Trade and Customs Policy

Lord Mendelsohn Excerpts

Tuesday 5th December 2017 Lords Chamber

[Lord Mendelsohn (Lab)]

My Lords, I join my voice to those who have said that this has been a remarkable debate. Those people who enjoy reading the previous day’s Hansard over a morning coffee are in for a real treat.

I join others, too, in paying tribute to the noble Lord, Lord Price, for the work that he did when he was Trade Minister. This has been the first opportunity to say so. It was excellent to be able to see him in public service. He did a great job. I am sorry that he is not there, not because I wish to see the Minister replaced but because a bit of additional strength to the department would be no bad thing in this context. However, it is always good to see the now-familiar noble Baroness the Minister, who made an excellent initial presentation that was certainly better than the White Papers that we were reading, which I confess were somewhat tough going—they are not vintages, but we are none the less dealing with something that has to take place and where there is, unfortunately, quite a vacuum.

We have to understand the context here. I hope that we do not end up always recreating the debate over Brexit, but those who wanted to leave have to demonstrate that there is a better case and greater prospects from doing so. They should not be afraid of having to meet that challenge and test. Just as they were able to present to the public the argument that things would be better outside, so they still have to meet the test of demonstrating that it is a better path, as was the challenge posed by many speakers today.

My fear is that the context in which we are debating this is quite difficult. I do not think that anyone who was there will forget hearing the noble Lord, Lord Prior, introduce the industrial strategy White Paper, when he talked about the problem we have in the country of very low GDP growth, terrible productivity—in fact, last quarter saw the worst performance in 200 years—and the terrible prospect of declining wages over the next 10 years. It will be another lost decade. It is a massive challenge to try to introduce such a change as we are and to deal with our trade strategy and policy.

That is largely because we were not exactly dealing with the finest trade performance before. Those who have participated in the many such debates that we have had previously will remember debating the then Chancellor’s target, when he established it in 2012, of doubling exports to £1 trillion. At that time, we had UKTI and a branding campaign. In 2015, the OBR projected that exports would be £630 billion in 2020—that was a third less. In 2016, UK exports were £544.8 billion. It is argued that global trade has slowed, but others have had a much better export performance. We knew that we had to achieve a much better export performance because our future and our economy depend on exports. Some 30% of our economy relies on exports, as do one in four jobs. We have always had to improve trade policy but have consistently failed to do so.

That target, from which the Government were moving away in 2015, I think I saw being buried in a Select Committee earlier this week. It is a real problem, because we are looking at a new trade policy where we cannot establish a figure nor what the impact of it will be. We cannot establish how much further that will take us forward in addressing our economic prospects. What we can see is some research which is troubling. The ICAEW concluded that, after what it described as an expensive advertising campaign, just 53% of all UK small businesses were exporting, which is exactly the same figure as in 2014. SME trade promotion is getting much worse—many of us are familiar with complaints about trade shows and the like. We have huge problems with our overall trade performance.

Even when we look at the prospects for services, our greatest potential attribute, we note that all surveys, including by the British Chambers of Commerce, show that the main target markets for our companies are the USA, Germany, France, China and the UAE. As the noble Lord, Lord Leigh, said, much of our trade will be dependent on areas outside the EU—90% of all growth over the next period will come from outside the EU, a third being China. We are not the first people to realise that; in fact, one thing we are turning away from is a concerted EU effort to address that as well. Many EU countries have been much better in their trade and export performance as a result of recognising that much earlier, so this is not all new.

Our test is to be realistic, to have a correct estimate of our position and to be entirely realistic about the prescriptions that we have. We have to make sure that we test these prognoses. We have to be straight about the fact that trade deals are quicker under the EU and take longer as a single nation. Look at the difference between the performance with Korea and the EU and somewhere such as Australia. Trade deals with the EU are comprehensive in scope, whereas for individual countries they are more difficult. That is a considerable challenge to us.

We have to be straight about the rest of the world in respect of the WTO quotas. This is a zero-sum game. We have introduced the British policy of Brexit and thought that the rest of the world will just say, “That is wonderful”. There is no greater zero-sum game in international diplomacy and the exercise of national interest than in trade. Is it any surprise that America, Australia and countries in Latin America have objected to a simple carving-up of the EU quotas in the WTO, which we thought would be straightforward? This is going to be the permanent story. The idea that the USA is going to simply roll over and change all its markets to satisfy us for Brexit—I just cannot see it. We have to be completely and seriously realistic.

We can talk about transitions, implementation periods, cliff edges, timescales—all these sorts of things—but let us be absolutely clear that it is going to be bumpy and uncertain. We are in unprecedented times. We are trying to muddle through and we are treading water, and that is our condition. It is in that context that we will have to look at whether or not the White Papers and the Bills are fit for purpose, offer the best possible alternative for us and demonstrate that the Government have put together the right resources with the right plan and have the right practical approach.

I will cover just a few issues. The trade White Paper explains the Government’s intention to transition existing EU free trade agreements and European partnership agreements so that, for example, the EU-South Korea free trade agreement will be replicated as a UK-South Korea free trade agreement. According to the EU’s website, more than 80 countries have signed an agreement with the EU. Around 30 of those agreements are fully in place and 50 are partly in place, including CETA. I would be grateful if the Minister could confirm these numbers and the details of how many EU trade agreements the Government are seeking to replicate.

Many of the EU agreements we have signed involve some of our most important trade partners outside the EU, including Switzerland, Canada, Singapore, South Korea, Norway, South Africa and Israel. By my rudimentary calculations, we export more than £60 billion each year to countries where we have an agreement in place through our EU membership, highlighting the importance of ensuring consistency in our trade with those countries after Brexit.

The Government have described transitioning as a “technical process” and essentially a formality. That is true if each country gives its consent, and some legal experts believe that it may not be so straightforward even then. It would be very interesting to get some idea on this from the Minister, especially after what has been said in the other place: with which countries do we have an agreement in principle to roll over the deal in its entirety and how many, and which, countries have notified us that they might wish to make modifications? As for those countries that have not yet agreed in principle to transition their deals, is this a matter of DIT resource, or are there more fundamental barriers to agreement?

There is also the question of by what process we will achieve the transition—or grandfathering—of EU FTAs. Will the Minister confirm whether the UK will be acceding to the existing agreements as an annexed party, or will we be seeking new, identical agreements with each country the EU currently has a trade agreement with? What level of scrutiny will Parliament be afforded during the transition process?

Will the Minister also clarify the Government’s plans for EU trade agreements that remain in negotiation, such as with the USA, Japan, India and Thailand? The fact that the EU has struggled to reach agreement with some of these countries should of course act as a reminder of the challenge that awaits the UK post Brexit and the importance of putting the right trade policy framework in place early on.

Transparency, public consultation and scrutiny will be important to ensure that a future trade policy has democratic legitimacy and will boost growth in a way that is more positively felt across all sections of society—especially with the warning of the noble Lord, Lord Prior, in our ears. It is welcome that the trade White Paper has a section titled “Trade that is transparent and inclusive”, but it looks like a missed opportunity that the Trade Bill itself includes no provisions at all in this area, despite the Secretary of State promising a,

“major consultation mechanism for new free trade agreements”.

Regarding parliamentary scrutiny, the White Paper says merely that the Government will,

“respect the role of Parliament”.

Will the Minister explain what this means? At present, the Government can negotiate and sign a trade deal in secret and ratify it via the negative procedure for secondary legislation without debate. Does the Minister think that this is sufficient for trade agreements with wide, long-lasting implications, or will a greater role for parliamentary scrutiny and accountability be established?

It is welcome that the White Paper and the Trade Bill accept the case for an independent UK trade remedy framework in the context of the mess we are likely to get into. The Government’s proposals for the UK Trade Remedies Authority include an economic interest test, but will the Minister explain why social and environmental criteria have not been included, and whether there are any plans to do so?

We are also somewhat in the dark about what will happen to trade defence measures that are in place currently through the EU. Will those be replicated? I would be grateful for an update, including on what consultation the department is carrying out with industry on this point. Of course, one important thing to understand about the value of our relationship with the EU is that trade defence measures are very hard to exercise on your own; they are much easier in concert with others.

No doubt the Government will seek to make the Bills we are likely to have as technical as possible, dealing only with a transition process. I am not sure that this will be sufficient. I am not sure that the position is one where we can just roll over what was done before. That is not practical and it ducks the important issues about being clear about what needs to be done. There is a realism on the scale of the task that we have to get used to, and there are ways forward. We need clearer goals and realistic language. We need a trade policy in line with our industrial strategy. We need to boost our capacity for conducting trade in the department and in other parts of government.

We are where we are. I am in business: every new business takes longer and costs more; every deal is more complicated and requires more work than was planned in integrating it. We have to face up to what is likely to be the most difficult part of the process—ensuring that we have some sort of stability. I fear that there will be an economic consequence to it and that we are now debating how to fill a vacuum. The vacuum has to be filled, but when the Bills finally arrive in this place, we will have to conclude whether we are being served an acceptable filler.

Exports: Africa and the Commonwealth

Lord Mendelsohn Excerpts

Monday 27th November 2017 Lords Chamber

[Lord Mendelsohn (Lab)]

My Lords, I declare an interest as the president of the Commonwealth Jewish Council, with commercial interests in Africa and the Commonwealth in gaming, natural resources, agriculture and technology. I thank the noble Lord, Lord Popat, for his excellent tour d’horizon at the start of this debate and for initiating it. He is a great advocate of the expansion of UK trade and a doughty campaigner on issues relating to Uganda. This has been an excellent debate and at one point I even thought we were going to hear the noble Lord, Lord Taylor, break into song to add melody to the words.

This debate is also notable for the Minister’s maiden speech. The noble Baroness is the first woman to hold the post of Minister in the Department for International Trade. This is a singular honour for someone with such a distinguished business career as a consultant in aerospace and in some of the UK’s great industrial champions, ICI and Pearson. Like the noble Lord, Lord Chidgey, I was interested to find that the noble Baroness is a qualified pilot and scuba diver. It came as some comfort to me to realise that her interest in “Blue Planet” owes more to David Attenborough than to travelling the world on behalf of the Conservative Party. We wish the noble Baroness very well in her task. As the noble Viscount, Lord Waverley, said, there are many here who wish only to help.

We have a new reality and are looking to significantly boost trade relations between the UK, Africa and the Commonwealth in the long term. We have to recognise that, in the short to medium term, there are as many problems as opportunities. The UK is held in high esteem across Africa and the Commonwealth for the British model of doing business: an open and dynamic method, underpinned by UK law. However, the Brexit process will take its toll and create obstacles to trade deals. The noble Lord, Lord Bilimoria, made very careful note of many of the challenges that we face. Africa is very close to us; there is an advantage in its location. For example, our country is still responsible for 40% of exports to Botswana and the Seychelles and for 20% to Gambia, Equatorial Guinea, Mauritius, Kenya and South Africa. However, our overall trade performance has not been excellent. Among the seven Commonwealth countries which the UK exports most to, we are the largest EU exporter to none. Germany exports more goods than the UK to Australia, Canada, Singapore, India, South Africa and Malaysia. Switzerland, Germany and Belgium all export more goods to India.

We have many great opportunities here. The noble Lord, Lord Risby, raised a number that were available in Algeria, not just in hydrocarbons but in financial services—a matter also raised by the noble Lord, Lord Sheikh, with the opportunities in Islamic finance. We have drifted behind and the UK’s export of goods to the Commonwealth has fallen by 16%—or £4.8 billion—compared to falls in exports to the EU of 11%. Since 2012, UK exports to African countries have fallen by 24%. Our services to the Commonwealth have plateaued since 2010. It is very important that we use this as an opportunity to redouble our efforts, because things have changed.

As the noble Lord, Lord Howell, said, the issue of China looms large. The EU in general has declined in significance as a trading partner because of the interest of China in Africa as well as much greater intra-African trade. We face remarkable competition with China’s belt and road approach. African development relies on the right infrastructure—electricity and transport—and on expansion of the internet, as penetration in Africa is quite low. Nigeria’s internet penetration is 97%, but Egypt’s is the next largest at 48% and Kenya’s is under 35%. Feature phones are common across Africa and we face a huge challenge with the Chinese devotion to getting their equipment and platforms—Alibaba, Baidu, Weibo and the others—there, as well as the China Bank. The noble Lord, Lord Howell, might be better directed to creating a triangular partnership with India into Africa than with China.

It is very important that we do what we can. SME trade is extremely important—a point also made by the noble Viscount, Lord Waverley, and the noble Lord, Lord Chidgey. We have to use the advantages that we have. This is why it has been so enormously tragic that our relationship with the Commonwealth has, in many ways, been allowed to go to rack and ruin when we had such a great opportunity. I pay tribute to the vision of the noble Lord, Lord Taylor, to the doughty campaigning on this by the noble Lord, Lord Howell, and even to the vision of the noble Lord, Lord Risby, who said that Algeria will be seeking to gain some status with the Commonwealth. It should be understood that there are many countries seeking to join the Commonwealth, because it is a different beast from what it was before. It is a free association of nations, very different from the way many people in this country conceive of it, as something to which the UK has certain rights. We do not. We have to deal with it in a very modern way. In fact, that relationship has been pioneered by the noble Lord, Lord Marland. I think that we will see some very positive developments at the Commonwealth summit as it has been approached on a reasonably surefooted basis. There are massive benefits to be gained from working with the Commonwealth, such as that of language. There is also an economically measurable advantage as there is a boost to trade and FDI for countries in the Commonwealth. However, a Commonwealth-wide agreement might be difficult. Malta and Cyprus are still in the EU and we have to handle this extremely well.

A huge number of complexities is involved in trading with Africa. The noble Lord, Lord Chidgey, raised some of those in regard to the EPA and some of the experiences which the all-party group has had, whose report I read with great interest. There is much that we can do to try to find new ways to establish our relationships there. We can look to build on our existing strengths rather than reinvent the wheel. We should take advantage of aspects of trade agreements that we are working on which are working well for African countries and their partners. A particular opportunity for us arises from the generalised system of preferences. We should try to keep this to enable African products to compete with UK and EU goods.

We should look more at how we can harmonise standards as part of our general approach to harmonising standards with the EU and the US. We should look at how we can project our soft power, how we can add to the voices developing rather interesting and useful regional trade models, and at how we can make sure that we maintain a real sense of understanding development priorities and regional integration. We should also look at other areas in which we have not been particularly successful in trade agreements, such as rules of origin and issues around transfer pricing to ensure support for regional supply chains, given that the velocity of increasing trade creates its own virtuous circle. Indeed, we should also make sure that future trade agreements are subject to democratic debate and consultation with civil society. That is important not just for development but because many of these people have a lot of valuable experience that can be of great advantage to us.

I ask the Minister to give us a sense of how we will look at these trade agreements in important priority markets. I would be very interested to hear her comments on the approach that we plan to take when dealing with South Africa. Are we looking to modify slightly the recently signed economic partnership agreement to cover a transitionary period or are we going to accept the existing EPA agreement in full? Have we taken the view that the EU negotiators have properly taken into account the interests of the UK or are we looking to negotiate a new South African/UK agreement? Would this not lead to another round of protracted negotiations which may be more complex and difficult, but does that present the greatest opportunity? Are we looking to accept the EPA but try to renegotiate agricultural access to the UK market because we might move out of the CAP regime?

It will be essential for us to understand all these things in comprehending how we are going to approach this opportunity. I would be very grateful if the Minister could give us her thoughts on that. We on these Benches feel that there is so much for us to try to achieve in a short period of time. We hope that we have the necessary resources and expertise to do so. We certainly have the good will but perhaps much more resource should be applied to our export opportunities not just around the world but in our areas of priority opportunities—namely, Africa and the Commonwealth.

Brexit: Commonwealth, Trade and Migration

Lord Mendelsohn Excerpts

Monday 13th March 2017 Lords Chamber

[The Minister of State, Department for International Trade (Lord Price) (Con)]

Our links with the Commonwealth are extremely important. We enjoy excellent trading relationships with Commonwealth partners and are committed to strengthening these further. As we leave the EU, openness to international talent will remain one of this country’s most distinctive assets. The process will be managed properly so that our immigration system serves the national interest. The precise arrangements are yet to be determined.

[Lord Mendelsohn (Lab)]

My Lords—

[Baroness Berridge (Con)]

I thank my noble friend the Minister for his Answer. Within the trade that was outlined, there are many British citizens of Commonwealth heritage who run businesses that trade incredibly effectively with those countries of heritage. Many want to see renewed opportunities for migration between the United Kingdom and those Commonwealth countries as free movement within the EU comes to an end. Can my noble friend confirm that there is or will be a strategic plan for engagement with the Commonwealth diaspora in the Foreign Office?

--- Later in debate ---

[Lord Price]

My noble friend asks an excellent Question and clearly one that many in the House want to rise quickly to ask further questions on. I am delighted to say that trade with the Commonwealth has grown sharply over recent years, in fact by about 10% a year since 1995. Trade with the Commonwealth stood at almost $700 billion last year and is projected to hit $1 trillion by 2020. Last week I am delighted to say that we had the inaugural meeting of Commonwealth Trade Ministers here in London, co-hosted between the UK and Malta. One thing that we talked about was the need to continue to have the very best movement of the brightest between Commonwealth countries to continue to build that trade. It is a point that the Secretary-General and the Commonwealth Secretariat will take away to work on with all 52 members of the Commonwealth.

[Lord Mendelsohn]

My Lords, I apologise for my enthusiasm earlier for this topic. I am sure that the whole House recognises and congratulates the noble Lord, Lord Marland, on his excellent work to organise the Commonwealth Trade Ministers’ meeting. When will the Government reply to his letter with an apology for claiming credit for organising it, as was outlined in the White Paper, when it was the Commonwealth that did so? Furthermore, do the Government understand that our chances of success in trade with the Commonwealth will be enhanced if we treat it as the modern free association of nations that it is, rather than as a British possession, as the incorrect claim seems to suggest to other Commonwealth nations?

[Lord Price]

I am delighted to put on record our thanks to the noble Lord, Lord Marland, for organising the first day of the two-day conference. I think the White Paper said that the conference was going to be held in the UK rather than it being organised by the UK. If it did not make that clear, my apologies once again. My noble friend did a wonderful job in bringing together 37 Trade Ministers from across the Commonwealth and we had very fruitful meetings.

On the noble Lord’s second point, the meeting drew out the fact that there are a wide range of economic opportunities and challenges across those 52 countries. Some are subject at the moment to GSP schemes from the EU, others have economic partnership arrangements, and a number have free trade agreements. All need to be treated differently so that we can achieve the best outcome for all 52 countries.