Negotiating Objectives for a Free Trade Agreement with India

Lord Balfe Excerpts

Tuesday 6th September 2022 Grand Committee

[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.