EU-Canada Comprehensive Economic and Trade Agreement Debate
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Barry Gardiner
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EU-Canada Comprehensive Economic and Trade Agreement
Barry Gardiner Excerpts(7 years, 10 months ago)
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The Chair
I will now take questions to the Minister, which will be brief because there will be an opportunity for debate later. I am happy to take supplementary questions.
Barry Gardiner (Brent North) (Lab)
First, I would like the Minister to clarify a point. He said that nothing stops us protecting the NHS. Of course, he will be aware that, uniquely, CETA adopts a negative list approach. The German Government have incorporated their health service in that negative list to protect it, but the UK Government did not see fit to do the same. They reserved that for private ambulance services, but not for the NHS. Will the Minister explain why that was the case?
Greg Hands
The Government have always been clear that protecting our NHS is of the utmost importance. It is important to understand that nothing in CETA prevents the UK, or other member states, including Germany, from regulating in pursuit of legitimate public policy objectives such as those relating to the NHS. CETA will not force or incite Governments to privatise or deregulate public services, and nothing in CETA will prevent any Government from reversing any decision to privatise in those sectors. Moreover, the joint interpretative instrument that was agreed by the European Union—by the Commission—and Canada in October affirms
“the right of governments, at all levels, to provide and support the provision of services that they consider public services including in areas such as public health and education, social services and housing and the collection, purification and distribution of water.”
Barry Gardiner
The Minister will know that although the joint interpretative instrument has legal force, it does not supersede the agreement. He talked about taking back into public ownership any aspect that had been privatised; will he explain further how the ratchet mechanism works? That seems to be in place precisely to stop any country doing exactly what he has just said.
Greg Hands
I thank the hon. Gentleman for the follow-up question, but he has no need for concern in this space. The October joint interpretative instrument is a clarification of what was already in the agreement, which is clear: the NHS will be protected by our right to regulate. Other member states have those same rights.
Barry Gardiner
Many, Sir Edward. Further to my question on the NHS, will the Minister explain why the German Government and other Governments saw fit to protect their health services in their entirety, while the British Government felt the need to protect private ambulance services by listing them in the annexe, but not the health service as a whole? That is the key question. What was the rationale for that? If he believes that health services are protected under the generality of the agreement, why did he bother specifying private ambulance services?
Greg Hands
The simple answer is that it was not necessary to put that in the JII. For the benefit of the Opposition—I know there is a lot of public interest in this—I will repeat the six points to make about protections taken with regard to the NHS in CETA. First, as I have said, simply nothing in CETA would require the UK to privatise public services. Secondly, CETA contains a reservation allowing EU member states to impose a public monopoly on services considered, at national or local level, to be public utilities, including in the health sector, so even if public services are contracted out or privatised, the Government would remain able to impose a public monopoly.
Thirdly, Government procurement decisions relating to sensitive public services such as the health service are excluded from the scope of CETA. Fourthly, CETA contains EU-wide reservations specifically designed to protect particularly sensitive public services, such as health and education, ensuring that the Government may act as they consider appropriate in relation to such services when they receive public funding. Fifthly, in particular areas, the UK has taken a number of UK-specific reservations that go beyond those applying to other member states. For example, as the hon. Gentleman rightly pointed out, the UK retains the right to take any measures that it sees fit concerning privately funded ambulances, because that right is not explicitly stated in the rest of the agreement—they are not a public utility.
Sixthly, CETA contains general exceptions that allow parties to take measures necessary to protect certain key public interests, including public health. Those are the six key protections. There is a specific reservation for services considered as public utilities that overrides the ratchet mechanism. Other reservations are also relevant in this space.
Barry Gardiner
I have to say that I am not satisfied with the Minister’s explanation, and nor indeed with what he said about the ratchet mechanism. I trust that we will have a chance to debate those issues. Will he provide more information on how the Government intend to transition CETA to apply to the UK once we have left the EU? He was right that the mixed investment part of the agreement would not apply in the provisional application, but he did not explain what transitional arrangements he is looking at to apply the agreement in the UK after we have left the EU.
Greg Hands
I thank the hon. Gentleman for that question, which allows us the opportunity to explore the matter. However, we do have to bear in mind that, with regard to what transitioning might be done, that is looking fairly far into the future. We are looking to maintain existing commitments, which I think would necessarily be less complex than starting from scratch, in places where such commitments are appropriate. We will seek to achieve continuity in our trade and investment relationships with third countries, including those covered by EU free trade agreements and other preferential arrangements.
Barry Gardiner
I am grateful to the Minister for that reply. Does he accept that because CETA was negotiated as an EU-Canada agreement, there will be areas in which what would be most beneficial to the UK has been sacrificed for the benefit of the rest of the EU, because that was the basis of the negotiation? Therefore, given that we will shortly be coming out of the EU, would it not actually be better for us to have a separate bilateral treaty? No doubt CETA could provide the basis of much of what would be contained in that. To sign ourselves up now to elements negotiated to our detriment and for the betterment of other countries in Europe would seem rather comical.
Greg Hands
Inevitably, a future UK-Canada free trade agreement or similar things would balance taking what is already there or agreed between Canada and the European Union and seeking to do something specific to the UK. Clearly at some point in the future there will be a balance to strike between continuity and seeking advantages for the UK compared to the previous agreement. However, that is a discussion for the future. The Government are strongly supportive of CETA, and at the moment we are looking to get it through the European Parliament for it to have its provisional application. The UK remains strongly supportive of CETA going through, as part of our message overall that the UK is a strong supporter of global free trade. The Prime Minister herself has said that the UK will be the most passionate, compelling and convincing advocate of global free trade, and we see CETA as part of that key agenda.
The Chair
Mr Gardiner, would you mind if I make this the last question from you, because others want to come in? You can always come in later.
Barry Gardiner
Of course, Sir Edward. To pick up on what the Minister has said, I think he accepts the basic premise that CETA was an EU-negotiated treaty and therefore some aspects of it will have been negotiated for other countries’ benefit and to our detriment. He then said that we are firm supporters of free trade—I totally agree with him that we want fair and open trade, because that is to all our benefit—but he has failed to articulate how we will be in a position to renegotiate the basis of the agreement we will have entered into under the European Union. The ratchet mechanism will still apply. He seems to think that once we have left the European Union we will be able simply to renegotiate the treaties we had, but that would be to an investor’s detriment; it would be to the detriment of Canada, which had already negotiated a better deal with us when we were part of the EU. It is very unlikely that it would concede to that. Indeed, the ratchet mechanism is there precisely to stop that.
Greg Hands
I simply do not accept the hon. Gentleman’s premise that the UK sacrificed some key interests on the altar of getting an EU-wide common position before going into these complex and intricate negotiations. The important thing is that CETA would no longer apply after we leave. Having negotiated at an EU level can form a basis but there is nothing to stop us negotiating our own deal thereafter.
The Chair
I will let Mr Gardiner in, and if there is time, Mr Grant can always ask another question.
Barry Gardiner
I want to pick up on the idea that the Secretary of State has done everything that could be reasonably required of him. He appeared before the European Scrutiny Committee on 26 October, which was after he had given the commitments on 7 September. He stated that he was “very happy” to have the debate on the Floor of the House. He claimed that the failure to set a date for the debate had been owing to a scheduling problem in the parliamentary calendar. In reality, as a freedom of information request submitted by my office revealed, the Government had not been delayed by a scheduling problem in the parliamentary calendar; in fact, the first time that the Department for International Trade had even approached the business managers to discuss a potential debate on CETA was on 25 October, precisely one day before the Secretary of State was due to appear before the Committee and account for his failure to schedule that debate.
Worse still, the email trail shows departmental officials asking whether they actually needed to set a date for a CETA debate at all, or whether it might be enough just to tell the Chairman of the European Scrutiny Committee that
“they were in the process of scheduling a debate”.
The email actually reads:
“What advice would you give would it be better to have an actual date or do you think we can just tell the chair we are in the process of scheduling a debate.”
The Chair
That is quite a long question. Shall we stop it there and let the Minister reply?
Greg Hands
I really do feel that I have already answered these questions. The hon. Member for Glenrothes, or perhaps the hon. Member for Swansea West, said that the Secretary of State was dragged before the European Scrutiny Committee. May I say that my right hon. Friend appeared just six days after the signing of the agreement, and could hardly have been quicker? That happened very quickly after scrutiny had to be overridden for the reasons that I explained: at the European Council, it would have been damaging for the UK to have appeared to obstruct CETA. That would have damaged our relations with the Commission and the EU member states, and greatly damaged our relations with Canada, one of our most important partners in the world, not just for trade but on security and other matters.
My right hon. Friend spoke to the Chairman of the European Scrutiny Committee on a number of occasions at that time, to explain what he was doing. He made a considerable effort to make sure that the Committee was brought into that decision process. We have today’s debate, and it might be time now, Sir Edward, to move to consider the substance of the debate, rather than these process arguments. After all, we are having the debate in advance of the European Parliament debate on 15 February.
The Chair
Time is running out, and we have dealt with the issue in quite a lot of detail. I think we should think about moving on to the substance, Mr. Gardiner.
The Chair
It is entirely up to you, but you have not got very long left. There is quite a lot of substance to debate, but you can take up the time exactly as you want.
Barry Gardiner
I do want to address all the issues of substance. The joint interpretive instrument was prayed in aid by the Minister but, of course, that says that the right to regulate applies only to procurement conditions that do not represent unnecessary barriers to trade.
Does the Minister consider that that is a proper restriction of the right to regulate, given that the trade dispute panels, as he well knows, have interpreted that word “necessity”—the necessity test—very narrowly in the past? Therefore, to pray it in aid as showing there will be no restriction is fine-tuning the interpretation in a way that experience would belie.
Greg Hands
I repeat that the JII is there to help as an addition to the agreement. It is agreed as an extra rider, as it were, to that agreement. The agreement itself provides for the right to regulate for parties and national Governments, including for the environment, public health, public ownership and all those other important issues. I think that, in his fears about the JII, the hon. Gentleman is chasing after something that does not exist.
Greg Hands
I have already talked about some of the concerns that the UK has had over some time in relation to the ICS. For example, some things still need clarification, such as how the arbiters are chosen, the cost of the ICS, the appointments and all of those kinds of things. Those will be matters for the future for the ICS. I repeat that the ICS is not a part of what is being provisionally applied; that is, what is in front of us today.
Barry Gardiner
Would the ICS not operate with general exceptions, rather than with country-specific reservation?
Greg Hands
Can I answer the hon. Gentleman’s specific point on the ICS in a moment?
Greg Hands
That is a fair point, Sir Edward. Let me instead ask members of the Committee to consider what the situation would have been on 18 October had it been not the Walloons who said no to the provisional agreement, but the UK. Bear in mind that the Government’s position is that we want this country to be at the global forefront of promoting free trade. Had it been the UK, which had been party to the negotiations for many years, that said no on 18 October—no to Canada, no to the Commission, no to Cecilia Malmström—it would have been catastrophic for our international relations and our trading relations. The Government’s position was and remains that this is a good agreement. Even though we are leaving the European Union, I cannot stress enough how important it is for us that CETA is passed and comes into effect.
I happened to note that earlier in the week the Opposition tabled a different amendment, one that was opposed to CETA—the actual content of CETA—rather than the procedural aspects and the lack of time, which the amendment before us today deals with. I ask all members of the Committee to consider whether we are believers in global free trade and want to have a good free trade agreement with Canada. I strongly believe it is in our country’s interests to do so, and I have yet to hear that from the official Opposition.
Barry Gardiner
Clarification that the Minister has heard that from the official Opposition today, because I stated it in the very first question I asked.
Greg Hands
I am not sure that I fully followed that, but on why the UK overrode scrutiny at the European Council on 18 October, the Secretary of State wrote to the Committee to outline what he intended to do, given the fact that the three motions were to be taken as a package. He then appeared before the Select Committee as soon as possible—really as soon as possible—after that European Council, in this case on 26 October. The European Council that took place on 18 October ultimately led to the signing on 20 October. You will recall, Sir Edward, the delay caused by the Walloons seeking further clarification.
As for the provisions of the 1998 resolution, it is not entirely clear to me whether that refers to the House as whole or to the European Scrutiny Committee, which acts on behalf of the House in these matters. I am happy to write to the hon. Gentleman setting out some clarification. I was not a Member of the House in 1998, but I am happy to write to him to outline the impact of that measure on our interactions since it was passed.
The Chair
We are running out of time, but I could extend the time and cut into the debate on the motion. Would you like to ask one more little question, Mr Gardiner, and then we can perhaps finish this part of the sitting on time and go into the debate?
Barry Gardiner
Thank you, Sir Edward. Perhaps the Minister could provide information on whether any comparison has been made between the risk from the investor-state dispute mechanism under our pre-existing bilateral investment treaties and the risk from the ICS established under CETA? Of course, 98.5% of our bilateral investment treaties in force are with non-OECD countries, and 61.45% of those treaties are so old that they predate the World Trade Organisation. There needs to have been an impact assessment of the risk from the ICS. Can the Minister assure us that that has been done? Which criteria were used in assessing the risks from the ICS? How did they compare with the risks under pre-existing bilateral treaties?
Geraint Davies
Thank you, Sir Edward.
The view of the European Scrutiny Committee is that in the light of the unfortunate lack of scrutiny, all members of the Committee should find it in their heart and mind to add the words in the amendment to the motion so that we can all come together and agree it. The Government might say, “Sorry, we don’t want more scrutiny; we want to take control, but we want to take it in the corner without other people having any involvement”, but I am afraid that I will certainly not vote for a motion that does not require extra scrutiny, given that the Secretary of State has given a solemn undertaking to provide it.
I will give some of the reasons for further scrutiny given the concerns about CETA, particularly when the ICS is introduced to it. The key debate in Europe has been about why we need the ICS, and the answer that has been given is that it is to protect investors. However, we must ask how investors are protected at the moment. Are they adequately protected? The answer is that they are. In Europe they are protected by county courts, national courts and national law, European law and the European Court of Human Rights. In Canada there are provincial courts, appeal courts and the Supreme Court. The United States has a similar legal system. It is not surprising that our long-established systems of public law, contract law and commercial law balance the interests of the investor against the wider public interest.
That is particularly important in examples such as the balance of investor and environmental interest in fracking. Or perhaps an investor such as a fizzy drinks manufacturer might come along and the Government might say, as the right hon. Member for Tatton (Mr Osborne) did, “Actually, we’re about bit worried about diabetes and obesity; 45% of sugar consumption by teenagers is from fizzy drinks, so we’ll put a tax on them.” If that went to court, the court could say, “We’ve got to balance the public interest with investor interest”. However, an arbitration court is all about the interest of the investor and whether a particular law has had an impact on the future profitability of a legitimate investor. In the narrow case in Mexico that I mentioned, of course the court, using that narrow definition of investor interest, ruled that the tax had reduced the investor’s sales and profitability, and the public had to pay the price. That is outrageous, and we should not just nod that sort of thing through.
We have systems of law that protect both the investors and the public. The precursor to the ICS—the so-called investor-state dispute settlement—was introduced in 1957 in an agreement between Germany and Pakistan, because the Germans thought that there was some risk to their investment. I do not have anything against arbitration courts per se if they are about, for instance, European countries investing in high-risk countries with undeveloped judiciaries and unstable political environments. That means that investors can take necessary risk and the arbitration court can take a view on unreasonable sequestration.
That is not what we are talking about here. We are talking about mature economies, judiciaries and democracies that already trade enormous amounts of goods and services. The great advantage of CETA is that it will pave the way for the regulation and harmonisation of standards—there are concerns about standards, incidentally, but I will come to that in a moment. The opportunity is something like 0.5% of GDP, so it is not overwhelming. Most of the problems are about tariffs, but the big problem has been about the ICS. I know that the Minister says we have set that to one side, but it will be a problem downstream. Issues such as this are fundamental to democracy, the rule of law and human rights, so we will need a proper debate. If the ICS comes in downstream and intimidates Governments into not introducing laws to protect their citizens, it will be a major problem for democracy itself. That is why there has been such a big debate among the 47 countries of the Council of Europe, above and beyond the European Union.
Barry Gardiner
I am listening carefully to my hon. Friend’s points and I agree with a great deal of what he says. Does he consider that there is an irony in the fact that we are leaving the European Union in order to come out from supranational institutions that can override national Parliaments and courts, yet at the very same moment we appear to be signing up to an agreement that will give us a supranational court that sits over us?
Geraint Davies
More than an irony—a tragedy. The view of some, apparently, is that we should move out of the orbit of the European Court of Human Rights, which supports the fundamental values of human rights, democracy and the rule of law, and into the orbit of arbitration courts whose basic remit relates to the interests of the investor, as opposed to the wider interests of the environment. If the Minister has looked at the detail of the chapters of CETA, he will have observed that the investor chapter is armed with arbitration courts that trump national and international law, but that there are no such teeth in the environment chapter, for instance. There is no enforceability of the Paris agreement that we have all signed up to in order to save the planet. Nor, for that matter, is there any enforceability of labour rights.
We need a debate, because ICS is down the road—I accept that it has not yet come in and we can do the other bits first, but there is a concern that that is an unnecessary and dangerous prospect. I do not want to run through hundreds of cases, but there was a famous case in which Obama said to TransCanada, “We don’t want this sand oil pipeline coming in from Canada to the US, because it is a breach of the Paris agreement.” As I understand it, the case has now been dropped because Donald Trump has taken over the presidency, but TransCanada was going to sue the US for $15 billion. My hon. Friend the Member for Brent North mentioned ratcheting and reassurances about health services; there was a case in which Slovakia attempted to renationalise part of its health service and was penalised in court with fines. Hon. Members may remember that at the last election the Labour party stood up and said that it wanted to freeze energy prices; one may or may not like that idea, but Argentina was sued for $1 billion under ISDS by energy companies from America and Europe for doing exactly that. Philip Morris, famously, has been pursuing a case against Australia and Uruguay to stop plain tobacco packaging, which was introduced to reduce deaths from cancer.
The problem with these courts is that they are secret, they have a narrow remit, they are run by commercial lawyers, they are inconsistent in outcomes and they do not normally have appeals. Under the new ICS they will have appeals, but they will not adopt the doctrine of precedent, so one court’s verdict may not inform the next court. The Council of Europe, which I mentioned earlier, has therefore said, “Hold on—we are very concerned about the investment court system, but if and when it does come in, it should be subject, as a minimum, to a number of constraints. In accordance with the European Court of Human Rights, there should be one-year opt-outs with six-year investor protection, and there should be actual damages rather than the fantasy projections of profit that have been sued for.”
I have already mentioned the problems with secrecy and lack of accountability. The Secretary of State seemed to think that it was marvellous that we should be able to go into a library on our own and have a look at the CETA documents, without taking photocopies. Obviously, no one can really understand what they are looking at and gain a meaningful view in the amount of time they are given. It seems to have been a bit of a joke, to put it mildly.
There are other issues that the Minister may want to respond to. There is widespread concern about European standards, for example, in relation to genetically modified food and other food standards, so can he give us any assurances that we will not be slipping to the lowest common denominator in health and equality standards? There are concerns that the precautionary principle, which has been a principle of EU law, has not in fact been instilled into CETA.
People are also concerned that there is a move away from openness in clinical trials. As Members may be aware, the clinical trials directive requires pharmaceutical companies to go public with the outcomes of their clinical trials. As I understand it, CETA will give private companies the right to withhold the outcomes of clinical trials. For example, if a company such as the one that manufactured thalidomide found that half the trials for a certain drug were negative and half were positive, it could publish only the half that were positive. What does the Minister have to say about that? What about the issues relating to trade secrets in CETA? He may think that these are minor points, but I want some reassurance.
I am trying to make the case that, given that there are so many issues, we need a proper debate. Parliamentarians are concerned. When we look at VW fixing emissions, for example, we see that there are new opportunities in CETA for trade secrets. If an employee blows the whistle because they discover that their company is harming public health, for example with diesel emissions, or a drug that harms babies—whatever it is—they can be punished by the company. These are issues of concern that require clarity and debate.
There are concerns about labour rights and whether there will be an assurance that International Labour Organisation conventions will be fulfilled. There are concerns about level playing fields and whether procurement will be equal and apposite. There are concerns about winners and losers, which the European Scrutiny Committee has also debated. We are told that there will be an overall GDP gain of something like 0.5%, but which sectors will win and which will lose? Will small companies lose out? The Prime Minister has already said that she will back certain winners, so perhaps motor manufacturers will get a good deal, but there is some fear that Welsh lamb producers could face a 40% tariff after Brexit. We also have the concern, raised by my hon. Friend the Member for Brent North, about geographical indicators. Welsh lamb was not a geographical indicator originally, so in theory someone could sell in Britain lamb that had been produced in Canada and call it Welsh lamb. That is a real problem.
Barry Gardiner
Thank you, Sir Edward. I welcome the opportunity, under your chairmanship, to address the Committee in this important and long overdue debate. My hon. Friend the Member for Swansea West speaks here for the European Scrutiny Committee. I speak for the official Opposition, and I am delighted to support the cross-party amendment tabled by me, my hon. Friend and the hon. Member for Glenrothes.
For the avoidance of any doubt—there was doubt, because the Minister tried to sow it—the Labour party believes in an open, fair system of trade. Trade is one of the most effective means of creating shared prosperity and decent jobs. From the very first, when free trade was a radical cause in British politics, my party argued for open markets in the crisis years of the 1920s and ’30s, as mounting calls for protectionism led the world towards disaster.
We understand the power of fair and open trade today. We share the dream of the vast majority of people around the world who want closer ties between countries. We want to build trade links, not protectionist walls. Trade is one of the most important mechanisms for binding peoples together, but we want trade agreements that respect—
Greg Hands
Does the hon. Gentleman agree with his party leader, who described free trade as a dogma?
Barry Gardiner
I am not interested in university debating points ad hominem. Free trade has become narrowed in its interpretation. The right hon. Gentleman will have noticed that I have focused on the benefits that an open and fair trading system can bring, and that is what we want, but we want trade agreements that respect sovereignty and that benefit little companies, not just major corporations. We want trade agreements that make our society a more, not less, equal place. That is why I am delighted to support the amendment tabled by my hon. Friend the Member for Swansea West.
I want to deal with the process first. I will try to be brief because we talked a great deal about this issue during the questions. The failure to bring consideration of CETA to a full debate on the Floor of the House should be a matter of not only regret by the Government, but deep disquiet for hon. Members from all parties. The job in front of the Committee today is very clear. It is not to decide whether CETA should proceed or not. It is to decide whether it is appropriate, given all the concerns there are about CETA, that the Secretary of State should honour the promise and commitment he gave to the House in his written statement and to the European Scrutiny Committee and that we should debate this on the Floor of the House.
I welcome the fact that we have finally today been given the opportunity to discuss this issue, but I cannot help but record that at its meeting on 7 September last year the European Scrutiny Committee recommended CETA for an early debate on the Floor of the House. It did so in view of the unprecedented public interest shown in this new generation of international trade agreements and the complex legal and policy issues raised for the UK. The Committee granted the Government a waiver to allow them to sign CETA at the EU Council of Ministers, but that waiver was conditional upon the promised debate being scheduled urgently to take place on the Floor of the House and at the very latest, it said, before the provisional application of CETA.
As I said, the Secretary of State appeared before the Committee on 26 October. He said that that he was “very happy” to have that debate on the Floor of the House and claimed that the failure to do so had been the result of scheduling problems in the parliamentary calendar. In reality, as the freedom of information request I referred to earlier showed, the Government had not been delayed by a scheduling problem in the parliamentary calendar at all. In fact, the first time the Secretary of State’s Department even approached the business managers to discuss a potential debate on CETA was 25 October—one day before the Secretary of State was due to appear before the European Scrutiny Committee to account for his failure to do so.
“What advice would you give”—
the Department asked—
“would it be better to have an actual date or do you think we can just tell the chair we are in the process of scheduling a debate”.
That does not sound like a Secretary of State committed to full parliamentary scrutiny and to keeping his promise. The Government confirmed in their subsequent letter of 30 November that they recognised a debate on the Floor of the House of Commons to be “of the utmost importance”.
Michael Tomlinson
Earlier in the Committee, the hon. Gentleman asked many questions about the process, but we are now in the debate. All Members of Parliament are entitled to attend the Committee and debate the matter, although not all Members are entitled to vote. I agree with him that it is regrettable we are not there; we are here. Should we get on with the debate?
Barry Gardiner
The hon. Gentleman is right that all Members of the House have the right to attend the Committee, but he will have noticed that this one and only opportunity for them to do so was deliberately timetabled at the same time that the European Union (Notification of Withdrawal) Bill is being considered in Committee on the Floor of the House. I do not believe that is a coincidence. I do not believe that is a mistake. I believe that it is part of a deliberate attempt to stop proper scrutiny. The hon. Gentleman talks about scrutiny and about moving this debate on to substantive issues within CETA, but the debate on the motion and amendment is precisely about whether this matter should go to the Floor of the House. That is why the process is important. We need to see that proper process has been kept, and sadly it has not.
Geraint Davies
Does my hon. Friend agree that in the three and a half months that the Government have had to hold the debate, this is probably the best time for them to have it in terms of hiding bad news under the noise of the Brexit debate? This is clearly pre-planned to stop proper scrutiny, public debate and media coverage.
Barry Gardiner
I wholeheartedly agree. We must now move forward. The Government said that it was of the utmost importance to have the debate on the Floor of the House, yet we find ourselves 68 days later with a debate up in Committee Room 10.
The European Scrutiny Committee issued the Government with a waiver, to allow them to sign CETA at the Council of Ministers. The Committee made it clear that the waiver did not extend to the provisional application or conclusion of CETA. The Secretary of State chose to disregard the Committee. We have heard from the Minister today the reason why: because it was bundled. It is important that we hear from him whether the UK made any objection or moved any procedural motion during the Council of Ministers to unbundle it, so that the Secretary of State could observe the protocols that he had undertaken to the Committee.
I can only concur with the Chairman of the European Scrutiny Committee, who said that it was a “serious” breach when the Secretary of State failed to honour the waiver he had been given. That stands in stark contrast to the many statements made by the Government in recent days to assure us of their commitment to respecting parliamentary scrutiny and accountability.
In the same vein, there has been a marked failure to present CETA for consultation before the devolved Administrations, despite the fact that their Departments are all listed in the annex of entities covered by the public procurement rules of CETA and are thus exposed to CETA’s strictures on central and sub-central Government entities alike. I call on the Government to remedy that failure as a matter of urgency, before initiating the process for ratification of CETA in the House. I hope that the Minister feels that he can give an undertaking on at least that level.
With regard to process, the Government failed to meet their own successive promises to bring CETA forward for a full debate on the Floor of the House. The Secretary of State was, at best, disingenuous in the statements made to the Chairman of the European Scrutiny Committee. He explicitly broke the waiver that the Committee had given to him, when he approved both the provisional application and the conclusion of CETA, and his Department has failed to engage with and consult the devolved Administrations in respect of an agreement that has specific application to them. Those are serious procedural failures that show a disregard for the proper scrutiny of Parliament, and they provide, in themselves, a compelling case for the Committee now to insist that the Government bring that full debate to the Commons. However, there are substantive reasons as well as procedural ones and, in many respects, they are more compelling.
I turn, therefore, to the content of CETA. It will be a surprise to the Committee to learn that the Government have not commissioned any research on what the impact of CETA might be on the UK economy. That should be a matter of concern, because the Government have repeatedly claimed, as the Minister did in his opening remarks, that CETA will bring up to £1.3 billion extra to the UK economy. Let me straightaway say that I would be the first to cheer if that were a credible prospect, but the Government admitted in their explanatory memorandum of July 2016 that it simply took a projection of overall gains to the EU and divided it by the UK’s share of EU GDP to come up with that figure. That is back-of-an-envelope calculation. It has to qualify as one of the crudest and least credible methodologies ever adopted to project the impact of a major trade agreement.
Only one study to date has disaggregated the prospective impacts of CETA on individual EU member states, and it concluded that countries such as France, Germany and Italy would indeed see an increase in their exports as a result of CETA. However, the study is clear that the UK would experience a decrease in both its exports and its balance of trade. At a time when the UK balance of trade is already under so much pressure, the very possibility that we might suffer a loss of exports should give us pause for proper scrutiny. At the very least, a proper impact assessment of how the agreement will specifically affect the UK needs to be conducted. That further underlines the need for the promised debate on the Floor of the House.
Members will also be surprised to learn that the Government have failed to list in annex 20 to the agreement a single one of the dozens of great British food products that qualify for protected geographical status. The UK is the only major EU member state that failed to secure such protection in CETA for its food businesses. The “Geographical Indications” annex of CETA is page after page of products listed for protection by France, Germany, Italy, Greece, Spain, Romania, Austria, Hungary and the rest, but there is not a single one from the UK. There is no protection for Scotch beef, Scotch lamb, Scottish farmed salmon, Welsh beef, Welsh lamb, Cornish pasties, west country farmhouse cheddar, blue Stilton, or white for that matter. More than 50 other British products that should qualify for protected geographical status are simply not protected. How can the Secretary of State have failed to protect a single one of our products under CETA? No wonder he does not want the matter to be discussed on the Floor of the House of Commons.
CETA is also remarkable in its complete disregard for the interests of small and medium-sized enterprises. Even TTIP contained a dedicated chapter outlining the support measures that the EU and the USA would introduce for SMEs. By contrast, in all the 2,255 pages of CETA there is not one single commitment to further the export interests of SMEs.
In recent times, we have heard much talk of the Government’s commitment to parliamentary sovereignty. The Prime Minister has declared that leaving the EU will allow Britain to be a fully independent, sovereign country once again, no longer subject to
“supranational institutions that can override national parliaments and courts.”
Likewise, the Secretary of State for International Trade has given us his vision of
“Britain as an independent sovereign nation, with a parliament beholden to no one”.
Yet, if we look at last week’s White Paper, it spelled things out very clearly. It has an annex about CETA—it creates a framework of supranational institutions that are precisely designed to override national Parliaments and courts. Along with the CETA Joint Committee, which will have binding powers over sovereign Parliaments in future, CETA includes the investment court system, the latest form of the ISDS mechanism, to allow foreign investors to sue host Governments over public policy measures that undermine their profits. Under CETA, a foreign company will have the right to bypass the domestic courts and avail itself of its own privileged commercial judicial system to challenge any regulatory reforms that run counter to its “legitimate expectations” as a profit-making enterprise, claiming vast sums in compensation even when Parliament has approved the reforms.
We in the Labour party are opposed to any system that grants foreign investors private justice in their own private courts. As noted in the charter for progressive trade deals that we adopted last year, we uphold the basic principle of equality before the law, which requires foreign investors to abide by the same rules as everyone else, in the same judicial system as everyone else. Foreign investors can have full confidence in the British legal systems to obtain redress where their interests have been unfairly harmed, and the British people can have confidence that the courts will then balance the competing interests of foreign companies and the public good when making their judgments. A company, however, does not even have to win its case in the investor court system to undermine UK sovereignty. The very threat of a legal challenge and the scale of both costs and potential damages can make Governments back away from regulation that would be in the public interest, and can exert its own regulatory chill on Government plans for new legislation. It was a legal technicality that prevented Philip Morris from obtaining billions of dollars of compensation that it sought in its case against Australia’s law on plain packaging for cigarettes. That did not stop other countries backing away from introducing similar measures for fear of being hit with their own claims.
The Chair
Order. Mr Gardiner, this is a very comprehensive speech, and very well written, but you will think of others, won’t you?
Barry Gardiner
Indeed.
Canadian companies have been among the most litigious in using the ISDS powers that exist in other treaties, yet we have learned from parliamentary questions that the Government have failed to conduct any risk assessment of the potential threats of investor-state challenges to health or the environment. That is another reason for the Committee to insist upon a full parliamentary debate on the issue. Such risk assessments are absolutely standard in other countries preparing to adopt ISDS provisions in their trade or investment agreements, and the Minister really must explain why no such impact assessment was conducted.
It is not just Canadian firms that will be able to use CETA to challenge social and environmental protections. Around 80% of the 13,000 US companies that operate in the UK have active subsidiaries operating in Canada, through which they will be able to bring ISDS claims, using the new CETA investment court system. That means that, overnight, 10,000 US firms will gain the right to sue the UK over any new social, environmental or public health regulations that might adversely affect their profits in future.
In that way, CETA will open the floodgates to precisely the wave of suits that the UK Government were warned about in the cost-benefit analysis that they commissioned from the London School of Economics back in 2013. That study made it clear that providing north American investors with privileged rights would bring no benefits whatsoever to the UK economy, but would incur “considerable” monetary costs to the UK taxpayer, as well as significant political costs.
The investment court system has been rejected by the European Association of Judges, which represents 44 national associations, and by the German Magistrates Association. More than 100 legal scholars from European universities have issued a strongly worded statement warning that the inclusion of such powers in CETA would undermine not only the rule of law but the very principles upon which our democracies are founded.
On the other side of the Atlantic, a group of Canadian lawyers with direct experience of investor-state disputes have published a letter outlining the threats that the investment court system poses—
“the undermining of democratic regulation, the special privileging of foreign investors, the lack of judicial independence and procedural fairness in the adjudicative process, and the lack of respect for domestic courts and domestic institutions.
Those are serious charges that deserve to be debated in full on the Floor of the House of Commons, as was promised.
CETA departs from all previous EU trade agreements in being the first in which the EU has accepted the high-risk negative list approach to scheduling our service sectors. Under that approach, all sectors that are not explicitly exempted are automatically committed to binding liberalisation, including future services that have not even been invented yet. My hon. Friend the Member for Swansea West gave certain examples. One might consider the potential ban on microbeads in cosmetics as another thing done for the public good that could open the Government up to a suit.
The adoption of the negative list method in CETA marks a significant departure from the EU’s previous use of the positive list approach, whereby only sectors actively listed for inclusion are subject to the rules and disciplines of the agreement. CETA introduces the standstill and ratchet mechanisms, which prevent countries from reversing liberalisation commitments already made in their service sectors, whether now or in the future. The standstill clause states that Governments forfeit the sovereign right to introduce any reforms that could reverse the level of market liberalisation registered in CETA. The “ratchet” clause goes even further, in that future Governments will lose the right to reverse liberalisation measures that might be introduced in years to come.
There has been much concern about whether our public services are vulnerable to attack from the far-reaching provisions of CETA. Trade lawyers from within and without the European Commission have cast serious doubts on the validity of the repeated assurances that public services such as the NHS are safe. Suffice it to say that on the European side, the only sectors definitively carved out of CETA are audio-visual services—in deference to the French exception culturelle—and certain air services. There is no disagreement that health, education, post, rail and waste water services are all covered by CETA.
Individual EU member states were permitted to register their national reservations in the two service annexes to CETA. To compensate for the lack of certainty surrounding the status of public services, the German Government took out a comprehensive reservation to ensure that all their health and social services would be fully protected from the threat of market liberalisation under CETA. The UK Government entered reservations for certain aspects of privately funded health and social services only, including privately funded ambulances, but they failed to protect the core functions of the NHS.
Going into the full intricacies of this complex issue would take us beyond the time that we have available this afternoon, but the lack of clarity plaguing the situation is yet another argument for the fuller debate on CETA on the Floor of the House that we were promised. I simply mention that the official impact assessment carried out for the European Commission at the start of negotiations included a specific warning that health and education services should be exempted from any investor-state dispute disciplines adopted in CETA. The fact that the recommendation was not taken up in the negotiations or the legal scrubbing that delivered the final CETA text is yet another reason why we must avoid rushing into an agreement that could see us bound to a deal that may well be in the best interests of our fellow European countries, but not our own. Indeed, hon. Members might consider that it would be better to conclude a separate deal with Canada when we have the legal capacity to do so on our own, outside the EU.
Those are some of the most pressing concerns we have on CETA, but I will make one final observation. The Secretary of State for International Trade stated last week that he intends to adopt all the EU’s free trade agreements into stand-alone UK treaties with the trading partners in question. The Canadian Government, for their part, said that they see CETA as the baseline for any future UK-Canada trade deals. Moreover, Ministers in this country have suggested that CETA could even provide the blueprint for a future UK-EU trade deal.
All those considerations underline the critical importance of getting it right on CETA. They underline the critical danger of not submitting the agreement to the full level of scrutiny that it deserves. There is still time for the CETA debate to be scheduled on the Floor of the House, as we were promised, and for parallel consultations to be held with the devolved Administrations before the provisional application of CETA comes into effect. That was the original chronology stipulated by the European Scrutiny Committee. Certainly the process of ratification must not be initiated in this country before Parliament has had the opportunity to decide on this issue, so I support the amendment.
Greg Hands
Foreign investment is incredibly important to this country. It is also important that we protect our investors in markets such as Canada. It is important that we ensure those things are protected, while also protecting the right of member states and Parliament to legislate as they see fit, and the right to regulate. The UK will continue to work with other member states to improve the system. I restate that crucially, the ICS is not being provisionally applied here. Parliament and the UK will therefore have the option further to debate and scrutinise the system, and CETA in its entirety, as part of the ratification process.
In the time available, I will deal with as many of the many points raised as I can. The hon. Member for Brent North asked why there has been no impact assessment of ICS or its predecessor, ISDS. The answer is that ISDS has been in operation for some time. The UK Government have never had a successful case taken against us. All the cases listed earlier were not actions against the UK Government. I reinforce that the system does not, will not and cannot supersede national laws.
Greg Hands
I am going to make a bit more progress, because a lot of points have already been raised. We had an extensive question-and-answer session and extensive speeches that I need to respond to, to be fair.
A question was asked about the methodology for the £1.3 billion figure, which is what the UK will likely gain from the agreement once it is fully in operation. Contrary to what the hon. Gentleman said, that was not produced simply by restating EU estimates. The figure is the result of modelling commissioned by the Government during the course of the negotiations, and it shows broad benefits across a range of sectors.
Barry Gardiner
I refer to the explanatory memorandum of July last year, which explicitly states the way in which the figure was calculated. I can find the exact reference.
Barry Gardiner
It is the Department for International Trade’s “Explanatory Memorandum on European Union Document: Proposal for a Council Decision on the provisional application of the Comprehensive Economic and Trade Agreement between Canada of the one part, and the European Union and its Member States, of the other part”, from July 2016.
Greg Hands
The figure of £1.3 billion may be the same one that the hon. Gentleman cites, but I am confident that my figure is the result of modelling commissioned by the Government.
I was asked whether environmental standards can be increased. Article 24.3 of CETA specifically provides that parties are free to establish their own environmental standards. The hon. Member for Swansea West raised fracking. Contrary to what he said, CETA does not get in the way of the right to regulate. Exactly as we would expect, it does not give fracking companies the right to invest in the UK if they are in breach of UK national laws.