Lord Leigh of Hurley
Main Page: Lord Leigh of Hurley (Conservative - Life peer)
Lord Leigh of Hurley
That this House takes note of the opportunities presented by the United Kingdom’s vote to leave the European Union for the promotion of global free trade, and the impact on domestic and international trade.
Lord Leigh of Hurley (Con)
My Lords, it is a great honour to lead off this take-note debate. I start by clearly stating my position. The debate title shows that opportunities abound if we can become an,
“outward looking champion of global free trade”.
We can do that only if we leave the EU customs union, and it is to that that I want to address my remarks.
In 2008, after seven grueling years of negotiation, the Doha round of trade talks collapsed as India, China and the US failed to agree on farm import rules. TTIP continues to founder as unions promulgate the barely even half-truth that it will lead to mass privatisation of the National Health Service. The raging US presidential debate piles myth on top of myth about the supposed damage caused by free trade, with startling implications for not only TTIP, but other trade agreements as well. Despite the UK having a trade commissioner present in the case of Doha during these events, the UK’s voice in trade was subsumed into that of the EU. Now, no longer. Now is the time to articulate our own vision of global free trade. I pay tribute to my noble friend Lord Maude, who began to do this with some alacrity, even before the referendum.
Leaving the European Union, which, for transparency, in case noble Lords had not guessed, I disclose that I voted to do, has undoubted risks. We have seen this with the slide in sterling and its possible implications for inflation. We may yet see it in business confidence and inward investment as the Article 50 negotiations proceed, with every summit, press conference and crossed word capable of moving markets. But, for all these threats, one such opportunity stands out. It is shown in the title of the debate—namely, for,
“this country to be an outward looking champion of global free trade”.
This is something for which the Conservatives have historical form. The Corn Laws were a great and terrible example of how protecting local producers at the expense of cheaper imports impoverished UK consumers. It was contentious enough to split the Conservative Party, but it seems to me, when we speak against global free trade today, that we are essentially making the same mistake, favouring narrow producer interest over the common good. Indeed, in 1904 we had not gone far enough for one Winston Churchill, leading him to join the Liberal Party in response to our ongoing fixation with tariffs. I look forward to hearing whether the modern incarnation of that party is similarly dedicated to free trade.
In the context of leaving the EU, how do we make this into an opportunity for the UK? There are many permutations for our future relationship with the EU, but I want to focus on what opportunities we might avail ourselves of by leaving the EU customs union. If we are to become a global trading nation once again, we must do so. While some UK businesses accustomed to the existing arrangements may cry foul, it is surely a price worth paying to be outside it. This is principally because, if we are, we can strike free trade deals of our own, and, indeed, grandfather into some free trade agreements.
We will not be bound by the protectionist whims of the EU. It is worth remembering that while tariffs have been eliminated between member states, they are most certainly imposed on countries outside the EU. It is worth bearing in mind that these tariffs were devised to protect certain EU industries in which the UK may not have any or significant interest. Once outside the customs union, we can reduce tariffs on non-EU countries, meaning low prices for British consumers.
Here I commend the excellent work of the Policy Exchange, in particular Dr Geoff Raby and his work on free trade. He tells us, for example, that the EU currently imposes tariffs of 165% on dairy products, 192% on livestock and 197% on horticulture. In addition, he cites the EU’s 97 anti-dumping measures, which were not designed with protecting British interests in mind. Once out of the EU, we will have a huge competitive advantage over EU countries. Yes, we will be bound by existing regulation, but we will not have to adopt future regulation. Achieving a mutually beneficial UK-EU trade treaty is viewed as a challenge by some, despite the fact that there is a deficit in both goods and services with the EU. In reality, all we have to do is merely to strive to maintain the status quo—an unusual objective, which so many EU businesses, despite pressure from EU leaders, are keen to see.
Notably, at worst, if no specific trading relationship were put in place, the UK would continue to trade with the EU using WTO most-favoured nation rates. For most manufactured goods, the EU’s most-favoured nation tariff rates are low, so UK exporters could certainly continue to trade profitably. To reiterate, this is the worst-case scenario, in that no alternative arrangement had been put in place. As Dr Raby said recently, “a EU-UK FTA”—free trade agreement—
“would be the most unusual trade negotiation in modern history. It would involve two highly integrated partners negotiating to introduce new trade barriers (such as tariffs, quotas, or non-tariff measures) which would make both parties worse off. This is the opposite of what trade negotiators are trained to do. The art of any trade negotiation is to produce win-win outcomes, not lose-lose”.
We should not underestimate how integrated the UK and EU markets are. Therefore, the barriers to signing a free trade agreement are much lower than with third parties. To those who recently referred in this House to the collapse in talks between the EU and Canada, this gives insufficient credence to the amount of existing alignment between the EU and the UK in both standards and regulations. This is a crucial point. I know others will go on to explain difficulties in doing business with the EU, but we have an enormous degree of alignment.
One obstacle that is often mentioned is the labour chapter, but the EU has many FT agreements where there are no labour chapters. I am thinking, in particular, of Turkey. Once outside the EU, we will automatically become a member of the WTO. Those saying we will have to re-join by negotiating with 163 countries are not right. As the WTO Director-General Roberto Azevedo has said, Britain would “remain” a member. He was not quite as helpful as in some of his comments in June, but he has now confirmed that we would remain a member and would then need to re-establish the defined terms in the WTO for trade in our goods and services. We could put ourselves on the fast track to do this by accepting higher commitments. This would involve opening up our economy significantly, but that is where the future should lie for our trading policy anyway. This would require real leadership from the Government.
This free trading approach is already gaining traction. At the recent G20 meeting in China, India, Mexico, South Korea and Singapore, all hugely dynamic economies, expressed an interest in freer trade with Britain. My recent trip to Israel with the APPG as a guest of the Israeli Government confirmed that this high-tech, fast-growth economy, is keen to sign a deal with us as soon as possible.
Your Lordships may have noticed that during the summer, UK politics seem to go a little quiet, so in mid-July I found myself at the Republican Convention in Cleveland, Ohio, as a guest—as an observer, I hasten to add. It was clear there that many in the States, and certainly in the Republicans, are very keen on a trade treaty with the UK at the earliest opportunity—and why should they not be? Britain is already second, behind only the US, for foreign direct investment. We can now showcase our own dynamism on a global stage. UK businesses may fear that renegotiating customs duties, and rules of origin will be fiddly in the extreme, but we need to look at this strategically. Our goal should be turning a European opportunity into a global one.
I am concerned that some are going in a different direction. The leader of the Opposition has already tumbled down the slippery slope of protectionism, claiming that free trade has,
“been pursued at the expense of the world's most fragile economies”.—[Official Report, Commons; 7/9/16; col. 338.]
I suggest he take a trip to Mexico, a country he should know well, where he could see first hand the benefits that NAFTA has brought to businesses and the economy there. It is a truism we should repeat daily: capitalism and free trade have eliminated more poverty than any aid programme. Despite their free trade policy’s once being of sufficient vim to entice Churchill to cross the Floor, the Liberal Democrats, I believe, remain wedded to the straitjacket of the customs union, failing to see the opportunities outside the EU for British consumers and businesses.
It is true that some 40% of our £500 billion of exports in goods and services currently go to the EU, but in 1991, that was more than 60%. Only £48 billion goes to the Commonwealth, for example. This surely shows us what potential for growth we have. Take China. We have doubled exports there in the past five years, and Chinese investment into the UK is growing at 85%. Imagine what we could do outside the customs union. I am delighted that our new Prime Minister has already been on a trade trip to China and is taking a plane load of SME businessmen and businesswomen to India next month.
I hope this is the optimistic and outward-looking approach that the Government ultimately adopt, and I hope they will be joined by noble Lords from all sides of the House. I look forward to contributions from some extremely distinguished experts and, more important, practitioners in international trade, far more so than would ever be possible in the other place. I particularly look forward to the maiden speech of my noble friend Lord Gadhia.
I began today by lamenting the loss of a distinct British voice in the global debate on trade from our position within the EU. Our re-entry into this most vital of debates is exactly what is needed to dull the voices of protectionism and get global free trade talks back on track. Since as far back as the Suez crisis, so many have questioned what Britain’s role in the world is and what it should be. I think that we may have found it again.
Lord Leigh of Hurley
My Lords, I thank the Minister for her comments, and for allowing this debate to take place. As she said, over the past three hours we have had a variety of contributions from people with an extraordinary amount of knowledge. We also welcomed a maiden speech from the noble Lord, Lord Gadhia—who I would advise not to get used to the outpouring of affection and love, or expect it every time he speaks. None the less, it was well deserved.
It is difficult to draw any conclusions of unanimity, although I will try to keep to the description of me by the noble Lord, Lord Mendelsohn, as “enthusiastic”. The first theme to come through was that we are all keen to see more free trade, and we need to find ways to ensure that it happens. Secondly, we are all aware of the huge uncertainty, which we all counsel the Government can be damaging to business. However, many businesses quite relish uncertainty and, as the noble Lord, Lord Farmer, said, they are used to it.
One worrying phrase I heard was that “politics trumps economics”. I do not know whether that is necessarily true; I hope it is not. It was reassuring to hear that in the privacy of certain conversations some politicians recognise that free trade is vital to this country, so perhaps I am not entirely living in the land of wishful thinking.
The current situation is not perfect, despite the fact that many people said that we might be losing something wonderful. As my noble friend Lord Bamford pointed out, there are imperfections. The Motion before us in this take-note debate mentions “opportunities”. One can only hope that we end up with a trading arrangement that allows all citizens of this country to benefit—and, more importantly, allows people from other parts of the world who are currently prohibited, or inhibited, from trading with us on effective terms, to do so.