such as professional, business and financial services. Along with our efforts to liberalise trade in goods, this means that, by 2035, a comprehensive deal could increase UK exports of services by billions of pounds, generating higher wages, supporting thousands of jobs and growing the economy.
The committee’s report rightly outlines that improving mobility for businesspeople will be key to delivering these benefits, again points that were raised this afternoon. That is why I want to assure the Committee and the noble Earl, Lord Sandwich, who raised this, that we are exploring mobility provisions that benefit UK businesses and consumers, but will not agree anything which undermines the UK’s points-based immigration system or our ability to control immigration.
Moving on to investment, the committee also raised the importance for UK businesses of opening India’s markets to investment. As outlined in our published objectives, we want to make sure that investment is protected and that investors are treated fairly. The UK and India have a common interest in seeing our investment relationship grow and providing businesses with confidence.
Let me say a little more about this because it was raised by the noble Baronesses, Lady Bennett and Lady Hayter, and my noble friends Lord Lansley and Lord Caithness. The Committee will know that India terminated our existing bilateral agreement for investment in 2017, so we want to agree new investment commitments that will form the backbone of the UK-India relationship for years to come but, in line with our public objective, we aim to make it easier for UK firms to invest in India by providing them with legal certainty and the confidence to operate in Indian markets. We will seek to provide sufficient protections to UK investors and guarantee that they receive fair and non-discriminatory treatment, ensuring their access to adequate remedies if those obligations are breached. The inclusion of ISDS is considered where it is in the UK’s interest and where we agree with partners that it can play a useful role in supporting the bilateral investment relationship.
I shall now address points raised by several noble Lords about deadlines, timescales and progress. I have fully taken note of all the comments made. The UK and India are different economies and there is no one-size-fits-all approach to negotiating trade agreements. When negotiations launched in January, both sides came to the table with high ambition and strong political backing—perhaps no surprise there. As far back as April 2020, Prime Ministers Modi and Johnson wholeheartedly committed to negotiating a comprehensive free trade agreement. Our negotiating objectives were based on input from hundreds of stakeholders, and we are pushing firmly and consistently to achieve results that matter to UK businesses and consumers. But for any negotiation to succeed, the outcome needs to work for both parties and, through the five completed rounds of negotiations, we have worked with our Indian friends to make progress towards a realistic agreement that benefits us both, including on a number of new and innovative chapters.
The target set by Prime Ministers Modi and Johnson to conclude the majority of talks by the end of October is a clear demonstration of continued political will to reach an agreement. It has focused minds and driven progress. With his great experience in this area, my noble friend Lord Frost, backed by my noble friend Lord Hannan, made the important point that having deadlines is helpful and important in such a process. Both nations are working hard to keep up this pace and beginning to see a potential deal that will benefit our trade relationship but, as we have made clear since the start of talks—I say this to reassure the noble Baroness, Lady Hayter, and other noble Lords—the Government will not sacrifice quality for speed. We will sign only deals that are in the UK’s best interest, whether they are with India or any other partner, so if it takes longer, it takes longer.
The noble Lord, Lord Kerr of Kinlochard, raised concerns about communications and keeping shareholders informed, so I shall move on to the related point about scrutiny and engagement. The report highlights the importance of engagement throughout the process, and I wholeheartedly agree with that objective. From the outset, this Government have engaged with UK businesses and consumers on this deal. Talks commenced only following an extensive consultation with stakeholders, as mentioned earlier, which directly shaped our objectives. We continue to connect regularly with hundreds of businesses, business representative organisations and civil society groups through our strategic advisory and trade advisory groups.
As with all our trade policy, Parliament has significant opportunities to scrutinise our deal with India. The noble Baroness, Lady Hayter, is right that it is the content of the deal that counts. I wholeheartedly agree with her on that. Ministers engage with the International Agreements Committee and the International Trade Committee throughout the life of a free trade agreement. Indeed, our chief negotiator has offered private briefings prior to signature, whenever that might be, at the committee’s leisure, which I hope this committee and the International Trade Committee will take up.
After signature, an economic impact assessment and full treaty text will be publicly available. The Trade and Agriculture Commission will then produce a report on the agreement and the scrutiny process under CRaG, which the Committee will be familiar with, will be carried out prior to ratification. In addition, any primary or secondary legislation will need to progress through Parliament in the usual way. This will take place in parallel to India’s ratification process.
Let me add a little more on the question asked by my noble friend Lord Lansley. He made the point that the Indian Secretary of Commerce made some comments on the timings in the chapters closed. I reiterate our public commitment to our shared target to conclude the majority of talks by the end of October this year. We have made good progress but we still have to work through some challenging and important areas to achieve a comprehensive FTA that respects both sides. However, I remain clear that we will sign a deal only when it is in the UK’s best interests. Given all the points raised, I hope that I have been clear about this matter this afternoon.
Moving on to standards and so-called red lines, which were raised by a number of noble Lords—my noble friend Lady McIntosh in particular—I am aware of concerns that the UK’s world-leading standards could be diminished by any new trade deal. To be clear, as in any FTA, the Government are committed to upholding high environmental, product and labour standards. We will not agree to provisions that will undermine or reduce the safety standards of products imported into the UK, including pesticides. In fact, we have already provisionally closed a stand-alone chapter on sanitary and phytosanitary standards. This will ensure that traded food is safe to consume and that animal and plant products are free from pests and disease. The noble Baroness, Lady Bennett, raised this point.
To add a little more to what I have said, our provisionally agreed chapter on sanitary and phytosanitary standards builds on our long-standing relationship and ensures that both parties can continue to protect their biosecurity, including through enhanced structures and streamlined processes. This includes provisions on antimicrobial resistance. Nothing in the provisionally closed SPS chapter changes our high food standards or strict requirements on imports from India. I say again that the UK is committed to maintaining our current high standards and will not agree to provisions that undermine the safety standards of products imported into the UK.
In addition, the Government share the public’s respect for worker protections and gender-based rights. We have already provisionally agreed a stand-alone trade and gender equality chapter with India—this was raised by noble Lords; I will say a bit more about it later—as well as a chapter on trade and development co-operation. However, we recognise that not all challenges can be solved by trade deals alone, which is why we are working across government on engaging our Indian friends to make progress across these areas. As always, the UK will continue to ensure that public services, including the NHS, are protected in all trade agreements.
Moving on, I understand that there are continuing concerns—they are usually raised in these debates—about dispute mechanisms, notably raised by the noble Baroness, Lady Hayter. These mechanisms play an important part in increasing businesses’ and stakeholders’ confidence that our international partners will uphold their obligations in such areas in FTAs. What is more, they are important deterrents; if an effective mechanism for enforcing commitments under FTAs is in place, it is more likely that our international partners will uphold their commitments.
I will say a few words about corruption, which, again, was a theme raised by the noble Baroness, Lady Hayter, and my noble friend Lord Udny-Lister. I understand that there are important concerns on this subject regarding this particular deal. Throughout our negotiations with India, the UK has made a strong case for a comprehensive anti-corruption chapter. I am pleased to say that our efforts have been successful and we have provisionally agreed one. It will be India’s first stand-alone anti-corruption chapter in a bilateral FTA and the provisional agreement goes further than the precedent set in previous FTAs. This speaks to India’s interests and intent. Although the chapter will not change India’s domestic legislation, it affirms its international commitments.
More broadly, all British businesses operating in India are bound by the UK’s Bribery Act and no FTA will change this. This matter was raised by my noble friend Lord Balfe in his comments on facilitation payments, and we know what is meant by that. Both nations are keen to combat the trade-distorting impact of bribery and corruption, as well as to provide important reassurance to British businesses.
I think I have time to cover a number of other questions that were raised. A number of Peers raised the important matter of Ukraine, and I absolutely take note of their comments and reiterate that the UK is working with international partners, including India, to co-ordinate the international response to Russia’s unlawful—and outrageous, I would say—invasion of Ukraine. Prime Minister Johnson visited India in April, where he discussed this issue directly with Prime Minister Modi and released a joint statement unequivocally condemning civilian deaths and calling for a peaceful resolution to the conflict. I should note that, historically, trade deals have not been a way to secure broad diplomatic agreements. However, I add that, as always, any decisions to agree to a trade deal will be taken at the appropriate time when talks conclude.
Innovation was raised, not least by my noble friends Lord Lansley and Lord Udny- Lister. I will say a few words on that important point as part of this FTA negotiation. The provisional agreement on innovation goes beyond the precedent set in India’s previous FTA negotiations. The UK and India, as I said earlier, share a highly productive relationship, collaborating on research and development for innovation. This will play an essential role not only for economic growth but in tackling global challenges, levelling up, building back better from the pandemic and climate change, which I hope I will have time to cover as well.
The important matter of labour rights and trade and gender equality was raised by my noble friend Lord Udny-Lister, with a focus on women. Let me say a little about that important point. The UK and India have provisionally agreed a chapter on trade and gender equality, which is the first of its kind for India and will enhance opportunities for women to access the full benefits of trade between the UK and India. This reflects our shared commitment to advancing gender equality and women’s economic empowerment, recognising that women often face disproportionate barriers across the economy and in trade. There is more work to be done on this, but I reassure noble Lords that it is very much a priority as part of this negotiation.
On labour rights, raised by the noble and right reverend Lord, Lord Harries, the noble Lord, Lord McNicol, and my noble friend Lord Balfe, both parties reaffirm their respective commitment to international labour standards while providing assurances that they will not fail to enforce domestic labour protections in order to gain a trade advantage—an important point to make. Also, any agreement must protect our regulatory sovereignty; a non-regression clause would constrain this. The provisions we seek on labour protections provide assurances for workers and businesses without undermining our security.
The noble Earl, Lord Sandwich, spoke about the important matter of intellectual property in respect of medications, or perhaps medicines. It could be both; generic versus brand, if I can put it that way. Briefly, it is an important point about a huge sector, particularly the pharmaceutical sector, for us in the UK. Our approach considers industry, which relies on the period of exclusivity provided by patent protection, while ensuring that the system facilitates the entry of generic medicines on patent expiry. While we cannot speak to specifics in the negotiation room, as I alluded to earlier, the UK remains committed to the Doha declaration on the TRIPS agreement and public health.
On the important subject of climate change, particularly in relation to this agreement, I will make some brief comments. We have been consistently clear that we will uphold our high environmental protections in our FTA, and this applies to this particular deal. We are seeking a range of provisions that support the Government’s ambition on climate change. I think I will write a letter to give more on this, but in terms of the point on decarbonisation raised by the noble Lord, Lord McNicol—I am sure that the noble Baroness, Lady Bennett, will have raised it—it also includes facilitating trade in low-carbon goods and services and strengthening co-operation to achieve environment and climate change objectives, including decarbonisation.
The noble Lord, Lord McNicol, raised a very important point about the DAs. I will cover them in my letter, but I reassure him that, whatever he may have heard, the opposite is true. The relationship with the DAs is very good. We are in constant contact with them. I would like to speak to him, perhaps outside the Room, as to where he got his information from, but I think a letter is in order to reassure him.
I will conclude, as there are other things going on which I think we are aware of. I thank the noble Baroness, Lady Hayter. As always, the International Agreements Committee’s report has provided the Government with welcome insight. We really are listening and plan to respond in detail later this month. I reiterate my thanks to the committee.
We appreciate that the final stages of the negotiations will be challenging, but I say again that we are making progress. As India’s middle class continues to grow towards a quarter of a billion people, its spending power will increase and increase. A free trade agreement will put British businesses at the front of the queue to satisfy this demand for decades to come. This is the prize. We must grasp it and be sure that we do not lower standards at the same time.
Baroness Hayter of Kentish Town (Lab)
I thank all those who have spoken in the debate. I thank them for their tributes to the work done, needless to say, not by myself but by our staff and my fellow committee members, some of whom we have heard from today: the noble Earl, Lord Sandwich, and the noble Lords, Lord Kerr, Lord Lansley and Lord Udny-Lister. I thank the anorak, the noble Lord, Lord Purvis, who managed to find supplementary bits, particularly about trade diversion, which is really important.
I thank the Minister for his response. We will take up the issue of a policy with whoever will be the new Secretary of State, and I thank all the speakers who have supported that today. It is really important, particularly hearing from the noble Lord, Lord Frost, and others. There has been support for not just that wider policy but the role of Parliament in it.
I was slightly worried by the noble Lords, Lord Frost and Lord Hannan, being worried about opening doors to domestic lobbies. I thought democracy was all about hearing from consumers, business and the DAs, so I was slightly surprised, but I think the tone was very supportive of that.
The Committee will be pleased to know that I am not going to go through the issues that were covered. They were wide-ranging and all were serious, whether it was legal and professional services, GIs, human rights, as raised by the noble and right reverend Lord, Lord Harries, and the noble Lords, Lord Hussain and Lord Balfe, labour rights and gender, as raised by the noble Lord, Lord Udny-Lister, the noble Baroness, Lady Bennett, my noble friend Lord McNicol and others, or the environment—an interesting point raised by the noble Earl, Lord Caithness, and the noble Baroness, Lady McIntosh, was that there could be opportunities for helping India move on this, as well as the challenges that we must ensure we do something about.
There were a variety of views on ISDS, which is something we need to discuss with the Government. I think there is clarity, even from the noble Earl, Lord Caithness, who has issues with it, that some independent arbitration is necessary to give people confidence, but without it being potentially used by those who have a different agenda from what it was meant to be for. I hope the Government will come up with something that we can all support.
I shall say two things to close. First, on Ukraine, this seems absolutely pertinent to the view that we are all pointing to. I think it was the noble Lord, Lord Kerr—he always gets the best phrases—who said that you cannot red-line trade; it is part of our global world relations and at the moment Ukraine is central to that. The noble Lord, Lord Balfe, may not quite have agreed, but I think the rest of us felt that it was the exemplar, if you like, of how we must see trade as both a tool and a part of our wider relations.
Secondly, my noble friend Lord McNicol reminded us that, just as India celebrated 75 years of independence, it overtook the UK as the world’s fifth-largest economy. The noble Lord, Lord Udny-Lister, and the noble Earl, Lord Sandwich, said that it will move towards being the third-largest within 20 years. This is clearly a market that is not just of potential interest to us but important in its own right. It is a major economy, but it is not perfect, as noble Lords have said. The challenge is to make sure we have a deal that is good for business, good for consumers, good for workers and good for UK plc, but also good for India and the global economy. I hope we can work with the Government to move towards that.