Comprehensive Economic Partnership (EUC Report)

Debate between Lord Lilley and Baroness Garden of Frognal

Thursday 26th November 2020 Grand Committee

[Lord Lilley (Con)]

My Lords, I welcome this trade agreement, not only because it secures the benefits of the existing EU-Japan free trade agreement. It goes beyond that, especially in digital and data, and, potentially, on geographic indicators and rules of origin, and it helps to pave the way for our future membership of the TTP, or the CTP—you know what I mean.

Before elaborating on those aspects, I repeat my habitual warning, like a cracked record, about the excessive importance attached to trade deals in public debate in this country and, indeed, in your Lordships’ House. Trade agreements like this are useful but far less important than most people imagine. What really drives trade is producing goods and services that people want to buy then getting out and selling them, preferably aided by a competitive exchange rate. Sadly, a significantly lower proportion of British small and medium-sized enterprises engage in international trade than is the case for similarly sized companies in our major competitors. That weakness in our business culture has been exacerbated by an exchange rate sustained at an uncompetitive level by the sale of assets, rather than by selling as much goods and services as we import.

This agreement with Japan is sometimes belittled, not just relative to the existing EU-Japan agreement but because it is not nearly as deep as the single market arrangements that we are leaving at the end of December. It is the accepted wisdom that the European single market represents the most comprehensive and deepest trade agreement that exists, whereas the WTO is treated as of little fundamental importance. I happened to be the Secretary of State for Trade and Industry who had to implement the single market legislation and helped to negotiate the Uruguay round which set up the WTO. Despite the optimistic speeches that I made at the time about how much the single market would boost our exports, we find that, over the ensuing quarter of a century, our goods exports to the 14 countries which founded the single market have little more than stagnated: they have grown by some 18%, barely 0.5% a year. By contrast, our goods exports to the 14 largest countries with which we trade just on WTO terms have grown by 80%—six times as fast—over the same period. As for the impact that either may have had on our GDP, that is almost impossible to assess, even in retrospect; it is certainly imperceptible, looking at the trend in our trade in recent decades.

I am sceptical in the extreme about the figures shown in the impact assessment of this trade agreement with Japan, and even more so about attempts to break this speculative impact down by region. As someone said, such figures serve only to make astrology look respectable. Government statisticians would be better employed trying to calculate cost-benefit assessments of the effect of the Covid restrictions on lives and livelihoods than those of the CEPA.

On the CEPA itself, the most striking element is the agreement on digital trade and data, which, according to the brief, accounts for as much 30% of our trade with Japan—a figure I find it hard to get my head around. If it is correct, the positive measures in this agreement are likely to be important to trade with Japan, and even more valuable as a template for future trade agreements across the world.

[The Deputy Chairman of Committees (Baroness Garden of Frognal)]

We now welcome the maiden speech of the noble Lord, Lord Darroch of Kew.