European Union (Definition of Treaties) (Canada Trade Agreement) Order 2018

Baroness Fairhead Excerpts

Monday 25th June 2018 Lords Chamber

Moved by

[Baroness Fairhead]

That the draft Order laid before the House on 21 May be approved.

[The Minister of State, Department for International Trade (Baroness Fairhead) (Con)]

My Lords, this order designates the EU-Canada Comprehensive Economic and Trade Agreement, or CETA, as an EU treaty pursuant to Section 1(3) of the European Communities Act 1972. This is a necessary step towards UK ratification of the agreement and part of the process to be followed in laying the treaty before Parliament for 21 days as set out in CRaG, the Constitutional Reform and Governance Act 2010. I am delighted that we have the opportunity to debate this agreement. It follows on from the thorough and constructive debate last year in the other place and the overwhelming support shown in a deferred Division. I very much hope that your Lordships will also agree to support this ambitious and progressive FTA today, and that the other place will again support the agreement when it is debated there tomorrow.

This Government are clear that CETA is a good deal for Europe and a good deal for the UK. Our total trade with Canada stood at £16.5 billion last year, up 6.4% on the previous year, and with a services surplus of £1.9 billion. CETA will improve on this already strong economic partnership. The agreement has the potential to boost our GDP by hundreds of millions of pounds a year: it will bring down trade costs by reducing burdens in the form of both tariffs and procedures; it will boost trade and investment; it will promote jobs and growth; and it will increase our ability to access Canadian goods, services and procurement markets to the benefit of a wide range of UK businesses and consumers. Canada is an important strategic partner too: as one of the Five Eyes group and a member of NATO, the Commonwealth, the G7 and the G20, we have bonds that go far beyond just our trading relationship.

As this House will know, CETA was provisionally applied in September last year, removing 98% of the tariffs previously faced by UK businesses at the Canadian border. Already, UK firms are benefiting from this. We have seen drinks exporters such as Dorset’s Black Cow Vodka and Kent-based sparkling wine producer Hush Heath Estate improve their market access and profitability following the reductions in tariff and non-tariff barriers. We are seeing new UK exporters to Canada, including Seedlip, the world’s first distilled non-alcoholic spirit. Under the agreement, Seedlip does not pay the 11% pre-CETA tariff on its product. Yorkshire-based Moordale Foods entered the Canadian market in March 2017, helped by CETA duty elimination. In services, the UK and Canadian architect bodies, ACE and CALA, have notified the EU Commission that they are in discussions on future mutual recognition.

In September last year, during her visit to Canada, my right honourable friend the Prime Minister and Prime Minister Trudeau reiterated their intention to seek to swiftly and seamlessly transition CETA to a UK-Canada deal once the UK has left the EU. To ensure as seamless a transition as possible, they formally announced a working group to take this forward. Officials from our two countries have already begun to meet to discuss transitioning CETA. It is important as a first step that we prevent a cliff edge for British and Canadian businesses. Of course, while we remain in the EU we continue to support the EU’s ambitious trade agenda. Free trade is not a zero-sum game, but rather a win-win. Ratifying CETA will send a strong message about our determination to champion the cause of free trade. This is a key part of the Government’s vision of delivering a prosperous and truly global Britain as we leave the EU. It is important to the UK that CETA is ratified successfully by all EU member states.

During the implementation period, the United Kingdom will retain access to EU free trade agreements but we will also be able to negotiate, sign and ratify new UK-only free trade agreements for the first time in more than 40 years. In doing so, we will safeguard the benefits already achieved in CETA for UK businesses and consumers and lay a foundation for an even stronger relationship.

Those areas of the agreement that were not provisionally applied in 2017 include a large part of the chapter on investment, including the new investment court system, on which there has been extensive discussion both in Parliament and in wider civil society. The UK supports the principle of investment protection and looks forward to engaging further with the Commission on the technical detail of the investment court system. We support the objectives of obtaining fair outcomes of claims, high ethical standards for arbitrators and increased transparency of tribunal hearings. Investment protection provisions protect investors from discriminatory or unfair treatment by a state. They apply only to investments in place, not to speculative future investments. We have more than 90 such agreements in place with other countries and there has never been a successful investor-state dispute settlement claim brought against the UK, nor has the threat of potential claims affected the Government’s legislative programme. Moreover, the agreement provides that member states should not reduce their labour and environmental standards to encourage trade and investment, ensuring that our high standards are not affected by this agreement.

Nothing in CETA prevents the UK regulating in the pursuit of legitimate public policy objectives—and that, of course, includes the NHS. The Government have been absolutely clear that protecting the NHS is of the utmost importance for the UK. The delivery of public health services is safeguarded in the trade in services aspects of all EU FTAs, including CETA. The UK Government will continue to ensure that decisions about public services are made by the UK and not our trading partners. This is a fundamental principle of our current and future trade policy.

On scrutiny, we have committed, through our White Paper published last year, that we will ensure appropriate parliamentary scrutiny of trade agreements as we move ahead with our independent trade policy. The Government can guarantee that Parliament will have a crucial role to play in the scrutiny and ratification of the UK’s future trade agreements and we will bring forward proposals in due course.

I welcome the opportunity to make the case for CETA today and to give the opportunity for full scrutiny of this important agreement, as the Government have done for previous EU free trade agreements. I look forward to hearing noble Lords’ contributions. I beg to move.

[Lord Whitty (Lab)]

My Lords, I certainly do not wish to oppose an agreement with Canada in this way but I have a number of questions—to some extent the noble Baroness has anticipated me—for two reasons. First, the Government have made it clear that on the one hand they regard CETA as a template for future UK-third party agreements around the world post Brexit and, on the other, they intend that CETA will be rolled over post Brexit into a UK-Canada free trade agreement. Both of those may or may not happen, but two slightly troubling points arise.

My second reason for raising this is the same as I gave in a slightly rambling intervention in a debate initiated last Thursday by the noble Baroness, Lady McIntosh of Pickering. The proponents of free trade, among whom I include myself, need to recognise that there is a negative political reaction in many countries around the world to the prospect of greater free trade. We have seen this in Britain in terms of the Brexit vote, in my opinion, and of course very strongly in America, which has effectively stymied the G7 from making a step change in terms of multilateral free trade around the world. Given that political difficulty, it is important that key sections of our population do not regard the extension of free trade as a threat to their security or to their position.

--- Later in debate ---

[Baroness Fairhead]

I thank noble Lords for their contributions today in what has been an interesting debate on CETA. They have talked about the benefits of CETA and free trade agreements. I recognise the concerns, which I shall come on to, but I am happy to hear the enthusiasm about there being shares for free trade based on rules, with some of the requirements to uphold standards that the noble Lords, Lord Fox and Lord Stevenson, focused on. I will touch on as many of these points as I can in the moments that I have.

The numbers that I have on our current trade and investment are that our exports are £9 billion and our imports are £7.5 billion. From my information, we have a slight deficit of £265 million on the goods side but a trade surplus of £1.9 billion on our services side. I am also happy to say that CETA includes services but possibly not as many as we had hoped at the beginning of the process. However, there are new opportunities in areas such as telecoms, finance, professional and environmental services. It will also allow UK firms to bid for a much broader range of Canadian public services, once Canada decides to open them up for such bids. Except of course for the public services, we will try to ensure that CETA guarantees the existing services’ liberalisation. There are some ways of helping SMEs, particularly on the processes. There are rapid ways of processing below €6,000. There is also a certification where you just have to put your name forward, and HMRC has pre-certified around 12,000 of those.

I turn to the future trading relationship with Canada. As I said, we will begin to transition CETA into a UK deal once the UK has left the EU, following a clear commitment. We believe that is important because it will prevent the cliff edge and, while we remain in the EU, we will continue to support the ambitious trade agenda of the EU. This provision was undertaken within that agenda, so it will ensure that during the implementation period we retain full access to CETA and other EU FTAs. An independent trade policy will allow us to be more ambitious, particularly in services.

I believe it was the noble Lord, Lord Fox, who asked me what would happen if the treaty was not ratified by all member states. I apologise; it was the noble Lord, Lord Stevenson. We expect ratification to take a number of years. We have noted Italy’s current position and will seek to ensure that everybody ratifies it. As it is currently provisionally applied, that will continue and we will be able to transition on that basis. It does not require such ratification for us to ratify it ourselves and transition that deal.

A number of noble Lords discussed ICS. Let me be clear that neither ICS nor any other investors’ dispute resolution can force the privatisation of public services. We alone retain the right to regulate. None of these tribunals can overturn Parliament or laws, as has sometimes been claimed. If I may deal with ICS first, there was a question about whether we are in front of the ECJ tomorrow. The answer I have is that we are not on that issue. However, we are aware of the concerns that some parties have with the proposed ICS. We believe in investor protection only where they are treated unfairly or with discrimination. ICS is part of this CETA but in looking at the future, we will look at a number of options of which ICS is one. There are others, which we will bring forward to the House. To be clear, the practical details of ICS have not currently been fully worked through by the Commission but it has committed to consult fully when that has happened.

The noble Lord, Lord Stevenson, and my noble friend Lady McIntosh asked about the scrutiny process. There is an impact assessment that we have made public, and I will write to noble Lords to give them exact details of how to access it. We are working to make sure that in future the process of negotiating and implementing new trade deals is transparent, efficient and effective because we want a legislative framework that will enable future trade agreements to move quickly from agreement to ratification while supporting due processes for full parliamentary scrutiny. We are currently considering the legislative framework, but Parliament will have a crucial role to play in the scrutiny and ratification of future trade agreements and deals. The Government will bring forward those proposals in due course.

The EU has high labour and environmental standards. They are not affected by CETA, and we sign up to them with CETA. The agreements provide that member states should not reduce their standards to encourage trade and investment. I think that is important. We are determined not to compromise food safety or the environment or to reduce labour standards in pursuit of trade agreements. We will be rolling over all the current agreements when we transition CETA into a direct UK-Canada deal. The noble Lord, Lord Whitty, made a serious point about enforcement. We are looking at ways to improve compliance and enforcement. That remains something we are actively working on.

On the economic benefit figures, I referred noble Lords to the impact assessment. We have looked at impacts in a number of sectors. The total benefit to the UK is expected to be more than £730 million. The sectors that are likely to benefit the most are motor services and financial services. We see increases of £280 million and £70 million respectively. Detailed work has been done, so I would not like to believe it does not exist.

The noble Lord, Lord Stevenson, referred to geographical indicators. We expect CETA to be positive for UK agriculture. We have been in consultation and were in consultation when the geographical indicators were discussed. We think CETA is positive. It gives access to a market of 35 million people. The protected food names scheme remains in place in the EU. It is true that no UK GIs were included in CETA. That was because there was a process within the EU that it had to reach a certain hurdle. We consulted widely with groups and none of them at the time went above the hurdle that was eventually decided upon by the Commission. However, there is a mechanism to add new GIs in future, which I think will be actively pursued by a number of states. I know that a number of people have raised the question of Scotch whisky outside this House. It is not included because it is already protected. It has been formally registered in Canada since 1998, and it is also protected by the EU-Canada wine and spirits agreement.

I have tried to answer as many of noble Lords’ questions as I could in the time available. I recognise their concerns; we are working on a number of them and developing our strategy for the future. I realise that their concerns are heartfelt, and we will be working with noble Lords on that. However, I believe that this is a good deal for UK businesses—SMEs as well as larger businesses—and for consumers, and in our national interest to ratify this agreement.

I thank noble Lords for our debate today and hope that they will feel able to support the ratification and the positive signs that it will send to our future trading partners. I commend the order.

Motion agreed.