Trade and Investment

Lord Pearson of Rannoch Excerpts

Monday 15th June 2015 Lords Chamber

[Lord Stoneham of Droxford (LD)]

My Lords, it is my pleasure and role this afternoon to welcome the noble Lord, Lord Maude of Horsham, and to congratulate him on his wide-ranging and very informative maiden speech on international trade. As the noble Lord has told us, he is part of a remarkable political dynasty, his father having been a Member of this House between 1983 and 1992. As he also told us, he spent 27 years as an MP in two places, North Warwickshire and Horsham. I think he was very unlucky to miss promotion to the Cabinet after the 1992 election, when he lost that marginal seat of North Warwickshire. However, patience finally had its reward; 18 years later, he played a major role in the coalition Government. Again, he was probably slightly disappointed that it was Liberal Democrats who blocked him from full membership of the Cabinet, but he did attend the Cabinet and of course played a key role as Paymaster-General and Minister for the Cabinet Office.

The noble Lord, Lord Maude, was at the heart of the Government’s modernisation plans. Whether you think that he achieved £10 billion or £20 billion of savings through the government service, it was a remarkable achievement. He also oversaw the Government’s transparency agenda and created the Government Digital Service. I notice that a number of very senior Members of this House were somewhat stirred up by his remarks on Cabinet reform, and I should warn him that whenever we discuss change in this House it arouses very strong feelings. His experience in Parliament, government and business will be very valuable to us in this House, and I am sure that, with those experiences, his contribution in his current post as Minister of State for Trade and Investment will be of great interest to us in the coming months.

In the week celebrating the national historic events of Magna Carta and Waterloo, it may seem odd to link those events to this debate on international trade and investment. Magna Carta dabbled in matters of trade as well as in its more well-known subjects of taxation and curbing absolute power. Lord Howe of Aberavon, who is sadly no longer a Member of this House, often reminded us that Magna Carta called for one system of weights and measures to ensure fair trade and that we have never actually achieved it. There is little point now in considering legislation on trade, or even on industry, unless it has an international dimension and takes full account of what is happening in the global marketplace.

Waterloo is often seen these days not simply as a defeat of the French but as an event underlining the importance of co-operation with the Germans. Angela Merkel is often portrayed as the Marshal Blücher of her age, coming to rescue our Prime Minister in the EU negotiations, inevitably at the last moment. In fact, the origins of the Napoleonic Wars were in the trade blockade imposed by Napoleon on the UK: the famous, or infamous, continental system. Nelson’s Navy had to gain control of the seas so that Wellington could conduct the land war and free up our trade. These days, we have to play our full part as a member of the EU to make sure that we achieve free trade.

Today, my proposition is that national law alone, or national initiatives on their own, cannot begin to influence international trade. We cannot raise our taxation without having regard to international competitiveness, and still as a major trading nation we have a major interest in free trade and the elimination of all forms of trade protection. We might have once sent the gunboats to free up our trade, but today, with not enough naval ships to defend in a flotilla even our one aircraft carrier—let alone the two that we are going to have—we have to find other ways of wielding the big stick in international trade negotiations.

We have to rely on our competitive advantage in the Diplomatic Service and in entrepreneurialism. The growth of jobs that has been achieved in the last few years in the UK says much for that entrepreneurial talent, the expertise of our inventors, the expertise of our universities and the skills therein. These are all forms of our competitive advantage in international trade going forward. As a small country, we have to fight above our weight, which internationally and historically we always have. We have to use that influence today, particularly in the EU.

Among the items in the government agenda, the first thing that the Government rightly have to achieve, having made the commitment, is to see through the European referendum as quickly and speedily as we can. Personally, I think complex decisions like that should be made by Parliament, but the electorate has decided. The referendum will not resolve matters. Referendums rarely do, as Scotland showed last year, and indeed as the referendum showed in 1975. Nor will it help the government party, as it did not in the 1970s. They do not resolve difficulties but often exacerbate divisions within political parties. However, while this is not resolved, it will deter investment by our industry in trading markets throughout the world.

Of course Europe needs reform, but it has to make sure that it makes its own industries and countries more competitive and that they work better in international markets. Not least, we have to complete the single market, particularly in digital and service trades, which could benefit the competitive advantage of those sectors in this country. Could the Minister tell us in his closing remarks the sort of timetable he now thinks we will be pursuing in the EU to achieve these important reforms and developments?

We have to use our influence in the EU to enact the Transatlantic Trade and Investment Partnership, which will set global standards for products and regulations. I cannot see the American Congress responding simply to the UK on its own, and I think that many join me in that. Other successful trade negotiations will require our membership of the EU; that is where the clout is. The alternatives to the EU do not stack up: outside Europe we would have little influence and we would follow the rules of trade that were being imposed from within the EU but without having any influence on them. We would still, like Norway and Switzerland, have to foot the bill for the EU, but with no say.

Our ultimate objective at this time, as well as negotiating the referendum proposals, is to achieve a greater balance in our economy and complete the work of the five years of the coalition Government. The trade deficit has to become as much a concern as the overall spending deficit, so that trade and investment contribute more to growth than consumer demand fed by credit and encouraged by high house prices. We know where that route leads, which is why we have to have greater balance in our economy. Our world position has to be enhanced by economic strength, building on the job creation and the entrepreneurial talent displayed in the past few years. As the UK understood in 1815, our future economic prosperity and security lie at the heart of Europe.

[Lord Pearson of Rannoch (UKIP)]

My Lords, could the noble Lord tell your Lordships, in view of his peroration, how countries that are not in the European Union—the USA, China, Japan, South Korea and others—manage to trade very successfully with the European Union without actually being in it?

[Lord Stoneham of Droxford]

They trade successfully because they started almost from scratch. We have had to deal with an economy that was not completely destroyed in the war. They have had the competitive advantage. For many years we stayed outside Europe when we could have had it as a major market on our doorstep, and we did not make the most of it by joining in the first place.

--- Later in debate ---

[Lord Pearson of Rannoch]

My Lords, it is an honour for me to speak in this debate because it was opened by the noble Lord, Lord Maude, with his maiden speech. I have had a nodding acquaintance with the noble Lord for many years, which from my side has always been respectful, although I suspect that the noble Lord may have sometimes regarded my views on the EU as coming from a rather unruly lower boy at the bottom of the lower fourth. So it is a privilege to be allowed to join the grown-ups today and I promise to be on best behaviour in his honour.

Even so, I must pick on one central tenet of the Government’s position on trade and investment in this country, and that is the Government’s support for the idea that our free trade with the EU and the rest of the world is best secured from within the single market and that that trade and the jobs which depend upon it would be in danger if we left the EU. I suspect that this question—what I call the “3 million jobs” question—will be one of the key battlegrounds in the forthcoming national debate about our EU membership. I have wearied your Lordships several times over many years as to why, given political will, jobs will be created if we leave the EU, if we get rid of the unnecessary EU regulation in our domestic market which comes with that membership, if we keep our trade with the single market and if we expand it in the growing markets of the future. So I will not repeat all the facts and arguments of us “come-outers” as to why we would indeed be better off out of the EU; I suspect that there will be time for that in our coming debates on the referendum and other matters.

However, I would like to take this opportunity to refer the Minister to the briefing notes on the globalbritain.co.uk website. I have recommended these to your Lordships before but I am not sure that Ministers or their officials in the Department for Business, Innovation and Skills have yet concentrated on them with the enthusiasm which they deserve. They have the advantage of being very brief, as they are designed for businesspeople, who do not have time for lengthy papers and, using official statistics, they constitute most of the economic case for the UK to leave the EU.

To make the noble Lord’s task easier, I shall pick out just a few of those briefing notes now. For instance, there is No. 82, entitled “Post-withdrawal, agreement on free UK-EU trade is inevitable”. This deals with the central fallacy of those who wish to stay in the EU because they fear that jobs might be lost if we left. These Europhiles, if I may refer to them as such, often give our car industry as a key example of one in which we would face new tariff barriers and so on, and thus lose trade and jobs.

If the Minister reads only one Global Britain briefing note, I recommend that he reads No. 96, entitled, “Post-Brexit, tariff-free UK-EU trade in cars will continue”. It is only one page long, well-spaced out, and most of the print is quite large. Its facts speak for themselves. We import twice as many cars from the EU as we export to it—1.4 million cars are imported and 0.6 million are exported. Of the 1.7 million cars imported into the UK in 2011, 83% were from the EU. EU manufacturers own 53% of the domestic UK car market, the Germans having 32%, with Volkswagen alone having 19%. The Renault Nissan Sunderland plant is the UK’s biggest car exporter, with 37% of all UK car exports. Our case—us Eurosceptics—is that these EU manufacturers will ensure that EU-UK free trade in cars will continue tariff-free in both directions, whatever politicians now pretend.

The EU is of course a customs union, not a free trade area. Briefing note No. 101 shows how customs unions have become an expensive and redundant relic from the 1950s, which is why there are now no significant customs unions left anywhere else in the world. The Minister and his officials might care to absorb, together with briefing note No. 101, briefing note No. 98, which reveals “The Hidden Cost of Exporting to the EU Single Market”—costs borne by an EU member state, such as ourselves, but not by countries outside the EU, such as the USA, China, Japan, South Korea and many others. This note sums up the 10 more respectable cost-benefit analyses over recent years, including one from the French Government’s leading think tank, one from the Swiss Government and even one from our own Treasury in 2005, which between them all put the costs of our EU membership at anything between 4% and 10% of GDP.

For those noble Lords who want to go more deeply into the subject, there is briefing note No. 92, which deals with global supply chains, through which much of modern international trade now passes, which take time to set up between suppliers and clients all over the world and which cannot be replicated overnight. We say that existing world trade arrangements will continue under the World Trade Organization, whatever we do about our EU membership. It is in the EU’s interest to continue existing arrangements with us because we are its largest client.

A number of your Lordships have suggested that we benefit from the weight of the EU’s account when it makes free-trade agreements on our behalf. We Eurorealists reply that, as the world’s fifth or sixth-largest economy, we would do better on our own in this area. We mention in passing that Singapore has had free-trade agreements with Japan, Russia and India for over 10 years, which we, as EU members, do not enjoy. We point out that Switzerland has an FTA with China, which we do not, as indeed does Iceland—not exactly a vast economy.

In conclusion, I would be most grateful for some assurance from the Minister that he will look at the Global Britain briefing note No. 96—the one-pager—and encourage his officials to look at those that I have mentioned and the others on the Global Britain website. Their author, Mr Ian Milne, and I will be happy to meet the Minister or, if we are not grand enough for him, perhaps his officials, for any elucidation that they may require. I trust that we could thus inform the forthcoming national debate in this vital area.

In the mean time, I wish the noble Lord well in his new appointment.