Trade Negotiations

Debate between Baroness Gustafsson and Lord Purvis of Tweed

Tuesday 13th May 2025 Lords Chamber

[Lord Purvis of Tweed (LD)]

My Lords, I look forward to the Minister answering my question from yesterday, as referenced by the noble Lord.

I wish to refer exclusively to the India agreement. We have debated in this House on a number of occasions UK-India trade, and on those occasions I have rehearsed the long-standing position on these Benches that free trade is part of our party’s DNA as a political movement. We believe fundamentally that free trade benefits consumers and businesses alike, and, combined with the means by which it is fair trade and inclusive, that it can be beneficial for wider policy ambitions on climate, sustainability, social justice and the reduction of poverty. These are the parameters by which we will judge any agreement that this Government sign with other Governments, as they were for the previous Administration, and specifically on the agreement with India.

We start from the position that we wish this agreement and the Government well in ensuring that it is the basis upon which India trade can develop. This is a complex time in international trade, as it is buffeted by policies and chaotic uncertainty from the United States. The fact that India has now signed an agreement with the UK, and that on Monday the second round of negotiations on an FTA between India and the European Union began, shows those of us who believe in widening free trade around the world that we need to redouble our efforts to reinforce the global trading environment and the rules upon which it is based.

The India agreement has been launched with a high degree of boosterism, last seen under the Boris Johnson Administration, and of course we would be a world leader in trade if press release assertion was a commodity. The Government say that we have a series of anticipated benefits as a result of this agreement. No doubt the Minister will rehearse some of those in her reply. However, looking carefully at the Government’s technical papers and not the press release, we can see that the cash figures of potential GDP growth, which she may quote in a moment, are purely a mathematical extrapolation of potential global trade in 2040, which the Government have then converted into pounds sterling, taking a starting point of 2023. This does not take into account the Trump Administration’s disruption of global trade. Therefore, all the cash figures that are presented are purely illustrative.

The technical papers also helpfully suggest that the Government made a policy decision to round up to 0.1% for the growth figures. Rounding up to 0.1% highlights that there will probably be modest results. Furthermore, very deep in the Government’s papers is that, to get their very ambitious figures on UK trade growth, the Government have taken the starting point as the baseline of 2019, which does not take into consideration the pandemic, the Ukraine war and the Trump supply chain issues. So they start at a high point in order to get higher. We do not necessarily oppose the agreement in principle, but we look at it from perhaps a more realistic and sober perspective. The issue then becomes how we will support our businesses to take advantage of the new market access arrangements.

According to the United Nations data figures, India has seen its exports rise over the last 10 years by 13.2%. This is an export market which the UK consumer wishes to benefit from. UK exports over the same time have expanded by only 5.1%. This is marginal growth over a decade, so it is right that we want to be part of a growing market. However, the European Union export growth has expanded by over 9.5% over the same period, nearly double the UK rate. We now have barriers erected, additional costs and more bureaucracy with the European Union, and we are trying to reduce them for India. So the fundamental issue is not that we have a tariff agreement but how British businesses will see the Indian market as barrier-free, open and accessible across all states, and reliable under the rule of law, with less corruption, more transparency—so that we trade more—and businesses supported more to access the market, which this agreement theoretically facilitates. What are the practical steps of actively supporting businesses that will take advantage of this agreement?

Because there is little reference so far in what the Government have said, can the Minister confirm that the agreement will include a human rights chapter, with clearly articulated mechanisms to address human rights supply chain concerns that have been raised in this House on a number of occasions, including by myself—for example, on broadcasting and civil liberties. If there is to be market access on digital, media and broadcasting, are we ensuring that it is reciprocated and that the restrictions that have been put in place for media have been lifted? Can the Minister confirm that there will be a climate chapter in the agreement that demonstrates that this agreement reduces emissions rather than contributes? On Monday, India and the EU announced their intent for an agreement by the end of the fourth quarter this year. Whether this happens is out of the Government’s hands—I completely understand that—but any comparative advantage that we are likely to have as a result of this agreement is likely to be impacted if there is an agreement between India and the European Union. On rules of origin and other areas of standards, how will we triangulate between India and EU trade?

Finally, I will ask the Minister about potential trade diversion and preference erosion as a result of this agreement. The House is well aware that I look for all the juicy details of these agreements in annexes, and typically on every page after page 200. In the previous Government’s scoping document, annex 9 of the technical paper showed that, with all the likely potential trade benefits for the UK of over £5 billion, which is very similar to this Government’s estimate, it is likely that there will be trade preference and trade erosion of over £3.25 billion.

What does that mean? It means that we must discount all of the benefits from the India agreement with the diversion of trade and the preference erosion from other countries—primarily Bangladesh, Pakistan, Kenya, Senegal, Ghana, Indonesia, the Philippines and Jamaica. For Bangladesh alone, the previous Government estimated that the trade erosion would be £1.5 billion less trade with the UK. So I hope the Government will have an impact assessment clearly articulating the likely trade erosion and trade preference. Will there be primary legislation as a result of this, what will be the extent of it and when are we likely to see it?

[The Minister of State, Department for Business and Trade and HM Treasury (Baroness Gustafsson) (Lab)]

My Lords, I thank the noble Lords for their questions and responses to the Minister of Trade’s policy Statement. It is lovely to see the full support for trade that we all share. I am happy to answer the questions, but, before I do, I will take a step back and quickly consider the agreement that we are due to discuss in context.

Fundamentally, as the noble Lord, Lord Purvis, said, the UK is a trading nation. The reality is deeply rooted in our DNA and that remains true to this day. Stronger trade ties with our partners around the world and championing free, fair and open trade delivers back here at home, generating growth, boosting wages and supporting jobs in every corner of the UK. It is this attitude and openness to trade that has helped cement the UK’s global reputation as being open for business and a home to iconic brands that are sought after all over the world. That is why we have always been clear-eyed in pursuing a deal with India, one of the fastest-growing economies in the world. Despite the strong ties connecting our two nations, not least through our people-to-people connections, there has always been room to strengthen our economic connections.

The deal we have does just that. This is a modern and comprehensive agreement that will increase UK GDP by £4.8 billion in the long run. Our bilateral trade, which is already £43 billion, will increase by £25.5 billion, £15.7 billion of which is expected to be UK exports. India has agreed that, from the first day this deal enters into force, it will cut tariffs worth £400 million on UK goods, a number that will jump to £900 million after 10 years. We have unlocked unprecedented access to India’s procurement market, giving UK companies access to 40,000 tenders worth £38 billion. New commitments of customs and digital trade will make it quicker, cheaper and easier to trade with India than ever before.

I hear the challenge about how those spreadsheets work and the models that sit behind them, and whether we are being optimistic. These are very realistic and measured, but ultimately an approximation of the benefit that this opportunity will bring us. It is also not a limit. We do still have the opportunity to benefit above and beyond the numbers that we have stated. I assure your Lordships that this is based on the modelling of worldwide standards but, at the signing of that trade deal, a full impact assessment will also be published to give noble Lords a little bit more small print to crawl through as well, which I know they will enjoy.

We have locked in access for our service companies, promoted stronger ties in a variety of areas—from innovation to gender to anti-corruption—and, most crucially, we have provided businesses with a certainty in a time when it is dearly lacking. I welcome the support that this deal has already had from across the House and from those who have recognised this for what it is, a landmark agreement with one of the most exciting and dynamic economies in the world.

I have also been warmed by the support from the businesses that will be using this deal, including the British Chambers of Commerce, the Institute of Directors, the Confederation of British Industry, the Scotch Whisky Association, the National Farmers’ Union, the Food & Drink Federation, techUK, Small Business Britain, the Premier League, Standard Chartered, Smith & Nephew, Coltraco and more.

I want to address the double contributions convention, which we have agreed to negotiate and implement in parallel with this free trade agreement. There has been much speculation, and indeed misinformation, regarding this element of the agreement. To set the record straight, this is a reciprocal agreement which is designed to prevent the double payment of social security contributions for a specific group of workers known as “detached workers”, who are sent by their employers on a temporary basis and whose long-term jobs are based in their original country. These agreements are for the benefit of both countries. The UK has agreed numerous DCCs over recent years, including with Iceland, Norway and Liechtenstein in 2023, Switzerland in 2021, the EU in 2020 and Chile in 2012.

There has been speculation this will make it cheaper for UK employers to hire temporary Indian workers than it is to hire British workers. This is not true. This applies only to Indian workers who are sent by their employers based in India to work temporarily in the UK for up to three years. There have also been claims that this agreement undercuts UK workers. In fact, the double contributions convention supports UK workers, particularly those in our world-class service sector. As a whole, this agreement will boost wages in the UK by £2.2 billion, putting money into the pockets of working people right across the country.

I am well aware that many in this House will rightly be keen to understand the intricacies of this agreement and have a keen eye for detail. We have already published the summary document, which includes a brief overview of every chapter within the agreement. My officials are working at pace to prepare the legal treaty, which will be available once the agreement is ready to be signed. As with any free trade agreement, parliamentarians will have ample opportunity to scrutinise the deal, which is subject to the usual ratification procedures under the Constitutional Reform and Governance Act 2010. The double contributions convention will also be scrutinised by Parliament via the standard processes outlined in the CRaG Act. Any legislative changes required will be scrutinised and passed by Parliament in the usual ways before ratification.

I hear the challenge about the human rights record. The UK is a leading advocate for human rights around the world, and we remain committed to the promotion of universal human rights. Where we have concerns, they are raised directly with the Government of India, including at ministerial level. This has been undertaken separately to these trade negotiations, although they are part of building open and trusting relationships with important partners. The avenue to communal trade supports our ability to influence in these matters far more greatly.

There was also a question about whether we are eroding trade and how that will be received. We set out further information on the trade diversion impacts of this agreement in our impact assessment. This free trade agreement will include India’s first ever trade and development chapter in an FTA. Both the UK and India will monitor the effects of the agreement on developing countries. To facilitate effective dialogue in this space, we will aim to share our research and understanding, and this will in turn help inform future development programmes and policies.

To conclude, as my colleague the Trade Minister rightfully outlined in the other place, this deal affords UK businesses certainty and stability during a time of global uncertainty and instability. It is a deal that will give British businesses access to one of our biggest markets abroad while raising wages and driving growth here at home.

UK-US Trade

Debate between Baroness Gustafsson and Lord Purvis of Tweed

Monday 12th May 2025 Lords Chamber

[Baroness Gustafsson (Lab)]

I agree with my noble friend that our trading relationship with the EU is incredibly important. I do not believe in the premise of false dichotomies or that we are picking between one and the other. This is a continuing relationship and dialogue. I note that there is a very important EU summit coming up in May, which should really endorse and build on our relationship with the EU.

[Lord Purvis of Tweed (LD)]

My Lords, if this is a first step, was the Minister not as confused as I was yesterday to hear our ambassador to the US say on CBS’s “Face the Nation” that this was a finalised agreement? There is no impact assessment that we have been presented with in Parliament, so when is that impact assessment going to be laid before Parliament? He also said that film and technology were included, but there is no reference to that within the text of the announcement last week of the framework to start negotiations. Is it the Government’s intent that this will not be laid as a treaty that would then be ratified by Parliament? If it is not, and it is not a preferential trade agreement, does the Minister agree that we will have to apply all the terms in this framework to all other countries under WTO rules?

[Baroness Gustafsson (Lab)]

To clarify, a lot of key sectors are covered in this framework, and this framework is a final decision on how those key sectors will be treated when it comes to trading between the UK and the US. Those sectors are things such as automotive, steel and pharmaceuticals, but also beef and ethanol, which we have heard so much about. But they are not all the sectors where trade is a part of the UK-US relationship; it could be areas such as technology and how we think about the relationship with that. So yes, this is a final agreement for the sectors that have been covered, but it does not necessarily cover all the sectors. There is still work to be done to understand what those future trading relationships look like with respect to those other sectors.

With regard to how this will be treated within Parliament and whether it will be ratified as a treaty, forgive me—I could not comment on that specifically. I would very quickly run shallow of my parliamentary journey of knowledge, which is still at its earliest stages, but I will be sure to write to the noble Lord on the specifics.

UK-US Trade and Tariffs

Debate between Baroness Gustafsson and Lord Purvis of Tweed

Thursday 3rd April 2025 Lords Chamber

[Lord Purvis of Tweed (LD)]

My Lords, this is my first opportunity to ask the Minister questions. I give her my belated welcome to the portfolio. She is in a new world when it comes to the unjustified and aggressive trade war that the United States has been launching. My party was forged out of a campaign for free trade. We broke with others when they introduced protectionism. Our principled position on Brexit was based on a rejection of new barriers, new costs and more bureaucracy for businesses and uncertainty for consumers. These same principles apply to our revulsion at the unwarranted and unjustified applications of the new tariffs.

They are, of course, on top of the pre-announced automotive, steel and aluminium tariffs. We should also recall the existing tariffs on UK exports to the United States. It means that, to take one example that is very close to my heart as I represented a textile-producing constituency in Scotland, the cashmere industry, the highest-quality sustainable product in the world now has a 35% tax tariff on exporting to the United States. What support are the Government intending to provide to some of our key exporting sectors now, rather than waiting until after a consultation? These Benches believe that we should have been consulting in advance of the announcement, as Canada did, not after it, so that we had a prepared proposal for a clear statement of intent, rather than a hope for the best in any agreement.

Part of the Statement today that surprised and disappointed me was the news that only if we have not secured an economic agreement with the US will we propose corrective measures. This means that the timetable of UK actions is in the hands of the Trump Administration, not in the hands of our Government, and that surely is not acceptable. It is our duty to represent the interests of British industry and consumers, not the United States.

Can I also ask for clear language? It now seems that we are simply seeking an economic agreement rather than a free trade agreement. What are we seeking from the Trump Administration? There is a world of difference between a comprehensive free trade agreement and cobbling together a number of bilateral agreements on services and goods simply to make a show of reaching some form of agreement. If the Minister could be clear in the language, I would be grateful.

Furthermore, I sincerely believe that we have showed too much of our market offer to the United States, so it can see clearly the areas where we are willing to cede decision-making: closing tax avoidance for UK companies with profits over €20 billion that are not paying their fair share of tax within the United Kingdom; aligning our AI and data regulations to what the Trump Administration want rather than what this Parliament has legislated for; and reducing agricultural and food standards. Every other country with which we may seek an FTA now knows the areas where this Government are open to ceding ground. That, surely, is regrettable.

Two responses today require more scrutiny: one from the Government and one from the Conservatives. The Statement says that the wholly unjustified tariff rate “vindicates” the Government’s “pragmatic approach”, but we know that, as far as the Trump Administration are concerned, the United Kingdom is in the same category as El Salvador, Guatemala and Uruguay—none of which even flourished a cringeworthy letter from a King in the Oval Office. The worst element of the Trump Administration applying the 10% tariffs is that we are now in the same category as Russia, for goodness’ sake. How is it a vindication of our pragmatic approach if Trump sees trading with the United Kingdom as the same as trading with Russia?

The second argument we have heard today, including a bit that we got from the noble Lord, is that we may have fared better because we are out of the EU rather than in it—but that is only if we are starting from a higher base than what the reality is, with the biggest barriers that we have erected for our near trading neighbours. But the critical point is that the United Kingdom, for goods in particular but for services too, is one of the most interconnected trading economies in the world. Nearly 70% of our exports to the EU are intermediate input to the production of other goods and services, and the majority of UK goods manufactured in the UK are intermediate. Therefore, the majority of the goods that we make source parts and components from the EU, so we are impacted by the 20%. Will the Government’s assessment of the impact be not just a sectoral analysis but a full trade analysis, including all the impacts of what will be applied to our biggest trading market?

Even the former Conservative Trade Minister Greg Hands said today that, as a result of Brexit, we now have a more complex means by which we are steering a path in the US-EU trade war. It is even harder, because the more concessions we give to the United States, the further we move away from the TCA. What is the Government’s assessment of trying to triangulate between the EU and the US? We on these Benches believe that the response has to be deeper co-ordination with the European Union.

Before I close, an element that has not been mentioned today, which is particularly close to my heart, having co-chaired the All-Party Parliamentary Group on Trade out of Poverty for so long, is that this Parliament has debated long and hard about our relationship with developing economies, many of which are being hit very hard by the Trump Administration, and the response of this Government is to cut official development assistance and technical support for trade facilitation for developing economies. Our response is to be silent to the Trump Administration but to cut trade facilitation for emerging economies. This cannot be right for the United Kingdom as a free-trading nation.

As I close, my appeal to the Minister is that we need urgent full co-ordination with Canada and the European Union, not necessarily just on the potential corrective mechanisms that may well be necessary and we believe will be justified, but to ensure that there are fully co-ordinated anti-coercion measures. These are not trade measures being introduced by the Trump Administration; they are economic coercion measures, and it was a tragedy that the previous Government dropped the anti-coercion instrument that we could have continued as a result of Brexit. We need urgent clarification on that.

Finally, we need a European Union-UK-Canada co-ordinated response—I will call it Eureka. In response to the Trump Administration, we need a Eureka moment, not just a wait-and-see approach.

[Baroness Gustafsson (Lab)]

I thank the noble Lords, Lord Hunt and Lord Purvis, for their contributions. I feel that what I hear is a genuine, shared passion for supporting our businesses here in the UK, but also a sadness at barriers to the open trade that so many of us have valued for so long.

There is a shared desire to avoid escalating retaliatory tariffs. The UK and the US have shared a fair and balanced relationship, one that has benefited both sides for many decades. We will both benefit as we strengthen this relationship further. Of course, we are disappointed by the US announcement last night of the 10% reciprocal tariff on UK exports and by the 25% global tariff on cars that has been imposed today. This follows tariffs of 25% on US imports of steel, aluminium and derivative products that were announced on 12 March.

I understand the desire for clarity and urgency, and for a simple answer that can allay the many fears that are rightly troubling businesses at the moment, but this is a complicated environment and a complicated problem. Unfortunately, complicated problems rarely have simple answers. The reality is that it is going to be a co-ordinated effort, where we work out, together with our businesses and industries, a solution that is thoughtful, pragmatic and calm, informed by the data and not by the emotions that many of us may be feeling.

The Secretary of State has been clear that we will always act in the best interests of UK businesses and consumers. As your Lordships know, throughout the last few weeks the Government have been fully focused on discussions on an economic deal with the US. We remain committed to doing this deal, which we hope will mitigate some of the impact that has been announced. I hope that, as the noble Lord, Lord Hunt, referred to, the House is not reading that there is cause for celebration in any of the news that we have announced. I hear the temptation to turn to the other names on the list of tariffs and draw comparisons, but that temptation is to turn inwards and point fingers. I urge all of us to avoid that temptation and instead think about how we work together with that wider community to support all our domestic economies.

We reserve the right to take action if a deal is ultimately not secured. That is a key part of why we are today launching a request for input on the implications for British businesses of possible retaliatory action. This is a formal step, necessary for us to keep all options on the table, but also to form our understanding of how those key areas will be influenced. This exercise will also give businesses the chance to have their say and influence the design of any possible UK response. After all, we are acting on behalf of those UK businesses. I hear the call by the noble Lord, Lord Hunt, that the ball is now in our court. The Government’s preference is to resolve these tariffs through a mutually beneficial deal. They have also been clear that they will always stand up for that national interest. This is why that request for input is so important: to inform the Government’s preparation of their options.

We know that it is a concerning time for both businesses and consumers, but it is important to note that this Government have made plenty of decisions which will have a positive impact on the economy in the weeks and months ahead. We are putting more pounds in people’s pockets by freezing fuel duty; boosting the minimum wage by up to £1,400 a year; and protecting working people, with no rise in their national insurance, income tax or VAT. Living standards are growing at their fastest rate in two years and the Spring Statement showed that each person will be £500 better off by the end of the Parliament. The OBR has said that the economy will grow every year from 2026 and that our planning reforms will lead to a 0.2% increase of GDP, worth £6.8 billion.

The UK remains an open, outward-looking nation and one of the world’s leading advocates for free trade. We have also joined the CPTPP trading bloc, and we continue to pursue export-boosting trade deals with the Gulf Co-operation Council and industrial giants such as India. Our number one priority is growing the UK economy. A positive trading relationship with all our trading partners, including the US, the EU and all these others, will help us deliver that. I hear the call for a full trade analysis and understanding of when future export opportunities will be available to us.

As we think about the impact on the automotive industry, we think about our key industries in the UK. We have used our industrial strategy to strengthen the UK’s automotive competitiveness. The Budget committed over £2 billion of capital and R&D funding to 2030 for zero-emission vehicle manufacturing and its supply chains. This long-term commitment is a vote of confidence in our automotive industry, supporting investment in its transformation as we accelerate to zero-emission vehicles. There was also over £300 million announced in the Budget to drive uptake of electric vehicles.

Our industrial strategy will continue to be unreservedly pro-business, engaging on complex issues that are barriers to investment, such as energy prices and access to finance and skills—all through the lens of promoting investment. Getting the transition right and supporting the growth of the electric vehicle market in the UK could unlock a multibillion-pound industry and deliver high-paid jobs for decades to come.

How will this impact our neighbours? I am thinking about the Windsor Framework in particular, and the opportunities for businesses to protect themselves through the Windsor Framework duty reimbursement scheme that has been referred to. This scheme is there to support businesses, ensuring that they can use it to mitigate any costs that may come from possible tariffs. Businesses should be able to contact HMRC for any information about the scheme. It will of course be a formative part of the advice to businesses we are giving through the great.gov website.

I understand that working closely with businesses to make sure they have all the information they need is really important. The request for input has been opened and that information is already becoming available. It came online today, and we have already seen a significant number of requests and input coming through that process.

This Government were elected to bring security back to working people’s lives. Businesses and workers alike are looking to this Government to act in the national interest and navigate Britain through this period. We will continue to progress on securing a deal that secures our industries while keeping all our options on the table.