International Trade Opportunities

Baroness Stowell of Beeston Excerpts

Thursday 7th July 2016 Lords Chamber

[The Lord Privy Seal (Baroness Stowell of Beeston) (Con)]

My Lords, by all means leave the Chamber if you are on the way out, but may I ask those exiting to do so quietly? My noble friend is trying to introduce this debate, but if anyone wants to leave now and go that way—do they want to go now?—they can do so while I am talking. I encourage my noble friend to start again.

[Baroness Mobarik]

My Lords, during the past few weeks, our focus has been on the EU referendum of 23 June and the result to leave after 42 years of membership. We are clearly entering a period of very significant change in the UK economy and in commercial relations between us and the EU. There is rightly a great deal of concern, as there is such a substantial degree of integration between the UK and EU economies. These cannot be disentangled overnight, and nor should they be. It is imperative that we maintain our access to the single market and that we negotiate the best trade relationships with the EU. I have every confidence that my colleagues will lead Brexit discussions to protect and enhance our trading position with the EU.

What we must not allow is a state of paralysis as we try to extricate ourselves from the EU and its institutions, and we must not ignore the absolutely crucial need to develop business opportunities with the rest of the world. If we accept that the degree of access to the single market may affect the types of agreements that can be negotiated elsewhere, the task has to start now—and simultaneously with the Brexit negotiations. While many of us may have serious misgivings and concerns about the impact of the referendum result, there is a general consensus that going it alone has one obvious plus: it allows us to be nimble and flexible. After all, it is one of the reasons that so many voted for an exit from the European Union. We now need proactive engagement with the rest of the world. It will by no means be from a standing start but we have to work to make it greater.

It may be useful to remember that the highly developed markets of the US and the EU have relatively slower growth than the emerging markets. We have of course been aware for some time that the world’s centre of gravity has been shifting eastwards and that building trade links with emerging markets is essential. In recent years, we have witnessed closer economic ties between Britain and China; the Chancellor’s support for the Asian Infrastructure Investment Bank illustrates this well. China has a maturing economy that is ripe for the services and luxury goods that are Britain’s strengths, but certain markets have been ignored to a large extent in the past. We must now take the opportunities wherever they are to enhance our relationships, and in particular to re-engage with the Commonwealth, where we already have such strong historical ties and a special relationship, which we have not taken advantage of fully.

The Commonwealth accounts for around 10% of UK trade; that has remained stable over the last decade. Among the Commonwealth countries, Australia, India, Canada, Singapore and South Africa are the largest of the trading partners. However, with the Commonwealth we are provided with a spectrum of economies at various stages of growth, from the developed and advanced economies of Australia and Canada all the way to some of the fledgling economies in Africa that really need support. In between, there is the exciting frontier of fast-emerging and fast-growing economies, such as those of India, Pakistan and Bangladesh.

IMF reports show that the developing and emerging economies’ share of global GDP has increased to 55.1%. I suggest that we require much more additional resource to establish proactive and dedicated campaign teams for particular regions—essentially, a task force working with existing departments and institutions to strengthen our commercial trade and business links with countries outside the EU. These campaign teams should be results-driven and run like a business. Unusual times and circumstances mean that we have to think out of the box—so we should have fewer reports and more action.

This is not to say that business organisations have not already been working hard in seeking global markets, but, by being liberated from the constraints that the EU inevitably presents as it seeks to balance the needs of its many members, the UK should be able to be more targeted in developing these commercial relationships through a highly tailored approach by country, region and sector.

I must acknowledge the work of the Foreign and Commonwealth Office through its embassies, high commissions and consulates that do such a fine job in building trade relations—but they have to be strengthened, as does UKTI. For example, one Commonwealth country in which I have an interest, as the Prime Minister’s trade champion in Pakistan, has huge potential yet there is not even one person at UKTI dedicated to developing business with it. I had the honour of representing the UK Government in Karachi last October when, for the first time, it held one of the Great British Festival events that promotes the Great Britain brand. The very small and dedicated team at the consulate had done a great job but we need to do so much more for a market which has been given emerging status and has a population of 200 million people, the vast majority under the age of 30. Although I am keenly aware that issues such as security have been an impediment to this potential trade, the arguments for engaging with this market are now too many to ignore. Apart from its significant population, its vast natural resources and a growing middle class with purchasing power are key attributes.

I hope that noble Lords will bear with me if they have heard this before, as I have previously highlighted these points and opportunities in another debate, but it is important to remind noble Lords that the Chinese investment of $42 billion in an economic corridor—a network of roads, railways and pipelines to transport oil and gas—enables China to develop a cheaper and shorter route to trade and investment with the Middle East, Africa and Europe. It links China, all the way through Pakistan, to the port of Gwadar on the Arabian Sea. According to analysts, it will place Pakistan at the heart of four out of the five fastest trade flows in the world. The UK has the potential to engage there in a number of areas: in energy, infrastructure, agriculture, dairy and of course education, which is key to building a skilled workforce for this emerging economy.

Pakistan is a good example of somewhere with which we already have some business links but where there is lots of room for growth. Preconceptions about security, corruption and the difficulty of doing business —in Pakistan in particular but non-western countries in general—need to be challenged, with a more realistic appraisal provided by trade organisations and the FCO. One thing that can help, and where we are well placed to deliver effectively, is our capacity-building skills and consultancy generally. These emerging economies are crying out for this. Education, which I have mentioned, is another area of expertise where we could be doing so much more across the emerging economies of the Commonwealth. High-value engineering, fashion retail—where we are possible world leaders—and of course financial services, which probably deserves a whole debate in itself, are all areas within our capacity.

But while we scope out our strategy for the future and where we want to be 10 years hence, we must also ensure that our teams pursue policies that will provide a future for those left behind in society, in particular by developing our manufacturing base. It is about being outward-looking, and engaging globally—but that means looking to home, and building and supporting businesses here. The last two days of debate on the outcome of the EU referendum have highlighted the concerns of many noble Lords that we have real issues of inequality and disparity in our society. So this must be a time for collective thinking—for creative thinking.

It is the small and new businesses which continue to revolutionise the economy of this country. The talents of people from all regions of the United Kingdom—from the north of Scotland all the way to the most southern regions of England and Wales and Northern Ireland—will take us forward. If we want to export, we have to make things. We must increase and expand our manufacturing base and output. The very substantial regional and generational inequalities have to be tackled, and having a goal to promote Britain abroad is a great way to take everyone forward together. It is time to invest in entrepreneurship and to teach and provide the young with certain skills. This is already being done in many schools but needs ever-greater attention. It is crucial that we persuade potential investors that the UK’s infrastructure and policies are among the most attractive in the world for manufacturing. I will make one important point here today: the UK has underinvested in infrastructure and we are hesitating once again in our commitment to airport expansion. This cannot be right at such a crucial time for our country and our economy.

As a student of history, I spent many hours trawling through the dusty archives of the Mitchell Library in Glasgow when I was carrying out some postgraduate research—which, I hasten to add, never saw completion. I recall the sense of awe when uncovering old company documents and reading of the great trading nation that Britain was. As a small island with a small population, Britain was the most advanced economy of the 19th century. Of course, the circumstances were quite different—we had the advantage of leading the industrial revolution—but there was something else there: determination and a strong work ethic. The degree of entrepreneurship and the fearlessness in exploring new geographies around the world was really quite remarkable.

With globalisation, we are so much more inter- connected, and in some ways that should make it easier. But we require leadership and the right conditions for business to flourish—venture capital investment and finance for small and medium-sized enterprises, and proper connectivity. There is one great plus that I can see from leaving the EU; with any luck, there will be a reduction in red tape and bureaucracy, which has for so long stifled SMEs. Perhaps now we can develop conditions whereby public procurement can benefit small companies.

I can say from my own experience of business just how dismal a scenario it has been. OJEC has required the kind of resource that small businesses just do not have. OJEC, or the Official Journal of the European Community—or now OJEU, the Official Journal of the European Union—is the publication in which all tenders from the public sector which are valued above a certain financial threshold according to EU legislation must be published. It is one rule that it will be a relief for companies such as mine to flush away—and let us refrain from putting other red tape in its place. We now need more doing and less paper-pushing.

Finally, we ought to develop a “Built in Britain” brand: something that stands for quality and longevity. It requires collective thinking from industry and government and requires an aggressive mix of bureaucrats and business people to make it happen. We need a Built in Britain brand which carries everyone with it and is part of the nation building that is so badly required—a banner under which we can export to the rest of the world.

In closing, I ask my noble friend the Minister to perhaps give us some indication of the current thinking of Her Majesty’s Government on the global opportunities for trade post Brexit.