Transatlantic Trade and Investment Partnership (EUC Report)

Lord Livingston of Parkhead Excerpts

Tuesday 17th June 2014 Lords Chamber

[The Minister of State, Department for Business, Innovation and Skills & Foreign and Commonwealth Office (Lord Livingston of Parkhead) (Con)]

My Lords, I am delighted to respond for the Government in this important debate. First, I would like to express my appreciation to my noble friend Lord Tugendhat and the whole committee for their thoughtful assessment of the opportunities and the challenges presented by TTIP. It is rare that a Minister can say he found his appearance before a committee to be both stimulating and enjoyable and also mean it.

I confirm to my noble friend Lord Jopling that the report has indeed been warmly received by the Government. The Government are considering its findings and will respond—we have two months to do so—by 13 July. If the noble Lord, Lord Stevenson, would like a first edition of the committee’s report, I think a deal could be done, as I have two copies. I have to say that the report was an excellent read, something I read from cover to cover. I am also grateful to all noble Lords who have spoken this afternoon for their contributions during the debate. I will attempt to cover the points raised, and I apologise in advance if there is anything I miss. I will write in detail later.

I welcome the report’s recognition of the significant opportunity that TTIP offers to reinforce what is already a very strong relationship between Europe and the US. As many noble Lords, including the noble Baroness, Lady Henig, said, the agreement could have not just an economic impact. There is an opportunity for a major geopolitical impact to reinforce the relationship between our two continents, but I will concentrate on the economic effect.

TTIP is an ambitious agreement. The numbers are by their nature speculative in some ways because we do not know what ultimately will be in the agreement, but it could be worth £10 billion annually to the UK economy alone. Whatever the number, it will create jobs and reduce prices for consumers in the EU and the US. It should not only eliminate almost all tariffs—that is sort of de rigueur in trade agreements now—but it goes much further. It could provide better access to markets and drive regulatory coherence across the Atlantic. In fact, regulatory coherence will account for more than half of the benefits that could arise from this agreement.

As we, the Commission President and President Obama have all emphasised, this is not about lowering standards—I really want to emphasise that—but about aligning or mutually recognising different standards that have similar intents. This represents a new territory for a major international trade agreement. I agree with noble Lords that it is not easy, but we should go for it.

Many detractors seek to describe the benefits of TTIP as being for big corporations, but I think that is entirely wrong. Many big corporations have the ability to overcome regulatory differences. If you have production lines that make 10 million of something, you can have a couple of them making it in a slightly different format. If you have one production line making 10,000 of something and there is a slightly different arrangement in the EU or the US, the net result is that you probably do not export at all. It is actually small and medium-sized businesses that will benefit far more. They are the ones that suffer through non-tariff barriers and differences in regulation.

There could also be a substantial gain for consumers. The EU’s estimate—and, of course, it is an estimate—is of a potential average gain of more than €500 for a family of four. That will come through lower prices. More choice, more trade and more competition give lower prices.

The noble Earl, Lord Sandwich, made a point about the impact of TTIP on other countries, and some have made the point that it will have a negative impact on other countries. I believe the agreement will benefit other countries. First, it will increase global growth, and that gives an opportunity for many. It will also allow countries wishing to export to two of the largest trading blocks in the world the opportunity to make one version of a product. Later, I will talk about the idea of a living agreement. I certainly share the view expressed by many noble Lords that the agreement should not be static and that other countries should be able to join. Perhaps we are starting to create worldwide standards for others.

While TTIP could bring huge benefits, concerns have been expressed—the noble Baroness, Lady Quin, among others, expressed them—about the impact of TTIP on regulatory standards, the effect of the ISDS clause and what it could do to public services. I shall address these issues in turn. As I said earlier, TTIP will not erode regulatory standards in the EU or the US. It is interesting that, when I go to both continents, I hear the complaint that the other has lower standards. We are talking about high standards in both. TTIP provides a good opportunity to take stock of existing rules on both sides of the Atlantic and remove any unnecessary regulatory duplication. This is not a static process. It is very important that we create a living agreement to deal with rules that have diverged over time for no reason at all.

My noble friend Lord Lamont raised a point about the difficulty of this process. He is right that it is difficult, but it has been done in other industries, sometimes with varying success. Accountancy bodies have managed to create a body of international accounting standards and we are seeing convergence over time. I know from my past in telecoms that one of the reasons that you can connect calls around the world is because of global standards, so it is possible. It will be easier for some industries, such as the automotive industry, and for some it will be more difficult. Again, that can be done without lowering environmental, labour or consumer safety standards.

Some noble Lords have raised how the inclusion of an ISDS clause in TTIP might affect a state’s right to regulate. These provisions, which will help to create a positive investment climate, are not new. They are being described by many NGOs as though they have been invented just for TTIP, but in fact the UK currently has over 90 of these sorts of agreements with other countries. To date, there have been only one or two cases against the UK and neither has been successful. However, investment provisions in TTIP must strike the right balance between protecting investors on the one hand, which we would want for investment into the UK and for our investors outside the UK, and on the other hand protecting the host nation’s right to regulate and determine policy.

The European Commission has recently launched a public consultation, which we very much welcome and we are listening to the concerns. It is good to have discussion because there is much misinformation. While some of the concerns about ISDS appear to be based on accidental—or, sometimes I suspect, intentional—misunderstanding of ISDS clauses, it is important to make the dispute resolution more transparent and to limit spurious claims. It is in the UK’s interests to create a modern investment agreement that will both encourage investment and create a model for future agreements with other countries.

Concerns have also been expressed that TTIP will somehow have a material impact on how the UK provides public services. It should be noted that we already have certain obligations under the General Agreement on Trade in Services. We are not seeking to expand those, and we have made it clear to the European Commission that it should be for member states to decide whether or not to open up public services to competition. This is the approach that the Commission is indeed taking.

A number of difficult areas were raised. My noble friend Lord Tugendhat mentioned financial services, which were also mentioned by the noble Lord, Lord Giddens. First, it is too early to start saying whether anything is in or out. Certainly, we will try to push back against red lines. We will continue to work with the Commission and industry—including in the US —regarding financial services. It is important to remember that financial services is not just banking; it also includes areas such as insurance and fund management. We must also recognise that, with Dodd-Frank, it is a sensitive time in the US. We have to be clear that we are not seeking to weaken US protection for financial services.

I agree that we must make a better job of explaining why their inclusion is important. There are a number of areas on which we will push further, but financial services are central to trade. If you do not have aligned financial services regulations, that will itself weaken the capability for global trade. It is also a global industry, as almost every financial services company operates around the world. There are conflicting rules that are meant to do broadly the same thing—protect banks and make sure that they do not cause systemic issues in the economy—so it is in everyone’s interests to deal with those. We have got to find ways of coming together to improve that.

That is not the only thing being challenged—the audio-visual industry was mentioned and people have made a number of other attempts to draw red lines. We will, however, continue to push the financial services industry, and we will continue to stress that this is not about weakening standards. We are not alone in that. The French and the Spanish, for instance, also have large interests in the financial services sector and are working with us in pushing these areas.

I now turn to another difficult area, which is procurement. It is important for Europe to obtain openness in US procurement, largely because Europe is today more open. However, I agree with a number of comments made by noble Lords about how Europe could also work on its single market. That is something quite separate that we will continue to push very strongly. It is important to gain agreement with America on the federal level and the state level, and the more that Europe can set an example, the better. States of course present a particular problem, but a lot of people have referred to the success that we have had with Canada on CETA, and the same is true for the US. We will continue to push the issue of the states as well as the federal government being included in the agreement.

One of the ways we are seeking to do that is with publicity. There has been some very good work by the British embassy in the US, which has produced a paper outlining the benefits of TTIP to every single state in the US in terms of jobs and economic benefit. I think this is the right approach. We have also stressed that the United States will not be able to pick and choose among individual states for individual matters.

I turn now to other issues, one of which is GIs or geographical indications. A number of European countries have concerns about the willingness of the US to accept them—feta cheese is raised in more Council meetings than you would believe. From the UK’s point of view, we believe that composite GIs are appropriate, such as for “Scotch whisky” or “West Country cheddar”, but we do not necessarily believe that cheddar on its own is something that needs to be protected, as it has become generic—the same probably applies to the hamburger and the frankfurter. We will continue to seek a balance on GIs and push for that.

On energy, which was mentioned, we are pushing very much for free trade. Recent events involving Ukraine and Russia have really indicated that a free trade agreement must include free trade in energy. That is something that is important on an economic level but even more important on a geopolitical level, and I suspect the US is increasingly recognising that.

The issue of China was raised by the noble Earl, Lord Sandwich. Today we have a very large Chinese delegation, including the Chinese premier, visiting the UK, and we will continue to discuss a free trade agreement. We have raised with the EU the commencement of a free trade agreement and we have seen greater Chinese interest in pursuing that. The Chinese were obviously involved in Bali and they have been involved in TISA, which is the Trade in Services Agreement. We have also seen them trialling free trade zones within their own country, changing their attitude as to what is and is not allowed. We would very much like to bring China into a free trade agreement. I think it is probably too early to suggest that China could be one of the early candidates to be included in a living agreement under TTIP.

We are also pushing free trade agreements with Japan and India—Canada has recently completed talks on the Pacific Alliance, which I think is very interesting—as well as, of course, multilateral trade agreements. Bali was a success, but we have to move on from that and the Doha development agenda is very important to us as well.

The noble Lord, Lord Jones, raised a point about US subsidies for aerospace. I will very much continue to champion the British aerospace industry, including Airbus and Rolls-Royce. Indeed, I visited Bombardier in Northern Ireland recently, where they are making the wings for the C series aircraft at one of the most advanced wings factories in the world. Every 2.5 seconds an aircraft takes off somewhere in the world powered by a UK company. We are the second largest producer in the aerospace industry, so I absolutely champion it and will continue to do so. There is a dispute about US subsidies for aerospace that has been ongoing at the World Trade Organisation between the EU and the US concerning the US Government’s funding of aircraft development programmes. The European Commission has already raised concerns about this subsidy package, and the Commission and the UK consider it to be an extension of the existing measures that the WTO has already found to be illegal. So we will continue, together with our EU partners, to take a robust line on this dispute. I think it is something that is separate from TTIP, but I can assure the noble Lord that both this Government and our EU partners are very much behind taking a robust line.

My Lords, I agree with the many noble Lords, including the noble Lord, Lord Radice, who raised the issue of making the case for TTIP. I also agree with the committee’s recommendation that it is really important that the Commission and all member states continue to reach out to citizens and civil society to set out the opportunities that TTIP will provide. It is important that we debate it openly, talk about the benefits and counter some of the myths. Within the UK, there are regular meetings with core stakeholder groups representing a number of business groups and, for instance, the consumer group Which? as well as a group of NGOs. We have also organised sectoral round tables as well as national roadshows in conjunction with BritishAmerican Business.

The noble Lord, Lord Radice, asked about the involvement of senior Ministers. I am sorry that I do not rank among them, but I hope that Ken Clarke—a big beast if ever there was one as a Minister—who has taken a special role in promoting TTIP will meet that requirement. In fact, he has been touring around both the UK and parts of Europe pushing for TTIP. Also, across the Cabinet, the Prime Minster has made it very clear that this is one of our key objectives and it will be so in the next period for the EU. So across the UK and across government we will push it very strongly.

I would caveat some comments that were made about the support for TTIP across Europe. Yes, Germany is unhappy in that it has some questions about ISDS clauses and it is unhappy about Snowden, but Germany is pro free trade, as is France. When I was in Spain last week, we saw very strong support for TTIP. From speaking to the other 28 Trade Ministers, I know that they are very supportive, so I think there is a strong majority in the Council. Of course, we have to see what final agreement we actually get.

As the negotiations become more substantive, we will increase the range and the frequency of our engagement activities. This will involve more stakeholder events, more involvement with the press and more digital engagement to promote the dissemination of accurate, substantive, user-friendly information that shows what the benefits are to small companies and to individuals. We will be holding, and participating in, a number of further stakeholder events around the country. For example, in a few weeks’ time there will be another regional event, and the Liverpool International Festival for Business includes an event in a few days’ time. So there is a series of events planned and we recognise the need for Government—as well many other parts of civil society and, indeed, this House—to make the case for TTIP.

There have now been five rounds of TTIP. On the last round in Arlington, Virginia, I have provided updates to the European Scrutiny Committee, to both Houses and to the All-Party Parliamentary Group on European Union-United States Trade and Investment. As the noble Baroness, Lady Henig, reminded us, a lot has actually been achieved in a year. It is only a year and we have made huge progress. Our assessment is that we are making reasonable headway, but it will be more difficult as we come across more difficult things. It is not easy—important things rarely are. We have got the mid-terms to concern ourselves with in the US. Hopefully, after that, fast-track authority will be easier. At the same time, the US is a bit focused on TPP with the Pacific countries, but we remain very focused on achieving a result by 2015.

My Lords, in summing up, I believe that TTIP is an important and ground-breaking agreement, but it will require a lot of hard work. Pascal Lamy, the former head of the WTO, commented:

“The new era begins with the Trans-Atlantic Trade and Investment Partnership”.

He contrasted it with every other trade agreement that had gone before. Someone as distinguished as the noble Lord, Lord Stevenson, said that it is a 21st century trade agreement, and I could not agree with him more. I thank the committee and the noble Lords who have spoken in the debate today for their role in helping us on the journey to achieving a breakthrough for the UK, for the EU, for the US and for the world economy.