Baroness Mobarik
Main Page: Baroness Mobarik (Conservative - Life peer)
Lord Mendelsohn (Lab)
My Lords, I thank the noble Lord, Lord Leigh, and congratulate him on securing this debate, which has been very interesting. As ever, the noble Lord demonstrated his great commitment to this House with a very interesting exposition of his views. One illustration of the way in which the debate has changed matters is that, during the course of this debate, Belgium has backed the trade deal with Canada. Many things change quite slowly in life, but it seems that in the world of international trade things that might have taken years change very quickly. Perhaps it is the power of the conversation in this House.
I also congratulate the noble Lord, Lord Gadhia, on his maiden speech, which was a truly excellent speech. I was most impressed as he read out his list of mentors and sponsors. It started to appear that it was a new board of directors of a company. One could be mistaken for taking such a view, given his distinguished career—he is now with the great behemoth, the Blackstone Group. We look forward to his contributions in this House and wish him much enjoyment and strength here.
It is also a pleasure to have the noble Baroness, Lady Mobarik, here for the first time, I believe, in her role in the department—
Lord Mendelsohn
This is her first time speaking in a debate. The noble Baroness is very well-known. She performed hugely effectively as the president of the Scottish CBI and is well-known as a champion of SMEs and family businesses. We wish her well in responding to the debate.
It has been a very useful and broad debate. We have had a number of very interesting contributions—started by the noble Lord, Lord Leigh, but there were others such as the noble Baroness, Lady Finn—that showed great enthusiasm for our prospects. Those were sensibly tempered by the wise words of my noble friends Lord Haskel, Lord Davies and Lord Hunt, who have raised a number of the issues that we have to demonstrate. The noble Lord, Lord Livingston, also made a very important point about how difficult it is to export and how difficult some of these issues really are.
The noble Lord, Lord Horam, made a very good point about the fact that there can be losers in free trade, which is important for us to recognise. I also want to associate myself with a number of questions that the noble Baroness, Lady Kramer, made in an outstanding summary speech. They are questions on which we are looking for the Government to give as much guidance as they can in the weeks ahead.
There is a new department in town. We on these Benches welcome the elevation of international trade to departmental level. It reaffirms our commitment to ensuring that Britain is seen as a great place to do business and that British products and services continue to be considered of world standard; this must be not just a means to usher in a new deregulatory agenda that is not so much about free trade as about rolling back standards on rights and protections. The department really needs to make sure that it adds power to trade promotion and works properly for the interests of SMEs as well as big business.
So the question at this stage is: what has the department been busy doing? Well, a tweet from the Department for International Trade requesting British jams has caused a major stir on social media. The department tweeted:
“France needs high quality, innovative British jams & marmalades #EXportingisGREAT #ExportOpps”.
It is linked to an advert saying:
“A fine food representative/agent, with good connections to gourmet distribution and fine food retailers on a national level, is looking for British food & drink brands which offer innovative and high quality jams/marmalades”.
It seems, however, that a few people did not take the appeal entirely seriously, with some suggesting it was straight out of “The Thick of It”, and others questioning whether the account was supposed to be a parody. I will read out some of the tweets and responses. One said:
“Tell me more about these innovative jams. Are they wi-fi enabled? Future-proof? Self-spreading? What's the future of jam?”.
Another said:
“You do realise you’re a government department, don’t you? This is international trade, not an episode of Bake Off”.
I have some sympathy for the Government, whose overriding strategy has been defined by the result of a referendum that they neither wanted nor planned for—a referendum that was a rejection of the real and an affirmation of an aspiration. The Government will be respected for their desire to be honest on the size of the challenge and the breadth of the changes needed. They will set themselves up for failure if they do not.
Some will say that Brexit helps us focus on the world beyond Europe, as if this was a sudden or new revelation. The European Commission’s trade and investment strategy, written in 2015—in which we played a significant role—is explicit in saying that 90% of future global growth will take place outside Europe’s borders and a variety of tools will be needed to ensure that Europe continues to thrive. Indeed, it is not just about commerce but also the values that we ascribe to commercial activity: human rights, sustainable development, anti-corruption, high-quality regulation and effective investment in public services. While we may not have even triggered the first steps in leaving, let alone defined our trade relationship, it does seem obvious that Europe is likely to be our most important ally in what even its most ardent detractors describe as the UK returning to leadership in free trade, competition and property rights.
We are where we are, and I hope that the Government will not mind some constructive thoughts and reasonable questions. There is only one thing more painful than learning from experience, and that is not learning from experience.
First, we have to address some of the weaknesses in our trade performance. Published data show that the UK ranks almost at the bottom of OECD countries when it comes to export growth since 2010. In dollar value, in 2015—pre-Brexit—we were the fourth biggest exporter. I think that we are two places lower now, but irrespective of that we need to do more than just recover our position; we need to excel.
Our export growth depends on a variety of factors. One of the most significant is whether the markets we are looking to export to need the goods and services that we are offering. The markets in developing and fast-developing nations have a demand for raw materials and capital goods, which are not our strongest point. They will be harder to create significant trade with, and we must focus very carefully on where we prioritise.
But it is not just about the UK’s performance. Since the late 1990s, the UK and the G7 have been in decline, as competition from emerging markets has increased. Our performance, however, has not been as good as countries such as Sweden, the Netherlands and Austria, and a very few, such as Germany, have increased their share. We have to raise the number of exporters and exporting businesses. I think that the Government had a target of moving from 188,000 in 2010 to 288,000 by 2020. But actually we need to reach around half a million to have any possibility of increasing our capacity.
I would like to know whether the Government have a new strategy for developing trade, and whether the Minister can give us some idea of it. In particular, we need a real sense of what we are going to do about our performance on goods. The UK is, I think, the 10th largest, by dollar value, exporter of goods. Naturally, China, America, Germany, Japan and France are there; we are, I believe, behind Italy, the Netherlands, Hong Kong and South Korea.
The size of the manufacturing sector has declined, but we have a couple of lagging problems. For example, UK manufacturers import 60% of the final value of their production from overseas, which makes it very difficult for us to get the full value of the drop in sterling. In the US, 30% of the final value is from imports. In addition, UK manufacturers have contracted out their offshore manufacturing rather than buying or building factories. Between 2010 and 2014, German companies invested in 165 manufacturing and 54 logistics projects a year compared to the UK’s 29 and 10 respectively. For an effective trade strategy, we will need to support overseas investment and have more effective targeting of FDI. FDI has changed: net outflows exceed net inflows, and therefore too much of just asset purchasing is insufficient to help us.
We need to plan for how we can continue our world-class performance in services. We are the number-two global exporter, with China, Germany and Malaysia hot on our tail. To remain world-class, we will need to overcome some of the issues around the fact that a lot of our services are dependent on our expertise in Europe, and the problems of finding new markets. It is important that the Government devise a strategy for that.
The country has chosen a new and difficult challenge for us, which will require all our skill—and our agreement that our past differences should be set aside for the sake of our future. We cannot take our future success for granted. I am in business and I have learned that opportunity is usually disguised as hard work, so most people do not recognise it, and I am a strong believer that hard work beats talent when talent does not work hard. We have to be prepared to work hard, to make this situation work and at times to get it wrong—mistakes are proof that you are trying. But I caution the Government that, without direction, their mistake could be that they do not show that they are serious about trying.
Baroness Mobarik
My Lords, I am pleased to wind up for the Government in this debate. It is the first time I have done so for this department, as the noble Lord, Lord Mendelsohn, mentioned, and I thank him for his kind words of welcome.
First, I would like to say just how enjoyable I have found this debate. I thank my noble friend Lord Leigh for initiating it. The views that I have heard and the number of speakers at this debate have certainly emphasised the importance that noble Lords place on trade. I also congratulate my noble friend Lord Gadhia on making his inspiring and most moving maiden speech here today, and look forward to hearing more of his contributions. He was right to emphasise the benefits of free trade, as have many others during this debate.
Leaving the EU offers us an opportunity to forge a new role for ourselves in the world: to negotiate our own free trade agreements and to be a positive and powerful force for free trade. I thank noble Lords for their input in this debate, and will now address the points that have been raised.
As the Prime Minister has said, the UK will strike a unique agreement that gets the best deal for people at home and the right deal for Britain abroad. It is possible to be in a customs union and still strike trade deals. We will consider all options available to us. As we develop that position we will consider all the options, bearing in mind the issues that we have discussed here today: the need to regain more control of the numbers of people who come here from Europe, while allowing British companies to trade with the single market in goods and services. We recognise the need for a smooth transition which minimises disruption to our trading relationships, including those with developing countries. The Government have been engaging widely since the referendum and my noble friend Lord Price has met with more than 20 Trade Ministers, both inside and outside the EU. Everyone is keen to ensure a smooth transition for the UK.
Although we will work to avoid short-term disruption, there is one important change that we must make in the longer term: we need to change the terms of the debate around trade. As we leave the EU, we have an opportunity to be a global champion for free trade. We will develop our trading links and create opportunities for UK businesses across the world, including in developing nations. Trade with the UK will be a force for good. We will work with our missions overseas to promote the UK as a trading partner and a place to do business. We will drive inward investment and we will support our businesses and exporters. In time, we will also negotiate free trade agreements that will lower barriers to trade and create vital opportunities for UK businesses.
The UK is a full and founding member of the WTO. We are currently represented by the EU at the WTO—as my noble friend Lord Leigh notes, we are already a member. As my noble friend Lord Patten has said, the WTO director-general, Roberto Azevedo, said only yesterday:
“The UK is a member of the WTO today, it will continue to be a member tomorrow. There will be no discontinuity in membership”.
When we establish the UK’s position at the WTO as a post-EU member we will need to separate out our schedules of commitments, which are currently integrated into the schedule for the EU as a whole. We will do this in a way that causes the least disruption possible to our trading partners. In response to the noble Lord, Lord Haskel, while the simplest option would be to replicate the EU’s existing tariffs, we cannot set out our approach at this stage.
To deliver all this, the Government have been building our capability rapidly. The trade policy team has more than doubled in size since the referendum. We are looking at models from around the world to inform our resourcing requirements and the most effective way for us to pursue trade negotiations. The overseas visits that DfIT Ministers have been carrying out over recent months have given us great insight into the way that other countries structure their trade departments. We are ensuring that we have the expertise to deal with specific sectors, as well as the right in-country knowledge, to prepare us fully for the time when we will need trade negotiators. Over time, we will be putting trade negotiators in place. My noble friend Lord Patten raised the need for external help in our negotiations; we have already had more than 800 expressions of interest from external parties, which we will consider carefully. My noble friend Lord Popat mentioned appointing those with a business background to overseas posts and I thank him for raising this important point—the business ambassador network of key business and academic leaders acts as a powerful advocate of the UK abroad.
It is important to remember that UK companies are still exporting and doing deals abroad. The Department for International Trade is continuing to support them with advice, marketing support, trade missions, expertise on foreign markets, and more. Britain will continue to press for an ambitious EU trade agenda, including forging ambitious free trade agreements with major trading partners. We will continue to participate fully in these discussions for as long as we are members of the EU. In response to the noble Lord, Lord Davies, on his point that the UK is walking away from existing EU deals, the Department for International Trade is looking at a range of options for the transitional adoption of EU deals. The UK remains committed to pursuing free trade and continued access to existing EU free trade agreements. So this may be an option we wish to pursue—it would be assessed on a case-by-case basis.
However, as we leave the EU, we will also forge our own new trade deals. The UK is keen to seize the opportunities that leaving the EU presents, as are many of our international partners who recognise the attractiveness of doing business with the UK. We will have discussions with countries on the potential for future free trade agreements. There are limits in terms of concluding deals while we remain a member of the EU, however, and we recognise those constraints. The Government will be holding discussions and making progress in the period before we leave the EU. The noble Lord, Lord Razzall, asked how long it would take to negotiate trade deals with different countries. Trade agreements vary in shape, scope and form and, therefore, there is no average timeframe for a deal. For example, the Trans-Pacific Partnership Agreement—TPP—took eight years, but the US-Jordan FTA negotiations took only four months. The process is complex and it would be wrong to set out timelines before entering into negotiations. We want to get the best deal for Britain. We have already received positive signals from a number of other countries and the Government have already announced the establishment of a bilateral trade working group with Australia and a bilateral trade policy dialogue with New Zealand. In addition to this activity, the leaders of countries including Mexico, South Korea and Singapore have said that they would welcome talks on removing the barriers to trade between our countries.
As many noble Lords have recognised, one of the advantages of leaving the EU is the greater flexibility it offers us to trade more freely with the rest of the world. My noble friend Lord Flight spoke of the importance of increasing trade with the Commonwealth, an issue on which I too have spoken before. Shared systems and language mean that the cost of trade between Commonwealth countries is already estimated to be 19% lower than that with non-Commonwealth countries. There are enormous opportunities for increasing trade with the Commonwealth, which is a priority for the UK. We are committed to helping the Commonwealth unlock its vast potential in this area.
We also want to promote free trade by making sure that our regulatory environment helps businesses and workers. We are committed to reducing regulatory barriers to trade and will continue to give our strong support for further WTO action to reduce and eradicate non-tariff barriers. With a reduction in tariffs in many advanced economies, tackling non-tariff barriers is increasingly important. We will work with trade partners to minimise the regulatory burden placed on exporters, where appropriate, by developing mutual recognition agreements and economic partnership agreements. We will also work within the WTO to build on its successful work in taking an axe to red tape across borders, phasing out distortive export subsidies, and scrapping tariffs. My noble friend Lord Caithness mentioned investor state dispute settlement; the UK has a great record of creating the right environment for investors and treating them fairly. 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 claims affected the Government’s legislative programme. But many UK investors overseas who have suffered discrimination, expropriation and lack of due legal process have relied on investor state dispute settlements.
Noble Lords will be aware that the Government are developing an industrial strategy that will put the United Kingdom in a strong position for the long-term future. This strategy will focus on improving productivity and rewarding hard-working people with higher wages. It will focus on creating more opportunities for young people and will ensure the benefits of growth are shared across cities and regions up and down the country. As my noble friends Lord Tugendhat and Lord Lupton highlighted, the industrial strategy must ensure that the economy delivers for all and not just the privileged few. The strategy will support and encourage companies to trade internationally, and create a business environment that will attract overseas investors to locate here for the long term. On top of all this, the strategy will identify and maximise the opportunities that we have from exiting the European Union, which we have discussed in such depth today.
The noble Lord, Lord Shipley, asked how we promote exports locally and whether the Department for International Trade is reducing funding to regions. The department supports all areas of the country. Support to the north and the Midlands has been up-weighted because overall economic indicators of prosperity are lower for those areas than for London and the south. Department for International Trade support continues to be available from international trade advisers in all English regions. This support is more sharply focused than ever on new exporters.
In response to the point made by the noble Lord, Lord Sterling, may I say that increasing opportunities is hugely important for SMEs. Small businesses account for more than 99% of private businesses in the UK, employ more than 15 million people, and generate nearly half of all private sector turnover. They play a vital role in the economy and in global trade. The Government will continue to support them, from working to reduce tariffs that hinder exports, to making sure that 95% of UK premises will have superfast broadband by 2017.
Another important question we must continue to consider as we leave the EU is how we can support developing countries. Countries to which we are providing aid today will be the markets that we can trade with tomorrow. The UK remains committed to ensuring that developing countries can reduce poverty through trading opportunities. Trade is an effective way of driving economic growth, and of helping to raise incomes and create jobs.
In answer to the question asked by my noble friend Lord Farmer about the role of DfID in terms of free trade with poorer countries, I can say that the UK’s aid programmes are tackling the domestic constraints in developing countries, reducing the costs of trade, integrating firms in poor countries into global value chains and improving the investment climate. DfID is committed to ensuring value for money and maximising the impact of UK aid on poorer people’s lives.
I thank noble Lords for their contributions over the course of this debate. Many valid points have been raised—for example, on international students’ ability to come to the UK; I think it was the noble Baroness, Lady Smith, who raised that point. I shall take those comments back to raise with the relevant departments and get back to her.
Noble Lords’ expertise will be invaluable to the Government on this most important of issues. I am sure that there will be many further opportunities to debate the subject of leaving the EU, and the trade opportunities which that brings to the UK. And I am sure that the House will continue to play an invaluable role in informing the Government on these issues.