EU-Japan Economic Partnership Agreement

Barry Gardiner Excerpts

Tuesday 26th June 2018 Commons Chamber

[Barry Gardiner (Brent North) (Lab)]

I welcome the Minister for Trade Policy to his new post. I am delighted to have him opposite us at the Dispatch Box. I also pay tribute to the right hon. Member for Chelsea and Fulham (Greg Hands) for the work that he did in this Department. We had many voluble exchanges in Committee and on the Floor of the House and he always dealt with them with exceptional good humour. I am sure that he will return to the Front Bench at a later stage and I look forward to that.

I am grateful for the opportunity to speak in this debate to set out our position on the EU-Japan economic partnership agreement. The relationship with Japan is, as many have said, of enormous importance, and we on the Labour Benches want to ensure that our future co-operation boosts trade and jobs in both our economies.

Exports make up 30% of our national economic output, and we celebrate the jobs and the myriad other benefits that come from international trade. No country exemplifies the importance of foreign investment to our economy more than Japan. It is Japanese companies that have chosen to invest billions in the manufacturing capital of this country over many decades, and with that investment has come jobs—good jobs, skilled jobs. Some 3,800 are directly employed by Toyota, with 7,000 directly employed by Nissan, and 3,400 directly employed by Honda. We could double those figures when we factor in the indirect employment in the UK that comes from these companies—the manufacturers of parts that go into their supply chain and the logistics companies that ensure their just-in-time delivery systems.

I was at Honda a week ago last Friday speaking both with the unions and the management in Swindon. A new car rolls off its production line every 69 seconds, and its just-in-time supply chain is critical to that performance. That is why workers at that plant were telling me of their strong support for Labour’s position on a new customs union that would stop disruption to that supply chain and why they cannot understand the Government’s red line that there should be no such customs union after we leave the EU.

The Government have put our trading relationship with Japan under enormous strain because of their disorganised approach to Brexit. Companies such as Honda will speak for themselves, but many working there cannot understand why the Government are taking such a risk with their livelihoods. Japan is one of our key export partners. It accounted for £12.5 billion of our exports in 2016.

[John Spellar]

Before my hon. Friend moves on from his comments about Japanese companies in the UK, will he join me in commending the very long-term view that those Japanese companies take? They invest significantly not only in capital equipment, but in their staff and their continuous training programmes, all of which have been an example that, I am pleased to say, has now been followed by many British companies.

[Barry Gardiner]

Indeed. I absolutely agree with my right hon. Friend. The Japanese investment into our country over many, many years has been hugely beneficial not simply in creating those jobs, but in sustaining them into the future. We absolutely cannot afford the Government’s red line, which puts that in jeopardy.

As I was saying, Japan accounted for £12.5 billion of our exports in 2016—it was our fifth largest export market. A Labour Government would certainly want to do a trade deal that builds on the commercial and diplomatic ties that bind our two countries together. The Government have been forced into calling this debate by the European Scrutiny Committee, chaired by the hon. Member for Stone (Sir William Cash). The Committee rightly said that the agreement raised

“complex legal and policy issues for the UK”,

which remain unanswered.

[Kevin Hollinrake (Thirsk and Malton) (Con)]

On a point of clarification, I think that it is the official position of the hon. Gentleman’s party—I am not sure whether he is fully signed up to it—that it would remain part of the customs union after leaving the European Union, which would inhibit his chances of striking a free trade deal anywhere, as the EU would be required to negotiate that deal on his behalf. Bearing in mind his reservations about the EU-Canada comprehensive economic and trade agreement discussed in the previous debate, and his potential reservations in this debate, is he confident that the EU will negotiate those trade deals to his satisfaction?

[Barry Gardiner]

Clearly, while we remain a member of the EU, we have a seat at the negotiating table of any deals. If we are outside the EU, we will not have that, but, equally, we will not have the benefit of being part of a 500 million-strong consumer market that would enable us to negotiate better deals. I am sure that the hon. Gentleman appreciates that being in a new customs union with the EU, as the leader of my party set out in a speech he gave in Coventry a little while ago, would mean that we would be co-decision makers with the EU in that relationship—a customs union not such as the one we currently have with the EU, but one much more like Mercosur, where each of the countries has equal sway.

[Sir William Cash]

rose—

[Barry Gardiner]

I will make a little progress and then, of course, I will very happily give way to the hon. Gentleman, because his Committee has raised a number of questions on the EU-Japan deal that we need to explore further. The Committee insisted, in fact, that the Government bring the deal to a debate on the Floor of the House before the EU Council. Interestingly, in the light of the absurdly tight timeframe that the Government imposed on themselves, the Committee also instructed them to publish their impact assessment on the EU-Japan EPA no later than 4 June.

The first question that the Minister must answer then is why the Government failed to meet that deadline. The impact assessment was published a week late, on 11 June, on the same day that this debate was announced. It is an extraordinary document. Its own authors openly acknowledge that the assessment cannot be taken as an accurate guide to the future impacts of the agreement. It failed to calculate the specific effects on individual EU member states. The assessment admits that it cannot know what proportion of any aggregate gains from the EU-Japan EPA might come to the UK or to any other EU member state. There has been no proper independent assessment of the impacts on the UK, and the authors—these are the authors of the assessment—say that they have just had to assume proportionate outcomes in line with the UK’s projected share of EU trade with Japan.

[Sir William Cash]

I thought I might try to lift this enormous pile of documents to show the House what we are actually considering today; it is really quite formidable. I want to make one point regarding the single market. Does the hon. Gentleman deny that, in relation to our trade with the other 27 member states, we run a deficit of £82 billion a year—these are figures from the Office for National Statistics—whereas our external growth, our external surplus, is growing exponentially and, of course, 90% of all future trading will be outside the EU?

[Barry Gardiner]

I am grateful to the hon. Gentleman on two counts—first for showing us precisely what we are talking about. I know that he will have read the full EPA assessment, as I have done. I am equally grateful to him for raising the issue of the balance of trade surplus and deficit that we currently run. I am just about to come to that point, so I hope that he can hold off with his remarks.

It is perhaps most damning to quote from the impact assessment document itself, which states:

“Figures presented here reflect the long run impacts per annum and should be treated as a magnitude of change and not a forecast…It is important to note the results below are not based on the final EU-Japan EPA text and are therefore subject to a degree of uncertainty…Estimates are produced against a baseline of 2008 and reflect a world in which the Doha trade round and EU-Korea FTA are un-concluded.”

So there we have it. The baseline is 10 years out of date and fails to take account not only of the EU-South Korea FTA, which has been applied ever since July 2011 —seven years ago—but of the terms of the final agreement text that it is supposed to be assessing.

The European Scrutiny Committee was absolutely right to demand in its report

“a clear breakdown of how different UK sectors and stakeholders are expected to win or lose from the agreement.”

All the independent projections made of the EU-Japan deal calculated that the gains accruing to Japanese firms would be far higher than those seen by European businesses. All the forecasts spoke of major increases in Japanese exports, and the potential loss of jobs and businesses in Europe as a result. The Government assessment has at least picked up on these forecasts, recognising that the UK’s balance of trade with Japan will take a serious hit when this agreement comes into force. Voting to approve this motion will allow the Government to rush ahead and sign a deal that the Government’s own figures show will result in a decline in our trade balance with Japan of between £2.2 billion and £2.9 billion, so the hon. Member for Stone, who chairs the European Scrutiny Committee and asked for the impact assessment to be published, will now see that the effect of this deal is, in fact, to increase our problems in terms of our balance of payments with Japan.

[The Secretary of State for International Trade and President of the Board of Trade (Dr Liam Fox)]

I will try again. Am I now to assume that the official position of the Labour party is not to ratify the Japan EPA?

[Barry Gardiner]

Note how keen the Secretary of State is to deflect the House from the fact that his own impact assessment says that, in signing the deal, this country will be between £2.2 billion and £2.8 billion worse off.

[Dr Fox]

Surely the House has a right to know the position of the official Opposition. Do they or do they not agree with this House ratifying the agreement that we are discussing and scrutinising today?

[Barry Gardiner]

Yes; and, ultimately, if the Secretary of State is patient and listens, it will become clear—

[Dr Fox]

This is rubbish.

[Barry Gardiner]

Goodness me! The Secretary of State is getting really exercised from a sedentary position; he is starting to be abusive. Let us be clear what has aggravated him so much. It is that I have read his impact assessment, and his own assessment of this deal says that this country will be £2.2 billion to £2.8 billion worse off.

[Several hon. Members rose—]

[Barry Gardiner]

I will make a little progress, Madam Deputy Speaker, because I know that you want to encourage other Members to speak.

The automotive industry offers the clearest indication of the issues posed by the EU’s deal with Japan. The EU-Japan EPA will, for example, remove the 10% tariff that currently applies to all car imports into the UK from Japan, which will—again, according to the Government’s figures—result in a £2.8 billion surge in Japanese car imports into the UK. That will have significant implications for the future viability of our domestic automotive sector and the thousands of jobs attached to it. But this is precisely where the Government’s assessment is so hopelessly unsatisfactory. It fails to ask the real questions as to what the long-term impacts on the UK car industry might be when we remove the existing 10% tariffs on Japanese car imports. This question is clearly of the utmost importance when it comes to safeguarding jobs in the UK auto industry, as there will no longer be a trade incentive to maintain Japanese investment in precisely the way in which my hon. Friends the Members for Newcastle upon Tyne North (Catherine McKinnell) and for Crewe and Nantwich (Laura Smith) mentioned earlier.

[Mr Chris Leslie (Nottingham East) (Lab/Co-op)]

I wonder whether my hon. Friend could help me out, because the Opposition are very keen to get to the denouement of this particular question. It feels to me as though he is raising some issues of concern. But, by and large, this is quite a positive deal for the UK, the EU and Japan. Is he saying that we should oppose the motion before the House?

[Barry Gardiner]

I am astonished. I should have thought that each week my hon. Friend reads—just as I do—the Whip that comes out from our Whips Office, so he will know perfectly well which way we will be voting. [Interruption.] No, and Government Members will get to find out in due course.

[Mr Leslie]

On a point of order, Madam Deputy Speaker.

--- Later in debate ---

[Madam Deputy Speaker]

That is a point of debate. I want the debate to move on because a lot of Members wish to speak.

[Barry Gardiner]

The Government have not published any serious analysis as to the potential outcomes of the EU-Japan EPA on the car industry beyond the basic econometric analysis in their impact assessment. It cannot be right to allow the Government to proceed with fast-tracking approval of this trade deal when we have not had answers to the critical questions posed by the hon. Member for Stone and his Committee, based on a proper analysis of what the likely impacts might be.

[Craig Mackinlay (South Thanet) (Con)]

Will the hon. Gentleman give way?

--- Later in debate ---

[Barry Gardiner]

I will not, because Madam Deputy Speaker wants me to press on to allow hon. Members to make their own contributions.

The car industry is far from the only sector involved in what is a comprehensive trade deal. Food and drink producers are also implicated, not least as regards the protection provided in the agreement for products with specific geographical indications. Once again, the Government have failed to defend the interests of British producers on overseas markets. France, Spain and Italy have each listed dozens of their national products for special protection in annex 14-B of the deal and Japan has listed 48 of its products for protection, yet the UK Government could only be bothered to list four products under the geographical indications provisions of the deal—Scottish farmed salmon, west country farmhouse cheddar, Stilton and Scotch whisky.

[Geraint Davies]

What about Welsh lamb?

[Barry Gardiner]

Indeed. As my hon. Friend says, what about Welsh lamb? What about Scotch beef, Dorset blue, Yorkshire Wensleydale, Cumberland sausage and Melton Mowbray pork pies? Can the Minister explain why we failed to register geographical indications to protect more of our UK food produce?

The European Scrutiny Committee raised many further crucial issues relating to the deal that remain unanswered. Under the negative list approach, all service sectors that are not explicitly exempted from liberalisation are included. It is considered to be a particular threat to public services, as it may prove impossible to shield them from liberalisation effectively once they have been committed to an international trade treaty. It means that any emergent sector in the future will be automatically subject to trade liberalisation even where there may be a clear need for Government regulation or intervention. We cannot possibly predict what those will be prior to their emergence, but what is the point of using such “negative lists” to reduce the capacity of the Government to regulate in the future?

Annex 1 allows countries to list existing non-conforming measures that enjoy some protection. Annex 2 is a stronger protection, in that it permits countries to protect service sectors into the future by allowing for the introduction of reforms that would otherwise contravene the EPA rules. As the Minister said, the UK has entered annex 2 reservations for cross-border auditing services, manpower planning for doctors in the NHS, privately funded ambulance services, and residential health facilities services other than hospital services. I repeat: other than hospital services. In other words, they are, and will forever remain in future, subject to liberalisation and competition under this agreement, in contradistinction to the implication that we heard earlier. I therefore repeat the Committee’s question: will the Minister confirm whether he is content with the proposed provisions enabling Governments to regulate in the public sector?

Do the Government intend to negotiate the UK’s future trade partnership and its future investment relationship with Japan at the same time, as one agreement—another question posed by the hon. Member for Stone and by my hon. Friend the Member for Crewe and Nantwich—or will the separate EU-only trade agreement constrain the UK’s ability to negotiate and conclude an integrated trade and investment agreement? The House will be rightly concerned that the Government have simultaneously inserted into the Trade Bill sweeping Henry VIII powers to implement such a future trade agreement without any proper scrutiny or oversight. Will the Minister confirm that no such investment chapters will be included in any future trade agreement with Japan?

Let me be clear: Labour would like to see a trade agreement with Japan. We have an incredibly strong trade and investment relationship between our two countries, and we believe that we can continue to build on that. We want a positive, dynamic relationship that elevates standards, boosts opportunities to benefit from advances in technology and research and development, and continues to support growth and investment in our high-tech manufacturing sectors and world-class services sector. But we cannot be expected to rely on this Government’s quiet promises alone, and it is imperative that Parliament has the proper opportunity to scrutinise and debate these trade agreements well in advance of their being signed.

It is worth noting that this deal has yet even to go through the full scrutiny process in the EU, with INTA—the Committee on International Trade—not scheduled to hold a public inquiry until 9 and 10 July and the European Parliament scheduled to vote on whether to give consent to the agreement in December. If the motion before us is voted through, it will allow Ministers to endorse the agreement without proper scrutiny by the House, and even before the full scrutiny process of the European Union has been properly applied. That sets a dangerous precedent for future trade agreements and makes a mockery of the idea that any future trade agreements to which the Trade Bill applies will have received proper scrutiny by this House.

[Several hon. Members rose—]