Exiting the European Union and Global Trade

Barry Gardiner Excerpts

Thursday 6th July 2017 Commons Chamber

[Barry Gardiner (Brent North) (Lab)]

First, I join the Secretary of State in paying tribute to PC Keith Palmer and all the other victims who suffered on that fateful day in March when this debate was last scheduled.

The Secretary of State is at the Dispatch Box fielding for the first time since the creation of his Department almost a year ago a debate on Government trade policy in Government time. It is not exactly normal practice for Trade Ministers to hasten to the Dispatch Box when the country has just posted one of the worst sets of balance of payments figures in its recorded history. Although I admire the right hon. Gentleman’s chutzpah, I am not entirely convinced about his timing. The figures released just last week by the Office for National Statistics show that in quarter 1, the UK’s current account deficit was £16.9 billion—a widening of £4.8 billion from a deficit of £12.1 billion in the previous quarter—most of which is due to the widening of the trade deficit. Despite sterling being so low, exports increased by only £1.7 billion, whereas imported goods increased by £4.3 billion—a widening of £2.6 billion.

[James Duddridge]

When we are importing more than we are exporting, surely it is easier to get a deal with our European colleagues, whose interest appears to be in continuing to export to us.

[Barry Gardiner]

I want us to get a deal. Of course we want the best deal for this country, but the hon. Gentleman has to take on board the fact that since the referendum decision our country’s currency has depreciated by 12%. I trust that that is not something that he feels sanguine about.

[Dr Fox]

Some sectors will respond quickly to devaluation. For example, in food and drink there has been a 7.3% increase in our exports in this quarter. Why, in the light of the uncertainty the hon. Gentleman describes, does he think the figure for foreign direct investment in Britain has been at an all-time record in the past year?

[Barry Gardiner]

Let me be absolutely clear: we welcome foreign direct investment in this country—of course we do. We want people to be investing in our jobs, our economy and our future—

[James Cartlidge]

Will the hon. Gentleman give way?

[Barry Gardiner]

Perhaps if I can finish responding to the Secretary of State’s intervention, at an appropriate juncture the hon. Gentleman might catch my eye.

There is no difference between the Secretary of State and me on those matters. In fairness, I will say that in the past 50 years there have been 15 sets of quarterly balance of payments figures that have been worse than last week’s, and one of them was under a Labour Government, just after the global financial crisis. The other 14 have all been in the past five years, under the Conservatives.

It would be mean of me to give the right hon. Gentleman too hard a slapdown because the Chancellor has been doing it so effectively on behalf of us all. Only yesterday, we read that the Chancellor is demanding that the Secretary of State prove the case that our ability to strike trade deals after Brexit will make up for losing tariff-free access to the EU. In other words, the right hon. Gentleman is being asked to justify his job as the Secretary of State for International Trade once leaving the customs union gives us the competence—perhaps in this case I should say the right—to negotiate our own independent trade agreements.

[Mr Duncan Smith]

Will the hon. Gentleman give way?

[Barry Gardiner]

I will, in a little while.

A year on from the referendum, a year on from the Government’s announcement that they were taking back competence in international trade negotiations, the Cabinet is still divided on what it has all been about. That is extraordinary. The country is crying out for leadership, and all its current leaders can do is sit around the Cabinet table plotting who amongst them should be their next leader. A year on, what has been achieved?

[Mr Duncan Smith]

rose—

[Barry Gardiner]

I give way to one of their previous leaders.

[Mr Duncan Smith]

The hon. Gentleman is busy asking the Government what their position is. We have set that out very clearly: out of the single market, out of the customs union, and making trade deals. As he speaks for the Opposition, perhaps he can now clarify what their position is. After the election, having fought on a manifesto containing a clear commitment to leave the European Union, Labour’s leader and shadow Chancellor said, “We are leaving the single market. We are leaving the customs union.” The right hon. and learned Member for Camberwell and Peckham (Ms Harman) said, “We are leaving the single market. We are leaving the customs union.” But when the hon. Member for Brent North (Barry Gardiner) and his colleague the shadow Brexit Secretary, the right hon. and learned Member for Holborn and St Pancras (Keir Starmer), were interviewed, they never confirmed what their leader and the shadow Chancellor said. They have been doing an intricate dance around the matter, so I ask the hon. Gentleman a simple question: is the Labour party’s position to leave the single market, to leave the customs union and to make trade deals?

[Barry Gardiner]

I urge the right hon. Gentleman to read precisely what our manifesto says. We have made our position on those points extremely clear: we are leaving the European Union; that means that we want to secure the best benefits, and we will look to secure exactly what the Secretary of State for Exiting the European Union said he would achieve, which is the exact same benefit benefits as we currently have inside the European Union.

[Mr Duncan Smith]

Will the hon. Gentleman give way?

[Barry Gardiner]

The right hon. Gentleman really must allow me to respond to his first intervention before seeking to follow it up with a second. The trouble with the right hon. Gentleman is that he does not want to listen to the answer. [Interruption.] Is he quite calm?

[Mr Duncan Smith]

No, I am not.

[Madam Deputy Speaker (Dame Rosie Winterton)]

Order. I am sure that Mr Gardiner will take the intervention when he wants to.

[Barry Gardiner]

As I was saying before I was persistently—and, I must say, quite rudely—interrupted, we have set out very clearly that we will try to secure exactly the same benefits that the Secretary of State for Exiting the European Union claimed would be procured in the negotiations, but we are not fixated on the structures; we are fixated on the outcomes. But we will be leaving the European Union. The right hon. Gentleman can be assured that we are committed to honouring that manifesto commitment.

[Mr Duncan Smith]

rose—

[Barry Gardiner]

No, the right hon. Gentleman has had his chance.

A year on, what has been achieved? It took Donald Trump’s Administration seven weeks to produce a trade policy paper. This maladministration has failed to do so in an entire year. I have now been asking the Secretary of State to produce a trade White Paper for seven months. How extraordinary it is that the Department for International Trade has existed for a year but has completely failed to set out its mission and vision in a White Paper so that British businesses can have some clarity about their future.

Nor was there any clarity in the Conservative manifesto. It was scant on detail and peppered with vague promises, such as:

“We will work to forge a new culture of exporting”

and

“We will take a more active role in supporting British consortia to win…contracts”.

Of course, we were promised a trade Bill, which has now been confirmed in the Queen’s Speech. The accompanying notes actually state that one of the main benefits of the trade Bill will be:

“To meet the manifesto commitment to ‘introduce a Trade Bill”.

Well, yes, but it is something of a tautology.

I am heartened to note that the Secretary of State clearly read our manifesto, because since the general election his Department has adopted Labour’s manifesto pledge to guarantee market access for the least developed countries to the same level they currently have with the EU. Since the general election the Government have also agreed with Labour’s manifesto pledge to address trade remedies. If only they would agree to publish a trade White Paper that integrates industrial strategy with international trade policy, that creates a network of regional trade and investment champions to promote exports, that promises full transparency and scrutiny of future trade deals, and that builds human rights and social justice as a key strand in trade policy, perhaps our encounters at the Dispatch Box would become a lot more consensual.

The challenges we face in leaving the EU are not insurmountable. Ours is a great and proud country and we are an enterprising people. Our goods and services are among the best in the world, our economy is a dynamic and attractive marketplace for investment, and we will be a thought leader in the next wave of industrial growth. However, if we are to rise to these challenges, we need more than the patriotic flag-waving we have seen from the Government Front Bench; we need clarity and careful planning, which we have not had.

We are setting out to leave our major trading partner. Where is the road map? There is no White Paper. Where is the estimate of costs? That appears to be what the Chancellor has now started demanding. Government Ministers appear incapable of presenting anything approaching a unified view on the matter. The Prime Minister repeatedly tells us that

“no deal is better than a bad deal”,

and her Chancellor says that actually

“no deal would be a very, very bad outcome for Britain”,

while her Brexit Secretary tells us that he is “pretty sure”, but “not certain” and “not 100% sure”, that there will ever be a deal.

The truth is that no deal is not a trump card to be thrown on the negotiating table in some macho gesture; it is actually the procedural outcome of article 50, because if we fail to negotiate a deal within the two-year period, we will be ejected from the single market of the European Union and put on World Trade Organisation terms. Far from being a trump card to be played, no deal is actually a cliff edge over which we would be pushed.

[Kelvin Hopkins]

My hon. Friend quite rightly focuses on the trade deficit, which with the rest of the European Union is gigantic, but actually we have a trade surplus with the rest of the world, so the problem is essentially with our trade with the EU. Does that not put us in a very strong position to negotiate with the rest of the EU about whatever happens afterwards?

[Barry Gardiner]

I have absolutely said that I want us to be in a strong position in these negotiations, but what I also want is clarity from the Government about what the future will mean for our businesses.

[Christian Matheson (City of Chester) (Lab)]

My hon. Friend talks about the possibility of crashing out of Europe without a deal. If we do not achieve a deal in those negotiations, who will be responsible for not having achieved a deal?

[Barry Gardiner]

We must all hope that we will ensure that we get a deal, and that it will absolutely provide us with friction-free access for our goods and services.

[Andrew Bridgen (North West Leicestershire) (Con)]

We talk about whether no deal is better than a bad deal, and it is a card that we can play. I put it to the hon. Gentleman that not accepting that does not mean that we will get a good deal, but if we do not accept that no deal is an option, we are guaranteed not to get an exceptional deal. For example, if he was to go and buy a car and said, “I have to buy a car today”, or if he said, “I would like to buy a car, but I don’t have to buy it today”, which would he get a better deal for? And would he like to buy a car?

[Barry Gardiner]

The point I would make to the hon. Gentleman is that the triggering of article 50 was setting precisely the timeframe in which he was to buy the car. It said that within two years either we had to negotiate a deal, or we would be trading on World Trade Organisation terms. He makes my point precisely.

[Mr Jenkin]

Will the hon. Gentleman give way?

[Barry Gardiner]

I am sorry, but I will not give way again, because I have given way many times and I am conscious that more than 20 Members wish to participate in the debate, and we have to be fair to colleagues.

My party has consistently said that economic logic should dictate the outcomes of the Brexit negotiations. Certainly we must not jeopardise a positive new trade deal for some arbitrary immigration targets set for political reasons. We need a new trade deal with the EU. It must maintain the supply chains and business relationships that link us to the EU and that are so critical for jobs and economic wellbeing.

Let us remind ourselves just what is at stake. The European Union currently accounts for 44% of our exports. The EU remains our closest trading partner, in terms of the volume of trade and geographical proximity. The top 10 Commonwealth trading partners combined account for just 8% of our exports, and the entire Commonwealth—all 52 countries—accounts for just 9%. The Secretary of State once referred to protectionism as a class A drug. If he really thinks that his current round of trade dialogues could possibly make up for the shortfall in goods exports of leaving the EU without a new free trade agreement in place, then protectionism is not the only class A drug he has been smoking.

Labour, business and the trade unions are united in prioritising the best possible access to the single market once we have left the EU. That means continued tariff-free access, no new non-tariff barriers to goods or services and, if necessary, a transitional arrangement to avoid any cliff edge.

It seems that we might lately have recruited the Chancellor to our cause. His Mansion House speech certainly seemed to have swallowed the Labour party playbook whole: fair and managed migration; a Brexit for jobs; and no deal being a very, very bad deal. Securing a trade agreement with the EU must remain the Government’s No. 1 priority. Leaving the EU without a trade agreement would be a significant failure by the Government, and the British public will remember that they were repeatedly told—we heard it repeated today—that it could not happen because the EU countries traded with us more than we did with them. Without an early and comprehensive deal with the EU, there will be substantive tariff and non-tariff measures, which will cause friction in trade between the UK and the EU, whether in customs duties, customs checks, visa processes for service providers or renewed VAT procedures.

The Government are to bring in the great repeal Bill to get rid of the European Communities Act 1972, which incorporates European legislation into domestic law and grants it supremacy over domestic law. Therefore, European legislation currently in place will be converted into ordinary repealable legislation. On the face of it, that appears to mean that the UK will be able to legislate without any regard to EU law. However, if we are to maintain a high level of access into the single market and preserve the supply chains currently in place, our exports will still have to meet European standards and requirements.

Much of the current legislation will have to remain as is. Our future legislative framework will need to be aligned to that of the EU in order to maintain the mutual recognition and equivalence necessary to trade into the European market. This is something that many British and foreign companies, including Toyota, BMW and the Confederation of British Industry, have been calling for. We will no longer have a seat around the negotiating table that decides on product and other standards, but we will be forced to accept them if we wish to continue trading into the single market. People might think that this is a rather hollow way of returning sovereignty to the UK.

In any free trade agreement that the UK negotiates after we have left the EU, we will have to make some compromises on our sovereignty. The UK will continue to be subject to some supranational court system—if not the European Court of Justice, we will be subject at least to the World Trade Organisation dispute settlement procedures. Importantly, modern free trade agreements often involve the harmonisation of national standards to match those of the partner country in order to be able to trade freely. This is not necessarily negative. International trade agreements provide an opportunity to promote higher standards across the world, rather than a race to the bottom, if they are negotiated correctly.

There is no dichotomy between trade with the EU and trade with the rest of the world—that is simply absurd—but our global trade opportunities will be shaped by our future relationship with the EU, whatever that is. Prospective trade agreement partners will want to know what trading bilaterally with the UK will mean for access onwards into the EU.

[Kelvin Hopkins]

Will my hon. Friend give way?

[Barry Gardiner]

One last time.

[Kelvin Hopkins]

I want to be helpful to my hon. Friend. There is a constant emphasis on access to EU markets, when they have a gigantic surplus in our markets. At Bretton Woods, John Maynard Keynes was concerned about gross trade imbalances between nations, and the conference tried to sort out a system that would avoid that in future. We have a gigantic trade distortion with the rest of the EU, which has to be sorted out one way or another. Does my hon. Friend accept that?

[Barry Gardiner]

My hon. Friend does not want to see a decline in jobs in any sector of this country. It is really not right simply to dismiss the fact that, if we do not secure friction-free, tariff-free arrangements with the European market, those jobs could be prejudiced in this country. I am sure that he would want to take cognisance of that.

Cross-border data flows are a key cornerstone of the digital economy. They help to drive UK innovation, economic growth and business efficiency through facilitating data transfers between organisations located in different countries. To help our economy grow and create jobs in the UK, we need to create a trade environment that drives innovation and positions the UK as a leader in the digital economy. techUK speaks for business when it says that the Government need to facilitate access to both the European market and the rest of the world, but this requires appropriate cross-border data flow arrangements with our different trading partners. It sounds simple. It is not.

The Transatlantic Trade and Investment Partnership negotiations on the EU’s privacy shield framework to replace the safe harbour privacy principles demonstrated that facilitating cross-border data flows between the European system and the American system is a genuine challenge that will not be addressed overnight in future free trade agreements. We cannot simply create a separate trade policy on this issue for the EU and a different one for non-EU countries. The direction we take on one influences our options on the other. Will the Minister set out what discussions he has had with industry on this and what decision, if any, he has taken about the appropriate way to go forward? He will appreciate that the issue of cross-border data flows is not just about facilitating market access. It is also about the regulatory framework to provide data protection for privacy and human rights.

The second example of the inseparability of EU trade and our policy for trade with the rest of the world relates to the future support that we provide our agricultural industry. The UK’s food and farming industry is not only important to our national identity; agriculture also contributed £9.7 billion to the UK economy in 2016. Our food and farming industry is the product of decades of shaping by the European single market and the £3 billion-plus of support from the common agricultural policy.

The EU’s combined rights and shared obligations under the WTO include a specified limit on the amount of agricultural subsidies that the EU may utilise. The UK is entitled to a share of these as part of the Brexit divorce and could, in theory, continue with a modified version of the CAP. But the Secretary of State will know that there are rumours that his Government are considering a deal whereby the UK would give up a share of its agricultural subsidies to the EU in order to secure a more favourable deal for other sectors of our economy. Will he guarantee today that our future trading relationships will not be based upon the sacrificing of British farmers and their livelihoods?

It is not just the EU that will be pressurising the UK to drop its share of agricultural subsidies. A number of countries have already expressed interest in free trade agreements with the UK on the basis of liberalising our agricultural market. Countries such as Australia, Canada, New Zealand and South Africa are active members of the Cairns Group, which is a WTO negotiating group precisely for agricultural trade liberalisation and the reduction of subsidies. Does the Secretary of State regard this liberalisation as positive for our farmers?

[Helen Goodman]

I am extremely concerned to hear what my hon. Friend is saying given that there are 400 sheep farmers in my constituency, who would be very badly affected were we to have a flood of cheap lamb imports from Australia and New Zealand. Does he agree that there can be no virtue in our destroying the hill farmers in our country to benefit the sheep farmers in wealthy countries such as Australia and New Zealand?

[Barry Gardiner]

My hon. Friend is absolutely right to point out that, were we to go on to WTO terms—from memory, the tariff rate for sheepmeat is about 44%—we would absolutely destroy the capacity of our hill farmers in particular to compete with foreign imports.

The Government need to come clean and give clarity to the British food and farming industry on our future trade policy options and what that means for the industry. It is not good enough to tell farmers that the status quo will be maintained until 2020 and then leave an abyss as to what options are available for their future. These people need a comprehensive international trade policy, and they need to know what it is.

Beyond Brexit, as the United Kingdom once again assumes competence for its own independent trade agreements, the Secretary of State must set out how he is pursuing agreements that share the benefits of globalisation more equitably. One can only wonder that this Government thought it sensible to embark upon a new industrial strategy without first publishing a White Paper on trade, so will he publish a trade White Paper? He has introduced a trade Bill in the Queen’s Speech but, as of this moment, he has not set out to Parliament or to business any policy on which to base it.

The Secretary of State has been travelling around the world holding preliminary talks with his counterparts. In fact, he has recently returned from a visit to the USA. When the Prime Minister first announced the start of preliminary talks with the USA, the American Farm Bureau Federation wasted no time in confirming that it would seek food hygiene changes in any UK-US deal, namely to end restrictions on US exports of chlorine-washed chicken and hormone-grown beef. Will the Secretary of State confirm to us that, in any talks about future trade deals, the sovereignty of our food safety and environmental protection standards will be not be sacrificed in the name of regulatory harmonisation?

An industrial strategy and international trade White Paper should have come together precisely because of the interdependence of trade, job creation, and economic growth. That makes Labour Members fearful that the Government have not done the proper assessment of the danger that future trade arrangements could pose for job losses and wage depression. The Government have put the cart before the horse. A trade White Paper should set out what the UK’s future policy on trade defence instruments will be. The EU currently has in place a series of trade defence measures, such as anti-dumping measures against China—and, to a lesser degree, India and Malaysia—on steel, other metals, and solar panels. The UK has famously opposed such measures at the EU. Now that we will be able to set our own trade policy, the Government must tell us whether they will stick to that line. If they do not plan to introduce trade defence measures, they need to set out whether and how they will protect and support sensitive sectors such as the steel industry and the solar panel industry from cheap imports.

The Government must also weigh whether they can afford to take a tough stance with countries like China and India with which they will be looking to conclude trade deals—or will they sell out our steel sector and others? The UK steel sector is in an existential crisis. My hon. Friend the Member for Middlesbrough South and East Cleveland, who chaired the all-party parliamentary group on steel, and my hon. Friend the Member for Aberavon (Stephen Kinnock), who launched the “Steel 2020” report earlier this year alongside my hon. Friend the Member for Redcar (Anna Turley), expressed outrage at the Government’s leaked memo that suggested steel would not be a priority industry post Brexit, threatening to destroy the very livelihoods of communities across England and south Wales. Similar concerns were raised by my hon. Friend the Member for Stoke-on-Trent Central, as the ceramics industry in the Potteries faces increasing competition from Chinese dumping on world markets. The British Government have for the past number of years been blocking efforts by the EU to introduce the sort of anti-dumping measures employed by the US by repeatedly exercising a veto and actively encouraging a blocking group of other nations. One official in Brussels is reported as saying:

“The British are sacrificing an entire European industry to say thank you to China for signing up to the nuclear power project at Hinkley Point, and pretending it is about free trade.”

It is right that we reach out to our international counterparts, but travelling around the world to hold “pre-negotiations” is no substitute for clear policy that sets out what our negotiating armoury is. An international trade White Paper should set out the Government’s principles—a clear plan of what the UK intends to achieve through future trade negotiations.

[Mr Jenkin]

Will the hon. Gentleman give way?

--- Later in debate ---

[Barry Gardiner]

No, I am about to conclude.

To that end, I ask the Minister to respond to the following questions about the Government’s international trade policy. What are their principal trade policy objectives? What will be their guiding principles for our future negotiations? How will they seek further liberalisation from our current tariff levels, and in which sectors? What transparency and parliamentary scrutiny will be given over our future trade negotiations? Will they commit to disclosing whether any obligations in trade agreements, both those in negotiation and finalised, are the motivation for legislative amendments before the House or regulatory changes by the Government? How will they ensure that our future trade agreements benefit British small and medium-sized enterprises as well as big business? How do they propose to protect and enhance workers’ rights? How will they address human rights within the context of new trade agreements? How will sustainable development be a guiding principle for our trade policy? How will they ensure that current environmental protections are maintained and enhanced in future trade agreements? What investment dispute resolution model, or models, are the Government willing to adopt?

The Department’s recruitment advertisements suggest that the priority trade sectors are healthcare, financial services, and education; clearly, food and farming do not feature among its priorities. How will trade policy address the sectors that do not appear to have been identified as a priority? Will the Government be excluding devolved Administrations and local government agencies from trade agreement commitments on Government procurement? How will they ensure that British businesses maintain access both to European markets and the markets of other trading partners, especially where there is considerable regulatory divergence between these markets? Will the UK be adopting any non-conforming measures for investment and service commitments in its future trade agreements?

By providing comprehensive answers to all these questions and publishing an international trade White Paper, the Government may be able to restore business confidence in the fact that they are holding current trade dialogues and working groups that are backed by a clear and strategic plan. If not, it will reinforce the sense that the Government are blundering into this process without a clear endgame and lacking a strategic understanding of the issues at stake for the UK economy and for jobs in this country.