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

Lord Edmiston Excerpts

Monday 16th January 2012 Grand Committee

[Lord Edmiston]

My Lords, if I may, I will make a few comments and I declare an interest as an importer of Far Eastern cars for the past 35 years, some of which were Korean—in fact, we imported Hyundai. We indeed were a beneficiary of “free trade” in those days. It was not free trade, but we had import duty free status for a period of years while industry in the Far East was growing. My perception is that this agreement may be more beneficial to Korea than to us. I am concerned as to whether we should be encouraging people to set up assembly facilities here. For instance, Toyota and Honda have set up facilities here. Does it prejudice their situation when Korean cars will come in duty-free? What impact does that have? I am concerned about that aspect of it and if the Minister can make some comments about that, it would be useful.

The second issue I have some concern about is that having been involved in a legal dispute in Korea, their legal system has—if I may put it this way—a few question marks over it. If British firms dealing in Korea were to be encouraged to use an international court, that might be very helpful. Those are my comments.

[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?

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[Baroness Wilcox]

That is a very good question, to which I shall give an answer. On the £500 million each year, that will come into force over time. I hope that that is of some help to the noble Lord.

[Lord Edmiston]

Is the Minister aware of certain practices that used to exist in South Korea? It may be that this does not happen any more, but in previous years anyone who drove a non-Korean-manufactured car could look forward to a visit from the tax inspector and a thorough investigation. There were various means by which South Korea managed to keep a very high percentage of local cars in its market. Is the Minister aware of other practices of that nature?

[Baroness Wilcox]

We are aware of difficulties that have happened in the past. When the noble Lord reads about the matter in Hansard, I hope that he will realise that we have put in place various restraints and careful practices with which we will ensure that the Koreans have to comply if we are to trade with them. We hope that they will want to trade with us even more than we will want to trade with them. I realise that the motor industry is a very sensitive issue, but we have a range of actions that we may take if we see that there is danger of unfair trade taking place.

The EU-South Korea free trade agreement is ground-breaking in its approach. We have reached an agreement that responds adequately to EU concerns on such things as diesel emissions and post-market surveillance of safety standards. We have tried where we can to write as many things as possible on to the face of the agreement to ensure that, if we feel that there is unfair practice going on, industry in this country can quickly tell us and we can quickly return to see whether we can quickly sort out the problems.