European Union (Definition of Treaties) (Republic of Korea Free Trade Agreement) Order 2012

Debate between Lord Dykes and Lord Young of Norwood Green

Monday 16th January 2012 Grand Committee

[Lord Dykes]

My Lords, I thank the Minister as well from this side of the Committee, and on behalf of the other part of the coalition, for making that brief statement on the Korea trade agreement. As she quite rightly said with a positive tone in her voice, which was justified, this is a really important agreement with a really important country. As we see from the documentation, the free trade agreement between the European Union and Korea is the most comprehensive free trade agreement ever negotiated by the EU. Enormous progress has been made on the learning curve, in the EU, in other countries and at the WTO. I believe I am right in saying that some of the UK members of the negotiating team on behalf of the EU, through the European Commission, were particularly complimentary about how progress was made in those detailed discussions with their Korean counterparts.

However, it is not all late in the day for this. It is still early days, as this agreement started provisionally only in July and is running until agreement is reached finally, once these orders have been ratified by the parliamentary process. It remains to be seen exactly what will happen. In the UK, there is a problem that we should all really work hard at, both in government and elsewhere, such as in industry—not to resolve it completely, which is probably impossible, but to mitigate it in the future. That problem is that the United Kingdom normally has a trade deficit with most other advanced territories in the world. There are some exceptions to that, which I will not go into in detail because otherwise I would speak for too long, but that is the reality. Of course, we make up for that overall position of net deficit in physical goods and exports by our invisibles and other matters in the City and elsewhere, which cover that position. Normally, we hope that those give us at least a reasonable current-account position even if not an overall surplus, which happens from time to time.

That is the reality. Even after the devaluation of the past five or six years, which has been in the 20 to 25 per cent range, we still find that is so. I believe that I am right in saying that the latest trade figures were, once again, the widest ever or they may have been the widest for quite a few years. I did not have time to look in the Library for those figures, but it is either one or the other. Either way, it is disturbing that after yet another devaluation post-war in the United Kingdom—some of them formal devaluations; others in the market place only—we are still not exporting enough in terms of physical goods and services. Korea will be sending more to us, and the amount that we will send to Korea will be less, except, of course, in services and in what legal and accounting firms and others can contribute to this trade agreement.

Will the Minister outline which groups in the UK did not support this free trade agreement? She said that most groups had supported it. Some £500 million of benefits per year to the UK is a modest figure in comparison with our objectives in the Far East. I hope that she is optimistic about a rate of growth. Finally, will she indicate to the Committee the Government’s understandable apprehensions about whether tensions now between the Republic of Korea and the Democratic People’s Republic of Korea will affect some of these aspects of growth and trade between the UK and the EU as exporters to Korea? What is the situation in Korea with regard to trade and business?

[Lord Young of Norwood Green]

My Lords, I, too, would like to thank the Minister for her statement. I am not opposing this statutory instrument, but I am, like a number of noble Lords, interested in the value of UK trade with Korea. The impact assessment shows a £0.2 billion deficit. Those are the figures under the heading:

“Value of UK trade with Korea”,

on page 10 of the document. In goods, there is nearly £1 billion excess on imports. In services, we have some advantage.

The noble Lord, Lord Dykes, was right to describe the boosting by £500 million a year as somewhat modest. While I do not want to pour cold water on the enthusiasm of the Minister in this area—I note what she said about BIS and Foreign Office Ministers hosting events, which is a good initiative—I would be interested in hearing from her whether BIS and UKTI will give any special assistance to business exporters and potential exporters of both goods and services.

The point that the noble Lord, Lord Edmiston, raised is that these are both—aggressive might not be the right word—enthusiastic and successful exporters. We should not underestimate that. Again, I do not want to sound as though I am opposing the concept of free trade: I am not. But we ought to be cognisant of the nature of competition and understand the importance of giving every assistance and encouragement to our own exporters both in goods and services.