International Trade and Geopolitics

Debate between Andy McDonald and Darren Jones

Thursday 20th April 2023 Commons Chamber

[Darren Jones]

I will do so briefly so that I do not test the patience of the Chair too much, given the number of pages I have left to read before the end of my speech. My initial observations are that it is in the UK’s interest to be a global leader on the net zero transition, both because that is the right thing to do and because it is a significant industrial opportunity, and that we should be partnering with the European Union to do so through our trade deal. In my view—I have not taken evidence on this; it is just my view—that would generate a larger rate of return for the British economy and British people than some of the other opportunities that have been presented.

[Andy McDonald (Middlesbrough) (Lab)]

Does my hon. Friend share my concern that in pursuance of net zero and the decarbonisation agenda, the automotive industry, for example, faces significant challenges in ensuring not only that we have a self-contained supply chain, but that we can engage with the European Union on our doorstep given restrictions on rules of origin? Will that present a difficulty, and is there an opportunity with the review of the trade and co-operation agreement to address that issue once and for all?

[Darren Jones]

My hon. Friend is exactly right, and electric vehicles are a prime example. He and I were in Sweden last week on a Select Committee visit to look at how its electric vehicle battery manufacturing looks in comparison with the UK. If we are to continue to export cars to the European Union, we will have to hit the so-called rules of origin requirements where the components come from local or regional sources. Eventually they will have carbon embedded within them, in order to meet carbon border adjustment mechanisms and net zero targets. It is therefore crucial that the UK Government work with the private sector successfully to deliver that industrial policy outcome, or I fear we will see the near total decline of car manufacturing in the UK. While it is not for me as Chair of the Business, Energy and Industrial Strategy Committee to prejudge the conclusion of its inquiry into this issue, the contrast between what we saw in Europe last week, and what is happening in the UK, was stark.

[Darren Jones]

I have to take the hon. Gentleman’s suggestion at his word as he knows much more about his constituency and farming than I do. If there are export opportunities that is great, but the question is whether that will deliver the wholesale economic growth that we need across the whole UK economy. It will be an important piece of the puzzle, but my proposition is that there is a much broader area where there are problems, and where Government policy is lacking.

In Sweden last week, we learnt about the sheer complexity of delivering a so-called gigafactory for electric vehicle battery manufacturing. We held in our hands, physically, fossil fuel-free iron made using hydrogen, which was being turned into low-carbon steel. I finally saw, after years, a carbon capture facility working, plugged in and capturing carbon in real life. Here in the UK, we just have ministerial statements setting out our intention to be world leading, without anything real or tangible to show for it. The British people will soon realise, if they have not already, that at the end of this yellow brick road set out by the Government there are just Conservative Ministers blowing smoke. The tragedy is that this is not just a dream: it is 13 years of Conservative economic mismanagement that will take years to clean up.

This sorry story is not just about what is happening in the European Union; it is about what is happening in the United States, too. During our Committee visits last year, it quickly became clear that the US is doing what Europe is doing, but on steroids. The Inflation Reduction Act, which is really a green new deal for the United States, sets long-term, multi-decade, easy-to-access tax incentives, grants, loans and market-setting standards to not only drive the net zero agenda but reinvest in the industrial capacity of the United States. This $500 billion multi-decade initiative is acting like a magnet, pulling investment, jobs and businesses into the American economy. Access to those tax incentives, grants and state-level support is predicated on agreements to train and employ Americans in areas that have been crying out for investment for years. In some circumstances, it is even predicated on business owners investing in childcare to help optimise the economic activity of the American labour market, including women.

[Andy McDonald]

Was my hon. Friend not struck by the stark report on Sky News, I think from Ed Conway, from AMTE Power in Thurso, one of the British manufacturers of car batteries? It was indeed attracted by the Inflation Reduction Act, so much so that we risk that factory—a gigafactory we do have—being relocated to the United States. Should that not be sending a signal warning to the Government that time is not on our side?

[Darren Jones]

Once again, my hon. Friend is absolutely right. That is why the European Union has responded to what is happening in America, but what do we have here in the United Kingdom? I tried to be generous to the Government in a collegiate fashion, but the only thing I could find that allowed me to give the Government credit was the recent establishment of the Office for Investment, whose job it is to secure inward investment to the UK. But it has no budget.

As I understand it, when two American businesses looked at the UK as an investment destination, they did not know who to contact. Was it the Department for International Trade, the Department for Business, the Department for Transport, the Treasury, the regional mayor or the local council? The Germans, meanwhile, put together an inward investment package with significant incentives and the Americans presented a map with different options in different states, topped up with significant federal incentives. In the UK, we have an Office for Investment whose job it is to go around Whitehall, cap in hand, trying to put together an offer within existing budgets. The tragedy is that the reason those companies were looking at the UK in the first place was that we have great natural resources: huge potential for low-carbon fuel energy supplies, great industrial clusters, world-leading research and development, and great pools of highly skilled labour. But we just did not compete and we lost out on both investments.

Let me take another example, which we have already talked about: the semiconductor industry. The United States is securing multibillion dollar inward investments, as too are the Europeans. As my Committee concluded in its recent report, while we will never have end-to-end supply chains in the UK, we should be collaborating with our American and European allies to agree that the UK invests in the parts of the supply chain where we excel: chip design and advanced compound semi- conductors. Britain can play a crucial exporting role within a multinational supply chain. So when the Government take decisions to decline or unwind Chinese-linked investments, such as Newport Wafer Fab, they must follow through with finding new investment and new owners. Instead, we have a semiconductor strategy that is now even more delayed than it was already because, as it was reported, Ministers cannot decide who is going to announce it. Meanwhile, other countries are racing ahead of us.

It seems to me that we have Ministers stuck in the headlights of a changing world, convinced that the best thing to do is for the state to get out of the way and let the free market fix our problems, praying that someone, somewhere might find the sunlit uplands of post-Brexit Britain that Conservative Prime Minsters promised to deliver—while our competitors race ahead of us. The question, therefore, is what should we do about it? Beyond the obvious points of having a proper industrial policy, ideally a stable Government, a stable economy and a stable policy framework; beyond the obvious point that we continue to fail to highlight the importance and value of the service economy to our exports—we are the largest exporter of services in the world after the United States—and beyond the obvious point that we must improve our trade deal with the EU, what can we do that is new, global and in Britain’s interests?

We should be leading the debate about a new model of multilateral co-operation between democracies. We clearly already collaborate on defence matters, but what we define as critical supply chains or as critical national infrastructure, what we think resilient supply chains should look like to create economic security for our countries, and how we collaborate as allies and partners to show that democracies will continue to prevail over authoritarian regimes—those issues warrant a new partnership, a new model of multilateral working. It is in Britain’s interest to lead that debate and to play a central role in it.

Some will understandably say that there is a risk of decoupling the existing post-war institutional frameworks. My response is that this is already happening and that Britain can do little to stop it. That does not mean walking away from the UN, the World Trade Organisation or the G7—of course not. And it certainly does not mean Britain should play fast and loose in breach of agreed global rules. But it does mean that we must respond to lead and to influence what happens next.

If this Government had a real mission-led approach to the UK economy, we would see co-ordinated strategic action from No. 10, the Treasury, the Foreign Office, the Department for Business and Trade, the Department for Science, Innovation and Technology, and others. But we do not. We do not see that because the Prime Minister does not have an answer. He cannot tell us what our path to prosperity is, what he thinks our unique selling points as a country are, or how Britain will maintain its standing as one of the largest, most advanced economies on the planet.

I have had the good fortune, over the past few years, of being able to represent our Parliament in many countries. From Brussels to Washington, Sydney to Tokyo and elsewhere, I keep being asked, “Are you guys okay? What’s happening to the UK?” It is embarrassing and it must stop.