Trade Negotiations

Baroness Gustafsson Excerpts

Tuesday 13th May 2025 Lords Chamber

[Lord Purvis of Tweed (LD)]

My Lords, I look forward to the Minister answering my question from yesterday, as referenced by the noble Lord.

I wish to refer exclusively to the India agreement. We have debated in this House on a number of occasions UK-India trade, and on those occasions I have rehearsed the long-standing position on these Benches that free trade is part of our party’s DNA as a political movement. We believe fundamentally that free trade benefits consumers and businesses alike, and, combined with the means by which it is fair trade and inclusive, that it can be beneficial for wider policy ambitions on climate, sustainability, social justice and the reduction of poverty. These are the parameters by which we will judge any agreement that this Government sign with other Governments, as they were for the previous Administration, and specifically on the agreement with India.

We start from the position that we wish this agreement and the Government well in ensuring that it is the basis upon which India trade can develop. This is a complex time in international trade, as it is buffeted by policies and chaotic uncertainty from the United States. The fact that India has now signed an agreement with the UK, and that on Monday the second round of negotiations on an FTA between India and the European Union began, shows those of us who believe in widening free trade around the world that we need to redouble our efforts to reinforce the global trading environment and the rules upon which it is based.

The India agreement has been launched with a high degree of boosterism, last seen under the Boris Johnson Administration, and of course we would be a world leader in trade if press release assertion was a commodity. The Government say that we have a series of anticipated benefits as a result of this agreement. No doubt the Minister will rehearse some of those in her reply. However, looking carefully at the Government’s technical papers and not the press release, we can see that the cash figures of potential GDP growth, which she may quote in a moment, are purely a mathematical extrapolation of potential global trade in 2040, which the Government have then converted into pounds sterling, taking a starting point of 2023. This does not take into account the Trump Administration’s disruption of global trade. Therefore, all the cash figures that are presented are purely illustrative.

The technical papers also helpfully suggest that the Government made a policy decision to round up to 0.1% for the growth figures. Rounding up to 0.1% highlights that there will probably be modest results. Furthermore, very deep in the Government’s papers is that, to get their very ambitious figures on UK trade growth, the Government have taken the starting point as the baseline of 2019, which does not take into consideration the pandemic, the Ukraine war and the Trump supply chain issues. So they start at a high point in order to get higher. We do not necessarily oppose the agreement in principle, but we look at it from perhaps a more realistic and sober perspective. The issue then becomes how we will support our businesses to take advantage of the new market access arrangements.

According to the United Nations data figures, India has seen its exports rise over the last 10 years by 13.2%. This is an export market which the UK consumer wishes to benefit from. UK exports over the same time have expanded by only 5.1%. This is marginal growth over a decade, so it is right that we want to be part of a growing market. However, the European Union export growth has expanded by over 9.5% over the same period, nearly double the UK rate. We now have barriers erected, additional costs and more bureaucracy with the European Union, and we are trying to reduce them for India. So the fundamental issue is not that we have a tariff agreement but how British businesses will see the Indian market as barrier-free, open and accessible across all states, and reliable under the rule of law, with less corruption, more transparency—so that we trade more—and businesses supported more to access the market, which this agreement theoretically facilitates. What are the practical steps of actively supporting businesses that will take advantage of this agreement?

Because there is little reference so far in what the Government have said, can the Minister confirm that the agreement will include a human rights chapter, with clearly articulated mechanisms to address human rights supply chain concerns that have been raised in this House on a number of occasions, including by myself—for example, on broadcasting and civil liberties. If there is to be market access on digital, media and broadcasting, are we ensuring that it is reciprocated and that the restrictions that have been put in place for media have been lifted? Can the Minister confirm that there will be a climate chapter in the agreement that demonstrates that this agreement reduces emissions rather than contributes? On Monday, India and the EU announced their intent for an agreement by the end of the fourth quarter this year. Whether this happens is out of the Government’s hands—I completely understand that—but any comparative advantage that we are likely to have as a result of this agreement is likely to be impacted if there is an agreement between India and the European Union. On rules of origin and other areas of standards, how will we triangulate between India and EU trade?

Finally, I will ask the Minister about potential trade diversion and preference erosion as a result of this agreement. The House is well aware that I look for all the juicy details of these agreements in annexes, and typically on every page after page 200. In the previous Government’s scoping document, annex 9 of the technical paper showed that, with all the likely potential trade benefits for the UK of over £5 billion, which is very similar to this Government’s estimate, it is likely that there will be trade preference and trade erosion of over £3.25 billion.

What does that mean? It means that we must discount all of the benefits from the India agreement with the diversion of trade and the preference erosion from other countries—primarily Bangladesh, Pakistan, Kenya, Senegal, Ghana, Indonesia, the Philippines and Jamaica. For Bangladesh alone, the previous Government estimated that the trade erosion would be £1.5 billion less trade with the UK. So I hope the Government will have an impact assessment clearly articulating the likely trade erosion and trade preference. Will there be primary legislation as a result of this, what will be the extent of it and when are we likely to see it?

[The Minister of State, Department for Business and Trade and HM Treasury (Baroness Gustafsson) (Lab)]

My Lords, I thank the noble Lords for their questions and responses to the Minister of Trade’s policy Statement. It is lovely to see the full support for trade that we all share. I am happy to answer the questions, but, before I do, I will take a step back and quickly consider the agreement that we are due to discuss in context.

Fundamentally, as the noble Lord, Lord Purvis, said, the UK is a trading nation. The reality is deeply rooted in our DNA and that remains true to this day. Stronger trade ties with our partners around the world and championing free, fair and open trade delivers back here at home, generating growth, boosting wages and supporting jobs in every corner of the UK. It is this attitude and openness to trade that has helped cement the UK’s global reputation as being open for business and a home to iconic brands that are sought after all over the world. That is why we have always been clear-eyed in pursuing a deal with India, one of the fastest-growing economies in the world. Despite the strong ties connecting our two nations, not least through our people-to-people connections, there has always been room to strengthen our economic connections.

The deal we have does just that. This is a modern and comprehensive agreement that will increase UK GDP by £4.8 billion in the long run. Our bilateral trade, which is already £43 billion, will increase by £25.5 billion, £15.7 billion of which is expected to be UK exports. India has agreed that, from the first day this deal enters into force, it will cut tariffs worth £400 million on UK goods, a number that will jump to £900 million after 10 years. We have unlocked unprecedented access to India’s procurement market, giving UK companies access to 40,000 tenders worth £38 billion. New commitments of customs and digital trade will make it quicker, cheaper and easier to trade with India than ever before.

I hear the challenge about how those spreadsheets work and the models that sit behind them, and whether we are being optimistic. These are very realistic and measured, but ultimately an approximation of the benefit that this opportunity will bring us. It is also not a limit. We do still have the opportunity to benefit above and beyond the numbers that we have stated. I assure your Lordships that this is based on the modelling of worldwide standards but, at the signing of that trade deal, a full impact assessment will also be published to give noble Lords a little bit more small print to crawl through as well, which I know they will enjoy.

We have locked in access for our service companies, promoted stronger ties in a variety of areas—from innovation to gender to anti-corruption—and, most crucially, we have provided businesses with a certainty in a time when it is dearly lacking. I welcome the support that this deal has already had from across the House and from those who have recognised this for what it is, a landmark agreement with one of the most exciting and dynamic economies in the world.

I have also been warmed by the support from the businesses that will be using this deal, including the British Chambers of Commerce, the Institute of Directors, the Confederation of British Industry, the Scotch Whisky Association, the National Farmers’ Union, the Food & Drink Federation, techUK, Small Business Britain, the Premier League, Standard Chartered, Smith & Nephew, Coltraco and more.

I want to address the double contributions convention, which we have agreed to negotiate and implement in parallel with this free trade agreement. There has been much speculation, and indeed misinformation, regarding this element of the agreement. To set the record straight, this is a reciprocal agreement which is designed to prevent the double payment of social security contributions for a specific group of workers known as “detached workers”, who are sent by their employers on a temporary basis and whose long-term jobs are based in their original country. These agreements are for the benefit of both countries. The UK has agreed numerous DCCs over recent years, including with Iceland, Norway and Liechtenstein in 2023, Switzerland in 2021, the EU in 2020 and Chile in 2012.

There has been speculation this will make it cheaper for UK employers to hire temporary Indian workers than it is to hire British workers. This is not true. This applies only to Indian workers who are sent by their employers based in India to work temporarily in the UK for up to three years. There have also been claims that this agreement undercuts UK workers. In fact, the double contributions convention supports UK workers, particularly those in our world-class service sector. As a whole, this agreement will boost wages in the UK by £2.2 billion, putting money into the pockets of working people right across the country.

I am well aware that many in this House will rightly be keen to understand the intricacies of this agreement and have a keen eye for detail. We have already published the summary document, which includes a brief overview of every chapter within the agreement. My officials are working at pace to prepare the legal treaty, which will be available once the agreement is ready to be signed. As with any free trade agreement, parliamentarians will have ample opportunity to scrutinise the deal, which is subject to the usual ratification procedures under the Constitutional Reform and Governance Act 2010. The double contributions convention will also be scrutinised by Parliament via the standard processes outlined in the CRaG Act. Any legislative changes required will be scrutinised and passed by Parliament in the usual ways before ratification.

I hear the challenge about the human rights record. The UK is a leading advocate for human rights around the world, and we remain committed to the promotion of universal human rights. Where we have concerns, they are raised directly with the Government of India, including at ministerial level. This has been undertaken separately to these trade negotiations, although they are part of building open and trusting relationships with important partners. The avenue to communal trade supports our ability to influence in these matters far more greatly.

There was also a question about whether we are eroding trade and how that will be received. We set out further information on the trade diversion impacts of this agreement in our impact assessment. This free trade agreement will include India’s first ever trade and development chapter in an FTA. Both the UK and India will monitor the effects of the agreement on developing countries. To facilitate effective dialogue in this space, we will aim to share our research and understanding, and this will in turn help inform future development programmes and policies.

To conclude, as my colleague the Trade Minister rightfully outlined in the other place, this deal affords UK businesses certainty and stability during a time of global uncertainty and instability. It is a deal that will give British businesses access to one of our biggest markets abroad while raising wages and driving growth here at home.

[Lord Hannay of Chiswick (CB)]

My Lords, I thank the Minister for that account of the agreement with India and the deal with the United States. She said what the processes will be for the India deal with respect to this House—that the CRAG arrangements will be triggered—but she has not said anything about the deal with the United States. First, could she possibly reply to the question: what parliamentary scrutiny process will be applied to the deal with the United States? Secondly, could she say whether the United States deal is consistent with the UK’s MFN—most favoured nation—treatment under the General Agreement on Tariffs and Trade, and also whether the US agreement will fulfil the provisions of Article XXIV(6) of the GATT to give a waiver to any discrimination?

[Baroness Gustafsson (Lab)]

I thank the noble Lord for his question. I think he knows that yesterday I commented that I would follow up in writing with the specifics on that, and I will endeavour also to include the noble Lord in that response. As I commented yesterday, my parliamentary knowledge is thin but building, but it is not yet at Article XXIV of the GATT.

[Baroness Curran (Lab)]

I say to my noble friend the Minister that I warmly welcome this Statement, most particularly its emphasis on the negotiations with India in respect of the Scottish whisky industry and the benefits it will bring for that industry but also, more broadly, for the Scottish economy. Will my noble friend the Minister confirm that these negotiations will reduce tariffs on Scotch whisky from 150% to 75% at entry, moving to 40% after 10 years? Given that Labour’s team has succeeded in these negotiations where the previous Tory Government patently failed, does the Minister think it appropriate that the team should perhaps celebrate with a wee dram? If she needs any advice on what Scottish whiskies she could partake in, I am more than happy to provide that introduction.

[Baroness Gustafsson (Lab)]

That is wonderful to hear—a worthy celebration indeed. Of course, I am delighted that, as a result of this deal, Scotland will benefit from significant tariff liberalisation for a whole variety of its exports, which includes whisky, for which the current 150% tariff will reduce to 75% from day one of the deal, reaching just 40% after 10 years. The Scotch Whisky Association described the deal as

“a once in a generation deal and a landmark moment”

which is “transformational” for Scotch whisky exports.

[Lord Lansley (Con)]

My Lords, I know many of us who were on the International Agreements Committee at an earlier stage, when we were looking at the difficulties of negotiating a deal with India, realise that it is a significant achievement and very welcome. It is not, however, as comprehensive as we had hoped it might be. Positively, I am very glad to see the procurement opportunities that it offers. In that regard, access to procurement in India is very large scale, but we need something which is digitally available, a bit like our own Tenders Electronic Daily. Is there an expectation that small businesses will have access to those procurement opportunities through that kind of mechanism? Secondly, we had hoped, at one time, that we might—and it would be very significant—have an investor-state dispute settlement provision in the deal. I do not understand that there is such a thing, but are there any side letters about giving assurance to UK investors in India for the future? Regarding parliamentary scrutiny, the CRaG provisions will apply, but would the Minister reiterate what we call the “Grimstone rule”—that is, if our International Agreements Committee was to recommend that the deal should be debated by this House, that such a debate would take place before the Government proceeded to ratification?

[Baroness Gustafsson (Lab)]

On the investor treaty and how we are making sure that we get investor protections for people looking to invest across borders, the bilateral investment treaty is not included as part of this free trade agreement. That is the next stage in these agreements, and that will be followed up afterwards. It is not part of the free trade agreement, but those negotiations are still ongoing and will be part of future conversations. Forgive me: the noble Lord asked a second question; would he mind just repeating it?

[Lord Lansley (Con)]

The Grimstone rule is essentially that the Government commit that, if our International Agreements Committee said that the treaty should be debated by this House, that debate should take place before the Government proceed to ratification.

[Baroness Gustafsson (Lab)]

I will follow that up with the noble Lord.

[Baroness Hoey (Non-Afl)]

My Lords, the Minister will know that not all these trade deals apply to Northern Ireland. Yesterday in the other place, the Secretary of State for Business said basically that that was because of the Belfast/Good Friday agreement and the Windsor Framework and we had to protect the Belfast/Good Friday agreement. Could the Minister give me exact detail of where it says in the Belfast/Good Friday agreement that businesses in Northern Ireland should be treated differently and that we should be left under the European Union’s court and rules? Would the Minister perhaps accept that we are getting a little bit tired of the Good Friday/Belfast agreement being used in so many different ways?

[Baroness Gustafsson (Lab)]

I hear the noble Baroness’s frustration. We want businesses in Northern Ireland to be able to benefit from this to the fullest extent that they can, and that is absolutely what we expect here. Businesses in Northern Ireland, exporting their goods and services will benefit from this free trade agreement, just as businesses elsewhere within the United Kingdom will. Businesses exporting from Northern Ireland will therefore benefit from the free trade agreement with India, so this should be a good news story. When we think about businesses importing into Northern Ireland from India—India-originating goods entering Northern Ireland—they will do so under the terms of this free trade agreement provided that those goods are not at risk of entering the EU. This is where the Windsor Framework kicks in, making sure that, under the usual process of the Windsor Framework, that is protected. Businesses operating within Northern Ireland will benefit from the terms of the free trade agreement.

[The Lord Bishop of Manchester]

My Lords, I too welcome both trade agreements in recent weeks and congratulate His Majesty’s Government on achieving them. I know that in my diocese in Manchester, the large Indian diaspora community will be working hard to help British exports where they have improved opportunities.

I am not sure that the Minister quite answered the question from the Liberal Democrat Front Bench, with references to human rights and climate change. I want to widen that slightly with regard to the upcoming trade strategy that the Statement referred to and ask whether there is any ethical component to it? Will moral considerations play any part in negotiating the trade agreements, or is trade, in effect, an ethics-free zone?

[Baroness Gustafsson (Lab)]

On the environmental aspect, this is India’s first ever chapter on the environment within a free trade agreement and it goes further into this area than it has ever gone before. The agreement requires India to promote high and continually improving levels of environmental protection, reaffirms our joint commitment to the Paris agreement and strengthens environmental standards through non-derogation commitments. It is a big first step, but a free trade agreement cannot fix all environmental issues. Those are most effectively tackled when we work directly and closely with our partners through this international approach. Having a deal like this solidifies our relationship and provides much broader access and opportunity to exert that influence.

[Baroness Ritchie of Downpatrick (Lab)]

My Lords, I thank my noble friend the Minister for the Statement. I welcome this trade deal, and I, for one, welcome the Belfast/Good Friday agreement and the Windsor framework. I believe that we should avail ourselves of every opportunity to access trade opportunities wherever they may arise, whether in India, the EU or North America, notwithstanding certain, shall we say, threats that may be made. In light of a previous question, what discussions will be held with the Northern Ireland Executive about potential opportunities for trade between Northern Ireland and India to avail of every opportunity and our ability to access the UK internal market and the EU in terms of goods?

[Baroness Gustafsson (Lab)]

I thank my noble friend for that question. This free trade agreement presents a selection of opportunities for trade between India and Northern Ireland, but it is not the only one. We will be working closely with the devolved Governments to think about those opportunities and build on them collaboratively. In my particular area, investment, we are working closely with those Governments to understand what those trade and investment opportunities are and how we, as that central Government, amplify some of them. When I travel the world, I talk to investors and share opportunities not just within a mile’s radius of where we stand today but across the UK, so that benefit can be felt throughout.

[Baroness Falkner of Margravine (CB)]

My Lords—

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[Baroness Lawlor (Con)]

The Minister mentioned that Indian firms could send their employees to work here. Do the Government have any idea of the numbers involved? Will they put a cap on those numbers, bearing in mind the Prime Minister’s statement yesterday and that of the Home Secretary? What mechanisms will be in place to ensure that when the three years are over, those employees will return? The Minister mentioned that there was a worry, which she answered, that they would undercut British workers. What steps will be taken so that UK workers—local workers—can avail themselves of the opportunities of this deal by seeking employment with Indian firms?

[Baroness Gustafsson (Lab)]

To provide some reassurance, there is no change in the visa process. The points-based immigration system is not affected, so there is no change in the various routes for visa applications as a consequence of this deal. In those limited instances where detached workers are employed by an Indian company on a short-term contract within the UK, they will not be paying social security contributions in both situations. This will not in any way change the immigration policy around visa applications; that will be consistent with the current processes to ensure that any visas granted are applied and people are understood to be in the country legally. Where they are not, the procedures will be as normal.

[Baroness Falkner of Margravine (CB)]

My Lords, I declare an interest as chair of the Equality and Human Rights Commission, but I am speaking in a personal capacity today. I have not heard the Minister explain whether, in following the usual processes, the Government will publish a human rights assessment and the other impact assessments mentioned by the noble Lord, Lord Purvis of Tweed, in advance of the debate in this House. On a slightly different point, in the projections and the wonderful figures that her modelling paints for a future some decades out, have the Government taken into account the long-term impact of geostrategic instability in south Asia, which we are witnessing as we speak?

[Baroness Gustafsson (Lab)]

In terms of the process and the timing of the impact statement, negotiations have concluded so we are in the final stages to get the treaty signed; it will happen as quickly as possible— I hope in the coming months. There will be a process for CRaG, and it will be discussed at parliamentary level. A full impact statement will be released, as well as the full trade agreement, on signature, so that should be available shortly. The human rights aspect is subject to an ongoing conversation and will be dealt with separately.

[Lord Lilley (Con)]

I strongly support the free trade elements in this deal, and not just because it is a Brexit benefit, which I am sure the Minister welcomes. Given that the Indians strongly wanted to link immigration to this free trade deal, can she give us an assurance regarding the strange loophole in the intercompany transfer arrangements? Although not incentivised by the tax issues to which she referred, has there been a guarantee that it will continue? Has there been any change in the situation since the last published figures, which showed that two-thirds of all the inter- company transfers coming into the country came from the contractor route? That means that people are migrants, employed by a contractor and then supplied to British firms, and 97% of those come from India. The loophole seems to be geared to the needs of the Indian desire to export some of their people. Can the Minister confirm that no assurance has been given that this loophole will not be closed? The last available figures show 26,000 people coming from India in a single year.

[Baroness Gustafsson (Lab)]

I shall repeat some of the statements that I made earlier. We are not giving away more visas or creating new routes as part of the deal. Existing mobility routes have been expanded to cover additional sectors, so a broader number of sectors will now be considered for that mobility visa, but that does not necessarily change the quota. It is the same number of people accessing those facilities. The facilities have not changed; it is just that we will consider a broader range of sectors when considering those visa applications. To qualify for the routes, professionals must demonstrate that they meet strict criteria for professional experience and qualifications, consistent with the current process.

[Baroness Hoey (Non-Afl)]

My Lords, I know the Minister is honest and straightforward, as, of course, all noble Lords are, but would she like to state what it seems no other Government Minister wishes to state: that we would not be having this discussion or these deals if we had not left the European Union?

[Baroness Gustafsson (Lab)]

I try to be as honest and straightforward as I possibly can. I refer to the numbers that we talked about when we talked about modelling the numbers. There are a lot of what ifs and hows, but the reality is that we have to deal with the state of the world as it is today. That presents threats in some corners but opportunities in others. What was in front of us was the opportunity to build and expand our relationship with India in a way that supports both our nations, and that is an opportunity that we grabbed with both hands and made the most of.

[Lord Lilley (Con)]

I am grateful for the frank and open reply that the Minister gave to my question, which I actually found rather worrying. I had not realised that there were existing restrictions on the intracompany transfer route to particular sectors, and that that was going to be liberalised and widened to additional sectors. Could she possibly write to me, and put a copy of the letter in the Library, about what the extent was before, how wide it will be in future and some estimate of the extra migration into this country that is going to come? Was any account taken of that in the Statement on migration from the Home Secretary the other day?

--- Later in debate ---

[Baroness Gustafsson (Lab)]

I assure the noble Lord that that worry is unfounded and that the numbers will not change. I am happy to write to him to follow up on the sectors that will now be included.

[Baroness Lawlor (Con)]

Could the Minister write to me and let me know what numbers are involved in company transfers to this country as matters stand? Do we have any idea of the numbers that companies will want permission to send here?

[Baroness Gustafsson (Lab)]

I will be happy to write to the noble Baroness.